Much is made within the industry about 'profitable' and 'unprofitable' clients, but outside the financial services bubble it can sound a bit crass or uncaring.
The industry should never apologise for making a profit – as long as the client/customer feels they are getting value for money.
After all, wealth management and financial planning is not part of the welfare state, so it is only right customers pay a price that allows advisers to make a decent living.
I will come back to value for money in a future Grouse, but this week I want to look at so-called 'unprofitable' clients, and where the responsibility lies for them.
I realised I was an unprofitable client for the firm that looked after my affairs when my adviser retired.
That is fine, because I do not have any current needs and I am young enough to find another adviser when my circumstances require one.
But what happens when a client is in their 80s or 90s and they are not profitable? What happens if these clients are suffering from dementia or Alzheimer's? I was discussing such issues with a regional manager recently, who confided he had three such elderly clients.
From a pure profit and loss perspective, the clients are not profitable – he looks after reasonable sums of money for them, but not enough to justify the usual fee structure.
From a 'risk' perspective they are also difficult clients to look after, so he has taken to conducting meetings with them only when members of their families are present.
Now, I know a number of advisers do that and it is entirely sensible. I know one adviser who makes family members read, in his presence, every page of a report and initial it to say they have understood what is being suggested.
You can call this covering your back or you can call it good business practice. I would call it the latter.
A couple of things impressed me about this particular adviser. Firstly, he has undergone professional training on how to deal with people suffering from dementia. The other course members were all from the public sector – also on the frontline dealing with people who might be suffering from the condition.
Secondly, it is the 'moral debt' this adviser has with these clients. They are not profitable, are much too risky and he could pass them on to someone else. But, as he took on these clients a number of years ago, he has a responsibility to remain with them through thick and thin.
So, he will carry on looking after them until they have passed away and will ignore whether he makes any money or not from the advice he provides. Now that is what I call a professional adviser.
Lawrence Gosling is the founding editor of Investment Week. His views are his own. Send any comments to him at [email protected]
