The ClientWise Blog

Should Financial Advisors Have a Minimum Account Size?

Posted by Chris Holman on Feb 13, 2014 2:08:00 PM

We see a large number of financial advisors who struggle with whether or not to establish an account minimum for their clients. Yet, a recent study that we undertook reveals a striking result. Financial advisors who diligently adhere to a minimum account size report 122% more assets on average per team member, than those who do not.


In collaboration with our Australian research partner, Business Health Pty. Ltd., ClientWise surveyed 125 top-performing financial advisory teams who attended the recent Barron’s Team Summit. They were asked this question:


Do you and the other members of your practice have a minimum account size?


The participants of the survey had three possible responses:


  • No
  • Yes, but we often make exceptions.
  • Yes, and we almost never make exceptions.


The “No” respondents composed 12% of the dataset. On average, they reported $59,980,045.00 in AUM per team member. The “Yes, but…” respondents comprised the majority of the group with 61.60% of the respondents. They reported $112,154,680.00 in AUM per team member. Finally, advisors who said, “Yes, and we almost never make exceptions” (26.4% of the study) reported assets of $132,967,305.00.


Thought-provoking findings! Financial advisors who are clear and definitive on their minimum account size reported 122% more assets than those who had no minimums whatsoever. Interestingly, only about one-quarter of the advisors surveyed were hard and fast with their minimums...despite the out-sized effect of doing this.


Other Factors to Consider

The account minimum discussion is part of a much larger discussion of identifying whom you’d like to serve, and how you’d like to serve them. Some other variables to factor into the discussion are:


Choosing the right minimum. Are your account minimums chosen because they are a nice round number, or have you considered what does it really cost to support a client? What is your threshold for client profitability? Getting really clear on your account profitability will give you an important reference point to begin the account minimum discussion.


What are the benefits to the client? The account minimum discussion becomes easier when you consider the real benefits to the clients themselves. For example, account minimums allow advisors to spend more time with the clients who they best serve. Account minimums enable advisors to build more customized wealth management solutions. Minimums might also allow advisors to maintain a cost-effective fee structure. Account minimums can serve clients and advisors both. (What are other account minimum benefits for your clients?)


Exceptions made? It may not make sense to be absolutely dogmatic in your account minimums, but frequent exceptions tend to weaken the benefits of strict minimums. Other factors to consider in making exceptions might be if the prospective client falls into one of the following categories: living in a smaller community, center of influence, ideal client, friend or family member of a good client, someone who you really like to work with, etc. As our study shows, advisors who have account minimums where they frequently make exceptions still have 88% more assets than the advisor who does not have minimums.


How can you serve “below-the-minimum” clients? Most financial advisors are in the business to help others, and it pains them to NOT help others. When you come across a client who you’d really like to help, who is below the minimum…are there other solutions that you can provide beyond working with them directly? For example, is there someone within your team who can serve them? If not, how about establishing an alliance with another advisor outside your team, who you respect and are comfortable with? What are some other solutions that you could create?


We trust that you find this discussion helpful.



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