Andi Kang has an enviable problem. With over 450 households, she has too many clients and wants to scale back, but can’t find the balance between her sense of obligation to her relationships and her need for a more balanced workload.

Kang started in the advisory business after working for more than 10 years as a buyer and manager for Gucci and Saks Fifth Ave. In 1989, pregnant with her second child, she and her husband moved from Cincinnati to Orange County, Cal., and Kang looked for a more kid-friendly career. “I wanted to be able to have Thanksgiving with my family,” she says.

Once there, she and her husband went to see a financial planner; Kang, who had taken some graduate-level business classes in Cincinnati and had an interest in finance, ended up getting a job with that company—and was miserable.  She wanted to do comprehensive planning but wound up mostly selling life insurance and annuities. “It was very difficult for me,” she says.

She stuck it out for a year and a half before starting her own practice, Crown Wealth Management, in Costa Mesa, Cal. “I didn’t want anyone to tell me what I could and couldn’t sell my clients,” she says. She organized seminars and workshops at local colleges and companies to drum up leads. She bought four practices. She now serves 459 households, has $70 million in assets under administration, $12 million in assets under management—and one assistant. So much for family time.

She’s seen three coaches over the past three years and all tell her to cut back to 100 clients.

But Kang, who is active in pro bono programs with the Financial Planning Association, feels it’s hypocritical to get rid of clients who might not have the preferred amount of assets.  “I feel passionately about helping the under-served. How can I tell clients to go to someone else when my job is to help people,” she says.

 She is interviewing to bring in a junior advisor to work with her less-affluent clients. Still, she fears she may have to sell or give away some accounts. She’s rating all of her clients on a complex formula including total gross revenue as well as charitable intent, and found her top 46 households make up 75% of revenues. The clock is ticking. On to the experts….

 

Brian Lauzon, managing principal, AdvisorAssist

The first thing is for her to focus on the role she plays with clients. I call it finding your area of genius. She needs to identify which functions fall into that area—financial planning, portfolio management, or something else—and spend 80% of her client time on that activity. She should say, “If I had a magic wand, how would I spend my client time?” Then outsource the rest. Build a team of external partners to help her focus on her area of genius.

Using qualitative factors to rate her clients is terrific. But that should come after a more quantitative rating system looking at client profitability. Then she can define her service model for different clients. For example, she’ll meet with certain clients twice a year and reach out to them two to three times in between—whatever the right number is. She sounds like a very caring and helpful person and she takes her relationships seriously and personally. She just has to be careful that doesn’t also lead to client-driven service models.

The junior hire is a great idea. Once she has defined her service levels, she can decide what she should be doing and what can be delegated, which gives you a pretty specific list of required activities. It will help her identify the profile of the ideal candidate for junior advisor. There also needs to be a path for growth for the new hire, to attract serious, long-term candidates.

She’ll have a like-minded team. So the firm is not just Andi. People are clients of Crown, not necessarily the clients of Andi. There will be a Crown way of doing things.

 

Hellen Davis

It’s an ethical issue. And that’s why she’s in such a quandary.  If she takes one red dime in trails for clients she must service them. It’s that simple.

I would suggest she make a decision about whether she’s going to keep that money or not. If she wants to keep the money, she needs to provide service and, perhaps, get a junior associate. My suggestion is she tell her clients she’s going into semi-retirement and hand some of them off to someone else.

The problem is the junior advisor is going to leave her. It’s not lucrative enough to make money from the type of book she’s talking about. , I think it’s likely he or she will leave her high and dry. I see this all the time. And it usually happens within a year. Also, if you were the client and had dealt for a long time with the same person—clearly a very caring person—would you want to deal with someone else?  She may find it hard to completely stop working with them anymore. If they need something, they will call her. It’s inevitable.

She would have to tell those clients she’s going into semi-retirement, hand them over, and make sure that associate answers all the phone calls.

Or she can transfer her clients to her broker-dealer. Hand it to the company. I’ve just told probably 30 financial planners in the last six months to do this. She’d explain to most of her book that she’s semi-retiring and provide a phone number for them to call. She also can provide clients with the names of maybe five advisors she respects whom they can turn to. She just has to give a definite date for when she will stop working as their advisor.

Ultimately, I don’t feel this is the advisor’s responsibility, at all. If a doctor retires, does anyone question his or her right to bow out or expect the person to provide a replacement?

 

Philip Palaveev

I have never fired a client. I emphasize that you have to be very careful whom you take on as a client, because it’s tough to get rid of them.  She has a lot of clients but has shown it can be done and done well.

Whatever she does, it’s really important that she doesn’t try to change who she is. If this is how she enjoys running her practice, it’s critical she maintains that level of excitement and enjoyment.  And it may be better to do what she wants and not pursue the highest profits. At the end of the day, not every advisor has to build a business empire.

But just for sanity’s sake, she does have to do something. She’s very very busy.

Hiring someone could be a solution. The issue is resources. You need at least $500,000 in revenues to hire an associate, to assure you have enough to pay a salary. But she also has to be clear about what she’s getting into. Having an associate will involve training. It will not immediately lower her work load.

The first priority is to look at her clients and identify who are the ones she has an ongoing commitment to, what is the extent of those commitments, how much time does she spend with them?

Then she has to look at what she does for clients and what she can standardize—her planning process and the documents she produces, her investment process, etc… Not using the same portfolio, but using model portfolios and a manageable number of investment choices. That will increase her efficiency. The more you standardize, the more you can reduce the number of hours you spend with clients—and the less urgency there is to let them go.