Should financial advisors leave their smaller accounts behind when they switch firms?
The average household with less than
What’s more, the firm argues, small clients rarely become big clients. Clients with
Even clients with
HURTING LARGE CLIENTS?
In addition, small clients make it more difficult to keep wealthier accounts,
As a result, “an advisor needs to make room and have the capacity to attract and serve the more complex needs of high-net-worth clients,” says
Leaving smaller clients behind increases the growth trajectory of an advisor’s new firm, and lowers the growth trajectory of his or her old firm, Mathur says. Consequently, she actually suggests that firms “make it as easy as possible for advisors who are leaving to keep their small clients." For instance, she says, the firm "could notify small clients that their advisor has left and facilitate an easy transition if they choose to follow.”
But industry executives are not so fast to ditch clients with smaller accounts.
Clients with fewer assets may simply be younger clients with the potential to grow, says
In addition, firms with efficient client segmentation strategies in place may be able to work with smaller accounts quite profitably, Brodeski maintains. Savant, in fact, has a division for smaller clients with less complex needs that utilizes junior advisors. “It allows our younger advisors a chance to get experience and allows the clients to get the level of service they need but would be harder to get if they were competing for a time with advisors who have larger accounts,” Brodeski says.
“There’s no doubt that in many cases the 80/20 rule applies, and 80% of profits come from 20% of clients,” Lockshin says. “But there is also an opportunity for firms with a lot of smaller clients to run their business efficiently and make a profit. Everybody wants to move upstream, but I think there’s a lot of opportunity downstream.”
|Source:||Source Media, Inc.|