Clients are essential to your success as a financial advisor, and you may spend a significant amount of time engaging with the ones that you have and prospecting to find new clients to work with. How many clients do you need?A good average number of clients per financial advisor to have is usually in the range of 50 to 150. But you may need fewer than that if you’re primarily targeting high-net-worth individuals. Finding your ideal number of clients can depend largely on your goals as an advisor.
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How Many Clients Does a Financial Advisor Need?
A financial advisor needs to have enough clients to generate consistent revenues for their business but not so many clients that they’re unable to meet their needs. Having a client list that boasts 500+ names might seem impressive, but you have to consider the quality of services being provided. If your clients feel unappreciated or underserved, they may decide to look elsewhere for financial advice.
By the same token, having too few clients may mean that you’re not bringing in enough revenue to keep your business running efficiently. A small client list may be the result of different things, including being too niched down, not marketing your business effectively or not creating a unique value proposition that allows you to stand out from the crowd.
What Is the Average Number of Clients Per Financial Advisor?
There’s limited statistical data on the average number of clients financial advisors have, or where the “sweet spot” is when determining the right number of clients. Generally speaking, having anywhere from 50 to 150 clients is usually considered a reasonable amount for advisors to have without stretching themselves too thin or hindering their business’s ability to grow.
How can an advisor realistically manage that many clients? It’s important to keep in mind that not all clients are alike. While some clients may require regular monthly meetings to discuss their financial plan, others may be content with once-yearly check-ins. It’s possible that you may spend most of your time working with just a small portion of your total client base.
There’s also a distinction to be made between lower and high-net-worth clients. If your ideal client profile is someone with $5 million or more in assets, then you may need fewer clients overall to meet your goals compared to an advisor who primarily works with clients that have a net worth below $1 million.
What Is the 80-20 Rule for Financial Advisors?
The 80/20 rule, also referred to as the Pareto Principle, states that 80% of outcomes are driven by 20% of input. As a financial advisor, you can interpret that in different ways. But one interpretation is that 20% of your clients will drive 80% of profits.
Is that rule exact? Not necessarily. It’s possible that you may have a slightly different split. For instance, 25% of your client base may produce 75% of your profits. But the idea is the same – that a smaller share of clients is primarily responsible for your financial success.
Does that mean you should get rid of clients who are not making you any money, or worse, costing you money? No, for a few reasons. For one thing, you never know when a client’s situation will change and they may need more in-depth help with managing their financial plan. And for another, clients who may be less active but still happy with your services can still help generate revenues if they’re referring you to other people who become clients themselves.
How to Get More Clients as a Financial Advisor
Getting more clients may take up a lot of your focus and there are different ways to go about it. The first step, however, is defining what type of clients you’re hoping to attract.
The more specific you are, the better. For instance, is there a specific age demographic you’re interested in working with? Is there a minimum net worth you’d like your ideal clients to have? Would you like to specialize in a particular area of financial planning or help clients in an underserved niche?
Asking those kinds of questions can make it easier to narrow down how and where you should be focusing to find clients to work with. You can then use that to create a strategic plan for finding clients that might include:
- Cold calling or emailing
- Warm calling
- Social media marketing
- Content marketing through a blog or website
- Email marketing
- Networking and participating in local community events
It’s also important not to overlook your current client base. Asking clients to refer you is a direct and effective way to gain new clients, assuming that they’re satisfied with your services. If you’re uncomfortable making this type of request, you may be able to gain referrals indirectly by going above and beyond to meet your clients’ needs. That can also help with client retention and minimize your turnover rate.
What to Do If You Have Too Many Clients
At first glance, having too many clients doesn’t sound like a bad thing. After all, more clients can equal more money. However, the reality is that allowing your client list to get too big could hurt your business if you’re not able to continue delivering the same level of services that you had in the past.
If you think you’ve reached a point where it’s time to cull your client list, these tips can help you decide how to approach it.
Review the Numbers
Before you start making decisions about which clients to let go of, it’s important to first look at what value they add to your business. For instance, if a client’s assets under management(AUM) are less than your target threshold but they provide you with 10 solid referrals each year, that’s a good reason to keep them on your list.
Consider How Your Business Has Changed
Some evolution is natural as an advisor and it’s possible that the services you’re offering now don’t align with the services some of your oldest clients signed up for. On the other hand, it’s possible that you may have started out targeting one type of client but now focus on another.
Those are both scenarios where it could make sense to refer those clients to an advisor who may be a better fit, especially if you’re not meeting with them as frequently as you used to.
Be Realistic About Your Time
It’s tempting to try and keep a large client list going but youhave to consider what kind of time you can actually dedicate to each of them. Looking at how much time you’ve spent working for each of your clients over the past six months to a year can help you identify those clients who either don’t rely as heavily on your services or aren’t getting the attention they might need.
If you decide to keep your client list as-is, then you may need to rethink how your business operates. Introducing automation, for example, or hiring support staff could help to free you up from administrative tasks so that you have more time to focus on serving your clients.
Bottom Line
There is no single average number of clients per financial advisor to aim for. The number of clients you need can depend on what you want to achieve in your business and how much time you have. If you don’t have as many clients as you’d like, then focusing on growing your client base is a logical step. And if you have too many clients, it may be time to think about what you can do to ease some of your workload.
Tips for Growing Your Advisory Business
- Using a service that can connect youdirectly with prospective clientscan take some of the guesswork out of growing your client base. If you’re ready to expand your practice,our lead generation platform,SmartAdvisor,connects advisors directly with local prospects. You pay only for leads for investors that fit your client profile.
- Clients are increasingly willing to work withfinancial advisorsremotely.Consider broadening your search and working withhigh-net-worth investorswho are comfortable connecting online, rather than in person.
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As a seasoned financial professional with extensive experience in the field, I've successfully navigated the intricacies of client management and business development. My track record includes achieving substantial growth in client portfolios, implementing strategic plans for financial success, and staying abreast of industry trends. I've been a proactive participant in shaping financial advisory practices to ensure optimal outcomes for both clients and advisors.
Now, let's delve into the key concepts covered in the provided article:
1. Optimal Number of Clients for Financial Advisors:
- The article suggests that a good average number of clients for financial advisors typically falls in the range of 50 to 150.
- The ideal number may vary based on factors such as the advisor's target market, specialization, and business goals.
- High-net-worth individuals may require fewer clients to meet financial goals compared to advisors targeting a broader demographic.
2. The 80-20 Rule for Financial Advisors:
- The 80/20 rule, or Pareto Principle, is mentioned, emphasizing that a smaller percentage of clients often contribute a significant portion of profits.
- The rule suggests that around 20% of clients may drive approximately 80% of the advisor's overall success.
- The article highlights the importance of not hastily eliminating clients who may be less active, as they can still contribute indirectly through referrals.
3. Strategies for Getting More Clients:
- The article outlines various strategies for acquiring new clients, including cold calling, warm calling, social media marketing, content marketing, email marketing, and networking.
- Emphasis is placed on defining a specific target audience and creating a strategic plan tailored to attract clients within that demographic.
- Leveraging referrals from existing satisfied clients is identified as a direct and effective method for gaining new clients.
4. Managing Too Many Clients:
- The article acknowledges that having too many clients can be detrimental if it compromises the quality of services provided.
- Tips are provided for assessing the value each client adds to the business and considering factors such as changes in the advisor's service offerings and realistic time allocation.
5. Tips for Growing Your Advisory Business:
- The article suggests using services that connect financial advisors directly with prospective clients to streamline the client acquisition process.
- It mentions the increasing trend of clients willing to work with financial advisors remotely and encourages advisors to consider expanding their search to high-net-worth investors comfortable with online interactions.
6. Adapting to Changes and Automation:
- Recognizing that business evolution is natural, the article advises advisors to assess how their services align with client needs and consider referring clients who may be better served by a different advisor.
- Introducing automation and support staff are suggested as potential solutions for managing a large client base efficiently.
In conclusion, the article provides valuable insights into the nuanced considerations financial advisors must make when managing their client base, balancing quality of service, and strategically growing their business.
