Are Your Minimums Turning Away a Generation of Clients?

Years ago, many advisory firms were coached that to keep getting bigger they needed to set (and enforce) minimum account sizes for FAmtheir perspective clients. The thinking was that there are only so many hours in the day and by working with clients that fall below the advisors’ minimum, the client was taking away from profitability of the firm.

Advisors were also encouraged to reassess their minimums each year and cull the bottom 10% of their client list to make room for only those who had enough wealth to fit your minimums. Template letters were written, scripts were practiced and, unfortunately, lots of clients were told their money was not good enough anymore.

Even today, I still hear people in the marketplace say you can “get bigger by getting smaller” simply by just upping your minimums and working with fewer but wealthier clients. In my mind, that philosophy may do some real harm to the future of your practice.

Plan for today – and the future

If you have been reading my blog or heard me speak recently, you know that one of my major passions is the future of your advisory practice. It amazes me that in a profession that focuses on planning for clients (investment, retirement, estate planning etc.), advisors do a very poor job of planning for their own businesses. When I get asked about coaching, most of the questions are about sales and marketing, rather than running a business and/or business planning. In larger firms, many have a lead advisor handle all aspects of running the firm alongside his/her practice, instead of hiring professional management. Planning for the future of your business comes after everything else, which is usually never.

There’s no better time than the present for advisors to ask themselves these questions:

  • What happens to the firm when I am no longer in it?
  • Is there value in my firm without me?
  • With the average age of financial services business owners like me being 57, what will my firm look when I am ready to slow down, retire or sell?

Blood is thicker than the advisor relationship

One of the disturbing trends that I see in research now are the studies that show the likelihood that an account will transfer away from an advisor after the death of the person who “owned” the relationship. I think the numbers are something like 70% that the surviving spouse will transfer out within a year, and more like 90% at the passing of both parents. Many advisors don’t have a real relationship with the spouse (typically the wife), not to mention the kids, so it is no wonder that the account transfers away.

So let’s fast forward about 10 years. By taking the advice of the “coaches,” advisors are working with a smaller book of wealthier clients. Those advisors are seeing that many of their “baby boom” clients have reached full retirement stage and are beginning to live on the assets and are now in the draw-down stage of their financial lives. Unfortunately, many of those clients will pass, and the remainder of their assets will transfer away with the surviving spouse or the kids – who never had a relationship with the advisor as they couldn’t meet the minimums. Not a pretty picture when you think of the value of their practice 10 years from now, is it?

Don’t change the minimum, change the service model

One of the biggest arguments for raising minimums is that an advisor can work less and be more profitable. In my opinion, that assumes that the advisor provides the same service for all clients. Why make that assumption? To have a successful “no minimum” strategy, I think it make sense to tier your service model, especially when dealing with the kids and grandkids of your best clients.

When looking at servicing your clients’ next gen, consider:

  • A flat fee for advisory services, which is more appealing to younger clients who are just getting started
  • Looking to your platform provider or favorite TAMP for investment models. Not every client needs a fully customized investment portfolio managed by your internal team of expensive talent.
  • Creating a single template for all “small account” annual meetings and conducting them via WebEx or Skype.
  • Hiring or training a younger advisor who can specialize in things like cash flow or 529 planning (his is what they want to talk about)
  • Creating a segmented list of the younger kids and grandkids, and sending content that is appropriate for them. In other words, don’t send them your usual estate or long term care newsletters.
  • Offer small account IRA rollovers for them to consolidate their assets with you, as they are changing jobs often
  • Encouraging your clients to send their kids (and grandkids) to you. They will appreciate that you are interested in the whole family.

When the unfortunate happens to your clients, you don’t want to be introducing yourself and your services to their kids. It’s better to have an existing relationship so you can help them in the future.

If a consultant says that you should have a minimum, that may be great advice for today, but what does that do for your future? If you look at your service model, can you get bigger by getting bigger?

Photo courtesy of


Share Button
John Anderson

John Anderson

John Anderson is the creator and lead author of Practically Speaking blog and Managing Director of Practice Management Solutions for the SEI Advisor Network.

Learn More About John Anderson



HNW Whitepaper

Recent Tweets