What You'll Learn In Today's Episode:

  • Reasons why advisors are hesitant to give up clients.
  • How to give yourself the freedom to replace clients.
  • The difference between clients you fire and clients you graduate.
  • How to calculate your hourly rate.
  • The importance of always being thorough and thoughtful—even in confrontational transitions.
  • Who to fire and who to not fire.
  • The role of setting expectations.

We often end up with an emotional connection to our clients, which can make it challenging to part ways with them—even if it’s for the best. So today Matt and Micah are discussing how and when to “fire” a client. They’ll cover everything from the reasons why advisors struggle to give up clients to various techniques for making a clean cut.

Listen in as Matt and Micah talk about the headspace that clients can take up—especially the particularly toxic or difficult ones—and why it’s often worth the income loss or uncomfortable situation to move them out. You will learn how important it is for you to focus on the value that you’re delivering, whether you are truly the best fit for this client under the circumstances, and why they might actually be better off with another advisor.

Resources In Today's Episode:

Read the Transcript Below:

This is The Perfect RIA, in case you didn’t know. Bringing you all the strategies to help your business grow. Are you happy? Are you satisfied? Are you hanging on the edge of your seat? Sit back and listen in while you feel the beat. Another myth bites the dust…

Micah Shilanski: Welcome back to the Perfect RIA podcast. I’m your cohost, Micah Shilanski, and with me as usual is the legendary Matthew Jarvis, brought to you from the front seat of his car. Matthew, what’s going on?

Matthew Jarvis: Well I’m out here in Coeur d’Alene Idaho, getting ready to spend a day mountain biking with my wife Jackie, so pretty excited about that. How about you Micah? Where are you located? I see that you’re also in your RV.

Micah Shilanski: Super cool. Yeah, we’re in our RV right now. So I’ve got a little bit of a surge week that’s coming up. So this is the last of it. We’re just kind of north of Anchorage by about an hour and a half or so, so still having a lot of fun.

Matthew Jarvis: That’s really great, that’s really great. Well, we want to start this episode by doing a shoutout to our dear friend, or someone we wish was a dear friend, Elon Musk. Elon, if you’re listening, please be sure to get the Starlink satellite network setup quickly. Micah and I will be glad to be your first customers at almost any price. Starlink by Elon Musk, hopefully coming soon to the Perfect RIA podcast. I’m just going to throw it out there, we will test the living crap out of this thing, right? I’ll put it in the plane, we’ll do it in the RV, you’ll do it on a mountain bike, rock climbing, we will test the hell out of this just to make sure it’s a good, solid network for you. So not just a one way relationship, right? Always adding value. That’s right, massive value. We will stream massive amounts of data.

Well in case Elon’s not listening today, I’m sure he’s got a lot of things to do running multiple companies, we want to talk today about a topic we’ve covered in the past on the Perfect RIA podcast, but something that keeps coming up. Came up the other day in the Backstage Pass, it comes up when we talk to advisors. And that is the question of how do I fire a client, or how do I know when I should fire a client? Micah, what are some of your initial thoughts in this area? Again, I know it’s something we’ve talked about quite a bit.

Micah Shilanski: This is a great one to talk about, right? Because sometimes we have such an emotional connection to our clients, rightly so. So it becomes challenging to fire them, to graduate them, whatever terminology you want to use. But also, it’s what’s the greater good here, right? So what’s actually better for the client? And if you’re not able to help them, if you’re not able to work with them to achieve their goals, you’re a hindrance. You’re not helping, right? Everything counts. Either it helps or it hurts, but everything counts. So where are you? So sometimes advisors really cling onto a couple of things. One is they’ll get a mentality that they can’t let someone go because it’s Bob’s and Sue’s great-great-great-grandson with a two thousand dollar IRA, and they have to take that on, or it’s potentially a high-revenue client but it’s just a giant pain in the ass and a jerk to work with and it makes your staff and life a living hell, right? But they feel they can’t get rid of it. And of course, that’s a total victim mindset. You can, and you’ve got to set some very clear rules for who you want to work with. And once you set those rules, it becomes very self-evident who needs to be on the outside.

Matthew Jarvis: Yeah Micah, I would add one other reason why advisors, myself included, are hesitant to give up clients, and that’s this idea of you’re saying, “Hey, I’m trying to get to a million dollar revenue,” or whatever your revenue number is. “If I give up a client, no matter the difficulty or the trivial dollar amount, that’s me going backwards, and I worked too hard to get to this point. I don’t want to take a step backwards.” So I know that at least for me, that can be a real struggle. Saying, “Boy, this is going to take away from my financial goals.” But Micah, in our experience, really the opposite is true. By freeing up that seat on the bus, or on the ark depending on the analogy you want to use, freeing up that mental headspace will actually catapult your practice. It’s sort of like delegation. It’s like saying, “Hey, I can’t afford to delegate until I get to this point,” and the truth is you’ll never get to that point if you don’t delegate and you’ll never get to that level of your practice if you hang onto people who aren’t a good fit.

Micah Shilanski: Absolutely. Your head trash, you’re taking up so much mental space with them just as you said. And one of the things that coach Joe Lucas brings up from time to time is when you have clients, especially larger clients that come in, make sure no client is generating more than 5% of your revenue that’s going to be there, because that gives us freedom to replace them, right? And I’ve seen some practices where some clients are like 25, 30% of your revenue, right? Yeah, and they’re not nice clients, either. And now it becomes really painful for the advisor to graduate them, to fire them, and take a massive revenue hit. And so now they feel trapped. Well, set yourself up for success. You’re going to bring in some large clients, awesome. Bring in multiple large clients, right? And by no means going above that 5% rule so you still have flexibility and you feel more in control.

Matthew Jarvis: Yeah, yeah. Well let’s break this up into two categories Micah. Let’s talk about clients that need to be fired and clients that can be graduated. And this is a bit of a semantics play, but Micah, you and I talked about this a little bit before the podcast. And we just kind of decided that the kind of clients that you fire are clients that are causing egregious issues in your firm. These are clients… and just to cite a few examples, who are proposing unethical or illegal behavior, that would be an automatic fire. These are clients that are abusive to your staff, or are disrespectful for you. But Micah, you have even a higher bar for that. Benchmark’s not the right word, but a mindset for that, who needs to be fired.

Micah Shilanski: I tell clients when they’re onboarding, right? When they’re coming on, when we’re going over the contract. And I let them know that this is totally voluntary, we can both fire each other at any point in time. And my joke here is I say, look, if the light comes on my voicemail and I say, “Oh my gosh, I hope it’s not Jarvis calling me again,” right? Okay, this is a time that we need to go. We need to graduate our relationship, because we’re not helping out. So if I can’t add value in that case, that’s kind of that first thing that I’m looking for, because that is a warning sign. If I’m not looking forward to our phone calls, if I’m not looking forward to our meetings, that is a huge red flag that says, “This is going to lead to a problem.”

Matthew Jarvis: That’s interesting Micah that you explain that to prospects, right? And it’s almost like… I don’t want to say a takeaway, but it’s—I’m not going to sort of phone this in. If I’m not excited to be working with you, then we need to find a different option. And I think that really speaks to a level of commitment going in right away. It’s sort of like we say, “Hey listen, anytime that you don’t think our value is worth the fees, we should part ways.” You’re really setting the stage for, we’re going to do amazing work together, and as soon as we’re not doing amazing work, if I notice it before you do we’re going to part ways as friends.

Micah Shilanski: And think about this too, right? Because sometimes people ask me, because I do about 27, 30 appointments during our surge week. So sometimes I’ll get people asking me, I get this, “Is that even possible? Aren’t you exhausted, and how do you do all these meetings?” And by the way, we talked to someone else that smokes me in meetings the other day. We’re going to try to get him on the podcast. He does, what does he do? 20 in a day?

Matthew Jarvis: Yeah, yeah. In an afternoon. In an afternoon. It’s insane.

Micah Shilanski: Yeah, so we’re going to touch on that in a little bit. But I’m going to spin this a little bit, and this kind of gets into the firing a client aspect of it. Imagine if you had lunch plans, breakfast plans, whatever, with 30 of your closest friends that you were excited to go see and get updates on their life. Would you be dreading those meetings, or would it be rejuvenating? Would it be exciting to go and see them, right? When Jarvis, I know you and I are going to get together, I get excited. When we’re going to go to Mastermind, I get excited. Well, if you built a clientele that you’re excited to go seen work with, not only is that so exciting for you, but imagine how much value you want to deliver because you are so committed in a loving and exciting way to that relationship.

Matthew Jarvis: Yeah, it’s really important. It’s interesting Micah that you sort of mentioned almost as kind of a jest, you and I getting together, but I think the same rule applies to any relationships. And again, TPR’s primarily focused on your business, but it’s also on your life. There’s aspects of your life where, “I’m really dreading this activity,” that’s an activity that really needs to be looked at to be eliminated. But back to your point Micah, as far as surge meetings, we’re not making widgets here. All we have to deliver is our mental power. I don’t mean to sound like a psychic ability, but our mental powers. That’s pretty much it. And so if anything is going on in our practice or the client is draining that mental power, that’s a detriment to that client, to yourself, to your practice, to all of your other clients. You’re not doing anybody a service by begrudgingly keeping them as a client.

Micah Shilanski: Yeah. And one of the other things, I think you kind of mentioned it, but I want to highlight again Jarvis, kind of the cardinal sins so to speak of somebody who’s going to trigger a firing is any client that is rude or goes off on staff, right? We all have bad days, we all have little events that we’re going to get irritated because there was a mistake made, and that’s not what I’m talking about. But if you ever had a client that really goes off on staff, that is an automatic firing in my book. If you have an issue, you bring it. And again, we explain this in our onboarding process. But if you have an issue, you bring it up with me. That’s what I’m here for, that’s not what they’re here for. But our team is so important to make sure that they’re working to provide value. And if they have a client they can’t stand, again, this is going to cause a huge cog in the wheel of their mental bandwidth.

Matthew Jarvis: Like you said, I’ll write somebody off as having a bad day, or maybe two bad days if some major life event just happened. But otherwise, if someone is disrespectful to my team or disrespectful to me, then that’s kind of end of the road. And I don’t know about, Micah I’m curious to your approach. I won’t even really address it with people. I’ll just say, “Hey, it’s just really not a good fit.” Because I don’t want to get into this. And maybe this is a Seattle thing, this passive aggressive, “You misunderstood me,” blah, blah, blah. Nope. If you don’t have the level of respect that you don’t bring your bad days to me, then we’re not a good fit for each other.

Micah Shilanski: Yeah, exactly. So let’s talk about that. Let’s pivot to the graduating conversation, which I think is a lot more common. But let’s talk about this. Jarvis, if they break any one of these rules right, and then all of a sudden they’re not a good fit and it’s a fire, what do you do?

Matthew Jarvis: Yeah, so I’ve got a letter that I send them. Because again, you and I jest about this all the time. You like to take the suffering in person, I like to take it from a distance. My letter, and it’s available on the Backstage Pass, but in the back of Nick Murray’s book, Behavioral Investment Counseling, he has an example of a great fire letter. And it really just goes into, “Hey, I’m trying to do my best work for my clients and my family, and I’ve realized I can’t serve you the way that you need, and so I’m resigning from the relationship. And I’ve found somebody else that you can talk to, and I’ll do whatever I can to facilitate the transfer, and I wish you all the best.” And that’s my approach as well. And maybe on the one hand that’s a cowardly approach, but on the other hand I just don’t want the confrontation, I don’t want to deal with it. I just want to be separated.

Micah Shilanski: Yeah, I like that. I’ve sent out letters, and we can post those as well in Backstage Pass, have been summary letters making sure they know after our telephone call that we’ve graduated, we’ve terminated our relationship, et cetera. But one of the things that I want to point out, even if this is a fire, we had one thing where we terminated a relationship with a client and then they were going to move all of their money to a USAA account. Okay, fine. They can’t do it anymore, right? So funny, it’s actually now going all back to Schwab. But anyway, they were moving all of their money to a USAA account, and they were doing it wrong. They were liquidating everything, a check was being sent to them, then they were going to go open up an account. So even after I terminated them, when these instructions came through our office, I actually called the client, former client, said, “Hey, this is maybe not what you want to do.” And I kind of explained to them how the process should work and what they should be doing with this.

So I would throw that out there, too, right? We are still professionals. We are still going to deliver massive value that’s going to be there. And it was a little bit confrontational when we ended the relationship, and he was grateful that I had actually picked up the phone and called him and helped him out with this. So again, I’m going to give that value as much as I can, even if it’s confrontational, because i don’t want them to end up in a bad situation.

Matthew Jarvis: No, and I look at this from a bit of a self-serving angle too. Anytime you’re transitioning a relationship, graduating, firing, whatever, you’re at a very high risk of getting a complaint. That’s because pissed people are upset in that period of time. They feel abandoned, whatever the case may be. And I want to eliminate any channels for a complaint. So again, I want to take the highest road I can. Micah, to your point, I want to facilitate their transfer, I want to refund their fees. I don’t want to give them any reason to say, “Boy, Matt, he really hurt my feelings and I’m going to stick it to him.” Because there’s so much leverage and so much damage that can be done. I want to take the highest of high roads.

Micah Shilanski: And even with that, and I like the aspect of a complaint, Jarvis. I know you and I are on the same path on this, but just to be clear. It’s not just that potential complaint that’s out there. When I lay my head on the pillow at night, do I feel I did the right thing? And if I don’t, man, I am not going to be able to sleep. I’m going to be tossing and turning, and worrying about it. So always taking that extra step that’s there.

Matthew Jarvis: Today’s podcast is brought to you by Surge Meetings. Feel like you don’t have enough time in the day or the week? Constantly putting out fires that keep you from delivering massive value to your clients? We have great news for you. The listeners of the Perfect RIA podcast can now access our time management video training series for free. Can’t believe it’s free, do we really do free things? For free by visiting tprdev0.wpengine.com/time, and entering the code “WHATTIMEISIT” to get access today. See you there.

Micah Shilanski: So I think that kind of wraps up firing clients. Anything else we need to talk about there before we move on to the graduation conversation?

Matthew Jarvis: No, and I think this is a great transition Micah, because you mentioned this being able to sleep well at night. And so when a client’s rude to you, it’s kind of easy to be like, “Well hey, listen, we’re just not a good fit. You need to go away. And we’ll take the high road and that will be great and I can sleep well at night.” But what about a client who’s so nice to you right, or maybe someone who’s been with you since day one, and you’re looking and you’re saying, “Boy, where my practice is now is not a good fit for you,” either because of your specialty that you’ve developed or quite honestly because of your minimum fee levels. That can be a much trickier head trash game to play in there.

Micah Shilanski: It really can, and this is one where I think Jarvis and I are going to have slightly different approaches but solving for the same things that really are going to be here. This is one that really gets me wrapped up. And I can jump right in that camp of saying, “They were with me from day one. They’ve always stuck with me. They’ve followed my advice,” blah, blah, blah, blah, blah. And I can really make justifications for limiting my practice growth because of this. If you’re resonating with that, what I’d drop there is there’s more than one option here, right? This isn’t just an option of solely fire them and kick them to the curb, and now they’re screwed for the rest of their life, or you’re going to limit your practice and it’s never going to grow. That’s not the decision that you have. There’s ways that you can build this to work, and that’s what we’re going to talk about on our graduation.

Matthew Jarvis: Yeah, yeah. There really is. In fact, the terminology that gets thrown around in our office is throwing them to the wolves, right? So there was a debate in our office for a while about graduating some clients, and some team members pushed back and said, “We’re just throwing them to the wolves.” And initially, I took some real reservation with that, but then I was able to with the team and with myself and say, “Am I the only good planner in the entire world?” Well, I’d like to think so, but obviously that’s not the case. There’s a lot of great planners out there, and there’s a lot of great aspiring planners who would take really good care of what for you is not an unprofitable client. And so this isn’t you saying, “Hey, call 1-900-GETRIPPEDOFF stockbroker.” This is you saying, “Hey, I found an advisor who’s a better fit for you who’s going to take better care of you than I would,” and you can say that with all integrity.

Now, does that mean that they are as financially successful as you? Maybe not. Does it mean they’re as smart and as specialized? Probably not. But for that client, they’re going to take better care of them if we’re being honest than you are. Sorry, that was a bit of a rant on that.

Micah Shilanski: No, no. It was really good. So Jarvis, alas, I’m not as fast at pulling up other people’s ADVs as you are, so I’m going to have to just take your word on this one. So when you sent out that letter, that graduation letter, or you have talked to a client and said, “Hey, these are some other advisors that would be better,” how many of them turned around and filed a complaint against you for doing that?

Matthew Jarvis: None of them did, none of them did. I did have one client that we did fire, not graduate, and she called and was very upset. And I won’t go into detail, but she was very upset about that. But again, I took that call. I figured it was going to come in, and I said, “Colleen, when this call comes in, put it right to me.” I took the call, I absorbed all of the heat. It was a lot of misdirected frustration. I said, “Yeah, I totally understand. I see how this is totally frustrating. Yeah, I’m really sorry about this situation. But like I said in the letter, I’m trying to spend more time with my family and so I’m limiting the number of clients I work with, and unfortunately I’m just not able to serve you the way that you need. But great news, I have found a really great advisor that I think would be a good fit for you.” Now, fire clients are a little tricker on that, because I don’t want to give another advisor a client I don’t like. So I have to really warn them what they’re getting into. But again, there’s advisors that thrive on that.

Micah Shilanski: There’s a couple advisors down the street that I know the names of that… I’m just kidding. I’m just kidding. So there’s a couple things that you need to think about when you’re graduating a client, right? And I think the biggest thing with this is we don’t know a client needs to be graduated until we know really what our niche is, what our market is, and what our focus is. So we’re not going to talk too much about this in this pod. We have plenty of other content on that, of course on Backstage Pass there’s a bunch. But you first need to set out with who is your ideal client that you can deliver massive value for. The key here is massive value.

The question isn’t can you help them, because that answer is yes to 99% of people that will walk through the door, because you know what the heck you’re doing, right? Our skills are very broad, and we can help in a whole lot of ways. So this is not the question. The question is, who do you deliver the most value to, the massive value? And this is now your profile, right? This is your avatar of clients that you want to focus on. So you need to know who that is. You need to know how much revenue you need to be making to operate your firm successfully. And it’s shocking how many advisors out there do not know what their average revenue is generated for a client. They don’t know what their average hourly rate is they generate when they’re working, now how to benchmark that, right?

Real quick, quickest way to know your hourly rate, how much money do you want to make this year, divide it by how much time do you want to work this year, equals your hourly rate. Money divided by time equals your hourly rate, and that’s what you need to make sure everyone is aspiring to client-wise to make sure you can meet your goals.

Matthew Jarvis: Yeah. Another way you can slice that is target revenue, and then target number of clients. You say I want a million dollars in revenue, I want to have 100 clients. Great, it’s $10 thousand a client. And then I would usually set thresholds relative to that. So let’s say that’s your number. $10 thousand average client revenue. Then I would say, great, anybody who’s less than half that number, so anybody below five thousand dollars, they need to be graduated, because I’m not going to get to my million dollar number if I’m full of one thousand, two thousand dollar clients.

Micah Shilanski: Let’s throw in here, and Jarvis you can definitely throw this back on me if I’m looking at this wrong. That’ll be a fun discussion. What I’m not saying is you take some client that has been a client… I’ve got one that’s coming to mind, right? They’ve been an idea client. They’ve been great, everything has been working. He had a ton of medical issues, we had to spend a whole lot of money on different types of treatment on different medical treatment et cetera. They’ve fallen below the revenue minimum. They’re now in their 80s. I’m not going to turn around and fire them because they’re 15% off the revenue minimums, right? That’s not the point of what I’m talking about here. What we’re talking about is those one and two thousand dollar IRA accounts. We’re talking about the grandchildren that come in, someone walks in off the street, or a buddy that you meet out mountain biking, rock climbing, or shooting, that says, “Hey, I’m just starting out. I’ve got $500, I’ve got a thousand dollars, I’ve got a hundred grand,” right? If it’s below your minimum, right, “I have this money, what do I do with it.” It’s those people that all of a sudden could be very problematic.

Matthew Jarvis: Yeah. 100% agree Micah, 100% agree. And I’ve never set an official age cap, maybe that’s ageism, where I would not fire a client. But the situation you gave, we’re going to stay with them til their last dollar. And I run into advisors all the time, they say, “Well Matthew, I have 100 clients that, they’re paying me less than a thousand dollars a year.” Those have to go. You just can’t build a profitable practice. Unless you’re… his model is he has 600 clients, and he sees them once every other year. But he lets people know, “Hey, we’re only going to see each other once every other year. You’ll pretty much never be able to get ahold of me on the phone, but you can work with me.” And that’s just his model, and he has integrity around that. But if your model is a perfect RIA model where you’re saying, “Hey, I’m going to deliver massive value on a regular basis,” you’ve got to limit the number of clients and you have to start by only working with clients that can pay your fees.

Micah Shilanski: Amen. So let’s talk about that graduation conversation just a little bit, right? So one of the things that always works out really well is setting expectations from day one that’s going to be there, about when a prospect comes in, when a client comes in, what is the expectation of a good relationship? Now again, we talk about this in so many ways. When we go through our advisory agreement, you have an example of us walking through that, it’s what is our communication policy? What do I expect from the client? What do they expect from us, right? What is our termination policy? What is our fee… we go through all of this stuff setting this expectation from day one, and that’s so important. So if you haven’t done that, this would be a phenomenal action item is to take this, and how do you make sure clients are on that same page? I know it’s slightly off of our how do I fire a client kind of topic, but setting up those communication expectations, setting up those policy expectations with your client is huge.

Now, if you get someone that just had, again, that couple thousand dollar IRA account, what do you do with it? I’ll give one example Jarvis, and then poke holes in it and what am I doing wrong, or jump in and say what you would suggest our advisors do. But one of the things is sometimes I’ll have people come in that are aspirational clients, right? That means they’re not a current fit for us, they’re not going to work, but they’re great people. I enjoy chatting with them, we have a strong tie-in to the military so these could be military folks that are going to be coming into the office. So we’re going to come in and we’re going to sit down and meet with them. Now, again, 99% of these people are all paying a $500 fee to come in, so we are getting a fee from that. And we meet with them, and it’s just not an ideal fit that’s going to be there. So I have a couple of different things that I can do.

Number one, I could take them on as a full client, which is probably a bad idea, because the fee we’re going to charge does not justify the level of service which they would be getting, right? They’re just not there yet. That’s going to be there. I could send them down the street to another advisor, or I could outline homework assignments and tell them to go do A, B, and C, or call another advisor, or call me based on what they want to do. So option two or three is generally what I’m going to do. Now, we do have a limited amount of what we call pro bono work that we are going to do, that we are going to help some people in some ways because we want to be able to give back. But that is quantified. This isn’t an unlimited pro bono, and if we do pro bono, it’s pro bono. We’re not charging a fee, because I don’t want them on as a client, and I tell them they are not a client, right? I want this very clear, because I want our clients to know who our clientele is and who to attract.

And this is another thing, it’s law of attraction, right? If you start doing a lot of pro bono work and they think they’re clients, they’re going to send more people to you to help build your practice like this. And oh by the way, that’s building it the wrong direction. So you really got to set some rules around this and how it’s going to work.

Matthew Jarvis: I really like that. And I would suggest to the nation to have this in writing for yourself. Not on your website, but for yourself, say, “Hey, I’m going to have five pro bono clients.” Or, “Friday afternoon, that’s going to be my pro bono day. I’m going to partner with a local community organization and offer, or the library, and do pro bono financial planning.” But I want to highlight an option Micah that you did not mention, because it’s not an option that’s available. Which is, “Well, I’ll just work for them at a discounted fee.” Right? And it’s so easy to fall into that, “Hey, they can’t afford my $10 thousand minimum.” I know you did, and that’s why I want to pull it out. Because it’s not an option. But it’s easy to think, “Well, they can’t afford my $10 thousand fee, so I’ll just charge them two thousand.”

And that is, it’s a slippery slope. And stealing is too strong of a word, but you are giving them a discount at the expense of either your other clients and your other clients are subsidizing this person, and/or your family is subsidizing them, and neither is an acceptable option. And that is something I had to use to get over my head trash. Say hey, if I work with this person for a $300 a year fee, I need to go home and tell my wife, tell my kids, “Hey listen, we can’t go camping this weekend, because I want to work for $2 an hour.” I’d have to do that, and I didn’t want to do that. I didn’t want to have that discussion with my nine year old now and say, “Hey Calvin, sorry, I can’t go play with you today because I want to go work for $2 an hour today.” So whatever you need to do to get over that head trash, use it.

Micah Shilanski: And the other thing that has really come up with us is anytime… because before we did, right? Years and years ago before we learned these painful lessons, we did discount fees in situations like this, and we justified it in our own mind and whatnot. And there is not one time, not one time it did not blow up on me. So it is never a good idea, because A, you’re subsidizing, and B in my opinion, you’re creating a ticking time bomb for other issues.

Matthew Jarvis: That’s right, that’s right. Because it’s important to remember, and again, we want to take the high road on our mentality and our mindset. But every client you take on could potentially be the end of your career. Right? Every client could potentially be the complaint or the lawsuit that ends your practice. And so you need to really think, say, “Hey, is this worth, is $50 a year in 12b-1 worth potentially losing my practice?” The answer for me is no, it’s certainly not. And that’s again, focus on delivering massive value to who you’re invested for, but as a business owner, you need to think about the risk management side. Don’t take unnecessary risks in your practice.

Micah Shilanski: So let’s go down and explore that path a quick minute, because you’ve thrown in $50 in 12b-1 fees, or that other stuff. So I always like throwing this in a client perspective, right? So if we were the advisor and we’re talking one on one with a client, and a client was like hey, I want to go buy a new car, or I’m going to have this expense, or I’m going to make a job change, I’m going to take this revenue cut, what would we advise to them? Well we advise today to start living without that money, right? If you want a new car payment, sweet, go stick that in the bank account today if you’re going to get a car. If you’re going to take a 20% pay cut, start living on that 20% pay cut today and see what it’s like. So same thing for you advisors out there. If your mind is wrapped around, “I can’t give up that revenue,” give it up now. Stick it in a savings account. Just like we would tell a client to do. And now you’re going to notice all of a sudden one quarter later, you don’t really need that revenue. And that’s going to free up that mental trap that you’re in that you have to have this coming in.

Matthew Jarvis: Yeah, that’s a good reminder for all aspects of your practice, right? If you’re dependent… and not to sidebar on this, but I was working with an advisor one time and he said, “Matthew, I just want to make another $50 thousand a year of net revenue.” And I said, “Really, why is that?” And he said, “Well, I’m just barely squeaking by right now.” And I said, “Dave, you’re making $200 thousand of personal income. If you’re just barely squeaking by right now, 250 is not going to cut it.” And so we could have a whole discussion on not letting your lifestyle consume all your income, but that’s a good reminder, Micah.

Micah Shilanski: And the other thing we should be thinking about inside of this, another trap I think advisers are going to fall into with this, is saying, “I really don’t meet with the clients. It’s just revenue coming in.” So this doesn’t count, right? That’s right Jarvis, it doesn’t count. If the advisor doesn’t take any of your time, we can leave them on to get the revenue, right?

Matthew Jarvis: Absolutely not, but that is-

Micah Shilanski: Absolutely not.

Matthew Jarvis: … a mental trap that people fall into all the time.

Micah Shilanski: And I think it goes back to our comment about are you delivering massive value? This is the question. And those clients that are there, great people, yes they need help inside of there, but if they’re not your avatar and you cannot deliver massive value, you need to help them transition to someone that does so you can make sure you’re working with your niche, working with your clientele, delivering massive value on a continuing basis. And you’re going to have a happy life and a great practice.

Matthew Jarvis: Yeah. That’s 100% true. Perfect. Well Micah, this was really some good content. Should we jump into some action items for the nation, or do you have any final thoughts on this topic?

Micah Shilanski: Absolutely. Let’s jump into some action items.

Matthew Jarvis: So I would say action item number one, look through your list of clients and apply what I’m going to call the Micah rule. If there’s any clients, you see their name and you think, “Ugh, if they call in I really don’t want to talk to them,” they need to be graduated or fired, and do it this week. It’s really easy to say, “I’ll do it next month. I’ll do it next quarter. I’ll do it next year.” Go onto Backstage Pass, download the letter. If you’re not a Backstage Pass member, well sign up. Or get Nick Murray’s book, it’s in the back of that. But start graduating clients right away. I remember back in 2008, 2009 when I was transforming my practice, I had 200 clients that had to be graduated, and I did five a week until they were done. It was death by annoying cuts. But it transformed my practice.

Micah Shilanski: Yeah, yeah, it absolutely does. Action item number two, if you haven’t done this already, you need to create minimum revenue levels and graduate one client a week that does not fit into your avatar mix in your minimum revenue level that’s going to be there. I say revenue versus asset level. Whatever floats your boat, right? But what is that line? And the way I like to do this is you remove the client names from the list so you don’t see them and get emotional about it. You then get the dollar amounts, you then run it, and then you put a red line. Everyone that’s below it, now you see it. And say, great, what am I going to do? And how do you address this so you’re delivering massive value?

Matthew Jarvis: I would say related to that action item, you need to have a really clear path. And again, I like these things in writing. What happens when someone’s referred to you by your best client who doesn’t meet your minimum? How will you help that person? And the great news is it’s the same path for both groups, people who don’t meet your asset minimum anymore, your revenue minimum, or prospects who don’t meet your minimum. What options are available to them? Because simply saying, “Hey, go away,” that’s not going to work well for you short-term or long-term. But if you don’t have an option, you’re going to be tempted into saying, “No, that’s fine. I can take just one more. I’ll do a pro bono. Not a big deal.”

Micah Shilanski: Yeah. All right, action item number three is I’m going to say ask your team who is not a good fit. This isn’t just about you, it’s about your team as well. Who is the problem client that you may not think is a problem client, but absolutely is a problem client for the team, and how do you need to address it?

Matthew Jarvis: Yeah, and I would definitely approach your team with saying, “Hey, I was listening to the Perfect RIA podcast, and they said that every year we should fire one client who’s not a good fit. Who would you fire?” And you can preface that however you want, but point the gun at us a little bit, and that way they don’t feel like they’re getting trapped. You say, “Hey listen, Matt and Micah said we have to fire one client a year. The client we like the least. Who would that be?” And if they automatically are like, “Oh, it’s Dave and Sue,” oh, great. And if they say, “I don’t really know, there’s not really anybody,” okay. Well there may not be anybody, but make sure you’re giving them as much permission as possible to volunteer that name.

Micah Shilanski: Absolutely, absolutely. Awesome. Well this is so important, right? Make sure you’re jumping into this. Make sure you’re looking at your client list and you’re focusing on delivering that massive add. There’s a reason it’s in the top three of what you’ve got to do for a perfect RIA, and that starts with working with the right people. So you’ve got to get rid of the other people so you can make sure you’re cultivating and growing a phenomenal lifestyle practice.

Matthew Jarvis: I love it. Well Micah, it was a pleasure as always. And to the entire nation, until next time. Happy planning.

Micah Shilanski: Happy planning.

Hold on before we go. Something that you need to know. This isn’t tax, legal, or investment advice. That isn’t our intent. Information designed to change lives. Financial planning can make you thrive. Start today. Don’t think twice. Be a better husband, father, mother, and wife. The Perfect RIA. The Perfect RIA.

Recommended Podcast

Understanding Annuities and the Characteristics of Successful Leaders

Training in the annuity space and discipline for success.

See More

How to Achieve Success in 2 Steps

The Difference Between Wishing and Goal-Setting

See More

The Annuity Conversation with Guest Tracy Lownsberry [Episode 265]

Understanding annuities and strategies to help your clients.

See More

Contact Us