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New Business Not Always Good Business What Type of Clients Don't You Want? Sept. 4, 2000 (SmartPros) As a financial planner, it is your responsibility to increase your client base and grow your business. However, not every new customer is a good customer. Regardless of whether a prospective client currently has an impressive portfolio or great future earning and investing potential, it is important to keep in mind that the revenues you could generate from that client should not be the sole reason you take on him or her. When you stray from the path of pursuit for the right client, you can get yourself into trouble by taking on business that is not healthy for the profitability of your business. Saying "no" to new business seems like the wrong thing to do — it is your responsibility to build your client base and meet certain sales goals. So how can you possibly turn down the opportunity to increase your sales?
Experience shows, however, that there are times when saying no to business is really the right thing to do. Consider the following nine circumstances in which new business should be turned down.
1) Your Gut Instinct Says No.
This circumstance belongs at the top of the list. You have probably learned this lesson in your personal life and the same rules apply in your professional life — everyone has an active gut instinct that should never be ignored.
Consider the following scenario: You meet with a prospective client about a financial plan, but you have a sinking feeling in your stomach. A red flag alerts you to a potentially dangerous situation. You cannot put your finger on it, but you know something just is not right and you are not seeing the whole picture. Then your head gets in the way: This louder, more practical voice talks you out of those negative feelings and you dismiss your instincts as ridiculous. You take on the new client.
There does not even have to be a logical explanation as to why you do not trust the situation. Just remember when you get that inner nagging feeling, do not to allow the pressure of meeting sales goals force you to ignore your first impression.
2) The Customer Does Not Appreciate the Value of Your Services.
Many — perhaps most — customers really have no idea how you earn a living. Their biggest concern is the growth and preservation of their assets. Although these types of customers might seek your counsel, it does not necessarily mean that they place a high value on the expertise you offer. (This may be because, in some cases, advice is intangible — a customer is not always going to see results right away.)
The most profitable business will come from clients who appreciate the value that you offer. Value is based on your financial planning expertise and guidance, credibility, the products and services you offer, the level of service provided and even the intangible "warm and fuzzy" element.
You offer clients an entire package, the components of which are both tangible and intangible. It's usually the intangible "added value" which sets you apart from the competition. Any client who treats you like a financial transactor instead of a financial planning expert views you as a commodity, not a valued service provider and may migrate to another financial planner simply because that person offers products and services for lower fees.
3) The Client Does Not Share Your Financial Planning Philosophy.
All clients are different. They all have their own level of investment risk with which they feel comfortable and secure. It is your job to recommend a plan that is prudent and that fits the client's short- and long-term financial goals.
Be leery of a client who seeks your counsel and then makes decisions that are in opposition to prudent financial investing strategies. This is a client who is shortsighted and is looking for quick, short-term financial gains. As you surely know, that type of approach goes against the entire philosophy of sound financial planning.
4) The Client Does Not Need Most of Your Products or Services.
Although you would like to be everything to everybody, sometimes the fit is just not right. If the client really only needs one of the many products or services you provide, there is little chance of a long-term profitable relationship.
On the other hand, a client with a relatively small amount of assets and investment cash available could need more of your products and services in the future — perhaps due to earning potential or even a forthcoming inheritance. It is a good idea to carefully review a client's financial situation to determine if it looks like he or she will grow into your ideal client profile.
5) The Customer Does Not Treat You in a Courteous or Professional Manner.
Profitable business is based on good working relationships. This does not mean that your client has to be your best friend but, in essence, your best clients will be those who seek partnerships with you.
Any client who constantly questions your advice, nit-picks about your fees, acts in an unprofessional manner or questions your credibility or judgment is not looking to develop a long-term relationship. There is no opportunity for trust in a relationship such as this.
Again, this type of client will view your services as a commodity — and the client who clearly demonstrates that he or she does not value your expertise or trust the relationship might choose to migrate to another financial planner at the drop of a hat.
6) The Client Asks for Products or Services You Do Not Provide.
Most financial planners specialize in assisting certain types of clients. You are best able to serve the clients whose products and services are tailored to your ideal customer profile — whether it is defined by current assets in holding, types of investments the client seeks, trust services or estate planning.
If a potential client approaches you but clearly has a unique set of financial planning requirements that fall outside of your realm of expertise, it is best to refer them to another professional. Never promise any services to a client that you know you cannot deliver.
It is always a temptation to tell a potential client you can give them exactly what they want even when, in reality, it might not be possible. But the ideal relationship will blossom when you're able to give them more than they expected, not less than they were promised.
7) The Client Has No Future Growth Potential.
Many people honestly want to save and plan for their future — that is why they seek your advice. In some cases, it is unrealistic to expect their earning potential to fund a portfolio that fits in your ideal client profile.
It is easy to want to help everyone save for a better future and meet his or her financial goals. But it is important, too, to clearly define the clients who have the potential to grow into most of your products and services. Your growth will be based on their growth so it is wise to make decision about which clients to take on in light of that reality.
8) You Do Not Have Time to Service the Customer.
Customers tend to fall into three categories:
You need to decide which types of clients you have time to service. There is a distinct difference between those clients who rely on your financial planning expertise and want a close working relationship with you, and those who monopolize your time and energy needlessly.
The latter are the types of clients who do not value your time, energy and expertise. A person who does value your expertise will call you for advice and then trust you to handle all the necessary details without frequently checking up on you.
9) The Customer Expects You to Offer Your Expertise For Free.
There is no hard-and-fast set of rules that defines what added value you can offer a client. When it comes to personal investment, people have their own sets of rules that do not necessarily correlate to other types of business relationships.
Some financially savvy clients may use your time and energy just so they can learn more about financial investing and then do it for themselves. Try to distinguish between those people who want your advice and also want you to implement their plan for them.
Finding the right customer is not always an easy task. But sometimes it is better to know what type of business you do not want so you can devote your time and energy to business that you do want. Turning down potential business may not be a poor business decision but rather a wise decision for the long-term growth and profitability of your bank.
Send your comments, questions and article proposals to information@smartpros.com.
2000, Smartpros Ltd. All Rights Reserved.
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