Kitces amp Carl Ep 27 Handling The Required Minimum Conversation Without Being Awkward

15 Feb    Investing News

Many financial advisors have asset minimums to ensure that they generate enough revenue from each client to be compensated appropriately for the value they provide (and the business cost to deliver it). But when it comes to having conversations about net worth with prospective clients to find out if they qualify for those minimums – especially those who are friends and family – the situation can quickly become awkward given the highly personal relationship individuals have with their money.

In our 27th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards talk about some ways to broach the sensitive and potentially difficult conversation about assets and net worth with prospective clients, and how to gracefully defer from taking on prospective clients who don’t meet the firms’ requisite minimums. Because even while the natural inclination for many financial advisors is to help anyone who asks, regardless of net worth, doing so often becomes increasingly difficult as an advisor’s firm grows and the capacity to spend time with clients who don’t actually meet their minimum fees becomes smaller and, in many cases, non-existent.

The first issue to consider when requiring asset minimums is simply to recognize that it’s not always apparent who may qualify (or not), which means it’s crucial to meet with prospects, conduct an initial discovery meeting to learn about goals and values, and to get a rough idea of the prospect’s balance sheet to safeguard against making premature assumptions about what the client is really worth. And in the event that a client does not meet the firm’s minimums, the advisor can still conduct a brief follow-up meeting to provide a few basic recommendations and resources to the prospect without much effort, and then describe to the prospect what the firm’s typical clientele generally looks like and what the minimum fees are… a simple act of goodwill to help the client, and also an effective marketing strategy, as prospects who are grateful for the guidance they received from the advisor may still be able to refer people in their network who are appropriate clients (having been given a description of who the firm does work with, in the process of being helped themselves)!

However, while spending time with prospective clients and running through a complete discovery meeting can be a rewarding process for both the client (for the free guidance they receive) and the advisor (for the opportunity to help someone in need and the creation of a new, potential referral source), it is also a time-consuming process and an advisor’s capacity may not often permit them to meet with all prospects without some screening mechanism in place. One potential remedy is to help people better understand who the firm works with before even reaching out to the advisor… which can be achieved through the firm’s website. Details about the typical clientele or specific niche served by the firm, together with the firm’s asset minimums and fees published directly for all to see, can help deter unsuitable prospects from reaching out to the firm in the first place (effectively allowing them to self-select out themselves). And including some potential resources (e.g., books, white papers, etc.) for individuals who may not be a good fit can again leave the individual with something of value from the firm, even though they may not be a suitable client.

Ultimately, the key point is that even though the ‘required minimum’ conversation can be awkward, there are ways for financial advisors to have these discussions as a meaningful discovery process that can even serve as an effective marketing strategy… and even (briefly and time efficiently) help those who might not be ideal clients in the process. Furthermore, maintaining a website that includes a profile of the ‘ideal client’, together with a clear description of the firms’ fees, can also keep discovery meetings with prospects who are unable to meet the firm’s required minimums to a manageable minimum!

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