April 14, 2020

Sometimes “No” is the kindest word.

Sujata Kabraji

Independant Financial Advisor

Who would have thought that this is true of our business? Saying no to a potential client? It took me a while to learn! This was our first lesson:

In the early days of our practice, we had a referral from an eminent fund house to meet a client. The client was looking for someone with specific skill sets. They had already sent 6-7 advisors but somehow the client did not get the answers he was seeking.  Finally, they requested me to give it a shot. Call it luck or fate, but the client seemed to be satisfied with our responses. We were so relieved that the client did not swallow us up for breakfast, we didn’t get in touch with him again.  A month later he called and yelled at for not asking for his business!

Over time we built a good rapport and he became one of our largest clients in terms of Assets Under Management (AUM). He kept us on our toes, always challenging us to keep abreast of markets and products. He was a veteran in the marketplace and so we rarely offered any suggestions, just followed his instructions, not daring to give too many inputs.

A few years later, he was approached by someone who was willing to share most of their commissions in cash and lured him into several exotic products where commissions were high. In his place I would have been tempted too. With regret we worked with him to move his assets to someone else. It was really hard to say no. There was fear – the loss of AUM was over 50%. There was regret because we always learnt something from him. There was anxiety about how to replace those assets.

Amidst all this, there was a silver lining. Once his work stopped, we had so much free time. We spent some time analysing the business impact. Our analysis showed that despite the large volume, our net margins were pathetic because of the time we spent on his portfolio. Also, it was easy for him to walk away because we were not adding enough value. At the end of this exercise, we realized that adding value was more important than volume. That choosing our clients with utmost care was crucial and de-risking your business should be a priority. This meant one had to learn to say no, even when tempted to say yes!

Some of our learnings about when to say No:

• Before on-boarding a client, make sure you are clear about where and how you can add substantial value. Take them on only if you feel you can provide substantial knowledge and expertise.
• Clients that only focus on returns will eventually get tempted and lured by someone who offers them a higher return, whether or not they deliver. A typical red flag is if they open their conversation by asking you what return you can give on their portfolio and stay stuck on that.

• Achieving goals is a team effort. A cart being pulled by both parties, in the same direction. Clients who come to you wanting to hand over the entire responsibility of their financial lives are hard work – take it on with caution.
• Clients who do not treat your team with respect and only wish to deal with you will leech away a ton of your time and cause discontent in your staff.
• If you do not have the skill-set required by a client, best refer them to someone who does. For e.g., a few of our clients have, over time, the good luck to sell their companies for very large sums of money. Their appetite and capacity for risk has therefore changed. We have referred them to family offices that are better equipped to their needs.
• We all have our value systems and ethics – a client who has different ones usually would like you to fall in with theirs. Best to be clear upfront.

Finding a way to say no is an art. It takes practice and courage. There is no easy way. In terms of timing, its best to say no before on-boarding. We spend 60-90 minutes in the first meeting, using an open-ended approach to understand the client. We then speak generally about our capabilities and slip in the parts which will tell the client indirectly that there is a mismatch of expectations. Either during the meeting or sometimes after we speak to the client again and discuss the reasons for a mismatch politely and in a way that helps them understand that it is in their best interests to find a suitable advisor. A background in counselling helps!

It takes courage as well as humility to say No! If you keep in mind that when you say no to the wrong people, it opens up the space for the right people to come in, it gets easier-but each time one has to do it, it is an effort.