The perennial problem facing financial advisors throughout their careers (and especially at the beginning) is simply getting in front of prospective clients… and then convincing them to actually hire you and pay for your great advice. However, for those advisors who eventually reach the point where their business is sustainable, and have clients who understand the value that a “real” financial advisor brings to the table, the problem can easily morph from not having enough clients to keep the lights on… to having too many clients to be able to serve effectively (and no remaining capacity to add more and grow further).
Because the reality is that we can only do so much before our calendars (and our brains) reach their limits. It’s at that point where the most obvious answer is to start hiring some team members to help. But that solution can create all sorts of new challenges, and there are plenty of advisors aren’t interested in all the other stuff that comes along with hiring and managing employees… and find that they’re stuck as a result. They don’t have room for more clients, and they’re not interested in hiring and managing employees to create more capacity. And so the question then becomes: how can you, as a financial advisor, create room in your practice to be able to start growing again, especially if you do not want to increase your staff headcount (and management responsibilities) in the process?
In our tenth episode of “Kitces & Carl”, Michael Kitces and financial advisor communication expert Carl Richards sit down to discuss some reasons you may need to start transitioning long-standing clients (some of whom may have given you a shot early on when no one else would, but consequently pay you far less than what it takes to service them) to make room so you can help others, some practical steps for communicating such a transition to those clients, and why arguably it’s your duty to do so… in order to ensure that all of your clients are getting the level of service they deserve.
As a starting point, it’s important to recognize that creating more capacity in your firm by transitioning away some long-standing clients isn’t about just booting those clients to the curb for the sole purpose of finding other, more profitable clients. But the reality is that the clients who you’ve “outgrown” would probably be better served somewhere else anyway. Or put more simply, your “C” clients are almost always someone else’s “A” clients. Which means transitioning them can be win-win-win for you (creating capacity), for the client (receiving better service as an A client), and for the other advisor (who may be thrilled to grow with the clients that aren’t a good fit for you anyway now!).
That still doesn’t solve the problem, though, of communicating this to your clients, some of whom might well have their feelings hurt by your decision. Practical ways of effecting this transition include: raising your minimum fees (in order to serve your clients well, and do all the things you do for them through the year) and letting the client decide for themselves if they value your (higher-fee) advice enough to continue on as your client, sitting down and simply telling them that you’re changing the direction of the firm and (with their blessing) would like to facilitate their transition to another advisor who’ll be a great fit for them, or simply telling them that you’ve been examining all of the relationships in your practice and feel that you’re simply not a good fit for them at this point in their lives.
Because at the end of the day, you are running an advisory business, and that’s nothing to be ashamed of. Taking on the responsibility of advising clients on the best way for them to manage, grow, and use their life savings is the very mission of that business, and ultimately you have to ensure that the direction of your practice is aligned with what your clients need… and if it’s not, it’s your job to tell them.
***Editor’s Note: Can’t get enough of Kitces & Carl? Neither can we, which is why we’ve released it as a podcast as well! Check it out on all the usual podcast platforms, including Apple Podcasts (iTunes), Spotify, and Stitcher.
Kitces & Carl Video Transcript
Michael: Welcome, Carl.
Carl: Oh, greetings, Michael. I’m so excited to be here, it’s the highlight of my week.
Michael: Welcome back. Welcome back. What have you been up to for the past week or two, since our last round of this?
Carl: Yeah. Yeah. Just so many fun conversations right now. It just feels to me like there’s a lot of cool stuff going on in the industry, so we’re just focused on trying to capture as much as that as we can over at the Secret Society of Real Financial Advisors. So that’s been the focus the last couple of weeks.
Michael: So, maybe the quick recap for whoever is new to us, joining in, can you just recap again what is Secret Society of Financial Advisors?
Carl: Yeah, first of all, you need to understand, I can’t remember when it was. I believe you were there. Were you on the panel? It was Tim Mauer and I, and, was it you on the panel at, what did they used to call it, Experience FPA?
Michael: Oh, yeah, FPA Experience? Yeah.
Carl: FPA retreat? It was the retreat one. And I made some comment, just like, “Yeah, it’s like there’s this secret society of real financial planners,” right? And we all had to run around and figure out what that meant. And ever since then, I’ve loved that phrase, but we’re trying to not make it so secret, right? So we’re building a whole series of online training programs for advisors to make this not so secret. So that’s what the society is. I think that the…
Michael: So for the subset of us that are really aggravated by all the other people who call themselves ‘financial advisors,’ but aren’t really financial advisors, but you really are a financial advisor, this is for you, you can get the real one.
Carl: Yeah. And what’s so frustrating about that is you can’t look it up. Try googling ‘real financial advisor’ and see what comes up, right? Unfortunately, there’s no…every time, in fact, I’ll just real quickly tell you this, Ron Lieber at “The New York Times,” and I, have both worked on this for almost, October will be 10 years I’ve been doing that column.
For 10 years, we’ve been talking about how to write a checklist, like, “Here’s how to find a real financial,” whatever you want to call them, “planner or advisor,” which we’re going to talk about in another episode. But here’s how to find one.
And every time we write that column, I think Ron’s made two attempts in 10 years, within a couple of weeks or months, somebody who checks all those boxes is in the news stealing money from little, old ladies, right?
So that was the frustrating thing, is it’s like we can’t even say, “Get your CFP,” although they’re good for a start, right? Good for a start. It’s a good sign.
First of all, there’s no checklist there out of the bottom for if it’s honest, or ethical. So that’s why I started the society. Because I’m the one that started, so I get to define it. It’s people who I would send my mother to, right?
Michael: I feel like this whole discussion may have to actually turn into an episode of its own someday, of just, we can either talk through or crowd-source from our collective advisor audience here, how do you make that checklist of the real financial advisors?
Michael: So for today, I just want to talk about this from the opposite extreme, which is the real financial advisor who’s actually doing this, and doing this so well that they’ve got the problem from the other end, which is you are a real financial advisor so too many good clients are finding you, and you’re running out of room.
We talked about this, I guess, indirectly, for the past couple of episodes, of what do you do with your time, and how do you be more efficient with your time? And if you get more efficient with your time, what are you going to do with it? Are you going to take more vacation? Are you going to go get more clients? What’s your balance? What checks the box for you?
But as we touched on, for some people, it’s just grow, grow, grow, and more power to them. And for some people, it’s not.
Michael: And most of us can only handle a certain number of clients before we either run out of time in our week, or run out of just room in our brain to keep track of all these different client relationships. And so when we hit capacity, I find most advisors have a real challenge with this, because I just don’t have any room to take on more clients, and I don’t want to hire someone and deal with all that stuff.
But I don’t know what else to do, because these people, I built this relationship with them. They work with me. They depend on me. Sometimes, they took a chance on me early on, because those usually tend to be the ones that are the smallest, with the least in cover dollars or assets. I don’t want to give up on them. They didn’t give up on me.
We get wrapped up in all this stuff where suddenly, there’s no option left, but I just can’t grow or help anyone else, or do anything else, because I don’t have any room left for more clients, and I can’t let go of any of them. Any of the ones I’ve got now.
Michael: And so I think the question for today, or the discussion for today is, if you want to free up a few more slots in that client roster for yourself, what do you do if you want to transition some clients away?
And I’m going to assume for a moment, it’s not just a bad client that you just want to fire because they’re mean to you, or are unpleasant or all that, right? If you got a whole bunch of pent up rage to fire them, just fire them, it’ll be okay. But I’m assuming these are good people. Maybe they’re not the most profitable client. These are good people. They started with me early when no one else did. They’ve been with me throughout. How do you outgrow someone who took the risk on you early on?
Carl: Yeah. So a couple of things I just want to clarify. One, we’ve covered this in a past episode, there’s nothing wrong with just…you could just call yourself, “Done.” You can say, “Cool. I’ve got 100 clients, I’m just going to keep these clients for life.” And I know advisors who’ve done that and they’re happy, happy, happy. There’s no problem.
So we’re making the assumption that you, and there’s nothing wrong with that, but we’re making an assumption here that you’ve made a different decision and you want to grow, or we can expand it and say, let’s say that you’re getting to the point where it’s time for you to sell your business. Because I was in this position in a slightly different way, which was it was time for me to sell my business because there were some other opportunities that were more interesting to me. I’m not saying they’re better for everyone, but for me, it just made sense.
So for whatever reason, you’ve determined that to take the next step, you need to get rid of some clients, right? So you’re in that situation. So yeah, let’s talk about how you do it. One thing for me, it was just, it really sort of annoying and life-changing, all at the same time, was that a mentor when I was getting ready to sell, or I was thinking about selling my business.
So you should know, the business I built, Persona Capital, I thought of it as my life. I was never going to sell. And I had those exact clients that were like, they’ve been with me forever. They trusted me, all of that. And I was maybe the poster child of that security blanket. And my wife one day said to me, because there was these other opportunities, writing, and I was enjoying that. I just learned that I was enjoying that more.
And my wife said, “Well, maybe they’ve gone from being a lifeboat to being an anchor. And it might be time to think about that.” So I started exploring it. And one of my mentors said to me, “Carl, one of the greatest disappointments in your life is going to be when you sell your business, and no one cries but you.” I was like…
Michael: Well, that’s harsh. So option one about how to let go of some clients if you’ve got too many, you need to free up room for growth, it basically just amounts to ‘get over yourself’?
Carl: That is, it’s not option one, it’s step one, right? Step one is to realize that it’s all going to be okay, especially if you do it the right way, which I think we both have some ideas of what the right way would be. You’re not some criminal. You’re not doing something wrong. You’re not abandoning anybody. You’re not selling out. All of that.
So step one was, and it turned out to be true, is my mentor was exactly right. No one cried. I really took some steps to try and do what I considered to be at least the right way for me, and no one cried. So that’s step one, is to realize you are not the center of the universe for people.
Michael: And there’s a corollary I would add to this as well that I’ve seen play out with a few advisors over the years, which is for that subset of clients that you’ve got that you’ve held on to forever, they were small, or they’re below whatever your minimums you’re shooting for now, but they came with you early, and they’ve stuck with you throughout.
The truth, for most of them, they know they’re a small client for you. They know they’re not really in the fit for where your practice is gone. They can see you’ve grown, you’ve developed, you’ve gone other places.
And what I’ve seen play out for a lot of those clients is when you know they’re small, consciously or subconsciously, they often end up getting the lower level of service. They’re not the first phone call you return when you come back from lunch and there’s three of them. You return the big client’s call first. They’re not the first email you respond to. They’re the ones that you scheduled to fit in around all of your other clients.
And I think the issue that crops up for it is that you have to remember, as well as your small clients, your C clients, if you like doing the A, B and C thing, your C client is someone else’s A client. Pretty much up and down, no matter where you on the spectrum, there’s someone who’s newer, younger, earlier, whatever, in the practice than where you are, who would love to service the bejesus out of the client that you basically accommodate because they were referred to you, or they were an early client, or some person that you feel like you have an obligation to hold on to and let go.
And so maybe it’s a sort of a second version of this, “Don’t kid yourself, they’re not going to cry when you say you’re moving on,” is don’t cage yourself. If they’re really not a fit, and you’re maybe consciously or subconsciously not exactly giving them the highest level of service anyways, send them to someone who they really would be a star client. Because it’s out there for someone, and that person will service them better than you because they’re more motivated. It’s a better-fit client.
So do the client a favor and send them to someone who actually will value them as a quality client and not keep them as an accommodation.
Carl: Yeah, and I think, two comments. One, I think a lot of that, well, all of that is true. I think a lot of that is a story inside our own heads, that they’re even thinking that. That anybody is like, “Oh, look, he’s getting rid of me.” If they do think about it, they’re okay, like you’re saying. But I don’t think people sign up for, you’re going to be here for the rest of my life. You’re not a family member.
Now, I want to keep in mind I’m sounding very callous here, but these people all cried in my office, right? And for me, it was the big and the small. It was the whole business that was going away. And it was the same thing, though. It was clear that my heart and mind were somewhere else, and that I was doing them a disservice by not getting them to the right place, right?
So I think that’s the next step, is you start thinking, “Okay, how can I best serve these human beings?” And if the best service I can make to them is, “Okay, let’s find a new home for them.”
And then remember that I think part of that getting over ourselves is this inside baseball story where we think they’re looking at us and going, “Oh, I’m too small for you,” or “Oh, I’m not big enough,” or “You’re jettisoning me,” or “You’re firing me.” I think a lot of that is just our own story.
So if we think, “All right, here I’ve got this pool of clients,” so that we can think of it the way you want. You’re selling your whole business, so there’s some clients of yours staying in the business, you would keep anyway. I had a group of clients that I wasn’t looking to get rid of any of them, right?
Or you’ve got a pool of clients you’re like, “Look, I want to make room on the upper end, so I’ve got to get rid of this bottom end.” Either way, I just think to me, the right way to do this is to treat this as if it’s your…I would use the F-word, right? I would say look, that you have a fiduciary duty.
Michael: Oh, that F-word. It’s like…
Carl: I don’t have any other ones, by the way. Just…
Michael: What F-word is coming into this conversation when you’re not going to work with the client anymore?
Carl: Watch this, I don’t have any other F-words.
Michael: So the fiduciary word.
Carl: Which is you have a duty, I viewed it as a duty. I’m going to go hand-in-hand with this group of clients, and I’m going to find them a home. I’m going to interview people. Whether you’re selling that, and by the way, selling it sounds like, “Oh, no, dirty. That’s…” No, it’s a business, it’s okay for you to get compensated for this transaction, right? For this transition, especially if you’re selling your whole business, but even a pocket of clients.
But your job is not to find the highest bidder. Your job is to find the best fit for the client. And I think if you approach it that way, it makes the next steps about, and we’re going to get to that, how do you talk to the clients about it, much easier if you take it as, “Okay, I’m walking hand-in-hand. My job is actually to interview advisors and find them the best.” I always joked, I treated it like I was trying to find a planner for my mom.
Carl: That’s how serious I took it.
Michael: Yeah, I think it’s important just for people to remember, if you’re in this situation, you’re not just kicking them to the curb, or at least, it’s not particularly the method we recommend here. If you’re concerned of, “Oh, my God, if I let them go, will they be able to find another good advisor?” then help them find another good advisor. You can be part of that process.
Carl: I think you should be.
Michael: You can go even a little more about the business. You can maybe find one where they’ll be an A-client to whoever it is that you refer them out to.
Michael: I will admit, the other direction that we, like we’ve even done a few times over the years in our practice, particularly the firm I was at before where I am now, we would handle this by increasing our fee, or actually for a lot of clients, just setting a minimum fee. Not necessarily minimum assets, because I know you don’t have the assets because I know what your assets are, just saying a minimum fee.
So as opposed to saying, “Hey, we’re going to have a $250,000 minimum,” and I know you don’t have $250,000, I might say, “In order to serve our clients well and do all the things we do through the year, we need a minimum fee of $3,000 per client. So, you’ve only been paying $1,700, because you’ve got a smaller account, so to continue working with us going forward, this is going to be the standard minimum fee for all of our clients. If you pay that fee, we’ll do the annual planning process, and the reviews, and manage your portfolio, and rebalance loss over,” all the things you want to put in there that you do.
You say, “Look, this is our minimum fee to service a client. If this is valuable to you at whatever assets you have, we are happy to continue with you as a client. And if this doesn’t work for you, we will find you someone else who’s a better fit.”
And I didn’t realize it early on until I’d sat in with the senior advisor that used to do this and watched him go through this process a couple of times. The reason why it works so well is he never had to let a client go. They fired him.
Michael: “My minimum fee is $3,000.” “Well, I don’t think we can pay $3,000.” “Okay, it’s cool. I’ll help you find someone else.” He didn’t have to tell them, “No, I’m not going to work with you anymore.” He just said, “I know my value, and I know what I need to get paid to deliver the value that I deliver. And if that’s not worthwhile to you, you can fire me. It’s okay, I won’t be offended.”
Michael: It turns the whole thing around, so you don’t have to reject your clients. Frankly, you can set your client up to reject you. But if you have trouble saying no to people, that actually may be easier. I think it was for him.
Carl: Yeah, yeah. No, it’s good. I think it also sets up the, it’s pretty easy for you to even tell someone, given that minimum fee it doesn’t make sense, right? But yeah, they often come to that conclusion themselves.
So let’s pretend you’ve identified a pool of clients, there’s value there, because there’s revenue associated with it. This is a business, it’s not a… I mean, although I love the fact that most of us take this on as a sacred responsibility, I think I never want to lose that. But there’s parts of it where we have to separate that for a minute and just say, okay, the cold hard fact of this is, I need to create a pool of clients, let’s say it’s 25 or 50 clients, that now, I can go out and find another advisor.
Like for me, a big firm bought my firm, and we went through a process of trying to make sure we were lining up with the right advisory team within that firm. And in some cases, we sent clients to different advisory firms based on the fit. But I got to the point where I was like… One of the advisors that took over most of my clients, his name was John. John was doing a better job than I was ever going to do. John is a real financial planner, right? And he was doing an amazing job. And so it was really easy for me to say, so we’ve got this pool of clients, we sit down, so what do we actually say? In that meeting, if you don’t change the new fee, you’re actually going to transition these clients to someone else.
In that meeting, even as I’m preparing to say this right now, I can feel it feeling a little scary, but it’s not. Right, no one’s going to cry. And so I think sitting down and just simply saying, “Hey, we’re changing the direction of the firm, and it’s become really clear… And this is, by the way, no reflection on you as a person. You didn’t do anything wrong or bad, and neither did I. It’s just as a firm…”
And one of my friends worked at a big, big, big, well, not a big firm, but at a really high-end firm that used to be a partnership and is now publicly traded. And I remember when I asked him about this, he was like, because we go to the same church. And I was like, “When people at church ask you for help…” because then you got the whole church thing. “When people at church ask you for help and you know their…” because their minimum was $50 million or something, “…you know that they’re…” and he’s like, “Well, it’s a business, we can’t do that, right? That’s like asking a foot surgeon to operate on a brain, or a brain surgeon to operate on a…” It just doesn’t work.
So it’s easy to say, “Look, the firm, we’re going in a slightly different direction, and it’s no longer going to be possible for me to spend the time and energy that needs to be spent with you to make sure that you get the success, the outcome that we were hoping to. And so what we’re doing is we want to actively find you an advisor that would be better suited.” And there’s a group of about 50 clients that that’s true for.
Now, it makes it a lot easier if this is a junior associate, because then there doesn’t have to be a big conversation.
Carl: John is sitting in the meeting, John is sitting in the next meeting. Carl is no longer in the third meeting.
Carl: Right? And that again, nobody cries. In fact, nobody even comes close to crying there. So to me, then it’s like, maybe you’ve already found the person. You’ve found your version of John for me,a and I can go to clients and say, “The good news is…the firm is going in a different direction. The good news is we’ve found somebody who will be amazing. His name’s John. Obviously, you have a choice here, so I wanted to talk to you about John, walk you through why I think it’s a good fit. And if you approve, I’d love to facilitate an introduction, and I’d like to sit in on that meeting.” That’s how I’ve seen advisors do it most successfully.
Michael: Yeah, the other path we’ve gone is, so I got the similar thing, “The firm is going in a different direction, hey, we need to change this,” angle, is with a few clients of theirs, we could just sit down and say, “Look, I just don’t think we’re a good fit for you and where you are.”
Michael: Right. It’s not about you or us in particular, we’re just not a good fit at this point. In some cases, that leads to another direction thing. We’re really focusing right now on working with retirees, and you’ve been working with us for a bunch of years, but you’re 42 years old. And we helped you with some things for your college plan for your kids, or whatever it was, if you’re doing a combination of clients. Look, we’re focusing on retirees. We’re not a good fit.
Carl: Let me cover it really quick, because I think there’s a really good takeaway there, which is, what’s the direction of the firm that you’re taking? Why is it not a good fit? I love taking it away from size or revenue, and only if this is true. By the way, I think this should go without saying. You can’t tell lies and call it marketing, right? So only if this is true.
But in most of these instances, it is, where you can say the direction is about, especially if you’re doing anything niche-related, the direction is about specialty. The direction is about this problem we’re trying to solve. We’re really dedicating our time to solving this problem, and it’s clear that it’s not a good fit. And I always love to say, because this comes up individually all the time with clients, right? Like 10% of the clients per year, it seemed like there was something…
We just say, “Look, I made a commitment to you that I would be the first person to tell you if it wasn’t a good fit, right? Because I care about you and the success that we’ve talked about, so we’re going to help you find somebody where that is a good fit.”
So I really love that idea, if it’s true, that this isn’t about necessarily… It might be about revenue, but you don’t need to talk specifically about revenue. You can talk about, like, “You’re too small. You need to get out.” That’s not what we’re saying. What we’re saying here is, this is it. We want to make sure that the direction of the firm is aligned with what you need, and if it’s not, we need to tell you.” I almost think you have a duty to do that.
Carl: Right? A duty to find somebody else if you aren’t servicing somebody, independent of why.
Michael: Yeah. Now, the other angle is I will say, and I’ve talked to a few advisors that do this, I am not not capable of pulling this conversation off with clients. I tried it once and I failed pretty quickly, because it just wasn’t happening for me. I know a few advisors that frame this as essentially, they say they graduate their clients. “I’ve taken you as far on the journey as I can, we’re not really a good fit anymore. I’m going to graduate you on to either working with someone else,” or I’ve talked to a few of them and said that they basically do this to turn the client back to being self-directed. “We’ve worked together. I’ve helped you get through a planning process, you’re in a different, better place now. But you’ve come the journey. I brought you as far as we can the journey, I think it’s time for you to go out on your own.”
Michael: PS, I’m delinking you from swap.
Carl: Now we have to dive into this a bit. Because I spend a little time thinking about how to communicate, and one of the rules we have internally is that if somebody were asked, so if you were to do that to me, I can feel myself wanting to say, “Whoa, whoa, what? Graduate? Wait, what are you talking about? What do you…?”
Michael: I feel like it gets used as euphuism, like it’s a not subtle thing to read between the lines. I’m basically saying I’m firing you, I just literally on the spot, came up with a better euphemism like graduate, but it’s not that hard to see.
Carl: So you can’t do that. If you have success doing that, more power to you. But here’s the problem, is if a client says, “Whoa, what are you talking about?” and you can’t answer it with a straight face, then you’re not allowed to do that, right? That’s our internal rule.
Because we literally ask this question, we ask in our family too, that if you say something and somebody asks more questions, and you’re uncomfortable with the future questions, it means you’re probably hiding. It means you’re probably being slightly, I’m not going to use the word, that’s not dishonest in any way, I’m just meaning you’re slightly off cue. Why not just be direct?
“This isn’t a good fit. We run a business, this isn’t a good fit. I made a commitment to tell you if we ever got there. I just don’t feel like I’m serving your needs the way they need to be served. But you’re important to me, so I want to help you find a solution to that. We’ve got an idea. Her name is Sally. Sally is amazing. Here’s all the reasons I think it’d be good fit. I’ve already interviewed her. I didn’t tell her anything about you because I didn’t have your permission, but I’ve already interviewed her completely. Here’s all the reasons.” Your fees are going to go up, your fees are going to go down, whatever. If they’re going to go up, you don’t have… Well, yes, you do.
“Either way, here’s why I think it’s a good reason for you to meet with Sally. Can I have your permission? I’d like to help with that. I’d like to go to the first meeting or two to make sure the transition is totally smooth.” What’s up with that?
Michael: I think what connected with me around the concept, because I really did, I started going down the road of this with a client that we needed to go and just bail, not far in, and just got back to, “We’re just not a good fit.” It was one of those, we just weren’t a good fit.
Michael: I think the part of the mental construct that does connect with me is just this acknowledgement that as you said, we’d like to look at these as relationships for life, but clients don’t literally hire us with the expectation that we’re going to be there until the day they die, unless they’re really senior, and that’s actually part of the plan.
It’s okay to recognize that you and the client may go together on this journey for a period of time, and then you may part ways, right? I think there’s a very literal experience of everyone’s got the friends that they had back in the high school or college that you were really close with and really tight with, and they were your great friends, and then everyone graduated and they went their separate direction. And that relationship’s still there. We can call it up at any time, but we’ve parted ways.
Michael: And it’s not a bad thing, it’s not an awkward thing, and it’s not a statement about you or me, just, “Hey, we graduated and our lives went in different directions, and these things happen sometimes.” And I think that mental framing of it, to me, is powerful. Or maybe saying to the client, I couldn’t do in the meeting. like saying, “So I’m graduating you to be a self-directed investor.” I [inaudible 00:30:48] there.
But the idea that you can take a client a certain distance on the journey, and add all that value and all that great stuff, and then just recognize there’s a point where it doesn’t make sense for you to take this journey together anymore, it’s okay. That’s okay.
Carl: I like that. I like that. I like the idea of acknowledging that, the word that keeps coming to mind is “outgrown,” right? That for whatever reason, one or both of us, we’ve outgrown this relationship, and in order for the next step for one or both of us, there needs to be a transition, right? I think that’s fine.
I think, yeah, I’ve made mistakes like that too, where I tried, I remember a referral question once that I was taught that I was like, I asked it and I had a very direct client just be like, “What are you talking? That’s the biggest bunch of crap you’ve ever said.” I was like, “Yeah, you’re right, it is. I didn’t think that way.”
So let’s just think through real quick steps. Number one, get over yourself, no one is going to cry. Number two, realize the difference between inside baseball and reality, like sort of the stories we tell. Some of them are true, but some of them are not.
Number three, do it the right way, which I think is just sort of insert a little element of fiduciary care around, just recognize that…
Michael: You can shepherd them to the next stage. You don’t have to kick them to the curb and close the door in their face.
Carl: And in fact, out to a large degree, especially if you’re thinking about selling, which I would encourage anybody who’s doing this, that’s an asset you’ve built up. It has value. I think if you’re thinking about selling, most likely it’s in your enlightened self-interest to make sure that relationship transitions. There may be an earn-out where the client has to stay around for two years in order for you to earn all the money.
So I’d even structure that if you’re selling a piece or the whole business, structure the relationship where you feel like you’ve still got skin in the game to make sure that that goes well, that all the words that are coming out of your mouth are actually true, not only because you’re a good person and you tell the truth, but because your interests are aligned with them, right?
And you’ve got a duty to do this. That’s the other piece of that, duty. If you’ve outgrown and it’s time for you and/or the client to graduate, you’ve got a duty to do this. Go find the right person, use some of the language, hopefully, there’s some language in here that’s been helpful. Use some of that language, and make it happen. And then call me if somebody cries, I’ll help you.
Michael: If someone does cry.
Carl: Yeah, I’ll help you. I can help you.
Michael: Wait, you’re only making the promise because you’re convinced no one is going to cry.
Carl: Yeah, exactly. I’m not going to get that phone call. It’s not going to happen. It’s not going to happen.
Michael: I like how we saw this came full circle. We started with what do you do if you need to let go one of these clients, and we’ve ended with just sell them and get paid for it. But do it nice.
Carl: Well, do it the right way. Again, you’re touching, you’re pointing at the story that we tell ourselves, which as soon as you say it that way, I feel the same way. Like, can I just do something dirty? And you’re like, “No, that’s part of the story.” Yeah, in the end, this is a valuable asset that you’ve built. Selling my firm was life-changing for me, financially. And by the way, my clients write me and tell me they’re so thrilled, right? They’re getting better service. Their fees, in no case did they go up. In some cases, they went down because of scale. Everybody is happy. There’s nothing wrong with that.
Michael: Well, I think that’s a good place to wrap up. Everybody is happy, and there is nothing wrong.
Carl: That’s right. A friend of mine told me that the other day, he said, “There’s nothing wrong with being happy.” I’m like, “Yeah, that’s true. Amen.”
Michael: Amen, I like that.
Carl: Thanks, Michael.
Michael: Well, thank you, Carl. Thanks for joining in again.
Carl: Yeah. Oh, and by the way, let’s just make sure everybody knows wherever that box is.
Michael: Yeah, where the comment box is below.
Carl: We literally…
Michael: For all your feedback or thoughts. If you figure out how to graduate people successfully, let us know, because we both want to know how that conversation actually goes in real time.
Carl: For sure. And we take this pretty seriously. Before we started this episode, we actually reviewed a bunch, so yeah, we love them. Send them. Awesome. Thanks, Michael.
Michael: Thank you, Carl.