When, Why, and How to Fire a Client [Episode 14]

Let's face it; sometimes partnerships sour. In all vocations, all industries, differences arise between individuals. And for something as valuable as the dynamic between advisor and client, sometimes firing clients is an absolutely necessary action. If an RIA is using time on a client that is less than ideal, that dynamic should be reconciled. Anything but the garnering of massive success for both client and advisor is a recipe for a stagnant practice. So, by necessity, Matt and Micah gather their resources and experiences to walk listeners through the when, why, and how of firing clients.

Matthew mentions an important caveat during the start of the episode: this isn't about cutting off the bottom 20% of your books; instead, it is about analyzing all clients and making a reasonable assessment towards future sustainability with those particular clients. It is also about finding the clients that "fit your mold," as Micah says. If they don't, it is important to mentally admit you made a mistake and then move on accordingly.

Matthew also points out that while you are analyzing your existing client base, the most important thing to consider is the cost. Your cost-benefit analysis of your clients should take into consideration if your confidence is being undermined, your process is being disrupted, or you cringe whenever 'X-Client' calls. Matt also states that if his clients don't follow his advice, they are out. Especially if clients start undoing key steps in the process; or, even more so, if a client keeps missing meetings, one must part ways.

But with all this being said, there is definitely a delicate way of letting someone go. Sending a letter, not going into the details in the document, and refunding the current quarter is Matt's process. And then taking any calls that may come through for explanations. Being delicate and careful on this issue is very important. Micah prefers having face-to-face meetings; but again, he communicates his reasons for firing the client very carefully. Both also bring up the important point that one should never be beholden to a client. This means that you should have a deep enough reserve of clients to keep the revenue stream flowing--even if you have to fire a client who brings your firm a lot of money.

Both Matt and Micah have some action steps for everyone in the industry. The first is to print off a list of every client you have and then ask yourself this: would you hire any given client again? If not, if you can't justify your keeping them, or you cringe whenever you see their name on the caller ID, it's time to part ways. Doing this first by yourself, and then later with your team can be a very powerful tool.

The second action step is to make a commitment to what Micah calls the "graduation conversation"--that is, the firing conversation or letter that will mark the termination of your partnership with a client.

The third actions step is to draw up a statement that clearly communicates your moral code, beliefs, and a line that won't be crossed by any means, to avoid waffling or gray-area conundrums. Outline what a 'fireable offense' is.