Who is a "bad fit" client for Drucker Wealth?
WRITTEN BY: Gideon Drucker, CFP® AIF® ECA
One of the first questions you should ask a wealth advisor is “who is NOT your ideal client?”
In my opinion, you don’t want to hire a firm that will work with anyone and everyone. Because if there aren’t clients that they’re willing to walk away from, it probably means they also don’t have a type of client that they have deemed their “best fit” client either. You want to work with a firm that is selective about the way they qualify new clients because it makes it that much more likely that you are choosing the right fit for you and your family…based upon your specific motivations & circumstances.
To save us both some time, here’s my list of the “wrong” fit clients for my firm.
1. FIRE Movement Subscribers.
The FIRE Movement, if you’re unfamiliar, refers to those that want to retire as soon as humanly possible and are willing to do whatever it takes to get there. This might mean not taking any vacations, downsizing the family home to the absolute bare minimum, not going out to eat, not paying for tv/Netflix/HBO…basically, living an austere lifestyle to save up enough money to retire asap. Now, I’m not trying to judge….there’s nothing inherently wrong with this approach…. it’s just one that I don’t think is the right fit for my firm when taking on new clients.
At Drucker Wealth, we believe that financial planning is meant to help you strike the right BALANCE between current lifestyle and future goals…between current wants and future needs. To my mind, effective planning allows you to enjoy life & maximize your time NOW while knowing that you’re not sacrificing your future goals in the process.
I find the FIRE movement especially stressful because not only are you sacrificing your current lifestyle in order to retire, but you’re creating a pretty rigid/fixed cost retirement as well since you will inevitably have to live on a set amount of money for the rest of your life.
So…..When does the fun part happen?? When do you get to live? I’m sure you’ve seen those “news” articles that highlight how John and Susan, aged 35, have retired with $1mm in the bank.” Really? What sort of “retired” life are they going to live as they try to make $1mm last the next FORTY-FIVE YEARS??
Quite simply, retirement is not a goal in it of itself…it is a reflection of what really matters: financial independence. I am 100% confident in saying that most of my clients are less focused on age-driven retirement than they are on attaining financial independence.
Financial Independence means doing what you want, with who you want, when you want, for as long as you want. For some this means full retirement at age 50, for others it means transitioning to part time income or doing some work consulting/nonprofit work that feeds your soul, and sometimes this means reaching retirement age and realizing that you still love what you do, are fully engaged, have very little stress or restraints doing it, and figure why not keep the party going!
We work with clients that are journeying through each of these life paths…and my team and I enjoy mapping these winding paths with our clients together over time And maybe it’s because I love what I do so thoroughly and find the “journey” in building my business as rewarding as whatever the final destination might be, but I just can’t just can’t wrap my head around those motivated, beyond anything else, to stop building/growing/accumulating completely.
2. Rental Properties/Passive Income Driven
Ok, team, buckle up.
I’ll start with one of our ironclad investment principles: the stock market has provided greater historical returns than rental real estate over the last 100 years (and 50 years and 20 years) while requiring a heck of a lot less work/hassle/personal involvement in order to achieve it. [2]
(I’ve shared my opinions on rental properties here and here if you’re interested in an additional 3,000 words on the subject.)
Now, this is not to say that any individual rental property can’t be a great investment. It can be. But here’s the real reason I’m mentioning this: in my experience, most people that bring up real estate on a first call aren’t looking for it to be just another solid investment (like their 401k, Roth IRA or ETF portfolio) instead they expect it work as some sort of magic pill that will allow them to retire 20 years earlier than they imagined.
Again, this is just my experience, but people that reach out fundamentally looking to generate “passive” income via rental properties (especially when their total liquid net worth is below $2mm) are looking to short circuit the planning work & time required for MOST people to achieve lasting wealth.
A lot of times, they tell me that they’re looking for their rental income to replace their business income or their W2 salary. I find this a bit strange & (usually) unrealistic. Again, from experience, most of our clients that have had success with rental properties look at their rental income as merely SUPPLEMENTING their current income & giving them more margin for error in their plan. They (correctly) do not see it as a panacea.
I have yet to see a rental property zealot achieve the lofty goals that they sometimes ascribe to their rental properties. And as a result, I don’t understand this impulse, nor do I see it a viable path towards true financial independence. First off, “passive” income doesn’t emanate like manna from heaven. It requires a capital outlay (down payment) and comes with its own ongoing costs (mortgage, payments, property taxes, maintenance costs etc.) that bring down the actual net income you receive. Income that is attached to a liability can’t be truly “passive.”
And as a final point as to the utility of “passive” income…. isn’t the purpose of any investment simply the growth of your net worth? Whether that increase comes from capital appreciation (stock market-based investing) or income that enters your cash flow (real estate or stock dividends), ultimately, it’s the same money ending up in the same pocket. Again, the only difference is what you choose to do with it…i.e.: you can let it keep growing and accumulating in your accounts (like in your investment account) or you can add it to your annual cash flow (like your net rental income).
And even this is a distinction hardly worth making though because you COULD turn your investment growth into an income stream if you really wanted to do (the dividend of the S&P 500 has far exceeded the CPI over the last 40 years).[1]
To what end though? Why would we want to stop compound interest from working for us before we need the money?
My last point in the spirit of brutal honesty: If you’re really looking for ways of increasing your income (a worthy target) I believe (based on real world experience with hundreds of clients) that there are far more lucrative and cost-effective ways of doing so. They just require a bit more sweat equity.
For example: starting a small business or engaging a side hustle that utilizes your specific skill set, learning a skill at work that allows you to advance professionally more quickly etc.
3. $10mm+ Liquid Net Worth
Ok, so this one is crazy for a wealth manager to admit….after all, who wouldn’t want to work with clients that have all this money for us to manage??? And yet, here we are.
Quite simply, the ultra-high net worth space is just not what excites me about what I do. To me, at a certain point, that would feel like working in the margins and without stakes. Instead, I like getting my hands dirty…I love working with clients that are looking to achieve that level of financial independence in the next 20-30 years and just need a plan of attack to get there. My team specializes in helping you define & design this financial roadmap and we relish getting to guide you over time as you strive to make financial independence your reality.
Most of my clients are high income earners in their 30’s and 40’s with a liquid (by this I mean not real estate) net worth between $500k-$3mm. This is where I think a fiduciary financial planner can provide the most value to the families that they’ve partnered with & the capital that they’ve decided to steward. (The fact that most of my team is in the same age demo of our clients is not an accident either.)
Again, just like the FIRE movement, this is not to say that ultra-high net worth families don’t need financial planning support or wouldn’t benefit from professional guidance…of course they would...but they would be best served by firms that are designed exclusively to work with them!
4. Price Shoppers
Looking at a few different financial planners before deciding is normal…of course! I’m not saying you shouldn’t do that (I do think there’s a point of overkill and that the right fit is the right fit no matter how many other firms you look at…but alas!)
But someone that makes the decision based on who is the least expensive in the short-term is honestly just not someone that thinks about planning in the same way that Drucker Wealth does. Someone who is that focused on the short-term cost of our guidance over the long-term value (both in tangible dollars and financial clarity) that our Financial Life Plan is designed to provide over the next 20-30 years probably isn’t the right fit.
Here’s the thing: in my experience in working with my personal CPA and Estate Attorney, I've come to realize this: cost is only a factor in the absence of value. In those relationships where I am the client, if I feel I'm getting the value that I want, I am HAPPY to pay these professionals their keep. They are doing work I can't do, I don't want to do, and are going above and beyond to take care of me... I'm a happy camper.
As I am proud to share with prospective & current clients: we are not trying to be the lowest cost option available to you. I always think of the joke about flying, "it's better to not think about the fact that every part of the plane you're sitting in was built by the lowest cost provider." Our goal is to provide unparalleled VALUE.
With something as serious and life altering as financial decision making, your choice should hinge on the value you expect to receive RELATIVE to the price you will be paying. Price by itself is not a barometer of anything.
5. Jerks & People that just want “Yes” Men & Women
Guys, this should really be first. My firm has a no “a** holes” policy when agreeing to take on new clients.
We only work with great people who appreciate the value of our services.
A financial planner’s value to their client is only as good as the personal relationship allows it to be.
We’re there for child births and parents’ death. We’re there for job promotions and corporate downsizing. Sometimes our job is to provide tough love & sometimes it’s to give you our “blessing” to make a lifestyle change because your plan supports it. This doesn’t always mean that you’ll agree with what we say or choose to do everything we recommend over time…. but it does mean that every interaction is based on mutual respect & trust. We are committed to living our lives from a place of joy and kindness and are committed to long-lasting, healthy relationships with each of our clients.
This is the only type of long-term relationship we know how to build. It’s the only one that allows YOU to maximize OUR knowledge & expertise over time. And it can’t happen if we’re just not on the same page…if there’s not some sort of personal connection underpinning the financial relationship and it definitely won’t bear fruit if we just seem to rub each other the wrong way. No advisor’s technical knowledge is worth the trouble if it’s not a good personal fit.
So, what is the “no jerks” rule? Well, to quote a common expression, we both know it when we see it.
And lastly, what do I mean by we’re not “yes men/women”? Simply put, we are not order takers. Our job is not just to simply affirm every decision you make and place every trade you instruct (We are not your old school stock “broker”. We are your fiduciary financial planner.) We will tell you when we disagree. We will show you the numbers & the context so you can make the decision that makes the most sense for your financial future.
Ok team, I hope that was helpful as you contemplate your own financial journey!
As always, please be encouraged to reach out at any time and schedule your 15 minute "Right Fit" call here.
