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Don’t Be Afraid to Tell Prospects No

By R.A. Monroe July 15, 2016

This week we talked with Don Reichert, founder and president of CDA Group in Greenville, S.C. Reichert recalls how turning a client’s initial request down paid off in the long run.

A few years ago a prospective client came to me through a referral. He had just moved into the area from out west and, after selling his former residence, had about $2 million he wanted me to manage. He was surprised when my first reaction was, “No, I’m sorry, I can’t do that for you.”

He was surprised to hear that and asked me why. I explained that it was clear to me that the size of his estate was much greater than $2 million and that while he had something of a financial plan in place, he did not have a comprehensive estate plan.

Based on the size and complexity of his estate it wouldn’t make sense for him or me to take on this account and make investments in a vacuum. Instead, I told him, that money should be considered within the context of a larger plan.

The client seemed somewhat taken aback by my answer. But I think he could also tell that I was completely sincere.

I offered to perform an analysis of his assets and his current financial plan as a preliminary step; he could then decide if it made sense for him to work with me in a more in-depth manner. He agreed and I began to take a look at the full picture.

Don Reichert

I realized he hadn’t been getting particularly good advice so far. I was able to show him how we could save him a huge amount of money on investment fees and reduce his estate tax exposure by several million dollars. I also found a problem that his previous advisor had made, which would’ve resulted in a highly problematic situation if either he or his spouse had died before it was resolved.

I explained that even though I could take over managing his investments and reduce his fees and improve his rate of return in the process, none of that would matter much if his estate remained structured the way it was. What good would a minor improvement on rate of return be if he was just going to turn around and give 40% to the IRS when he died? He ended up eagerly signing on as a client and we did a comprehensive estate plan for him. In the end, the account was several multiples larger than that initial $2 million.

This wasn’t the first time I’d said no to a client and seen that approach pay off. It’s definitely a gamble to push back when a good prospect comes to you with a substantial account. Over the years I’ve heard a number of investors say they like to spread their money around and give one third of their assets to each of three different advisors. When someone floats an idea like that I always tell them that I’m sorry, but I don’t work that way. It puts me at risk as an advisor; I have no idea what the other advisors are doing. And without a comprehensive view I can’t make sure my client’s needs are being met.

Often, telling a client an initial “no” means you are signing up for a longer, more intensive process. Not every advisor wants to put in that much effort. What’s more, other advisors might be afraid of telling a client no. You just have to remember that you’re pushing back because it will provide a win-win situation – one that’s not only better for you, but also better for your client.