How to Handle Losing a Major Client

You never want to receive an unexpected email from a very important client that reads “I need to talk to you at 2:30 today.” Particularly if he’s never sent you anything like that before.  But one morning last month, that was the message that landed in my inbox. My heartbeat quickening, I replied, “Of course, I’ll be here.”

In my profession, investment management, we are judged on one of two metrics: performance and professionalism. As CEO, I am our firm’s toughest critic, but I know from examining published data from my peers that our performance has been very competitive.  I also think we’re very professional – as far as I knew, we had never been anything but prepared, polite, respectful of, and accessible to this client.

Still, I found myself wondering: had we been lacking somewhere?  Now, I had four hours to wait until 2:30, and despite my partners’ assurance that this would be about wiring some money for last-minute needs (a new house?), I didn’t like the smell of it.

In my purgatory hours, I reviewed the client’s holdings, their performance, our previous correspondence, and notes from our meetings; I found nothing alarming, but nothing particularly calming either.  The phone rang at exactly 2:30. Stephen, the agent for an extremely wealthy family that hired us to manage a portion of their money, got straight to the point.  It took less than a minute for him to fire us from the account, very matter-of-factly, with little attempt to acknowledge the eight-year relationship that had seemed (we thought, obviously, in error) to be very positive.  Stephen explained that they had hired another manager with a very strong track record who required a high minimum investment; they were redeeming from several other managers to meet that threshold.

Stephen ended with a description of how he would email me the specific transfer instructions for the assets.  We said goodbye, I hung up the phone, and then stared into space for a few minutes.  By the time I looked at my screen, the transfer information was already there.  I walked out of my office to share the news with my partners.

In the weeks since, I’ve thought a lot about what we could have done to keep this client, and how to respond when a client leaves.

I started by asking the client who they were doing business with instead – I figured it couldn’t hurt to ask. However, despite asking Stephen for details on the family’s new investment manager, but he wouldn’t tell me. Because our conversation was so short, I don’t know for sure why this client left. But my guess is that we hadn’t fully understood their expectations – or that the client’s expectations had changed.

Then I asked myself: did I really understand what the client wanted? What did this customer really desire  if it wasn’t steady performance returns?  Of course, I can only speculate, but one guess is that we were not “sexy” enough. It kills me to say that, because I hate being typecast as the opposite: “stodgy.” I would rather be Hermes than Gaultier. But in my industry, the “sexy” managers are the guys (no offense to my male-dominated industry, but they are almost always guys) whom people talk about at Soho cocktail parties and the investment meetings of non-profit boards.  They invite clients to their skyboxes at NFL games and promise huge returns – and high risks.

This led to my next question: could my firm actually deliver what the client wanted? We’re a relatively small firm; we don’t speak at huge institutional gatherings, don’t do a lot of marketing, and don’t have a huge wining-and-dining budget. Our growth comes entirely from on word-of-mouth and referrals. I now found myself wondering if we should have tried to cultivate a different image that would have better met this client’s expectations.  But I don’t think so.  We have a solid presence in our market segment.  Changing the way we do business could alienate our other clients.

Finally, I took stock of the damage done by  losing this client. While losing this relationship did hurt, because the absolute dollars were large, the percent of total revenue it represented was relatively small.  If the market we serve suddenly began to crave only the hot new manager, of course we would need to address that shift in taste, and try to publicize our strengths more actively. But it wasn’t  worth beating ourselves up about falling short of one client’s expectations.

Don’t kid yourself; I hate losing any business and would love to be the dream advisor for every major client out there.   But if you do lose a big account:

  • Ask the client why, and who they’re doing business with now;
  • Ask yourself whether you understood their expectations, and if not, whether this was preventable;
  • Evaluate whether your firm could or should even try to meet their expectations;
  • And ask yourself if this is part of a larger pattern, or just an isolated incident.

If it’s only one unhappy client, and you like your market niche and feel you’re meeting the goals of the vast majority of your clients – well, tell yourself you were lucky to have had the business “temporarily.” Losing a big client is never fun, and much less than ideal for your bottom line, but it’s as much a part of business as landing a dream account. And it’s sometimes the fallout of staying true to your style and strengths.

Karen Firestone is the President and CEO of Aureus Asset Management, an asset management firm which serves as the primary financial advisor to families, individuals, and nonprofit institutions. She cofounded Aureus after 22 years as a fund manager and research analyst at Fidelity Investments.