Philadelphia: “I really don't think it’s fair to treat clients differently, so I provide the same level of service to all my clients,” Marty explained. “But I’m really swamped –- I’m beginning to think that I’ve got to change something.”

Marty is dealing with an issue that I’ve been talking about since writing, “How to Build a 21st Century Practice” nearly a decade ago -- client segmentation. Every financial advisor has only so much bandwidth, so much client service capacity. One of the many revelations financial advisors have experienced as a result of this Category 5 financial tsunami is the time and attention smaller clients require when they are scared about their financial well-being. Throughout this crisis, whenever advisors are asked which clients are calling in the most, the answer is always the same: smaller clients.

As I explained to Marty, every client should get the service they pay for and a little bit more. Every client! To that end, I’m a client advocate. However, rarely do advisors find themselves with too many clients because they are taking a personal interest in serving every client. The reality is that it’s such a challenge to acquire clients in those first few years; the industry has inadvertently conditioned advisors to collect clients. In our heart of hearts we all know that collecting clients isn’t about service, it’s about our own insecurities.

So here is the 5-Step Client Re-engineering Process that we coach advisors to follow for gaining bandwidth:

1. Conduct a Net-Profit-Contribution Analysis for every client on the books. This is a simple inventory process where you assess four criteria:

• Annual revenue generated;
• Assets on the books;
• Potential revenue (assets held elsewhere, other financial solutions that could add value and fully monetize the relationship);
• Center-of-Influence (ability to introduce you to affluent friends, colleagues, family members, or clients).

If a client meets any one of the aforementioned, they are classified “above firewall” and labeled accordingly (R-revenue, A-assets, P-Potential, COI-center-of-influence).

2. Determine the appropriate actions for clients who are above firewall. For example, Marty had a few clients with a lot of assets but generating no revenue; his objective was to upgrade those clients into profitable revenue generators. He also had two CPAs and an estate attorney who are centers-of-influence but not clients; he decided to schmooze them as if they were top clients.

This firewall exercise also involves assessing the service your best clients have been getting. In Marty’s case, he wasn’t providing them the time and attention they deserved because he was swamped dealing with his smaller clients.

3. Identify the clients who you have classified as below firewall. These are clients who by your own calculations are generating minimal to no revenue, have no potential, and are not centers-of-influence. This is what’s clogging your bandwidth.

4. Determine what path you are going to take with clients who are below your firewall to gain bandwidth:

• Sever the relationship completely (give them away);
• Get another advisor to service these clients for a revenue-sharing arrangement;
• Bring a junior advisor onto your team to service these smaller clients;
• Give these clients to your firm for servicing.

Whatever path you take will be determined by a number of variables: your broker-dealer of record (some of the larger firms have service centers where advisors can park smaller clients), your access to junior advisors (whether in your office, your firm, or your community), the quality of these junior advisors (must be honest, hardworking, and competent), the willingness of a quality junior advisor in assuming the servicing responsibilities of your smaller clients (a newer advisor in a serious growth mode is usually a good fit), whether you feel the need for a junior advisor on your team; and finally and of most importance, which path will accelerate your long-term growth.

Marty was mentoring a newer advisor and after much consideration, he opted to give these clients away to this individual. Initially he wanted a shared-revenue arrangement, but he realized his continued liability (name remaining on statements) wasn’t worth the minimal shared revenue he’d receive, wouldn’t really gain bandwidth, and therefore wouldn’t fuel his growth.

5. Communicate with each client and inform them of the path you have selected in step four. Like many advisors, Marty opted for a combination that involved a personal phone call to a select number of clients with whom he had a personal relationship, while sending a letter to the rest.

Incidentally, I made certain that Marty understood that even though he would be signing his name to this letter, the junior advisor who was receiving these clients would write it with a post-script that read: If you have any questions feel free to call "Junior Advisor" at 888-123-4567. (The idea is for Marty to spend as little time as possible giving these clients away.)

Marty’s initial reaction was like that of many advisors; he was full of guilt and resistance. It was only when I got him to admit that these clients would be served better by the advisor he was mentoring that he consented to take the plunge.

With only 29.9 percent of advisors increasing the personal time they are spending with their affluent clients during this crisis, and with the preferred medium of communication of today’s affluent being face-to-face, advisors need to be very aware of their bandwidth.

One of the reasons New World Advisors, today’s elite, are in a growth mode is because they have the bandwidth to spend time with their top clients and to penetrate their affluent centers-of-influence.


If you would like a FREE copy of our Client Re-engineering Guidelines, visit our Download Center. This will provide you with a template as you begin the process of re-engineering your book. Enjoy!

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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 rich.santos@penton.com.