When Is It Time to Say Goodbye to Clients?

Breaking up is hard to do. 

Building a book of business and constantly seeking out new clients is grueling but essential for advisors. So when the time comes to drop a client, it can be just as difficult but also just as important. Whether a client ignores advice, withholds information or is simply rude, cutting ties might be the healthiest option.

“Holding onto a toxic relationship drains more than it gives,” said Thomas Ravert, CFP with Pathway Capital. “Letting go creates space to focus on clients who value the relationship.”

I Saw the Sign

An advisor’s main job is to advise (duh), so when clients don’t follow recommendations, the relationship loses meaning. Tom Arasz, founder of Bmore Financially Fit, said he experienced that firsthand with one couple. In meeting after meeting, the three would agree on a financial plan, but the couple would never stick to it. “They’d go out and buy a new car instead of paying off credit card debt,” he told Advisor Upside. When Arasz ultimately fired the clients, he felt like he was fulfilling his fiduciary duty by not having the couple waste money on his services if they weren’t taking them seriously.

As the saying goes, there’s no such thing as a free lunch. Some clients, however, try to get one, or at least a cheaper meal. Arasz recalled firing another client who misled him about complex tax issues that were beyond the advisor’s expertise. “Even if I had the expertise, I would’ve quoted them a higher fee to balance out how much work they were going to be,” he said.

If a client is kind but uncommitted, an advisor might give a final nudge or recommend a better fit elsewhere. But if a client is abusive to staff, that’s an immediate red flag, said Tom Balcom, founder of 1650 Wealth. “I wouldn’t want to drop that ‘grenade’ in the lap of another financial advisor, so I would merely de-link them from our firm,” he told Advisor Upside.

Break It Off. Even with glaring red flags, letting go isn’t easy. Rising acquisition costs make every client feel hard-earned. The median cost to acquire a new client hit $3,800 in 2023, up 75% from 2021, according to Kitces Research. High-growth practices now spend 12.5% of revenue on marketing, compared with 9.7% by their peers.

“Part of it is that it is so difficult to get clients,” said Monica Dwyer, CFP with Harvest Advisor. “You work so hard for it and you have likely already made a huge time commitment.”