‘This Is Not Go­ing to Work’

Key warn­ing signs that in­di­cate a prospec­tive client might turn out to be a poor fit for your prac­tice.

Financial Planning - - CONTENT - By In­grid Case

Key warn­ing signs that in­di­cate a prospec­tive client might end up be­ing a poor fit for your prac­tice.

WHEN A CLIENT PROVES TO BE A POOR FIT FOR A plan­ning prac­tice, a smart plan­ner lets that client go. An even smarter plan­ner screens po­ten­tial clients be­fore com­mit­ting.

Many prac­tices rely on web­sites and emails to de­scribe the ser­vices they of­fer and the types of clients they serve.

“If they like what they see, I sched­ule a call with them where I find out more about their cir­cum­stances,” says Craig Larsen, founder and pres­i­dent of AHC Ad­vi­sors in St. Charles, Illi­nois. “If they may be a fit, we then sched­ule an in-per­son meet­ing to help them learn more about us, and we learn more about them. If they still like what they hear, then we sched­ule a sec­ond meet­ing to go over our in­vest­ment phi­los­o­phy and ap­proach in de­tail. At that meet­ing, it is pretty clear to ev­ery­one if we are a fit for each other.”

In th­ese con­ver­sa­tions, Larsen and plan­ners like him lis­ten for po­ten­tially deal-break­ing an­swers to ques­tions.


Metaphor­i­cally speak­ing, if a plan­ner is a den­tist but the client needs a sur­geon, the re­la­tion­ship won’t work.

“I don’t re­quire that po­ten­tial clients be fi­nan­cial ex­perts, but when they say, ‘My fi­nances are a com­plete mess,’ a red flag goes up,” says Cathy Cur­tis, owner of Cur­tis Fi­nan­cial Plan­ning in Oak­land, Cal­i­for­nia.

“If they mean that they don’t un­der­stand in­vest­ing or what to do with their 401(k) ac­counts, that’s fine. If they mean that they are on the edge of bank­ruptcy or have tons of credit card debt, those aren’t my ar­eas of ex­per­tise. Their prob­lems just aren’t in my wheel­house.”


Prospects who want to ar­gue about fees be­fore they’re even clients aren’t usu­ally worth a plan­ner’s ef­forts, says Ge­orge Gagliardi, a plan­ner in Lex­ing­ton, Mas­sachusetts.

Af­ter whin­ing about Gagliardi’s fees, he says, th­ese prospects of­ten sug­gest some­thing like, “’We’ll give you a small piece of our as­sets.’ That’s a small price for a large headache, plus now they can mimic my setup in the rest of their port­fo­lio,” he says. “I’m a pro­fes­sional and would like to be treated as such.”

Clients who try to ne­go­ti­ate Cur­tis’ fee may also try to get more than she of­fered or ex­pect a di­rect dis­count. The worst fee-sen­si­tive clients may end up stiff­ing you for your fee. “That’s a dis­as­ter,” Cur­tis says — and good rea­son to screen care­fully up front.


“If all they care about is per­for­mance, that’s not go­ing to work,” Gagliardi says. “Try­ing to meet clients’ fi­nan­cial goals with risk-man­aged re­turns is what I do. A guy came up to me at a town func­tion and said, ‘Can you beat the mar­ket in good times and not get hurt dur­ing bad times?’ No, and that’s not my job.”

Peo­ple who can’t re­sist the next hot in­vest­ment or want to guess what the mar­ket will do are also a prob­lem, says Scot Stark, owner of Stark Strate­gic Cap­i­tal Man­age­ment in Free­land, Mary­land. “There are peo­ple who yearn for you to fore­cast the fu­ture, and I have col­leagues who do that, em­pha­siz­ing the out­look for the Fed, the econ­omy and so forth,” he says. But prog­nos­ti­ca­tion isn’t what Stark does.

Like most plan­ners, Gagliardi says he wants to work with clients who can take the long view. “When some­one looks at a week’s per­for­mance and freaks out and won’t lis­ten to a rea­son­able dis­cus­sion, it tells me that this is not go­ing to work,” he says.

Per­for­mance chasers of­ten re­veal them­selves in sto­ries

about their for­mer plan­ners. Ask whether a prospec­tive client has worked with an ad­viser be­fore.

If so, what hap­pened to that re­la­tion­ship? Some peo­ple fire mul­ti­ple ad­vis­ers, Cur­tis says, be­cause of un­rea­son­able ex­pec­ta­tions for port­fo­lio per­for­mance.


So­cially re­spon­si­ble in­vest­ing pref­er­ences are one thing. Mi­cro­manag­ing is another.

“A guy came in and said that his wife knows about this stuff and doesn’t like this fund and that fund,” Gagliardi re­mem­bers. “I can tai­lor a port­fo­lio, but this was an early warn­ing sign.”

Cur­tis asks prospec­tive clients how they’ve been manag­ing their money thus far. “If they say their fa­ther or their brother has been manag­ing it, that’s a huge red flag,” she says. “The money will move over and all of a sud­den they will tell me that I can’t sell this stock or that stock, be­cause their fa­ther bought it for them.”

Stark cringes when he meets know-italls. Cor­rect them, and they’re of­fended. “Th­ese peo­ple are usu­ally men, be­cause men are usu­ally more ma­cho about their money. You want clients who are del­e­ga­tors and good lis­ten­ers,” Stark says.


You don’t need to be friends with your clients, but you do need to like them enough to work with them.

“Some folks are just plain dif­fi­cult,” says Erika Safran, owner of Safran Wealth Ad­vi­sors in New York. “Their ex­pec­ta­tions about their fi­nances are clearly un­re­al­is­tic, and the at­ti­tude with which they present their ex­pec­ta­tions can hint at fu­ture dis­cord in our re­la­tion­ship. You raise your voice at a meet­ing and the meet­ing is over.”

Larsen takes that pol­icy a step fur­ther. “If a prospect treats any of the staff rudely, then we don’t work with them. Pe­riod,” he says.

It’s hard to turn away work, es­pe­cially when your prac­tice is rel­a­tively new. Stand firm, th­ese plan­ners say.

“It’s very dif­fi­cult to turn away clients who could im­prove your bot­tom line, but if the cost to me and my prac­tice is frus­tra­tion, lost time and an un­sat­is­fied client, then it is bet­ter to break off the en­gage­ment than to suf­fer a painful mar­riage and a pre­dictable di­vorce,” Gagliardi says.

“If a prospec­tive client says, ‘My fi­nances are a com­plete mess,’ a red flag goes up,” says Cathy Cur­tis of Cur­tis Fi­nan­cial Plan­ning.

“It is bet­ter to break off the en­gage­ment than to suf­fer a painful mar­riage and a pre­dictable di­vorce,” says Ge­orge Gagliardi.

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