Firing a client seems counterintuitive, particularly if you’re trying to build a base of relationships and revenue. But as hard as terminating a paying customer can be, occasionally there are valid reasons for doing so. 

“There are always more clients out there, and that’s the lesson advisors have to learn,” said Meredith Gail Langus, FSCP, CLU, a 12-year MDRT member from White Plains, New York, USA, who has let a handful of clients go. “They’re so scared to give up a client, but it’s not worth your mental well-being of getting all worked up. Another client will come along.”

A client who argues that their accountant, their attorney or another advisor knows more than you is a warning that it’s probably time to end that relationship. Langus has had her share of clients who have taken incorrect information from another advisor, such as the deadline for contributing to a retirement account, and argue that she was wrong. In some cases, the pushback continued after she showed them third-party sources to back up what she was saying.

“If someone can’t trust me, I’m not doing business with them,” she said. “When someone starts arguing with me, I don’t want to work with that person. We can have conversations, but when I am showing someone accurate information, and they demonstrate they don’t trust me, then why are they working with me?”

Refusing to engage is another red flag. A client came to Langus with very aggressive allocations in a portfolio. Langus assessed her risk tolerance and recommended a conservative strategy based on the client’s goals that would also produce a steady stream of income. The client was onboard — that is until interest rates increased and some of her investments declined. Langus tried to remind the client about the long-term goals they agreed on and the importance of staying on track and riding through the market’s ups and downs.

“She wouldn’t talk to me on the phone. She only wanted to communicate via email. That’s a red flag,” Langus said, adding that she fired that client.

Kasey Massatti, MBA, a 13-year MDRT member from Lancaster, Ohio, USA, fired male clients who refused to work with a female advisor. They tended to be longtime clients of her business partner, Ronald E. Ruff, CPA, a 22-year MDRT member also from Lancaster. Even when she told them, “Ron and I worked on this plan together, and this is what we recommend,” they didn’t want to listen to what she had to say. They wanted Ruff to deliver the news directly to them, even though he is semiretired and not always available. When he eventually met with these clients, he supported the advice Massatti delivered. Having clients second-guess her advice wasted the firm’s time, so she let them go. “I don’t need to work with difficult clients who don’t appreciate or accept my advice. I do not need clients like that. I want for myself and for my staff a peaceful workplace with clients who value what we do and are appreciative,” Massatti said. “It’s just easier to ask them to move on.”

Travis D. Manning, CFP, CLU, a 15-year MDRT member from Caledonia, Ontario, Canada, had a client with a medium risk tolerance who said he would be happy if his mutual fund portfolio earned 7% annually. Over several years, Manning grew the portfolio substantially, yet the client complained one year because the value increased only 16% while his uncle’s investments grew by 18%. He also wanted to go all in on a riskier income trust investment. Manning reminded him several times about his risk tolerance and the goals they set earlier. He also warned that the Canada Revenue Agency was probably on the verge of changing the rules, which would negatively impact that type of investment.

“The final straw was when he called and was verbally abusive to my staff,” Manning said. “You can talk to me a certain way, but you can’t talk to my staff that way. So, we had a call with him.” Manning and the other advisor in the practice told the client that his behavior was unacceptable, and they would not be his advisors going forward. Three months later the government changed the rules, resulting in a probable 20% drop in the ex-client’s holdings if he had followed through on moving his mutual funds into the income trust.

“It was a relief to get rid of him,” Manning said. “He was starting to cause a lot of stress, but also it was nice for the staff to realize that they’re more important to me than a guy who’s got $2 million with me. It doesn’t matter how much money they have. If they’re not going to be respectful, and they’re not going to be nice to people who are doing a job for them, then I don’t want them.” 

He uses that example and a story about a client in her mid-70s who ultimately took $40,000 from her retirement account to buy bitcoin from an unlicensed online brokerage she had been communicating with via FaceTime. Manning pleaded with the client that cryptocurrency was way out of her risk category, that she would be taxed on the money she pulled out of her account and that bitcoin would have to generate an unrealistic return just to pay back the account and the tax penalty. Despite several discussions, she withdrew a third of her account to buy bitcoin. Manning fired her, as she had done so much damage to her nest egg that no matter how well he managed her remaining funds, it would never be enough.

“I use those experiences when I’m onboarding new clients,” Manning said. “I’ll tell them all the horror stories of what happens when you have a plan and don’t stick to it, or when you do things the wrong way. I always stress to them, ‘If I see something I like, I’ll tell you. If I don’t, I’ll tell you. It’s as simple as that, and then it’s up to you to make a decision. I’ll never tell you that you can’t cash out your own money, but I will tell you if it’s a really bad idea and it’s going to hurt you for the rest of your life.’”