Conscious Uncoupling: 7 steps to firing clients ethically

“Firing clients.” Now that’s something that gets a lot of attention these days, in part because it conflicts with the traditional notion of the customer always being right. But experts say some clients are so troublesome and so expensive to serve that you must fire them in order to protect your bottom line, your staff morale, and your own sanity.

What’s more, firing a bad client removes people from your life who sap your energy and motivation, making it harder for you to serve the customers with whom you really enjoy working.

An even bigger reason to fire bad clients is to reduce errors-and-omissions claims. That’s because they are so painful to work with that advisors are tempted to spend less time with them, increasing the likelihood of mistakes and failure to perform required tasks. Both can result in client complaints and lawsuits.

Bad clients exhibit all kinds of irksome behaviors. Some refuse to follow your investment or insurance advice. But then they blame you when their decisions don’t work out. Others have toxic personal habits such as gambling addictions or a self-destructive appetite for market risk. Then there are those who hide information from you (example: off-the-books spending). Finally, some clients simply abuse their advisors—yelling and screaming at them, hurling personal insults, or attacking their racial backgrounds or religious beliefs.

In the face of such nightmares, it’s easy to become unhinged yourself—criticizing “those crazy clients” behind their backs, arguing with them or badmouthing them to others in the community. And if you decide to fire them—we prefer softer terms such as “resigning the account” or “disengaging with clients”—it’s tempting to do it in anger. But this will only breed resentment and result in the terminated client tearing you down on the Internet. Then you’ll pay twice for jettisoning that customer—with lower revenue AND a tarnished professional reputation. Surely, there must be a better way.

Indeed, there is—“conscious uncoupling,” a term popularized by actress Gwyneth Paltrow last year when she announced her divorce from Coldplay rocker Chris Martin. Applied to the challenging tasks of dismissing a bad client, conscious uncoupling implies a mindful, calm, and amicable approach to winding down unproductive and frustrating client relationships. It also suggests an ethical mindset where the advisor expresses concern for the client’s future welfare—and takes steps to assure the client isn’t left in the lurch.

What constitutes a mindful and ethical approach to firing, umm, dismissing a client? Here are the major elements:

First, your decision must be fact-driven, not emotion-driven. Upon a careful review of the client’s account, you must be able to demonstrate that the financial benefit of keeping the client exceed the costs of servicing the client. If the facts don’t support this finding, then you should postpone a decision until they do.

Second, you should make a good faith effort at reconciliation. Always notify clients of your concerns and then give them multiple opportunities to change their behavior. If they fail to, then you are justified in taking action. And don’t forget to leave a paper trail during the remediation process to protect yourself. Remediation should also include an effort to find alternative ways of working together. Perhaps the relationship would work better via e-mail exchanges rather than phone conferences. Or maybe the client would accept a lower level of customer service, presumably at a lower cost to you. The point is, you want to demonstrate your reasonableness and flexibility to the client, even though the person may be utterly lacking in both qualities.

Third, give the person one last chance… in writing. If the problem persists, then begin the dismissal process. Now, having made the decision doesn’t mean you need to execute it immediately, especially if doing so would cause a problem for you or traumatize the client. For example, if the account is very large, you might want to forego the financial hit until you’ve replaced the revenue with new clients. Or maybe the person is facing some life challenges and would be hard-pressed to deal with finding another advisor at the moment. By all means, show flexibility by putting the termination off for a few weeks or months until things calm down.

Fourth, after you make your decision, request to meet with the client in person. Winding down the relationship over the phone or e-mail may seem easier, but actually may cause more blowback in the long run. Remember, during the termination process, you don’t want to create an enemy. You simply want to extricate yourself from a troublesome and costly situation.

Fifth, during the meeting, keep the discussion pointed and brief. Explain why you have decided to end the working relationship. Don’t lay blame; rather, explain how things aren’t working to the benefit of both parties. If the customer now promises to change, stick to your decision, since you’ve already given the person multiple chances to turn things around.

Sixth, offer to help the person find another financial advisor. Give referrals to several colleagues who might be a better fit. However, encourage the person to do their full due diligence before making a decision as you are unable to warranty another advisor’s competence.

Seventh and finally, resolve to conduct the meeting without angry words, frustration, or personal attacks. Again, the last thing you want to client into a foe. Rather, treat the person with professionalism so he or she sees no need for revenge later. In fact, consider going a step further and treating the person with compassion. This might be hard to do with a nightmare client, but doing so might result in the person accepting your decision and perhaps even sending you referrals in the future.

Once you finish the meeting, allow yourself to breathe a sigh of relief. However, don’t breathe a word of your decision to anyone outside the office. Keeping client matters confidential is a crucial ethical practice. Just because clients are a problem doesn’t give you the right to complain about them to others, either while they’re clients or after their departure.

The key takeaway: whatever you think of Gwyneth Paltrow’s acting talents, you have to admit her approach to divorce showed common sense. Whether you need to end a marriage or a client relationship, conscious uncoupling is a reasonable, low-stress method of problem solving that achieves results while avoiding drama and errors-and-omissions claims. Give it a try with your next problem client. Perhaps you can leave your Iron Man suit at home.

• Please share your experiences with dismissing trouble clients – or add your tips for handling these types of situations – on this new thread now.

For more information on ethical business practices, please visit the National Ethics Association’sEthics Center. For more information on affordable errors and omissions insurance for low-risk financial advisors, visit E&