Before I launch into the subject of my article on how to help clients leave your firm, I wanted to let you know about our upcoming program. On June 11 this year, we again open our office for Be Our Guest. A $1,000 donation to the Foundation for Financial Planning is an entrée to spending a day with our entire staff understanding all aspects of our firm. You get to see the things we are doing right, the areas where we have messed up, how our succession plan is working, and ask any questions you may have about how we have built and managed our almost 50-person, fee-only firm. And equally important, you learn from one another. If the past is any reflection of this event, attendees come from all over the country and from various types of practices with their own successes and issues. Our space is limited to 20 people, so please let me know if you are interested ([email protected]) and your donation can secure a spot.

This is a really good year to attend, because last year had so many ups and downs (and I am not just referring to the market).

Last year got me thinking about a lot of things, including the question: When is it the best time for a client to leave a firm? Sometimes the decision is the client’s and sometimes it is yours, but there are clearly better and worse times for a departure. Anyone who has been in business for a while probably has a very high client retention rate, yet will still lose some clients.

The worst time for a client to leave us is when our diversified portfolio doesn’t perform as well as the S&P 500—hello, first three quarters of 2018. If a client is frustrated about market returns, there are a lot of things at work. One obvious one is that we may have not created enough value in their mind with the countless other services we provide. Another reason may be that the client was not the right fit in the first place. Our firm has enjoyed a lot of growth over the last few years, and that means there are many new clients who haven’t experienced the full benefits of asset allocation and mean reversion. The problem with people leaving before they reap those benefits is that they are probably departing when the value of that strategy will soon be realized. We lost a couple of clients in 2018 because of this, and had we kept them they would have been far better off when the fourth-quarter selloff occurred.

Clients may be having emotional responses to market changes. They may not know how risk-averse or risk-tolerant they really are. In general, if a client is solely focused on pure performance and not wealth management services or our insight into what matters most to him or her, that client is not a good fit. If our objective is to be sure that clients have the money they want to spend when they want to spend it, then our risk management and tax planning for the portfolios should be the real consideration—along with returns—in the investment management stool.

Ironically, it is generally far better for clients to leave you after a correction (unless they run to a market timer) because the new planner will most likely participate in the inevitable rebound. The clients likely didn’t perceive that you protected them during the decline, but then again, they likely won’t be hurt either if they move after a simple, mild drop. If they lose their stomach for investing altogether, however, that is a different story.

But still, if clients leave because of our investment performance, they might not realize how much more we do for them besides simply managing money. At Accredited Investors Wealth Management, our clients have two to three wealth managers and an investment manager working with them on integrating their money with their values and goals. We have rich conversations about what matters most to them, and at times they forget this when concentrated returns look so much more alluring than diversified ones and, shall we say, greed takes hold.

When clients have given up on you, rather than simply bidding them adieu, I suggest you try to direct them to a soft landing with another comprehensive advisor who can take care of them through the next market downturn. Sometimes they have a short time with you simply because they joined you at the wrong moment. All you can do is make it as positive an ending as possible for them.

We’ve seen some other familiar situations crop up in which clients might also leave us.

Take, for example, a widowed client or divorcée with a new partner. The client is in good financial standing. The new partner is not. We are often working with the client to rebuild her life, help her gain confidence in her abilities (especially if she has not worked and she depended on the departed spouse to earn and garner assets). We are helping this person recast a new future and want to create a relationship, not a dependency. But awkward discussions arise when we try to protect this client’s assets from new people—raising topics like prenuptial agreements and when to combine assets and when to keep money separate.

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