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Who is not your ideal client?
Every financial advisor is looking for ideal clients. yet only 25% of advisors have a clear definition of who an ideal client is. ( The Future of Practice Management, an inaugural study by the FPA Research and Practice Institute a program of the Financial Planning Association® (FPA®) -December 2013.) That means that 75% of financial advisors don't know who their ideal client is and 100% of them don't know who their ideal client is not.
Criteria for non-ideal clients
Elite advisors know what their time is worth and who they clearly want to spend time with. Depending on the level of your practice understanding the ideal revenue you want to get from a client becomes challenging, especially when you do not have a clear definition of an ideal client. This can become a long list. I remember when we celebrated as a team when one of our non-ideal clients left. Dealing with people that are frustrating time consuming and not enjoyable is obvious. You and your team need to know who your non-ideal clients are. But what is not obvious is what clients don't want. People that don't want a comprehensive financial plan people that don't share all of their information with you, people that always talk about people that would never refer you or introduce you? People that don't deal with other professionals and pay their fees such as accountants lawyers mortgage brokers etc. or people that treat you like a transaction when you're treating them like an ideal client. You provide more and they want less.
Do you want to sit in first-class or coach?
Let's face it everybody wants to sit in first class but not everybody wants to pay for it. A lot of your clients don’t know the difference between sitting in first class in your business or coach. That’s because most advisors treat all clients the same, yet some are paying first class and getting coach service. You only need two service levels, ideal and non-ideal.
Non-ideal client criteria include:
Taking on too much risk and not following your advice
Unrealistic performance or planning expectations and is only performance driven
Not sharing all of their financial information in all seven areas including tax, investment, estate, risk, insurance, debts, and cash flow
Has more than one financial advisor or insurance agent and deals with several banks
Has a lot of wealth and has never consolidated any of it, and does not trust one person with it
Has a comprehensive plan that covers all seven areas and has not implemented it
Meets their financial advisor without their spouse
Is not goal-oriented and not coachable
Sees money management as a commodity and thinks it should always cost less, focuses on fees
Disrespectful to team members and disrupts your team
Is not a delegator, but fools you to think they are a delegator and consolidator
Does not want coordinated meetings with other professionals
Share this list in your next team meeting to see if your team can help identify non-ideal clients. Stop spending time with wealthy people who are not ideal, will never be ideal, and treat you like a transactional advisor, not an ideal advisor! Time is your most valuable asset, treat it carefully. I wish when I started out someone guided me to identify ideal clients and non-ideal clients, to save me a lot of time!
What to do about non-ideal clients?
There is no easy solution for non-ideal clients, except that the amount of time you will save by not working with them anymore. Depending on the firm you are with, or if you are independent, there are several options such as selling or transferring to other financial advisors. This is what I call the ideal capacity process. It takes time, planning, and money to build and implement this process. This is the number one practice management challenge in the financial industry!
Where do I start?
I would recommend a few simple things. First, segment your clients properly between ideal and non-ideal. Second, add up the potential time you will save in not working with non-ideal clients, such as meetings, updating plans, putting advice to paper, compliance, communications, and more. This is an easy way to find 100+ hours in your business this year. Then use that time saved for yourself, your family, or acquiring ideal clients. This will be life-changing for you. Now go and spend more time with the ideal people in first class and see what happens!
How about your goals for your practice in 2021? Our Practice management checklist or fee audit checklist
While each financial advisor's practice may have a different approach, advisors need to understand where their practice needs help, and will they get the right help for the right part of their practice. What areas does your practice need help with? Get a copy of our updated 21-page “Comprehensive Practice Management Strategies checklist” by going to our website.
Related: How Advisors Can Deliver an Innovative Client Experience