Time Well Spent? - Business Management for Financial Advisers

Julie little child has examined how much time a advisor spends serving high-priority, average and low-priority clients. Figure (Contact Goal: Senior Adviser) shows that advisers clearly max out in terms of the number of optimal relationships they can manage. Let’s look at the time spent in serving high priority clients. In this example, an adviser estimates he has eleven proactive contacts with each high-priority client in a year—three face-to face meetings and eight by phone.

Each of these meetings requires some preparation. The adviser also consumes a fair amount of time responding to client inquiries, which often involve some research as well. The total time spent dealing with a high-priority client is estimated at 19.8 hours per year. For the sake of simplicity, let’s round this to twenty hours.

The typical adviser puts in 1,800 hours in an average work year— some work more, some less. By dividing twenty hours into 1,800, it would appear that the maximum number of high-priority clients the adviser can manage is ninety. And that’s assuming the adviser does nothing else and that he has only top-priority clients. Of course, that’s never the case, which makes this exercise all the more painful for advisers who have no way to leverage.

If the advisor would implement the technology solutions to become very efficient, he now has few methods by which to grow the firm’s income. Call the clients to remove the ones at the bottom and take on only the most profitable clients, limit the number of clients or raise his fees. Any of the above can preserve firm size and maintain his span of control over a key number of relationships.

Each of these choices is reasonable, but they’re likely to go against the grain for advisers who thrive on new clients or those who feel an obligation to respond to their sources of referral when new business opportunities come in. This point was brought home to us in a study group of ten advisers. Twice a year, they would meet to share successes and challenges, compare their firms’ numbers and ratios, and take turns making presentations on new initiatives.

At one of the meetings, one adviser was adamant that he had no desire to grow his firm beyond its present size. “Look,” he said, “I make a good living, I have time to spend with my kids while they’re young, and I’m able to tend to my clients’ needs.

Contact Goal: Senior Adviser

Contact Goal: Senior Adviser

He became even more uncomfortable when the group looked over his financial data. They saw a tremendous increase in overhead expenses as a percentage of revenue, especially in the categories of marketing and administrative salaries (and related expenses, such as benefits). He also told the group that he was looking for more space to accommodate his fleet of support staff.

He later admitted that it was getting harder for him to tend to his clients while having to manage a growing number of staff who were not directly involved in the advisory cycle but were hired primarily to support him.

The solo model works extraordinarily well for those who do not want to grow, but for many advisers, that’s a little like a heroin addict not wanting a fix. There are exceptions, but the law of professional practices is that once you become known for being really good, everybody wants to do business with you. And it’s very hard to turn away good clients.


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