"Problem Clients": The Ultimate Oxymoron

Sample 2020

From the December 2019 issue

OUR INDUSTRY SEEMS TO ME UNIQUE—AND CERTAINLY NOT in a good way—in the volume of practice management literature which is regularly turned out by people who have never practiced. Indeed, I can't think of any other profession in which this is the case.

One of the staple themes of these blogs, essays and white papers is how to handle, and I quote, “problem clients.” The suggestions posited are invariably wrong, and often disastrously so. Well, they would have to be: they are premised on the absurd notion that there even exists such a phenomenon as the “problem client.”

But in fact—like “water landing,” “settled science” and “short-sleeve dress shirt”—the phrase “problem client” is an oxymoron. I would go so far as to say that, in our little world, it is (or certainly ought to be) the ultimate oxymoron.

This becomes clear the moment we remind ourselves of the most practical working definition of the term “client.” To wit: a client is a person who follows your advice for no other essential reason than that it is your advice. He/she may certainly require, and undoubtedly deserves, your full explanation of your recommendations. But in the end, you—the Behavioral Investment Counselor—are not asking to be understood; you are insisting on being believed, which is an entirely different thing.

Moreover, you decline ever to assume a burden of “proof,” not least because there are no facts about the future. And you ought never to be in the position of straining to convince anyone of anything: your passion, conviction and manifest sincerity have to be enough.

When they are not, you certainly have a problem. But—and here again is the point of this little essay—you don't have a client, as we have chosen to define that term. A person can be a client, or he can be a problem, but he can never be both.

Next, accept (nay, embrace) the inarguable truth that the continued presence inside your practice of a problem person is not his fault, and that therefore you have no valid reason to focus your vexation on him. He is there because you have allowed him to stay there—and to consume time and energy that, as you know deep down, you should be expending on genuine clients, or on prospective clients.

Ah, but it is the dearth (if not the absence) of prospective clients that must ultimately be the issue here—the essence of why you continue to cast your pearls before swine. Why would you, against all reason and logic, continue trying to serve someone who clearly refuses to be well served by you? Who doesn't follow your advice, who second-guesses it, who never refers you, who snipes at your fee, and who doesn't give any indication of even liking you? There can be only one reason: because you don't believe you can replace him.

QED: The continued presence in your professional life of a problem person (or people) is prima facie evidence of the breakdown of your client acquisition discipline. The more problem people, the more complete the breakdown. It's a law of nature.

The profession of personal financial advisory is a wonderfully simple and straightforward one. Indeed, it has only two elements: client acquisition, and everything else. Client acquisition is the uncaused cause of all success, and even of professional happiness. We love to do good for people, and we love doing well by doing good. That's why we came into the business. But first we have to find people who will accept and even cherish our doing good for them.

One of the many benefits of a robust client acquisition discipline is that it washes out the problem people. You let them go because you're having too much fun, and making too much money, bringing delightful new people under your stewardship. It's the difference between a clear, fast-flowing stream and a fetid, stagnant pond. Prospecting (however you define the term) keeps you sharp, fresh and positive. (Not incidentally, it also earns you the respect of your team.) Prospecting is love; the avoidance of prospecting is fear (read your Game of Numbers and, while you're at it, The War of Art).

If and to the extent that any of the foregoing applies to you—much less causes you to wince in pain—you know what Job One is for 2020. Allow me to suggest a focus for your renewed efforts.

There are 10,000 people retiring in this country today, and there will continue to be so at least through 2029, the year the youngest Baby Boomer turns 65. Looked at another way: there were, when the sun came up over the republic this morning, about 40 million people walking around who find themselves between their 50th birthdays and their retirement dates—the age at which concern about retirement saving begins to verge on panic. OK, forget 20 million of them; they're going to end up living on Social Security.The other 20 million own a huge and growing slug of the retirement savings in the U.S., which currently sums to about 150% of GDP!

Does this sound like a prospect pool worth working? Well wait, because I'm just getting warmed up:

1. These people do not have a plan. They do not even know, with any precision, what sum of capital they'll need to accumulate in order to support three decades of a lifestyle-sustaining income, and then leave a meaningful legacy. Since you do know how to calculate that sum, would you consider offering that service to more people, out of simple human kindness? (Or would that be too much like p-p-prospecting?)

2. They are investing for retirement in all the wrong things. It has been reliably estimated that by 2020 the amount of 401(k) money invested in target date funds—those which systematically take people out of the only asset class that can keep them alive in a 30-year retirement—will be $4 trillion, or half of all 401(k) balances. Might you, out of pity if nothing else, step up your efforts to bring this to your community's attention? (Or would that
trigger unbearable spasms of “fear of rejection,” whatever the hell that is?)

Of course, you needn't (and in fact mustn't) wait for the healing waters of a revivified client acquisition discipline to clean out your practice. There is a passive as well as an active way of jump-starting that process.

(a) Passive: Starting this morning, stop contacting people to whom you've made important strategic recommendations, and who have not implemented them. Just go silent. No “regularly scheduled follow-up,” no annual report, no nothing. Have the minimal self-respect it takes to say, “I've given my very best advice, and it's brilliant. That advice has been turned aside for some ridiculous reason (“market's too high”), or simply ignored. I'm done.”

The next contact you have with such a person, if there is one, must be initiated by him/her. If he/she asks for advice, which doesn't seem likely, simply state that it is the same as the advice you gave last time you spoke. Repeat its key points, then politely ask for permission to go ahead. If the person demurs, invite him/her to find another advisor.

(b) Active: This Friday, the day after Thanksgiving, fire somebody. It doesn't have to be your most obstreperous or passive aggressive non-client—that will come later. Rather, it's in the nature of a practice drill, just to get you back in touch with the rush of self-esteem we invariably get when we dismiss an undeserving person. Then—let's say a week later—fire the most malignant person in your book. (See Scripts #45 and/or November 3 in Around the Year.) Note: if that person is also the largest account you have, ignore the foregoing instruction and fire him/her right this minute. There isn't a moment to lose. Your self-esteem demands it.

Or stay stuck. But acknowledge that you have made the conscious decision to stay stuck, and that no one else is to be blamed or held responsible for that terrible decision.