The most amazing part of being an IFA is dealing with clients. They are so wonderful to deal with and so tolerant and willing and trusting and it provides tremendous job satisfaction.

The most amazing part of being an IFA is dealing with clients. They are so wonderful to deal with and so tolerant and willing and trusting and it provides tremendous job satisfaction.

But it is also amazing how things change when they no longer are clients. Turn your back on a client and you have a high chance of picking up a complainer. They can be absolutely beastly when they are not clients!

To some extent this is understandable. When we take on a client it isn’t difficult to look askance at the previous advice and you are only doing your duty to send their case to FOS for a free review as a starting point for the new relationship.

So the lesson of part one of this article is this: don’t lose clients, because they will then complain. 

But part two, and the real meat of this article is how to get rid of the clients that you don’t want! The 80/20 rule determines that too much of your time is spent on too few, and a minority of the twenty per cent need to be shown the door.

Experience shows that if you write to say goodbye to those who are costing you money, you are likely to trigger a complaint. If you send them a letter to say that you are no longer able to provide them with assistance – they will normally check the money paid to you over how many years and request a reclaim. 

So lesson two is this: make sure your file is tickety boo before you sack them.

Lesson three: if they do complain, then at least you have the reassurance to know that they would probably have complained at some point! So you now know you really did make the right decision. The ones who go quiet on you provide more anguish!

Which ones should you sack? IFAC say that you should be able to calculate how much time is spent on each client. Put that figure into one column on a spreadsheet and you are a long way to working out where your practice is spending its days, and which clients are taking up your time. Most professionals work on the assumption that there are one thousand chargeable hours in a year, and one thousand other hours spent on all the non productive work – paying the landlord, sorting out the maternity leave and training. That makes a total of approximately 2,000 hours, and every one of these hours has to be counted and paid for.

All professionals need to remember how difficult it can be to charge by the hour. For instance, if you have an important phone call to make it can take ten minutes to prepare, only to take five attempts to contact the client. That could be one hour spent trying to contact a client – hardly a valid item on an invoice. I am reminded here of the great QC George Carman (“Gorgeous George”) who prosecuted some of the great white collar criminals in the 1990’s. His obituary reminded us that some friend had stopped George in the street to ask some advice, and was astonished to get a bill from George in the post a week later for his time on the pavement!

So the first task is to get the time sorted – using approximate time spend per review, per phone call, per letter and so on. Then the second column of the spreadsheet should record how much money each client has made in the past year. And no prizes for guessing that the third column calculates the rate per hour each client has generated. So next you have to set the minimum, and that is, obviously, your expenses divided by the number of chargeable hours. Then your profit will come from those paying more than the minimum rate. 

If you do this you will be looking at culling twenty per cent of your clients. After removing those who are cross subsidised by wealthy god-parents or who give you free tickets to the rugby, you are down to ten per cent. 

And the next section explains how to go about culling them. First of all you need to tell them. The letter needs to state quite clearly that in the future, you need to charge them, say, £200 per hour. And of course this being regulated work, they need to consider and accept that – probably in writing. So a new client agreement will need to be sent out, that mirrors the other client agreements in your practice, because you cannot discriminate against the poor or vulnerable. IFAC client agreements are on the Doc library in Bat.

I am very sorry, but our minimum charges are now….and I will need to levy these on you if you continue to use our services….

I attach our new client agreement and would request you sign this in agreement….

Then you need to give them a chance to reply. I suggest one month, followed by one chaser letter. If the clients do not reply to the chaser, you can probably send them a third saying that if nothing heard in the next week or so they will no longer be considered clients, and all the commission will be rebated back to the policy from that day on. 

Of course no one likes to give up the money, or hand it on by rebate. But you need to be clear and determined. You will make money from this process, because it will inject some discipline into your practice, and in fact you will recoup this money by spending more time on the productive clients who do make money for you. If one per cent is your minimum, then don’t make exceptions, because the next time you quote one per cent a sharp customer will see it in your eyes.

The most common response is nothing. But the second most common response is a request to see your file. And so your file needs to be ready for public view. And no short hand such as VDIFF which is commonly used in the NHS in the margin of client notes to stand for VERY DIFFICULT CLIENT. 

Can you refuse to show them the file? In theory yes, but in practice probably no. So review the file.

In short every organisation should be shedding clients each year, as normal progress, and so make sure you are in control of this process, and that you are the one doing the sacking, and not the one getting sacked.