Servicing unprofitable clients in the hope that they will one day generate income can prove costly to advisers according to Russell Investments head of advice capability John Nolan.
Nolan said that not enough advisers terminate bad client relationships out of fear of losing revenue or finding a more appropriate client to replace the one they have let go.
“So they’ll do things for them at cost or even below what it costs them to produce on the premise that one day they’ll turn into a very profitable client,” he said.
“But for some of them, that day never comes and the advisers can never really convert that client into paying what they should for the advice that they’re receiving.”
Other advisers may have a skewed perception of the value of the advice they deliver to clients which leads them to undervalue their service offer.
According to Nolan advisers should reassess the short-term value of their client books to retain their business value moving forward.
“Advisers lose sight of how much value they provide clients and prospects every time they offer an opinion or clarify a technical issue for them,” Nolan said.
“Clients will pay for quality advice, but advisers need to remind themselves how much value they really provide.”
Removing difficult clients can also present advisers with the opportunity to build a strong portfolio of clients that are more suited to that practice.
Nolan also said allowing advisers within a practice to terminate difficult clients can often boost the morale within a business.
“It’s a great demonstration of believing in your team and involving them in the business,’” he said.
“I’ve worked with so many advisers now who have said that the morale and spirit in their office just goes through the roof when their own team knows they’ve got the power to say they don’t want to do business with that client anymore.”
SUBSCRIBE TO THE IFA DAILY BULLETIN
- 16 Nov 2018Government sets $51m to pursue misconductBy Eliot Hastie
- 16 Nov 2018The financial advisers most people don’t read aboutBy James Mitchell
- 16 Nov 2018Clients expect advisers to understand their situationBy Eliot Hastie
- 16 Nov 2018Retirees hit hardest by franking credit changes, says FSCBy Sarah Simpkins
- 16 Nov 2018Trust in advice more important than everBy Stephanie Aikins
- 15 Nov 2018We’ll lose advisers through FASEA but it’s necessaryBy Adrian Flores
- view all