Welcome to Financial Advisor IQ

Always Have a Contingency Plan

May 25, 2018

This time we hear from Mike Molitoris, a financial advisor at Flagship Wealth Management Group in Cary, N.C. He learns the importance of having a contingency plan for his business should a substantial client decide to walk away.

I met a prospect through a direct mail seminar I hosted, and a few weeks after the event, he signed on as a client. When we began, most of his money was tied up in fixed retirement accounts, and he was interested in getting into real estate and other investments that were not directly correlated with the market. We built a plan focused on real estate, nonqualified annuities, and asset management accounts. This was the biggest account I had ever landed, and I was eager to make it work.

However, I quickly learned that this client had a large ego and wanted to play puppet master — taking credit for the investments that did well and blaming me for those that did poorly — all while making his own decisions in the background. Oftentimes, I would learn about his separate dealings only after he’d completed them. I also learned that he had left his previous advisor after they disagreed about a certain investment; he openly bad-mouthed that advisor to me several times at the start of our relationship. Red flags went up, but I was young, and I thought an account of this size signified success.

Month after month, I worked on building the trust between us and, along the way, finding ways to deal with his peculiar antics. At one point, I asked if he was interested in buying individual stocks, as this was a route that brings some clients large financial gains. He laughed at the idea. He “didn’t do individual stocks,” he said dismissively. We dropped the topic and moved on, but he came back angry after he found out the stocks I’d mentioned had grown exponentially. Of course, he blamed me for the missed opportunity.

I finally had to face the fact that our professional relationship could end at any time, over any miscommunication. I began to shift my focus and think about what I would do when he and I inevitably parted ways. The question wasn’t “if” that day would come, it was “when.” And I needed to plan for that “when” so it wouldn’t throw the rest of my business off course.

I looked at my expenses and identified where I could cut back on non-essential items, such as software, subscriptions, and other business tools. I actively looked for new clients and put more effort into building relationships with the ones I had. I tracked exactly how much revenue this client represented. For months I worked on building my finances around the idea of losing that money, because I knew it would be gone eventually. I was forming a contingency plan to preserve my business and my family’s lifestyle — especially with my third child on the way.

Later that year my family met his family at the beach in North Carolina, as they were in the area for vacation and our wives and kids had become friends over the years. We spent the day with them and continued on our own family vacation. Two days after seeing them, I received an email from my client: He had fired me.

Mike Molitoris

Despite his impeccable timing, I wasn’t surprised. And because of that contingency plan, his departure wasn’t the disaster it might’ve been. In fact, losing this account was actually beneficial in some ways. It freed up my schedule, and I decided to pursue additional education while continuing to grow my business. Within three months, I landed an even larger — and exceptionally lower-maintenance — client who is still with me today. This former client taught me a lot. Not only do I know the types of personalities to stay away from, but I’ve also learned the importance of knowing my numbers and the true impact one client can have on my overall book of business.