The right way to fire your clients

Whenever financial adviser Christopher Van Slyke ends a relationship with a client, he relies on a tried-and-true technique perfected over years of bad dates and failed romances.

“I tell them, “It’s not you, it’s me,’” said Mr. Van Slyke, a partner at Trovena LLC, who is now happily married. “I really try to convince them that I’m not the firm for them anymore. It doesn’t always work.”

Breaking up, as the song goes, is hard to do — even when it comes to adviser-client relationships. Many advisers hang on to clients who aren’t the right match for far too long, putting a squeeze on their valuable time and resources.

Instead, advisers should recognize when relationships are no longer working out, whether due to irreconcilable differences or because the client isn’t profitable enough, and move quickly to end them. Just how you do the dumping depends on the situation.

First off, advisers need to trust their gut instincts when deciding whether a relationship is worth continuing, said Mark Matson, founder and chief executive of Abundance Technologies Inc., an investment advisory firm with $2.5 billion in assets.

“You have these clients that when they’re on the phone … you feel like you’re going to throw up — then you know it’s time,” Mr. Matson said. “Advisers are becoming prisoners of their clients.”

For example, he added, any client who is constantly nagging an adviser or is rude to staff members should be dumped.

Another surefire sign that a client deserves the boot is if he or she refuses to follow the representative’s advice, said Blaine F. Aikin, president and chief executive of Fiduciary360 LLC, which trains advisers. He recalls firing a client who kept spending beyond his means, despite repeated warnings that he would soon run out of money if he didn’t stick to a budget.

“This client was burning through money, and I was ending the relationship to wake him up,” Mr. Aikin said.

Other potential problem clients, practice-management experts said, include those with unrealistic expectations, those who eat up a disproportionate amount of time and clients who complain about fees. Even a well-liked client may need to be let go if they don’t generate enough revenue to continue advising (“I think we should just be friends,” probably won’t help.)

When there’s no one right way to fire a client, practice-management experts said, just as with any relationship, there are some rough rules to follow.

For example, if the adviser-client relationship has turned bitter, experts recommend that the adviser make a clean break to avoid more of the nasty squabbles that caused it to fall apart, said Christopher Holman, senior executive coach at ClientWise LLC.

A simple breakup phrase, he said, will do: “As my business has grown, I’m refining what clients I serve and how I serve them. At this time, I believe you’d be better-served by working with another adviser.”

Allison Couch, LPL Financial’s senior vice president of business consulting, said that before firing a client, advisers should talk with their compliance and legal departments to make certain their client notes are up-to-date.

Experts also said it’s imperative that advisers dump the clients in person, not via phone, e-mail or text message. “[Not breaking up in person] just reminds me of breaking up on Post-it notes like you hear about on TV shows,” said Ms. Couch.

Advisers should also send a letter to the client clearly stating that the relationship has ended.

Advisers also can’t rely on that other classic breakup tactic of ignoring phone calls and e-mails, because dodging such communications from a client can lead to lawsuits, experts said.

“They can’t ignore the client and hope they’ll go away,” said John Graziano, an adviser with Future Financial Planners Inc. “If an adviser is accepting fees for that client, they have a fiduciary responsibility.”

Mr. Graziano recommends that advisers make certain their former clients’ new advisers take on all of their assets — even those the new reps may not be interested in.

“The new adviser sometimes will take certain assets and leave the assets they don’t want — like stocks the client inherited from their mom or dad,” said Mr. Graziano, whose firm has $50 million in assets. “You want to move the whole account away. Don’t let the new adviser pick and choose.”

Firing a client whom an adviser still personally likes but is less profitable requires a more gentle touch, said Stephanie Bogan, president of Quantuvis Consulting Inc.

 She tells advisers to explain to clients that they’ve changed the focus of the firm and now have an annual minimum fee. The client then has three options: Move more assets to the adviser, pay for a once-a-year financial plan or go to another adviser.

“You tell them, “I don’t want to charge you for services you don’t need right now,’” she said. “That’s not the right thing to do.”

And while most advisers will deal with breakups as they come, one has set up a simple strategy for getting rid of his worst clients. On his birthday each year, Thomas Gryzmala, who is a principal and securities expert witness at Forensic Analytics LLC, dumps his most annoying client.

“It’s not easy to fire clients,” he said. “But afterward, I always felt so much better that I did it.”

E-mail Lisa Shidler at [email protected].