Welcome to Day 10 of our Referral Clinic and Blog-a-thon. We asked advisors to send us their toughest referral challenges. Now we're featuring the best, along with solutions from top referral experts and veteran financial advisors.
Today's winning question comes from Edward K., a regional advisor from Atlanta. Thanks, Edward!
Top advisor Gregory D. Gardner, CFP will tackle Edward's question. Greg is president of Dallas-based The Gardner Group, a comprehensive wealth management firm specializing in high net worth investors. Gardner is also actively involved with his alma mater, Southern Methodist University, where he played football. He is the chairman of Planned Giving for SMU Athletics, and also serves on the university's Planned Giving Board.
Question: "I've always tried to paint a vivid picture when I tell my clients what kind of new clients I'm seeking. I'll even say a minimum asset size of $200,000. I still continue to get some referrals with accounts under $100k. How do I decline to work with these folks without creating ill will with the referring clients?"
Greg Gardner's answer: I went through a phase of being referred "downward" by some of my better clients. We were getting a lot of referrals, but they were introducing me to their debt-ridden children and administrative assistants. We were doing a lot of charity work, explaining how to get out of credit card debt, etc.
After re-reading Nick Murray's The New Financial Advisor, I remembered why it was so important to stick to my firm minimum. For every client I brought on under $400,000… the next one would have to be that much larger. That made me reiterate my value proposition with my very best clients. For every minute I'm dealing with someone with $50,000... I'm not dealing with you.
I have taken on several steps to help improve this situation. I've done a better job lately letting clients know who we're going to work with and who we're not. We reworked our brand image to make them understand they were referring people not just to me, but to a process and a company. I explain to them how many families I believe we can manage. 250 relationships is our magic number. I tell them not to worry, we still have room to grow. It puts them at ease. They don't want to be passed on to paraplanner for their investment questions.
Unfortunately, the downward referral still happens from time to time. One client referred me to one of his employees, a guy making $75,000 who had $35,000 in assets. Taking on that person didn't make sense. I still talked to the referral on phone for an hour. I gave him some free advice, but I didn't take him on. I told my client I work with people like him, who have $1 million in net worth and $500,000 in investable assets.
That being said, you gotta take the children of your clients--regardless of account size. I always meet with relatives of clients. From there, I usually spend 3-5 hours educating them on why they should NOT work with me until they are out of debt, investing faithfully in their 401(k), and some financial basics are established. This eliminates the operational headaches that smaller clients often bring us.
Next, I have brought on a junior wealth advisor to help with these smaller clients, if and when it makes sense. We also employ technology. Lower-tiered clients who come in via referral often report surprise at the high level of contact we provide--weekly e-mail market updates, a monthly electronic newsletter, and an annual face-to-face review. Based on their experiences at other firms, they didn't think we'd have time for them. Even clients with $10,000 invested with me are getting contacted by us frequently. They can opt out if they want to, but with technology, we can deliver that level of service at no additional cost or time commitment.
So, I have the technology and systems in place to handle the smaller accounts. However, just like you, I only have 168 hours in the week.
Got questions or thoughts about today's challenge or Greg's response? Post a comment.
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