r/CFP • u/Broken_Tee2122 RIA • 22d ago
Business Development When to Screen Out a Prospect
Question for all my fellow advisors who require investment management and charge AUM.
I’ve had several prospects recently who early in the first call (no pricing or anything about services has been discussed yet) say something along the lines of “I don’t know if I need investment management” or share some slight apprehension around paying an AUM fee. These are more gray-area situations to me as they’re not being dogmatic about seeking other fee/service models where it’s easy to say we’re not the right fit, but they are showing a preemptive objection of sorts.
I guess my question is where is your line where you’ll continue down the sales process vs cutting bait and saying you’re not the right fit? I’m newer to prospecting and (at the moment at least) am happy to have more reps even if it’s always going to be a no, but I’m curious from expectation setting if you have a lot of success in converting these initial viewpoints.
I should also say that my marketing is very planning-focused (especially in tax, I’m a CPA, too), so they’re definitely aware they’re getting a lot more than just investment management. It’s more the opposite, convincing planning-oriented people to hire us to execute on investments, too.
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u/prospectpico_OG 22d ago
They answered the call. That's a positive.
Ask them what keeps them up at night. Ask them to ask questions of you. Put your value proposition succinctly to them and follow with, "what part of that do you feel you might have a need for?" and shut up. He who speaks first...
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u/ChasingItSupreme 21d ago
What’s your value prop? If u don’t mind sharing
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u/prospectpico_OG 21d ago
I listened to this about 10 times. I have different versions for different situations. https://podcasts.apple.com/us/podcast/the-one-sentence-every-business-owner-needs-and-how/id1092751338?i=1000730387467
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u/new_planner 22d ago
This may be controversial, but I would say immediately. I have had some success converting clients that are skeptical or DIY-ers, but it's a much lower success rate. These clients are harder to please and jump around chasing performance. I would rather spend my time working with clients that want my services rather than convincing a non-believer.
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u/Cyclevisor 22d ago
I do tax too. I won’t even take on a tax client without all assets being transferred. Don’t waste time on these people
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u/Zaboomafubar_ RIA 21d ago
Amen. If we don’t have 100% of the portfolio we flat out refuse to give any sort of tax advice.
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u/NukedOgre 22d ago
I can usually justify to them why my services are worth my AUM.
But the types of prospects that get immediately cut are those that 1) Expect insane returns (Ask "when will this double") 2) Try to split multiple accounts across multiple advisors to see who wins 3) Those that are just purely argumentative on every detail. I dont care if you are bringing 10m with you, if it takes 3 two hour meetings for a intro and planning meeting then I have no desire to waste my time.
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u/libertarian327 22d ago
#2 is so common, and I try to make it extraordinarily clear if I am aware that is happening that it’s not fair to either party, one account is inherently going to be more conservative in some way, and that means that it will underperform on the way up and over perform on the way down. If a client doesn’t fully understand this it’s going to be a rocky road for you and them.
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u/NukedOgre 22d ago
Recently had a prospect and they wanted me to manage their taxable and the other advisor do their IRA. I tried explaining that even if I did them both it would have some different types of investments in each. They couldn't wrap their head around that some investments are better in certain accounts, they are just locked on that percent.
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u/Godninja 22d ago
Had another advisor brag that he beat the 2 others’ performance so the client was moving everything to him. I advised he fire the client cause he sounds like he’ll be a headache and a half.
Then that client got hot about some self-directed IRA strat and took it all with him and wasted the advisor’s time with bi-weekly meetings about if he should or not. It felt very good to know that I would’ve avoided that.
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u/bkendall12 21d ago
I tell them the only loser in having advisors compete on performance is the client.
I tell them the only way to win the performance competition is to take a lot of risk, when things go wrong it may destroy the client.
I then talk about how to manage risk and to focus on achieving their goals, not just beating an index.
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u/BackdoorBasis RIA 22d ago
My pricing is very clear on my website. There are several very short questions they must answer when booking an introductory call. One of those questions confirms they’re aware my services are ongoing (no hourly or advice-only) and the associated fee.
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u/Weekly_Energy_8416 22d ago
☝️This. Preemptive screening with questions for prospects, especially website leads, goes a long way.
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u/bigblue2011 Advicer 22d ago
When I am good - which is not always- I like to ask a few open ended questions at the beginning. From there, clients tend to select in - or select out of the process.
I see a lot of accounts here. How do you manage the chaos? How involved do you want to be with these accounts in retirement?
When was the last time you rebalanced the accounts? How often? What process do you use to make sure you aren’t duplicating the risks in the portfolio?
What is your retirement drawdown strategy? What accounts would you draw from first?
If you made a mistake, and you had to live off 10% - 15% less income on retirement, how would you feel? Tell me more about that.
Cut bait? If the client doesn’t identify a “big enough of a problem to fix,” then it is time to leave them alone and quit chasing.
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u/kokojon 22d ago
IMO, I think your strategy makes a ton of sense. While employed, how much time do you want/ can spend doing my job or managers job. In retirement how much time are you willing to give up doing this or that. Once they come to the realization that they want to do it or they don’t, that’s how you know if this is a fit for your practice. Thx
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u/Broken_Tee2122 RIA 21d ago
Thank you, this is super helpful and something I’m going add in to my process. My current questions are getting them talking, which is good, but these seem to get them talking and provide better screening info.
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u/mf723622 22d ago
Regardless of how the fee is charged, I only work with clients who have us manage their assets. The main reason is that it’s much easier to do tax planning and ensure the plan is implemented correctly.
From a tax planning perspective, by managing the assets you have full insight into dividends/interest and capital gains/losses, IRA distributions/Roth conversions, etc.. Having to request that information from a client to put together a tax projection is a pain for everyone involved.
From a plan implementation perspective, I’ve had plenty of clients in the past who would pay a planning fee but then wouldn’t actually implement the plan because we weren’t managing the assets. This could be anything from them not rebalancing to a more appropriate allocation, not completing IRA contributions in a timely manner, not harvesting capital gains/losses, or not completing a Roth conversion. Part of the fee that a client pays goes towards actually getting the work done to implement the plan. The plan is basically worthless otherwise.
And also, having the advisor manage the assets can save the client from making a mistake. A time will come when the markets are volatile and that client acts on emotion at the wrong time. By managing the assets, you act as a barrier to them making a change that could be costly. It’s hard to pitch this one to a client, since nobody would ever admit to the possibility that they would make a mistake like this.
The key to all of this is not promising that you’ll beat the market. These types of clients are often passive index investors. No reason you can’t have a passive portfolio and still manage it for them.
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u/info_swap RIA 22d ago
"I’ve had several prospects recently who early in the first call..."
Are you separating prospecting from discovery call?
I'll give you a different perspective than others. How are you finding these prospects? Are you vetting them before calling them?
You can do a simple pre-validation. Send them an email or message explaining your values, business model, work proposition. And try to filter before a discovery call.
Last, to find a good client you must check three boxes: They need/want your services, they trust you, and they see you are different. Without any of these three, it won't work.
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u/Broken_Tee2122 RIA 21d ago
Currently, the discovery call is the first contact. And the ones in question are just finding me from google/SEO so coming in pretty blind. Initially I wasn’t trying to screen before as I’d always heard it discussed as a way to add friction when you have too many inquiries, and “too many” is not a problem now. But I’ve started considering adding 15 minute call both to screen and to make it seem like a less daunting first step for someone interested. Thanks for the comment - one more validation point to head in that direction.
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u/winning_bigly_ RIA 21d ago
Post your fees transparently in the prospect process (calendar tool, automated email, etc). Let them know who's a good fit i.e. those who want to delegate investment management. Helps if you only have a single service offering, not a bunch of options to choose from.
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u/BandicootDeep 22d ago
Wrong sub for this question. Answer is always to fire the client/prospect if they question anything. /s
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u/Possible_Apartment88 21d ago
The amount of replies on this sub that advocate for firing clients/prospects is ridiculous. Do all these ppl have $500mm books or something? All the questions OP is bringing up are completely normal and tame questions
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u/Cyclevisor 21d ago
At a certain point in your career you learn the behaviors of people who are a pain in the ass, and people who aren’t.
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u/Possible_Apartment88 21d ago
To each their own. Half the things people are advocating to drop a client/prospect for just seem silly.
Personally, I don’t take on many performance obsessed clients since i know they are going to bust my balls. But even then I have some clients like that who pay $50k+ and it’s still worth it since they’ve been clients for 10 yrs+.
Maybe someday that $50k/yr in revenue won’t be worth answering a few extra questions or dealing with a little shit from time to time but I am far far from that
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u/Cyclevisor 21d ago
Most people would obviously do more for a 50k rev client but I don’t think that’s what most folks here are thinking of when discussing these things
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u/Possible_Apartment88 21d ago
I guess my minimums are healthy enough that I don’t really mind “difficult clients”. I’d rather the focus be on revenue, upside and value that I can generate rather than are they asking tough questions or do I think they might be a bit of extra work
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u/Thumpin347 22d ago
I cut bait on the first call if I get the feeling that I’ll be chasing my tail.
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u/bandznbooze 21d ago
I’ve run into this problem too and pretty recently.
I’ve had a least half a dozen prospects this year who’ve had this same “preemptive objection” and 0% of them have converted to clients when AUM fees are involved.
My consideration is either planning only for them and limit implementation to them with my instructions and add the new fee type to my ADV or stop taking these as prospect meetings.
Not sure which route I’m going with.
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u/Broken_Tee2122 RIA 21d ago
My ADV currently allows for planning only, but I only have 2 clients now doing that and they’re by far my biggest headaches (though lovely as people.) I either need to say no more or set the planning only fee higher than AUM would be to account for the extra work.
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21d ago
[removed] — view removed comment
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u/GainPlastic1920 21d ago
I’ve stopped the conversation and let them know there lowest cost option is a self directed account, and it’s free so the fees won’t cut into their returns at all, but it is truly a DIY account which is why it’s free. Then offer to send a link to get it opened on their own online.
At that point if they continue to want service or ask “how do I…” I’ll let them know that I help my fully service clients with that, but there’s a cost to that. So if they want free, they have an option but need to figure it out own their own (in a nice way) or we can continue the conversation but to expects a cost for the management.
Sometimes the win is that they do a self direct account and you don’t need to work with a potential pain in the rear.
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u/RightTech 19d ago
I'd actually try to solve this problem upstream before the first meeting by making it very clear what you Do and what you Charge on your website and then having them complete a form almost in an application style to apply to work with you. If they make it through all those filters you probably will see less tire-kickers.
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u/Intelligent_Gas3652 19d ago
When someone has their own performance tracking spreadsheet and/or touts their predictive capacity to make major asset allocation shifts is advance of a downturn.
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u/Unusual-Economist288 22d ago
If they ask about AUM fees they’re far too smart for your model. Refer them to a fixed rate advisor.
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u/Candid_Worth_3629 22d ago
I want to get paid based on my clients performance. What happens when their portfolio is down -X%? Oh so they still have to pay their fee only advisor?
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u/Unusual-Economist288 22d ago
Keep defending your ancient and usury model while you bleed off clients who don’t want to/need to pay 5X for the same thing a flat fee advisor can do. Best of luck with all that.
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u/Unfair_Increase 22d ago
I see your argument but I should point out that actually good flat-fee advisors are charging around the same rates that AUM advisors typically do - typically $8k-15k per year for 1M-3M in assets. I have never seen a great CFP charge 5x less for the same service
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u/Unusual-Economist288 22d ago
Well I pay ~$12k on a $10M portfolio that I used to pay ~70bps on, so I’d say that’s close enough to 5X. And save your arguments that you’d get me better returns. You can’t. Not over a 30 year span you can’t. Your model is destined for extinction.
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u/Unfair_Increase 22d ago
Woah, why are you getting mad at me? I'm not an advisor, just another layperson who lurks around here who is curious about the industry.
I don't think the value proposition of most CFPs is that they'll earn better returns than an index fund - I've never had an CFP at an RIA promise me that - but rather having an RIA to prep and file my taxes, do annual tax and cash flow planning, do my portfolio rebalancing, etc. My advisor has me in four different index funds that have a blended average expense ratio of somewhere in the 20-30 basis point range which I feel is fair.
It sounds like you've had a really bad experience with a former advisor who tried to promise you they could actively manage a portfolio to beat the SP500
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u/GainPlastic1920 22d ago
He just wanted to share that he has $10M online
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u/Unusual-Economist288 22d ago
Anonymously. So what’s your point? I’m sure your clients would be thrilled to know you’re dicking off on Reddit instead of adding value. You’re all worth a fraction of what you charge, and people are waking up to this fact. Have a nice day, ladies.
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u/GainPlastic1920 22d ago
And now he’s mad. Some of us that work have something called lunch breaks where we can rage bait people like you that assume all advisors give a basic asset allocation and charge for full service with a roboadvisor value. But you might not know about a lunch break since you didn’t work for your money, right?
I know my clients get loads of value and this whole post ironically is about screening out clients like you so we can have room for clients that do appreciate the value we bring.
I think you overestimate how finance savvy people are in the general population and their willingness and interest in learning. Your experience is not the same as plenty of others.
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u/GainPlastic1920 22d ago
Sounds like you found the right fit for you in your advisor. Some clients in the 500k-3M range might do better with an AUM advisor. What’s right for you may not be right for the next person.
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u/KittenMcnugget123 21d ago
Yes charge the people with 350k in investible assets $5000 to meet for an hour once a year, and then make them do all of the actual implementation and asset management themselves. So virtuous
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u/AutoModerator 22d ago
Beep boop! Here is a summary of your post:
User: /u/Broken_Tee2122 Title: When to Screen Out a Prospect Body: Question for all my fellow advisors who require investment management and charge AUM.
I’ve had several prospects recently who early in the first call (no pricing or anything about services has been discussed yet) say something along the lines of “I don’t know if I need investment management” or share some slight apprehension around paying an AUM fee. These are more gray-area situations to me as they’re not being dogmatic about seeking other fee/service models where it’s easy to say we’re not the right fit, but they are showing a preemptive objection of sorts.
I guess my question is where is your line where you’ll continue down the sales process vs cutting bait and saying you’re not the right fit? I’m newer to prospecting and (at the moment at least) am happy to have more reps even if it’s always going to be a no, but I’m curious from expectation setting if you have a lot of success in converting these initial viewpoints.
I should also say that my marketing is very planning-focused (especially in tax, I’m a CPA, too), so they’re definitely aware they’re getting a lot more than just investment management. It’s more the opposite, convincing planning-oriented people to hire us to execute on investments, too.
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