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Advisors Cut Smaller Fund Clients

Last fall, Tif Joyce and his wife, Judy, left their jobs at West America Bank to run their own financial advisory firm. The pair spent the past year arduously building a client base for the business, Joyce Financial Management, which is based in Sonoma County, Calif. The initiative was, by most standards, a success; the firm now has 175 clients.

Then came the terrorist attacks of Sept. 11. And on the heels of that came Oct. 7, the Sunday when the U.S. began bombing Afghanistan.

Because of those events, investors now require and demand a new level of attention from their financial advisors, say those who service individual investors. Like so many of the uncertainties that Americans now face, investors wonder if their assets are still allocated properly and still secure. Investors are emotional, prone to rash decision-making, and vulnerable to competitors who, with only a phone call, might be able to pluck them away from their current advisor.

Added Client Demands

Now, the Joyces find themselves shifting their focus from attracting more clients, to adequately servicing the needs of the investors they serve. Tif Joyce wonders if he is up to the task, and because of that, he is considering cutting his client rolls in half, bringing the number to just less than 90 clients.

"This is the time you want to be in contact with people, but when you have a large client list, it's not possible," he says.

He isn't alone. Financial advisors, overcome by an influx of individual investors interested in prosperous markets, began cutting their rolls in 1999, says Christopher Lanafame, a wholesaler for Franklin Templeton who serves Joyce Financial. Advisors did it again when the markets settled into a protracted slump 18 months ago, he says.

Crisis Forces Some to Cut Clients

This year, if financial advisors have not cut their rolls, Lanfame says, Sept. 11 and the events that followed have spurred them to do so.

"Sept. 11 was a national catalyst for every advisor to quickly do triage and figure out, Who are my top 200 [clients]?" Lanafame says. "If you didn't have a top 200, Sept. 11 made you figure that out. You had to do some business strategy very quickly."

Thirty percent of Lanfame's top 200 producers have cut their client rolls in the past six months, he said. More, he suspects, will eliminate small client accounts in the wake of the attacks.

Advisors and wholesalers agree that they should contact their clients regularly, offer a hand to hold, a reassuring voice. If they don't, clients may feel ignored, may act rashly, and move on to another advisor. "Now, advisors need to make sure they've put a protective shield around their existing client base and made sure that they are servicing them incredibly well," Lanfame says. "A lot of people will tell you, times like this is when advisors are ... really working for their money."

Wholesale Advice

Lanfame has recommended that Joyce and other financial advisors call each of their clients at least once every three weeks. The wholesaler, who has a doctorate in education and several other degrees in communications, wrote his doctoral thesis on how investors make decisions. The background has positioned him to provide insight to financial advisors about the psychology of investors in the wake of the terrorist attacks.

Trauma victims, a label that applies more or less to all Americans who turned on the news Sept. 11, generally rotate through an emotional cycle, experiencing denial, isolation, anger, depression, resistance and acceptance, Lanfame told advisors. If an advisor made a round of calls one week after the attacks, a client in denial may have said, "Everything's fine." By now, the client may have moved on to feelings of anger or depression, and during that time, the client will worry about his or her investments.

For Tif Joyce, the realization that he may need to show clients the door in order to take good care of his premier clients came during a long, continuing period of reflection following the attacks. "Things like that make you question your world, what you're doing," he says. "We get more out of our business than just money. We want to do things a certain way. We get self-respect out of this, too. It's really important to discuss our business in a certain way and that part doesn't have much to do with money. You sit up and go, Man, what's it all about here?' You can't take care of everybody."

Paring Down the List

Because of that, he said he won't simply chisel away his smallest accounts. He'll take note of whom he likes to work with, who takes his advice, who is focused on building a long-term investment plan, rather than chasing the hot, flashy equities.

But not all advisors see cutting client rolls as the only way to free up time and better-serve their best clients. Lew Semones, a fund industry consultant with Tiburon Strategic Advisors, said advisors are creating new partnerships to handle smaller client accounts. Merrill Lynch, he said, is encouraging advisors to focus on wealthier clients and shuffle smaller accounts off to call centers, he said.

Semones said companies are not overtly telling advisors how to run their businesses. But wholesalers who represent fund companies seem to be to applauding advisors who cut their client rolls.

"I don't think it would be a surprise to hear a wholesaler say, You need to focus your business on your most important people," Lanfame said.

A lot of strategic coaches are saying it's not about throwing out a big net now; it's more about servicing the right people."