How to choose a Client? - Network FP
April 20, 2018

How to choose a Client?

Saurabh Bajaj
Founder & CEO at Nidhi Investments

How to Choose a Client?

“Ohh!! Did I read it wrong? Shouldn’t it be How to choose a financial advisor?” This could be the first thought that could come to our minds reading the title.

Good news is, you have read it right. The tide has turned the other way now and there is a deluge of investors willing to invest in the capital markets (and mutual funds). Unfortunately, (or fortunately) number of IFAs has not increased in significant proportion.

While this comes as a great business opportunity, it would also be prudent to choose our clients wisely.
Why do we need to choose our clients?

First, we are not in a transactional business; rather we do hand-holding for our clients. Thus, our relationship with clients works almost like a marriage (15-20 years). Thus, we can’t go for a “Love at First Sight” Strategy. We need to more diligent for a long-term relationship.

Second, our industry has a very dynamic revenue structure. We mainly survive on trail model. But then we also keep getting bombarded with a series of regulations wherein the revenue structures might change anytime.

The only hedge against this is having those quality clients who will help us sail through.

Although it will be tempting to onboard every client that comes, let’s acknowledge that everyone CAN’T be our client. Let’s look for few characteristics in our clients

1. Respect for our expertise

This should probably be the first and foremost characteristics we should look for, in our client. If he doesn’t respect our expertise, he will keep running to bankers, PMS sellers, direct equity or even direct AMCs. Only when he respects the fact that you are an expert who can help him, he will stick around with you.

2. Values our time

Many IFAs face this situation wherein the client calls them for a meeting and then makes them wait for long, claiming that “He is busy in some important work”. Let’s understand the value of our own time. If we have a list of 100 clients, out of which 5 act in this manner, we have every right to put them in the watchlist and give second preference than to those who value our time.

3. Is “Fairly” busy

If the client discussed in point 2 sounds like a pain, let’s also understand that a client who is super-free is equally undesirable. If he does not have anything productive or interesting to do, he will continue checking his portfolio and keep bugging you for every fall. He is also likely to expect a daily market commentary from you. This is neither going to create wealth for him and at the same time eat up a lot of your time. Instead, have clients who are “fairly” busy and are happy with an annual review meet (or at the most bi-annual meet).

4. Believes in Win-Win

It’s not difficult to find clients who want enormous wealth for themselves but don’t want anyone else to make money. Such clients will keep bugging you for passbacks, freebies etc. Instead, let’s be upfront in communicating to clients that its important for IFA to make sustainable income so that the clients can be serviced. Those who agree with this idea, are the right-fits for onboarding. Those who resist may be put on a waitlist.

5. Has reasonable expectations

While this could be difficult on its own, but we can definitely make an attempt to set the expectations right. Clients having unreasonable expectations (be it returns, service, knowledge) are not likely to stick around for long.

The list can go on, but I will just cut it short here. Many IFAs may not agree with this idea of being “Selective” in the first go. But let’s understand that we have limited bandwidth. Some of us are operating individually. Those who are operating with small teams will still have bandwidth issues.

By onboarding one painful client, we might be in a situation of doing dis-service to 5 other good clients. The painful client will eat up so much of our time, energy and patience, that we will be left with little for the deserving ones.

All of the above criteria might not be applicable for all of us. Some of us still might want to choose the painful clients. I would like to thank them personally on behalf of the IFA community. Because of them, we have the good lot available to us.


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