Account Minimums

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Dec 1, 2009 9:06 am

When I went indy 6 mos ago I was going to follow Dave Mullens System from The Million Dollar Financial Services Practice. I don't want to be a Million Dollar Producer. My goal is $300k. He states that you should have 100 HouseHolds with a minimum of $100k.

 
I have brought over 40 Households with average account size of approx $250-$300k. all at 1% trail.
 
I broke my rule and brought over some accounts that have between $50k and $100k. What I have noticed is those accounts take up more of my time and do liquidations than the ones with over $100k.
 
I still have clients to bring over from my former firm.
 
My question is should I stick to my guns and only bring over the ones with $100k+ in assets
or should I also include the ones with $50k-$100k that take up more of my time. Remember everthing is at 1% trails.
 
The issue is do I take everything I can today and have more service issues tomorrow with the smaller accounts or should I be selective today and only take accounts with $100k plus and have a lower maintance practice.
 
I also want to stay a solo practice and have quality of life. With a 100-150 household practice of only packaged products I can easily service that compared to the 1000+ households I had at the bank.
 
Thanks for your help.
Dec 1, 2009 9:22 am

OMO,

 
I would say stick to your guns.  Just run the numbers.  Let's say 25 accounts at $75,000 each = $18,750 gross ($1.8mm AUM).  And don't forget the headaches, liquidations, ticket charges (if applicable), etc.  How long would it take you to replace $1.8mm?  And would you need to?  Based on your net payout, what is $18 Gross?  15K net?  Is it worth it?  I would say don't bother.  Of course, you CAN pick and choose.  There may be a few gems that have more wealth coming.  But if these are broke 45 year-olds going nowhere, or the 75 year-old with her last 50K and a SS check, they might not be worth the headaches.
Another way of looking at it, is that you would need to replace every five 50K accounts with one 250K account, and have 1/5th the work (maybe less).
 
I would say stick to your guns.
Dec 1, 2009 9:30 am

B24,

 
That is what I was thinking.
My wife planted that seed of doubt and said to take it all however she does not understand the business. She's thinking about the $18k I'm leaving on the table today and not thinking about me being hen pecked to death.
Dec 1, 2009 11:08 am

If you want to stay purely solo (ie no admin person) then I would stick to the minimum.


BUT, if you were to take the small accounts, charge 1.5% vs 1%, you would very quickly have enough incremental income to hire a pt/ft admin to handle all the small account issues as well as all your other admin issues. Hiring this admin would then give you the leverage to grow your practice even faster.

Dec 1, 2009 12:53 pm
B24:

OMO,

 
I would say stick to your guns.  Just run the numbers.  Let's say 25 accounts at $75,000 each = $18,750 gross ($1.8mm AUM).  And don't forget the headaches, liquidations, ticket charges (if applicable), etc.  How long would it take you to replace $1.8mm?  And would you need to?  Based on your net payout, what is $18 Gross?  15K net?  Is it worth it?  I would say don't bother.  Of course, you CAN pick and choose.  There may be a few gems that have more wealth coming.  But if these are broke 45 year-olds going nowhere, or the 75 year-old with her last 50K and a SS check, they might not be worth the headaches.
Another way of looking at it, is that you would need to replace every five 50K accounts with one 250K account, and have 1/5th the work (maybe less).
 
I would say stick to your guns.
 
Agreed. Common sense says that if they have a $50K account but a $700K rollover you keep them or if they have a network to give referrals.
 
I have a client with $35K total, but she has referred close to 13 people in the last 2 years. So I keep her and keep her happy. Because eventhough her account only generates $350/year, all those referrals generate way more than that...
 
So i would make exceptions for certain cases.
Dec 1, 2009 3:11 pm

I took everything when I was younger and dumber, and they are now henpecking me to death.  I concur with the above, unless there is potential for more, or you have someone else who can focus on them, stick to your guns. 

But regarding "potential", make sure it's for real. About 7-8 years ago I took a guy with $250 in a 529 who was "about to sell" a hotel building for 500k. I think he lives in it now.

Dec 1, 2009 4:00 pm

Just take everything $50k+

$10mil wrapped with 40 HH is a nice book but you can't be that busy with 40 households.  Clients with $250k+ accounts aren't exactly beating down your door I'm guessing, so if you can get some easy gets in the $50-100k range just take them.  Obviously you can dictate the relationship that you won't be running to their house at 8PM on a Friday Night to do a review with them and if they don't like it then tough beans, but these smaller accounts don't have that much going on and they know they're not huge accounts and shouldn't be demanding a lot of attention, so why do you think they're a lot of work?  If they want to withdraw some money because they're lower middle class and don't have sufficient emergency reserves then so be it.  That takes you 10mins to tell them it's a bad idea, tell them the taxes and penalties they face, and then document and execute the order?

Dec 1, 2009 4:00 pm
btrcp2000:

I took everything when I was younger and dumber, and they are now henpecking me to death.  I concur with the above, unless there is potential for more, or you have someone else who can focus on them, stick to your guns. 

But regarding "potential", make sure it's for real. About 7-8 years ago I took a guy with $250 in a 529 who was "about to sell" a hotel building for 500k. I think he lives in it now.

 
In most cases, I'm referring to someone that has a huge 401K.  I have several clients like that.  55 years old, 500K in 401K and 50K with me.  This is why I help all of my clients with their 401K allocations....keep tabs on those balances!  I also have a few business owners with pretty substantial businesses that they will sell eventually.  Never know when (could be 2 years or 20 years), and business owners usually aren't too much trouble.  The people I hate are the 30-somethings that end up liquidating their Roth's cuz they need the money, always questioning the allocation of their 28K IRA rollover, and can only meet at night...at their house...in the dining room with all their rugrats running around.  I avoid those type like the plague now.
Dec 1, 2009 4:34 pm

I don't get how people take up so much of your time.  I have tons of accounts that are under 50k and 90% of them I don't hear from EVER.   So just collect that fee/trail and go on.  I'll meet with them if they have new business otherwise it's a 15 minute phone call.  That is not hard work or time consuming.   



I say bring over anything over 50k unless you know they're a pain intheass.  If you can control the fee, up that for 50-100k and tell them when you're over 100k the fee will go down and you'll get more face to face contact.  Until then, this is the deal: take it or leave it.  Or just move those <100k assets to C shares with the fund company where it sits until 100k and you don't have to worry about ticket charges. 
Dec 1, 2009 6:37 pm

Humn, 50k is not a 2k account. =) But I do agree, most accounts around 50k are not real pain in the asses. Besides, those 50k accounts might of been 100k accounts... or they are not telling you about other money.

Make sure you are charging people appropriately.

My current fee schedule works for me...

For small accounts that do insurance or what not, monthly fee of $35 a month.

25k to 250k 1.5%

250k to 1 mil 1.25%

1mil plus 1% or discounted as needed.

I will eat the ticket charges on accounts over 100k.

Dec 1, 2009 6:58 pm

I eat the tickets on all accounts.

 
Minimum account size $25K, but anything below $100K is for referrals only.
1.45<$250K
1.25 250-500k
1.00 500-1MM
0.75 1MM-2MM
negot 2mm+