Self-Imposed Account Minimums?

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Jun 19, 2007 2:13 am

Mainly for indie guys: What's your current account minimum? Reason for the specific number? If you started out low, did this lead to a lot of unprofitable cusotmer service later on? If you started too high, did this effect your production negatively or increase it in the end?

Jun 19, 2007 10:29 am

If you're just starting out, you should have smaller account minimums; say $10,000-$20,000. This is just to get some cash flow moving in your direction to help you survive.


Once your basic monthly overhead is covered, increase your monthly minimums to $100,000+.


In any event, regardless of your time in the business (newbie or old timer), if a whale presents you with the opportunity to get a piece of their business (that's below your minimum), waive the requirement. Getting your foot in the door, via a small account for a big whale, presents the best opportunity to eventually snag all their assets.


Just sayin'....



Jun 19, 2007 2:38 pm

Also good to accept accounts from "niche" clients, even under your minimum.  You don't want to alienate anyone in a specific group (for example employees of a specific company, organization, etc.).  They are good referral sources and sources of "good will" within your niche.


Jun 19, 2007 3:14 pm
xbanker:

Mainly for indie guys: What's your current account minimum? Reason for the specific number? If you started out low, did this lead to a lot of unprofitable cusotmer service later on? If you started too high, did this effect your production negatively or increase it in the end?



Whatever minimum you quote, remember that it is sometimes practical to make an exception for a good referral source or the friend of a client.

I recruited one FA who needed to change firms because his branch manager was hassling him about a hand full of accounts under the firm minimum.  His production was otherwise good (top quintile for his LOS).  He asked the FA for a "written justification" for the undersized accounts.

He called me that day saying he HAD to find a new brokerage.  It seems that more than one of these accounts belonged to the mistresses of various clients.   One of them was the Mayor's girlfriend.

Jun 19, 2007 3:22 pm

I usually don't have minimums because I sell lots of insurance, so I can make good bank from someone if they have decent cashflow and no assets.  However, if you are charging fees instead of earning commissions, I would suggest a minimum fee instead. 


If you charge 1% and your minimum is $250,000, just change your minimum to $2,500.  There's no reason to turn someone down simply because they only have $100,000 and are willing to pay you 2.5%.  It's your fee, they can choose to accept it or not.

Jun 20, 2007 1:25 am

I've talked to a lot of people about this since posting. Some good thoughts:



Lower minimum for accounts where management is "delegated" such as all mutual funds.



Lower minimum for all income portfolio or other buy/hold strategy requiring little management.



Anonymous: one practical note about your idea is that anything over a certain amount (3%?) needs a written disclosure indicating that it is much above industry norm. I can't remember the specific regulation but can't imagine ever getting near that high a fee to begin with.