How to Communicate Your Account Minimum to Prospects

Jun 25, 2013

The following is a guest blog post by Dan Richards, founder of ClientInsights, a leader in providing financial advisors with video-based content for their own use and for use with clients. Dan’s advisor newsletter is on my must-read list; start receiving his emails by visiting his site and signing up at the bottom of the page to get his insights delivered to your inbox now.

Over the past decade, there’s been increasing pressure on advisors to establish a minimum account size for new clients.

The question is how to communicate that minimum to prospects. That’s the question a New York City based advisor recently asked in this email:

“Reading your article on the sentence that generated $600k in new business triggered this question.

I was curious to know how you would advise effectively responding to prospects who contact our office who may not meet our minimum. We have a mature practice and have capacity to take on fewer than a dozen new clients per year. To this point, investable assets are the sole criteria we use to determine whether a prospect is qualified.

That said, it just doesn’t seem right to tell someone over the phone something on the order of “We have a $2 million minimum.” I perceive it to sound snooty, and I’m not entirely comfortable with what is supposed to happen with the conversation after that gets said. Note that we tend to provide the greatest value to people with more complex financial and planning situations – while that’s not 100% correlated with assets, there is certainly a connection.

And then there are the referrals from clients. As much as we try to train existing clients as to the people we can best serve, there are always exceptions – the nephew, the pal who may need help but doesn’t qualify.

Any light you can shed on this would be much appreciated”

Within this email there are actually three questions:

  1. Should you have a minimum asset threshold for new clients?
  2. Should there be other factors that you look at beyond just assets?
  3. How do you communicate your criteria to prospective clients?

The need for an account minimum

It’s clear that every advisor needs to set a minimum threshold for new clients.

The reason is very simple: While that threshold will vary based on individual practices, if you have a minimum standard of service level that you provide, you need a minimum threshold of revenue to justify that service.

Note that at one time you could have a large number of clients who delivered little or no profit (or in some cases on which you lost money when you took your all your time into account.) That worked when larger clients provided windfall profits and in effect were subsidizing smaller clients. That model no longer works – increasingly you need to ensure that all clients deliver sufficient income to offset the costs of serving them.

Should assets be the only criteria for new clients?

This advisor provides the most value to people with complex financial situations, associated with but not 100% correlated with assets.

Despite this, he only considers assets in taking on new clients – ignoring the value he can provide, how satisfying and enjoyable a client will be to work with or a prospective client’s ability to be a point of access into a higher level of potential clients

Some advisors have adopted a scoring formula, where they assign a point value to a variety of factors:

• the level of income a new client would provide

• other potential short term revenue from assets held elsewhere or cross selling other services

• future potential (There’s a big difference between a prospect who’s 45 with $500,000 and a prospect who’s 65 with the same assets)

• the ability to add value

• fit with their core target group

• how enjoyable they would be to work with (the only area where prospects can lose points)

Yes revenue is important, but there are other factors that should be taken into account as well.

How to communicate account minimums to prospects

I agree with this advisor that telling prospects on your website or on the phone that you only take $1 million clients over the phone can be off- putting and send the signal that it’s about you rather than your clients. That said, there are ways to communicate your minimum standards for new clients on your website or in your marketing material – in fact saying that you have limited capacity for new clients so need to be selective can be seen as a good thing.

The key is to frame your decision-making not from your point of view but rather from the prospect’s.

So for example you could have a section on your website titled “Creating effective partnerships” in which you articulate the elements that you look for to create an effective working relationship with clients. There might be three to five items on that list, including whether clients are genuinely looking for a partnership with an advisor and if they fit into your defined target group.

You could also have a line on your website that says: “In order to deliver sufficient value for the fees charged, new clients normally have assets of $1 million.” That way you can say over the phone: “From what you’ve said, I don’t think we’d be able to add enough value to justify the kind of fee we normally charge for an account such as yours.”

Note that almost all advisors accept close family members of existing clients, regardless of assets, as an investment in the future of the relationship. In other cases, something that can help when a client is just too small is being able to refer them elsewhere.

I sent the advisor from New York City an email with my thoughts and then asked whether there advisors in his marketplace where he respects their professionalism and client orientation but whose practice is at a less mature level than his, so that he could give prospective clients who aren’t a fit for him their names to talk to?

He responded with an email thanking me for the suggestion: It turns out that recently his firm began a relationship with another advisor seeking to grow his business who has a similar process as theirs and a high degree of integrity. He mentioned that this relieves that uncomfortable feeling if a prospect isn’t a good fit and takes the pressure off of asking the qualifying questions.

As you think about your process for attracting new clients, take some time to consider the three questions that this advisor asked and to put in place the approach that is right for you:

  1. Should you have a minimum asset threshold for new clients?
  2. Should there be other factors that you look at beyond just assets?
  3. How do you communicate your criteria to prospective clients?

The opinions and views expressed herein are those of the author and SEI bears no responsibility for their accuracy. Neither the author nor Client Insights is affiliated with SEI or its subsidiaries.


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