How to know when a client relationship is over

How to know when a client relationship is over

I recently participated in an interesting online discussion about ongoing fees and annual reviews – specifically what to do when your service package includes an annual review but you can’t get the clients to the table no matter how hard you try.

It got me thinking about what an ethical approach to this issue looks like. Here were my initial thoughts:

“I think relationships do often come to a natural end, and that includes business/advisory relationships. If you aren't actually delivering any services (regardless of how many times you have tried to engage the client) then you really shouldn't be taking any money from them. I think this expectation is really a hangover from commission days. When/if they need you again, they will get in touch at the time. You can still send them newsletters etc to keep them 'warm' but that's different to collecting actual fees. I'm sure many will disagree, but I believe that if you want to be truly ethical, then you have to actually deliver services, not just take fees.”

I’ve been doing quite a bit of thinking off the back of the RC and just the general climate of distrust, and I’ve come to the position that I believe financial advisers should be as trustworthy (and held to the same high standard) as medical professionals. This doesn’t mean that I believe in hourly billing, not at all in fact! But I do think that advisers should operate under the same sort of expectations that doctors do. For instance:

  • I would love to see a Hippocratic oath for financial planners, starting with the concept ‘first do no harm’;
  • I am totally in agreement with the educational expectations, although I think the timeline to implement FASEA is ridiculous;
  • I don’t think advisers should be able to implement a strategy that is clearly bad for the clients (regardless of how much the clients want it);
  • I think the term ‘general advice’ is total bollocks and should be done away with. Either you are selling a product or giving personalised advice; and
  • Lastly, while a retainer style pricing model is fine, I really do think that clients should be getting what they are paying for, primarily because advice fees tend to come out of retirement savings and the LAST thing we as an industry should be doing is reducing the retirement savings of the people that we are trying to help. Which leads me to…

You have to know when the relationship has run its course. Frankly, it’s pretty unreasonable to think that you will be able to add value to a client every year into perpetuity. Don’t get me wrong, I think financial advice is FANTASTIC, and I’ll rave about it to anyone who will listen, but I do think that there are times in a client’s life when they just don’t need the full service (for the time being anyway). And as a fiduciary, it is up to you to know when you can no longer add $3,000 or $5,000 or $10,000 (or whatever your ongoing fees are) worth of value to your client.

There are of course a few things to think about if you have a client in this boat.

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Firstly, and I think this is really important, don’t take it as some kind of personal failing. In fact, often it’s quite the opposite. You can even look at it as an opportunity to ‘graduate’ your client onto a different service package.

Next, depending on how many clients are in this situation, you could consider offering a different style of relationship, perhaps based around cash flow management, quarterly ‘all of wealth’ reports or something similar.

Here’s another approach for the recalcitrant clients – you could send them a reverse fact find with some pointed questions to jog their memories. Because it is of course entirely possible that there are good reasons why they should talk to you, but they haven’t realised.

You also need to have a view on how long you let the ‘no review’ situation go on for before you take action. From a purely legal point of view, I don’t think this has been challenged in court yet as all the big banks just rolled over as soon as ASIC raised it, but I’m sure most licensees have a position. My gut feel says that after six months of trying every month or so, you might have to concede that things have changed.

From a business management perspective, chasing non-communicative clients is just a pain. I totally get that. That’s why I’d use a marketing automation system to follow up so that you can keep on them without it causing you extra work. Using marketing automation, you can automatically get in touch with clients (you could bucket your clients by month) using a standardised set of email follow-ups. The other advantage to this of course is if ASIC comes knocking, you have clear evidence that you were trying your best to get hold of them and that you have a process in place. If you need a hand writing the email series and setting up the automation, drop me a line.

And lastly, for goodness sake, don’t completely cut contact with ex-clients. They may well need you again in future (let’s say almost definitely!) so you want to be their first port of call when they next need advice. Keep them on your email list, invite them to your events, ask for a testimonial to use on your website, maybe even write them a personalised note once a year to check in. Just a few lines.


Sarah Penn, managing director, Mayflower Consulting

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