Chasing prospective clients: when not to sign them up

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3 mins read

In growing their business, financial advisers may obtain incompatible clients. To ensure you continue to build the right client portfolio, it pays to be discerning.

While most businesses fall over themselves trying to woo new clients, the really smart firms appreciate that not all prospective clients are the right fit. Terry Bell, a partner at Business Health, and adviser to the financial services sector, says businesses can pay a long-term price for signing up clients for short-term gains.

Understanding what a ‘good client’ actually is to you.

When weighing up would-be clients, it all comes down to one question for Bell: “Can I forge a good adviser-client relationship with the person walking in the door?” If not, resist the urge to take them on.

“That’s the number-one driver and, as good as you are technically and professionally, it’s the relationship that the client has with you that’s most important,” Bell says.

Make sure there is mutual respect, he says, confirm that your products and services meet the needs of the new client, and be reasonably sure they will listen to your advice.

Explain your service offering

Bell says it is crucial to articulate your value proposition to a potential client, then explain your service offering and fee structures. “And if they hesitate anywhere along that line, then it may be better to recommend an alternative adviser.”

Do your due diligence

The adviser and the client should “evaluate each other”, according to Bell, through a robust fact-finding and discovery process. Such due diligence should be the first stage of ongoing communication – make it frequent, meaningful and relevant – that underpins the adviser-client relationship.

Assess why you and your best clients work well together

Bell suggests examining your current client base and determining which ones are ‘A-class’ – not just in terms of revenue but with regard to relationships. What do you like about them? How do they enhance your practice?

“Those key features are what I’d be looking for with a new client coming in the door.”

Ensure clients have compatible values

“Over time most small businesses evolve, and most start from a small or zero base. When you’re trying to survive you’ll invariably accept most people who come in the door.”

However it is crucial that you can be confident your clients will heed and implement your advice, and be comfortable paying your fee in a timely fashion. Treat your clients with respect, says Bell.

As part of a review of clients, Bell’s advice is to assess whether clients who were taken on in the past are still compatible with your business’s service offering. “If I determine that a client doesn’t fit my offer today, I’d try to find a way to move them to someone who can help them.”

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Important: This article has been prepared without taking account of the objectives, financial or taxation situation or needs of any particular individual. Before acting on the information, you should consider its appropriateness to your circumstances and if necessary, seek appropriate professional advice. Any information used in this article is for illustrative purposes only. Terry Bell is not a member of the Commonwealth Bank of Australia Group of Companies (the Group) and the content or any view expressed by Terry Bell does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. CBA, nor members of the Group accept any liability for losses or damage arising from any reliance on external parties their products, services and material. Past performance is no guarantee of future performance.