Weeding out non-profitable clients is a critical part of running a successful business, however many financial planners lack the confidence to confront these clients, according to consultant Carol Davis.
Davis says the Paul Resnik/ ING Opinion Leaders survey found financial planners acknowledged they had non-profitable clients, but were uncertain about how to address the problem.
“A lot of planners believe having a client exiting plan is critical. Planners need to focus on clients that are interested in creating wealth not those who are constantly indecisive,” Davis says.
She says that of the 20 financial planners surveyed, only a few spoke about categorising their client base. Planners can categorises their clients as either A clients who are the planners top priority; B clients who are also important clients and serious investors; or C and D clients who are not high priority clients to the planner and may be considered non-profitable clients.
However, the C and D are not always considered non-profitable clients, they may just be seeking a life insurance policy from the planner and not require constant contact.
Davis says the survey found many of the planners were weighed down by the concerns of trying to find the most appropriate process of exiting clients.
“Advisers need to look at the traits of the clients, and one particular planner that I spoke with found that they wanted to only keep the people that were ambitious and interested in creating wealth,” Davis says.
“People don’t want to work with clients that are procrastinating, indecisive or not serious. If the client is not pulling their weight then what’s the point.”
However, on the other hand, Davis says many planners are not prepared to release the non-profitable clients completely from the groups client base and instead chooses to hand the client over to another planner on staff.
One group who was surveyed by Davis was North Sydney based planners Guest McLeod. Guest McLeod believe strongly in promoting a steady platform for junior planner learning.
Since its beginnings in 1990, the group has provided a mentor style process for its staff members. The process involves junior planners in the firm sitting in on senior planners in client meetings, writing the client reports and eventually taking responsibility of the client and their plan.
In many cases senior planners will have good clients but will hold on to higher value clients, with lesser value clients passed on to salaried planners in their business.
“One person I spoke with, has passed down 270 clients to three full-time salaried financial planners in the business, with all of them still high profile clients,” Davis says.
