Being a financial advisor is about helping people with their finances. Which makes it very hard for most financial advisors to say “no” to those who ask for help. Especially given the business reality that at least some growth is usually essential to keep the advisory firm economically viable and sustaining. And for most financial advisors, growth opportunities and new prospective clients don’t come along very often.
Yet the challenge is that we are all constrained to the same limited number of hours in the day, week, month, and year… which means it’s simply not possible to say “yes” to everyone, forever. At some point, continuing to say “yes” simply means we take on so much that we can’t even do everything we said “yes” to. Or we end up saying “no” once we feel overwhelmed and out of time – where there’s no choice but to say “no”. Which means our “filter” for figuring out what to say yes and “no” to is “whoever asks me first gets a yes, and whoever asks me last gets a no”. And when you think about it, “who asks first” is not really a good way to decide how to allocate your precious limited time!
In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss why as financial advisors, we need to actively think about what kind of filters we use to say “no” to prospective clients and business opportunities, and how those filters tend to change over the course of our career and business growth as a financial advisor!
Of course, when most financial advisors get started, the reality is… you have a lot of time, and not a lot of clients. As a result, the filter for who to accept is usually little more than “anyone who can actually pay me anything“. However, as an advisory business continues to grow, eventually you reach a point where you’re seeing about all the clients that anyone has time to see (perhaps 75-100 clients?), and once you hit capacity, you simply can’t take on any new clients. At this point, revenue stops growing, and if you want to get it to start growing again, the optimal solution changes: now, it’s about getting paid more for each client you work with. Which means the second filter for deciding what to say “no” to, often becomes “am I getting paid enough for my time to work with this client?” At this stage, advisors typically start to target a value of their time (e.g., $150/hour, or $200/hour, or more), and use that as a filter to decide whether a relationship is profitable.
For a lot of advisors, the filter of “will this client pay me enough to be worth my time” is the last filter they’ll ever use or need (and they simply keep raising the dollar amount over time). But for advisors who are thinking longer term about how to build a business, this isn’t necessarily tje best filter. Because sometimes the client who pays the most or is the most profitable now isn’t necessarily the best long-term value for the business. For instance, clients who pay one-time commissions or planning fees aren’t necessarily as valuable as those who pay smaller-but-ongoing recurring retainer or AUM fees, and clients who have strong referral networks can similarly generate more long-term value for the business (through their referrals) even if they don’t pay as much for your time today. Which means considering that “long-term multiplier effect” of some prospective clients over others becomes an important filter to decide who to say yes or “no” to!
But eventually, the challenge that comes for some advisors is that we get to the point where we have the money we need to have “enough”. And suddenly, these filters about getting paid enough money, or generating long-term business value, stop “working” as effective filters to make us happy with how we’re spending our time. Instead, the filter shifts… often to a focus on an “ideal client profile”… such as those who not only pay you well, but those who are willing and happy to delegate, and actually show their appreciation for the value of your advice. In other words, the filter is no longer about whether it’s an economically viable client, but also whether it’s one who is fun and pleasant to work with in the first place. And some advisors even go a step further, applying an additional filter of their own core values, and filtering out any prospective client who doesn’t fit the advisor’s own core values.
Of course, much of the progression only happens as an advisor’s business becomes successful enough to enable it. Filtering based on core values won’t work very well for an advisor just getting started and who needs to grow their revenue, just as a filter based on revenue doesn’t work very well for those who already have the income they want and need. But ultimately, it is important to acknowledge that our time is limited, and we need some filter to determine what we say “no” to! If we don’t we’ll end up allocating our time based on saying “yes” to whoever asks first, which doesn’t work very well regardless of what stage our business is in!
source https://www.kitces.com/blog/financial-advisor-what-filter-say-no-prospective-clients-five-stages-career/?utm_source=rss&utm_medium=rss&utm_campaign=financial-advisor-what-filter-say-no-prospective-clients-five-stages-career
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