Executive Summary
For many financial advisors, setting asset minimums helps ensure that their firm can generate enough revenue to maintain business costs and compensate the advisor appropriately. While finding prospective clients who are a good fit for the firm can be challenging, what can be even more challenging is letting a prospect who doesn’t meet the firm’s asset minimum requirements know that they wouldn’t be a good fit for the firm. The topic of assets and net worth can be a very sensitive topic; some prospects may take it very personally when they’re told they don’t have enough to be taken on as a client, and at the same time, many advisors feel awkward when they have to turn prospective clients away.
In our 105th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards discuss some of the reasons that conversations about asset minimums with prospective clients can be so difficult, and offer a few ways to gracefully inform a prospect they do not meet the firm’s asset minimum while still providing value for them even if the relationship isn’t going to continue.
As a starting point, it’s important to recognize that many prospective clients may not know what an asset minimum is, why some advisors have them, and whether they would qualify to work with a particular advisor because of their minimum requirements. A simple way for advisors to educate prospects about asset minimums is to include the information on their firm’s website. This would help prospects searching for an advisor online to self-select themselves out from firms whose asset minimums may not apply to them. This could also help prevent them from scheduling unnecessary meetings in the first place, saving both the advisor and the prospect time and potential awkwardness.
Additionally, advisors can spend time in the initial discovery meeting explaining who the firm’s clients generally are when meeting with new prospects, reviewing typical asset management ranges and any particular niches served. This can help prospective clients who don’t see (or comprehend) the information on the firm’s website understand why working with the advisor might not make the most sense for them, which can help to avoid any hard feelings and make it easier for the prospect to accept why the advisor may decline the engagement. Importantly, even though a working relationship may not make sense, advisors can still offer to help the prospect move forward with their financial planning needs. For example, the advisor can offer a list of vetted advisors with lower (or no) asset minimums who would potentially be a better fit for the prospect , and they can even compile a brief list of some simple action items for the prospect to tackle on their own, so that they can begin addressing some of their most immediate financial planning needs.
Ultimately, the key point is that even though asset minimum conversations can be awkward, being honest and upfront can keep advisors from feeling pressured to engage with a client who can’t generate enough revenue to justify the relationship. And by communicating with honesty, clarity, and empathy, advisors can help mitigate any of the prospect’s disheartened feelings of rejection while still providing valuable guidance on what they can do on their own and who can help them, letting the prospect go with their dignity intact.
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***Editor's Note: Can't get enough of Kitces & Carl? Neither can we, which is why we've released it as a podcast as well! Check it out on all the usual podcast platforms, including Apple Podcasts (iTunes), Spotify, and Stitcher.
Show Notes
- Kitces & Carl Ep 27: Handling The ‘Required Minimum’ Conversation Without Being Awkward
- Another Reason For Putting Your Advisory Firm Fees And Minimums On Your Website
- Setting Proper Client Minimums: AUM Account Vs Retainer Fee Minimums For Advisors
- Garret Planning Network
Kitces & Carl Podcast Transcript
Michael: Greetings, Carl.
Carl: Well, hello, Michael Kitces. How are you?
Michael: I'm doing well. How are you?
Carl: I'm really good. We've got lots of snow in Utah, which is fantastic. Don't tell anyone, though, because we don't want anybody else coming here.
Michael: Oh, those darn tourists. They take all your ski places.
Carl: I just saw a note from somebody who's like, "I'm headed to Utah because we're getting pounded and nobody else is." So, we'll just keep that quiet. By the time this comes out, it'll all have passed.
Michael: That's true. That's true. We record these little ways in advance. So by the time anyone hears it, you'll have already enjoyed all the snow there was to enjoy without them.
Carl: Exactly. That's what we need. Exactly.
Michael: It's good planning. That's really why we record these in advance, so that...
Carl: Exactly.
Michael: ...we don't have to actually let out the word on what is currently good ski season in Utah.
Carl: That's exactly right. Perfect. What are we talking about today? Something exciting, I'm sure.
Gracefully Declining Business Relationships And Easing Awkwardness By Using A Templated Response [01:05]
Michael: So, we had a great question come in from listeners, I feel like is one of those moments that we've all been in. It's a pretty straightforward situation. You're sitting in a prospect meeting, you're about 5 minutes in, and it is clearly not a good fit. And not just personality-wise, they just don't have the financial wherewithal to make this work. So, how do you handle that moment in the meeting, so you don't have to just be that person that says, "Go build some assets and come back," because nobody feels good about that? So, how do you try to be useful and valuable in that meeting? Right, ideally, we give them some value and send them on their way with the value.
Carl: Yep.
Michael: How do you handle that moment? So, I guess there's sort of twofold to this. How do you give them some value before you send them on their way, and/or just how do you handle the awkwardness of the moment when you realize they don't have the financial wherewithal to hire you and you have to be the person that says you don't have enough money to work with me?
Carl: Yeah. I love that.
Michael: So, how do you handle this situation?
Carl: Yeah, no, I love that. That's obviously something I've thought a lot about. I think one thing that really, we've gotta always keep in mind is the feelings you're having about how awkward this situation is largely inside baseball. Meaning like the people, I'm pointing out the window, the people out there don't know about this awkward feeling. You're making it awkward. I mean that with deep empathy and let me explain. Here's all we really need to say, and I want to talk about the deliverable because I feel really strongly about this and I know I'm wrong, but I feel really strongly about it. And what I mean by that is I'm sure there are other ways to do it. I'm going to present it as if there's only one way, and I know I'm wrong about that.
So, first thing, it's really simple just to say... And I don't know if it's 5 minutes in or 15 minutes in, or listen, we'll talk more about that in a minute, but I just want to get this outta the way so we can discuss the awkwardness. At some point, it's really easy to say, "Michael, it's clear based on what I've learned about you today. Thank you for taking the time today. It's clear that based on what we do here, this would not be a good fit." That's not awkward.
Michael: "Why not, Carl? Why? I heard you are a great financial planner and I need help."
Carl: Yeah. You're putting me on the spot, on a, what is this? A Thursday afternoon at 4:30?
Michael: Hey, we got put on the spot by prospects, so, yeah.
Carl: Okay, we're meeting today. Yeah.
Michael: Right, but this is the script that plays in our heads, or not plays in our heads. Well, maybe...
Carl: I've never had anybody say why, which is odd, and I think that... That's not odd actually. It's odd that it's coming outta my mouth, but I've never had anybody say why. If somebody did say why, it'd be pretty simple to me. And I think the best way to approach these things is talk like you were talking to a friend, right? "We help people with a specific set in a certain niche." To me, that's the easiest place to go, right? "We help people with a specific set of challenges, right? And you're...
Michael: "We help doctors who are trying to get through buying into their medical practices partners, and you are not one of those." So, easy when I've got a tight niche. Easier.
Carl: Yeah. "We work with entrepreneurs with a successful exit," right? "Oh, I am an entrepreneur with a successful exit." "Well, then we're not having this conversation anyway," right?
Michael: Right. Right. Right.
Carl: But if it's just like, "Okay, we work with retirees, and you don't happen to have enough money," we can talk about that in a minute. How do you handle that...if they ask you why, the only answer you possibly have is because you don't have enough money, right?
Michael: Yeah.
Carl: And I think the answer to that question is, "Look, based on the business we run here, there's a certain level of complexity that we deliver. The service model we use here, it requires a certain level of complexity. That's not where you're at right now. And so, it wouldn't be a good fit because we're overkill," right? Something along those lines. And I've never had that come up because it was always around a niche. Now, let's talk real quick for a minute about this strong fancy feeling I have about the deliverable because then we can back into it and break it down and we can see what you say and go through it. I actually believe that everybody deserves a one-page plan, right? And, of course, it can be a less robust one-page plan. It can be a half-page plan, right?
I actually believe... and I did this originally because of altruistic reasons. I was just like, "Look, I got in this business to help people." I found out pretty quickly it ended up becoming a really great business development process. But to me, it's not that hard to listen, ask really good questions for 35 or 40 minutes, even an hour. I would shift into practice mode, so it's not like I'm wasting my time. I'd be like, "Oh, this is a great chance for me to learn. How could I listen better?" Give this person the experience that every human deserves of being asked interesting questions, thoughtful questions, and listen to around the topic of money. Just give that as a gift. Now, what do you get from it? You practice, right? Practice. And then in my mind, I believe...
Michael: So, I'm doing this like I'm going to come back to them with the one-page plan later, or I'm just...
Carl: Yeah, here's what I would say. I would've listened the whole time. I decided in the first 5 minutes based on the... I think we got this off the toot machine, right? Twitter?
Michael: Yep.
Carl: Yeah, the tooter.
Michael: That's not what they call it, but yes.
Carl: That's fine. So, based on the tweet, we learned in the first 7 minutes of pattern matching, we're all good at this, we've all been there, it happens almost all the time, right? I don't think we say anything there. I think I give somebody the amazing experience which no one gets anywhere else. You're the only people who can do it, right? I listen to them, I ask good questions, and then at the end, I tell them, "Hey, it's clear to me after we've talked, Michael, that working with us as a client wouldn't be a good fit, but I've learned a lot about you, and I have a couple of ideas." And so, here's what I loved to do. I used to say, "Come back for the second meeting," but I think now in this scenario, why not just say, "Here's what I want to do. Give me a couple of days to just absorb what I've heard, and I'm going to write a list of suggestions, just action steps of what I think you should do, and I'll send that to you.
Let's call that... I don't even know. I would just call it an executive summary of our meeting. Let me just write up our meeting notes. I wouldn't call it a one-page plan. I wouldn't imply anything more than that. And then I would just take the time to write a couple of simple suggestions, "Open an account at Vanguard and invest $50 a month in the S&P 500 index fund. Pay down this, refinance your mortgage," whatever the simple suggestions were. And even easier, if I can charge for that on an hourly basis. But if I can't, if I'm just a straight AUM advisor, what's the harm, right? And to me, for altruistic reasons, for karma reasons, that's a reason enough. And what I found, especially if I was clear about who my ideal client was in that conversation, that person became a good referral source. I had that happen. And they didn't refer people like them. They referred my ideal client that I described to them. So, that's the arc of where I would go, and now I'm super happy to talk about it.
Delivering Clear Messaging About Minimums Before Meeting With Prospective Clients [9:28]
Michael: So, I have to admit, I'm still a little bit stuck on the first part.
Carl: Me too.
Michael: Why isn't this awkward for them? You kind of set this up as like, "This is awkward. We're making this awkward in our heads." And I get it. I do think there are a bunch of things that we build it way up further in our heads. We build it up to be messy in our heads than it really actually is for the person on the other end. I have to admit, I did not think of this as one of those situations. Now, perhaps I'm just channeling my own prior experiences when I really had this crop up the first few times and I had no idea how to handle it, and I basically just said something to the effect of, "Well, we have certain asset minimums here, dot, dot, dot, and you don't have enough." And it was awkward, it didn't feel good. They very clearly visibly felt rejected and were not happy about that. So, I feel like this isn't just in my head awkward, this is really awkward, awkward if it's not handled well.
Carl: If it's 100% about you don't have enough money.
Michael: But it is. Sucks that that's the reality, but it is.
Carl: But we painted a scenario here where it's not a good fit, right?
Michael: It's a money fit.
Carl: If it's 100%...
Michael: "Look, I just don't want to work with you because you're an unpleasant human being." I don't have a problem with that one. I just say it's not a good fit, and I exit the conversation. The answer is, "You need to build some assets and come back because you don't have enough right now." To me, those are the painful awkward ones. It's pretty awkward.
Carl: So, look, if that's the only thing we're talking about, and you can't get away with it's not a good fit, I would still try, it's not a good fit. And if somebody said, "Why?" Well, then now let's talk about the awkward piece. It's awkward at that point. If the only reason why is because you don't have enough money, it's awkward at that point.
Michael: So, how am I navigating that?
Carl: You tell me, how are you navigating it?
Michael: Well, so my takeaway, having gone through situations like this over the years, I'm determined not to put myself in that position in the first place, which means that's why I advocate for things like put your minimums on your website. Whether it's the minimum fee or minimum assets or whatever it is, put out there, "Here's what you need." And you know what happens? People in the modern era look on the internet to find out what's going on. They don't call, and then I don't have to have an awkward conversation. They screen themselves out very effectively if you just put the information out there. We have such a tendency to hide the information and then they don't know that they don't meet our minimum, so they come in and then we have to reject them to their face, which feels even worse, or we don't want to reject them to their face, and then we take them as accommodation clients that we probably shouldn't have taken and get stuck in the business because we take all these accommodation clients because we didn't want to reject 'em in their face because we didn't even want to reject 'em on the website in the first place.
So, the approach that I ended out with because I really don't like these conversations and find them very awkward is I'm just going to get really clear on my website about here's the minimums of what it takes, and if you don't have that, it's cool. In fact, at my prior firm, we did that for years. I would actually tell people if they even just approached in social situations, they're interested like, "Would love to have that conversation. This isn't really the best place to talk about the business and what we do. So here's what I'd suggest. Go to our website. It has a lot more information about just what we do and how we work with clients, and then follow up with me next week if you want to continue the conversation." And if I had a strong understanding that they probably were a qualified client, I might follow up with them a little bit more proactively. Otherwise, I will leave the ball in their court because I knew that our minimums were very clear on our website.
So, at some point, someone's going to click like the fees and minimums page, and they're going to see what it is. And if that's the number, they just self-select themselves out off of the website, and all I had to do was say, "Hey, why don't you just go here because it would be good so you understand the full breadth of what we do. You know I do some nerdy tax things, but we got a whole offering. Go take a look at more of what we have on our website. It explains it pretty well. And then touch base with me next week, or I'll touch base with you next week depending on how much I want to drive this, and let's continue the conversation." And once I started doing that, these conversations basically just went to zero because people would self-select themselves out because we were clear about what it takes.
I know one advisor that actually takes this one step further, and if you do the contact on their website, they've got a little questionnaire in their contact form, and literally, in the questionnaire it says...it's something to the effect of, "I'm comfortable with the firm's minimum fees.'' And you have to check Yes or the form won't complete. So, you have to acknowledge. And I'm forgetting exactly how he words it, it's pretty tactful. But you have to acknowledge the firm's minimums and that you are okay with where they are before the meeting can even be set. So, he never has this conversation because he filters them out. I was never quite that in your face in the advisory firm context. And I was part of a multi-partner firm and not all my partners wanted to go to that level, but I got the minimums on our website so that I could steer anyone there where we were having this social conversation, and just the number of non-qualified prospects basically went to 0. They really do. Look, ironically, that was the affirmation for me that prospects really do read the website because the non-qualified prospect inquiries just went to zero once we were clear about our minimums.
Using Empathy And Honesty To Let Prospects Down Gently [15:34]
Carl: For another day, I'd love to...we need to do another episode on whether or not about this idea of including fees on a website because I actually have a slightly different take on that. I just don't think people are in the position to understand the context based on the website, but that's a whole ‘nother subject. But the idea of minimums, look, I think that's a great idea. And now that I've sort of caught up to the conversation because you did spring this on me at 4:05 on a Thursday afternoon when...
Michael: Thursday.
Carl: ...all I'm thinking about is skiing, here's how I always think about this from the human level, like what would I actually say? And what I actually said, because remember, I worked for a big brokerage firm with bull as its symbol for a while before I started my own firm. We couldn't put minimums. There wasn't a website...
Michael: Yeah, you control the website or any of that, but…
Carl: ...people just ended up there. So, I had this conversation a lot, and what I would actually say was, "Hey, Michael, it kills me." I would just say, "This is one of the most challenging conversations I have, but the reality of the business that I run here..." Now, where I was going with the awkward in our own heads is if you go see an ankle surgeon and you've got a knee problem and they tell you they can't help you, that's not awkward. That's where I was going. And I could see...
Michael: I would agree. The more clearly we are defined in who we go after, it should get pretty clear, right? As you said, you have a knee problem and I'm a heart doctor, right? You're a young doctor getting going and I specialize in retirees. This gets pretty straightforward at that point.
Carl: Yeah. I remember my friend, we went to the same church locally and he worked for a big firm, I think we've talked about this before. I won't name the firm, but it has G and S as its initials. And he for some reason never... I was like, "How do you deal with..." Because we'd have all the people in the community that would come and ask for help. And I was like, "How do you say no?" And he's like, "What do you mean how do I say? I just say it. Like, I'm a heart surgeon and you need ankle surgery, right? Like, it's not a good fit." So, back to our real-life situation, though, is like, okay, yeah, that's cute, but the real question here was, it's because they don't have enough money, that's the only reason they're not a good fit. And if that's the case, then I think you're in a situation where I think you're right. It is a little awkward because it's about you don't measure up, right? And especially about this thing called money.
Michael: That's what makes me feel bad. Yeah.
Carl: You have this thing called money, and you are a failure, right? All of that imagery that we have in our minds around financial success. And so that's why I think I would just say that "Michael, this is my least favorite conversation because I really enjoyed our conversation here, but the reality of the business that I run here is we only work with clients with a million dollars. We only work with clients with $250,000, whatever the number is, so I can't have you as a client. But what I'd love to do is, you've spent the time with me today. I've learned a lot about you. Could I put together a list of suggestions on what you think I should do? Because frankly, Michael, even if we could take you on as a client, you don't really need what we do right now. So, could I just point out if it'd be okay with you, what I'd love to do is just I'll send you an email, give me a couple of days to put it together."
What I used to say was, I wouldn't say any of that in the first meeting. I would say, "Great. Let's schedule the second meeting, and it's just an altruistic thing. And now, I wouldn't do that because it's just too much time. So I'd just shortcut it. At the end of the first meeting say, "Michael, this is always one of my most challenging conversations, but because of the reality of the business that I run here, we only work with clients with X. But we've spent an hour together here and you've told me a bunch, and I can already see a couple of things." Oh, and I'd insert that last piece too like, "And to be honest, your situation doesn't warrant the... You don't need me right now. Could I point out a couple things?" And then I would say, "Just give me a couple of days, and I'll shoot you an email with a list of things that I would tackle first." And just go down the list. "Feel free to check in every once in a while, if I can be helpful." That's how I'd handle that. That's just actually the truth.
Providing Value To Prospects By Offering A Vetted List Of Advisors Who Are A ‘Good Fit’ [20:03]
Michael: Yeah. So, I will say the other way I used to handle this before I managed to get us to put the minimums on the website, so we got a lot more of these, I had gone online to Garrett Planning Network's website. So, Garrett's the network for advisors that are hourly and strong focus on working with folks essentially in the middle class and mass affluent. And so, I went on Garrett, I found two or three Garrett advisors in the area. They charge straight hourly. They'll take anyone who is willing to pay the hourly rate for an hour or few of their time. And so, I had a couple of Garrett planners I knew that I actually spent a little bit of time getting to know them. Bought them a meal and got to know them because I wanted to really get comfortable like, "If this is where I'm going to send someone, I want to make sure you're actually going to take care of them well."
So, did a little bit of diligence on my end. And when someone came in and we had that moment of, "Oh God, they're not a good fit, and it's just a money thing," then I would say to them something effective... well, a version of what you said like, "Look, I don't think we're a good fit because we do a lot of financial planning and ongoing asset management, and we have certain minimums around that. But I know a planner, his name is Jim, he works directly on an hourly basis simply to answer whatever questions you've got. I think he's actually a much better fit to simply jump in and ask the questions that you are asking about here. So, let me give you an introduction to Jim because I know it's really hard to just find advisors that are a good fit. And so that's the value I'm going to bring you today." I wouldn't say it quite that way, but like, "That's the value I'm going to bring you today is..."
Carl: "Oh, wait, wait, wait. I'm going to do... But wait, Michael..."
Michael: "...I'm going to help you actually find the right advisor."
Carl: "But wait, Michael, why am I not a good? Why do you think Jim's better than you? My friend sent me to you."
Michael: "Yeah, because we work with clients ongoing basis for financial planning and investment management, and we have $250,000 minimums."
Carl: Perfect.
Michael: "But Jim works with people directly on an hourly basis and you can pay him for exactly the amount of time that you need." So, I would acknowledge we have minimums, but I would try to frame in the context of, "Look, it's really hard to figure out which advisors do what and how to pick amongst us because it's really hard to tell us apart. So, I've actually done some homework to find advisors that would be a good fit for someone in your situation and I'd love to make an introduction to you." And I did find in those situations people were generally grateful at that point because the sentiment usually was something to the effect of, "Yeah, I can't tell y'all apart. I have no idea how to figure out who's actually a good advisor that's a good fit for me. And so, if you are giving me a shortcut to just the advisor that can actually work with me, I appreciate that."
Just, it was genuine. I got a lot of appreciation of like the value doesn't have to be answering their questions, the value can be showing them how to actually find the right advisor for them because it's hard for people. We're used to it because we live in the industry all along, but it's hard for people. And for any advisor who's ever worried about referring a client out to an advisor they don't know and you're like, "I don't know if he or she's going to be that good. I'd hate to make the referral and have it not go well." You're in the industry and you struggle with that, so imagine what it's like for every prospect who has no idea how to understand our industry, our channels, the rules, the standards, the designations, all that stuff, and they're trying to figure out how to navigate our industry.
Carl: It's terrible.
Michael: So, I felt like the opportunity was if I can find the right advisors for them, the value I'm going to provide is I'm going to take a moment to explain to them just the different ways that advisors in the industry work and how to understand the right type of advisor for them, and introduce them to one or two that they can go to, and just say, "This person is good. Gotten to know him or her. They work with people just like you. They're a good fit. Here you go." But I still dislike the conversation so much that I also champion getting minimums on the website so the conversations go away. I will still own that. I don't like the conversation because I didn't know how to, I guess…I still didn't know how to have the conversation to send them out without at some point just saying, "We have minimums." So, I try to frame in a constructive like, "Hey, part of what we do is literally ongoing investment management for people's sizable portfolios, and that's not to say like, 'And you don't have one,' and that's not the service you're looking for. You've got these questions about your student loans and your credit cards, that's not what we're focused on here. That's what Jim does. So, let me introduce you to Jim."
Carl: I love that. Yeah. I love that. And that's something I did as well. You find a couple... I remember even recently using some of the find planner tools that someplace like Garrett or XY so that you could... And I think just one little twist on that is, "Go see Sally. Sally's an hourly planner." And based on our conversation, the first thing you want to make sure all Sally knows is about this thing. But she'll know. But just like, "Hey, you got some value from our meeting. Boom." So, I love that. And I think you're right. In the end, if you can't get away with, "It's not a good fit," and somebody asks you why, and the only reason why is because you don't have enough money, that's awkward. Guess what? You're an adult. You can have an awkward conversation. Just be honest.
Michael: Yeah, just I try to frame it away from, "You don't have enough money," and in the direction of, "One of the services that we provide here is managing people's ongoing portfolios typically with at least a half a million dollars, and that's one of the big things that they pay us for, etc." And you know you don't have that, like you don't have to fill in the blank there. But they don't have that and that's literally not the service they're looking for. And so, again, it would give them an opportunity. I would try to set up the situation so that I don't have to reject them. I'm just going to get clear about what we do so they can reject me. Because I'll be okay and that empowers them and makes it feel less bad for them to say, "Well, a big piece of what we do is investment management for portfolios of at least a half a million dollars." And they can say, "Oh, well I don't need that." It's like, "Cool. Can I introduce you to someone else?" And it just it allows them to leave with dignity intact.
Carl: Totally. I hope whoever tooted that to us got the value they needed.
Michael: I hope so. I hope so. Thank you, Carl.
Carl: Cheers. Yep. Bye.
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