I was recently emailed by a training participant for my thoughts on the “definition of a successful practice” – in particular the vexed question ‘what number of clients that can reasonably be expected to receive ongoing service by one adviser?’  It’s a great question which I am often asked at conferences when speaking on client engagement and portfolio management.  I fired off an email reply and thought I would share it with the readers of reVUE.

On this topic, I have heard a lot of coaches focus on particular numbers.  Many seem to say that for consumer-based advisers that 50-150 clients should keep an adviser busy and profitable – for business-based advisers it’s somewhere between 25-75.  However, I am not wedded to any particular number.

When we teach relationship management the key issue of “how many clients” is driven by your client service model - how much time do you need to spend with each client per year to manage their needs, justify your fees and deliver your specified service model.

For example, a financial planner focused on high net worth clients might have a high-touch relationship management model involving two face to face meetings, four phone calls and six personalised emails every year with each client.  With that sort of model you can only manage 50-75 clients per year.  If your revenue target is $250,000 pa, then by deduction you need clients paying $3,333-5,000 pa each.  And that doesn’t seem unreasonable for that level of service.

However, perhaps you run a financial planner with a high volume model where you only see clients face to face once per year, plus allow for one phone call and two personalised emails.  This might be a “mums and dads business”.  With that sort of model you can probably manage 200 clients or even more if you have a good client service/admin team behind you.  Let's just say 200 clients for this exercise.  Let's also say you want $400,000 pa per year in revenue.  This means $2,000 pa for each client.  Perhaps, however, that might be a little pricey per client for that service model.  So instead we look to manage 300 clients at $1,333 pa...which might be possible.

The key when determining your “how many clients” model is to consider FOUR VARIABLES.

1. The time commitment you need to make to each client for your defined service level
2. What you are able to charge for that service model on a per client basis
3. The overall revenue you seek to make
4. The number of clients required

To solve the problem you need to fix three of these variables and then solve for the fourth.  Too often, however, businesses only work with two of these variables.

For the record, I am not convinced there is "one best model".  I have seen many successful high-volume professional practices which have 500-600 clients per adviser and each client might see a different adviser each time they come in.  In comparison, boutique services firms may have as few as clients per adviser and have 2-3 staff per client.  Both are profitable and justifiable models.  But both have made clear decisions about services levels, time commitment, fee levels and client numbers.  Who is to say one is better than the other?  Why are a smaller number of larger clients always “better”?

The other problem I have with specifying a given number of clients per adviser is that it assumes all clients are the "right" clients...which so many advisers have difficulty attaining.  As a result, advisers get too focused on the number of clients rather than a quality of clients (“quality” could mean large/valuable clients or small/numerous clients - suitable is perhaps the key word).

A good book I often recommend on this subject is Supanova which is about the Merrill Lynch client service model in the US.  It has lots of stats and analysis of their financial planning model and is a good thought-provoking read.  You can read our review from a previous issue of reVUE here.