In the world of financial advisors, there is variety among the number of clients an advisor may have. One financial advisor may service fifteen, another may service two hundred. Of course, clientele often corresponds with time in the industry. Seasoned advisors accumulate an array of clients over the years, while new advisors must begin from scratch.
However, most advisors agree that identifying an ideal number of clients would be beneficial for career planning. As an advisor, should I be hunting for more clients? Should I focus on maintaining current clientele? In the content below, we hope to answer these questions.
More is Not Always Better.
Robin Dunbar, British anthropologist, investigated the capacity of human beings to maintain personal relationships. Dunbar’s 1992 study concluded that the maximum physiological limit was about 150. How does Dunbar’s number relate to the financial advising industry? Personal relationships define the financial advising industry. Clients are not simply customers. Customers purchase a product once, maybe twice. A client is engaged in an open-ended professional relationship. Spending an adequate amount of time on an active client demands brain power, time, and emotional expense.
Thus, most advisors need not pursue over 100 clients. In fact, 100 should be the absolute maximum.
Shoot for 100 Clients – or Fewer.
A financial planning strategist with a wealth of knowledge, Michael Kitces acutely explores the logistics of servicing 100 clients every year:
“Across the span of 100 clients, working 12 hours per year with each would add up to 1,200 hours per year, which is certainly manageable. Someone who works 40 hours per week all year, and takes off 2 weeks for vacations, ends out working about 2,000 hours per year. Which means at 1,200 hours of client-facing time is still only 60% of the advisor’s time for the year, leaving 800 hours per year (or almost 3 hours per working day, or about 2 days per week) for all the other activities involved in running the advisory business, from compliance obligations to marketing to perhaps some other behind-the-scenes support work for clients.”
At approximately $150/hour, a typical professional rate, an advisor with 100 clients accumulates nearly $180,000 in gross revenue. 50 active, higher paying clients will accrue the same amount, if not more. Of course, accruing 100 clients takes time. An advisor just starting his or her career will begin with a smaller clientele, perhaps 15-25 wealthy clients. A client base takes time to acquire – with the correct partnership, however, the process can be streamlined. Advisors growing their business independently from a wirehouse find freedom to service clients effectively and efficiently.
Freedom Wealth Alliance
Freedom Wealth Alliance is an Independent RIA Firm, dedicating to providing a home for financial advisors seeking business growth, operational excellent, and compliance oversight. Financial advisors partnered with our organization find freedom to develop their business a faster pace.
If you are interested in learning how to make the transition from the wirehouse to independence, please do not hesitate to reach out at 262.798.7979 or at firstname.lastname@example.org.