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Refining Your Practice

What's the ideal number of clients an advisor should have? Smaller clients typically cry out for help more than larger clients in times of uncertainty. This can quickly become a major speed-block to growth.

Los Angeles: “I keep hearing about client segmentation, client segmentation,” groaned Bruce during the Q&A period. “What's the ideal number of clients an advisor should have?”

As a result of this lingering financial crisis (I know; the recession officially is over,) I’ve been getting this question with a surprising degree of regularity. Why? Because smaller clients typically cry out for help more than larger clients in times of uncertainty. This can quickly become a major speed-block to growth.

This is a bandwidth/capacity issue. As you enter into the fourth quarter, it might be a good idea to a step back and think about refining your practice so you can enter 2011 already on a roll.

The following seven steps require work, but they will help you refine your practice–which in turn will eliminate speed bumps and help you grow.

Step 1: Define your ideal (i.e. $2mm) and minimum (i.e. $250K) client profile. Only a small percentage of advisors have a minimum account size they consistently follow, much less an ideal client profile. Over time this creates internal confusion within a practice in attempting to meet the needs and expectations of all clients.

The key is to determine the profile of the ideal client you want to attract to your practice from which to develop a client experience that will exceed expectations. It’s impossible for any advisor to determine an ideal number of clients without completing this step.

Step 2: Take an inventory of your entire client base using a net profit contribution analysis for every household in your book of business. You should assess the following criteria:
• Annual revenue.
• Assets on the books.
• Potential.
• Center-of-Influence.
Think in terms of a certain amount of annual revenue from which you can afford to service a client, a level of assets that is meaningful (even though they might not be currently productive), the potential to be a good profitable client (money elsewhere, soon to be retiring, young professional, etc.), or if this client is a good referral source.

If a client meets any one of these four criteria, you will want to label him accordingly. These clients are where your time and attention should be devoted. You will want to draw what we call a firewall, a line of demarcation where the rest of your smaller clients (minimal revenue/assets, no potential or influence) fall below.

Step 3: Conduct a two week Time Motion Study where everyone, especially support personnel, is to keep a daily log that tracks:
• Who called?
• What was the call about?
• How long was the call?
• How long did it take to fulfill the request?
The idea is not to monitor the work ethic of your team, but to determine where their time is being spent each day, and what clients want.

Step 4: Compare Net Profit Contribution Analysis and Time Motion Study to determine:
• Amount of time below the firewall (servicing non-revenue producing clients).
• Amount of time spent servicing your profitable clients.
• Amount of time spent servicing your top clients.

Step 5: Analyze existing processes for servicing current clients:
• Are you delivering a consistent client experience to each client within a given segment?
• What is your service model?
• How do you differentiate between different client segments?

Step 6: Develop specific processes for servicing your two top client segments (ideal and minimum standard clients):
• Develop two service models, one for top clients (segment 1) and another for clients that meet your minimum standards (segment 2).
• Make certain every member of your team/practice is aware of both your two service models and the segmentation of your clients (who gets what).

Step 7: Clear your bandwidth (expand your capacity) by:
• Sending clients below your firewall to a call center (if available).
• Giving these clients to a junior advisor.
• Mentoring a junior advisor who will service these clients as he or she learns the business.
• Revenue share with a junior advisor.

My recommendation has always been to give these clients away. If your firm has a call center, terrific; if not, you need to find a junior advisor who is hungry. However, if you are considering developing a team, taking a junior advisor under your wing to mentor for a couple of years. It will enable you to assess the capabilities of a junior advisor as he or she frees you from working with these smaller clients.

None of this is easy, which is probably why so many advisors can relate to Bruce. They know some iteration of the above needs to be done, but it is a lot of work. Bruce determined he could personally handle 100 clients (ideal and minimum); 300 clients were sent to his firm’s call center, and he agreed to a mentoring relationship with a younger advisor.

All of this is geared to clear his bandwidth for growth. You can do the same. Start now and enter 2011 immersed in a true growth mode.

If you would like a FREE copy of our Know Your Client Worksheet, visit our Download Center. Enjoy!

Also, if you haven't already - join The Oechsli Institute's Group on LinkedIn!

Once again, we want to thank all of you who have emailed comments and questions to us. We will continue to do our best to answer each one.

If you have any topic suggestions or special requests, please contact Rich Santos, publisher of Registered Rep. and Trust & Estates magazines, at [email protected].

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