Two advisors start their practice at the same time and financially are in the same boat. To avoid cash-flow issues, both take any new client who can fog a mirror. In doing so, they maintain a positive cash flow and, over time, gradually grow their two practices. Fast-forward 15 years. One advisor generates $200,000 per year with 400 households while the other brings in $1 million annually with 100 households. Why the difference?

It could be that the latter has articulated what type of client he wants and aligns his clientele to meet this vision. The other is willing to work with anyone and aligns his vision to fit whatever the client base happens to become. That brings to the fore the issue of "pruning." This means proactively asking some clients to transfer their accounts to other advisors. But to many professionals, it is controversial.

Because such clients are often dubbed "C" or "D" clients, one has to consider how his firm can progress if they are a significant drag on the organization. Several factors could influence an advisor's decision to prune clients. He may have become more sophisticated, gotten a CFP license, learned to enjoy a particular type of client or problem to work on, found more or less time in the day, moved office or home, or discovered a need for more revenue.

Some advisors have trouble with the concept of pruning-not to mention its execution. They feel that, if they have taken on a client, they have taken him or her on for life. So pruning could imply a lack of loyalty. After all, these may be the clients who helped the advisor get started, helped the advisor "make it." Is it right to terminate those relationships?

Gurus offer contradictory advice. In her article, "Five Keys to Success," Patti Abrams, formerly of CEG, presents pruning as a strategy that can make a significant difference in an advisor's financial success and quality of life. She asserts that advisors who focus on fewer, wealthier clients won't be pulled in so many directions and will have fewer demands on their attention and schedule. On the other hand, for decades author and marketing expert Bill Good has said that pruning is the number one worst tactic-at least from a marketing perspective.

One Or Many?

Few argue with the logic of terminating a client or two if they put the firm at risk, say, when a client asks you to use trust money for things other than the trust's stated intent or asks you to do something else outside the bounds of your fiduciary duty. Another clear candidate for pruning is the client abusive to the advisor or staff. Such a person isn't worth losing employees over.

But there are other clients an advisor may not be as sure about. For example, what about clients who are nuisances, frequently telephoning because of anxiety about small market changes, wanting to check balances daily, questioning every recommendation or failing to heed the advisor's financial advice? Are such clients worth the hassle? 

But pruning generally means eliminating more than one or two clients. There may be tens or hundreds involved.

The Odds

One common argument against pruning is that there may be some less attractive clients who down the road will come into money through inheritance or something else. But that's a little like playing the lottery. The odds of winning are very low. Critics of that approach say that waiting for clients to come into money is a failed business model. It would be better to wait for their ideal clients to come into more money.

Staff Input

One advisor analyzed his client list and came up with the names of 40 people he barely broke even with. But because they were nice people and didn't take up too much time, he was inclined to keep them. Then he shared the list with his staff. Of the 40 names, the staff identified ten who used up too much of their time and energy. 

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