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How many clients should advisers take on?

Advice firms are continuing to review their client books to ensure they stay in the sweet spot between too few and too many clients.

The number of clients that an adviser can manage often comes down to a combination of external factors.

Submissions to the Money Marketing awards this year showed a great variety in the ratio of clients to advisers at firms, varying from fewer than 50 to more than 250.

Determining the right number is based on the how many advisers are in the team, the needs of the clients, and how complicated those requirements are.

Thameside Financial Planning director Tom Kean says that calculating the hours you want to work, how streamlined your office and back office systems are, and how much you are able to outsource or use a platform for are just some of the key considerations.

He says: “It also depends whether you have an altruistic streak to your nature and you will help people who can’t pay you very much and whether you have legacy clients. What will make you be able to deal with more clients is a better balance of time and efficiency.”

If an adviser wants a decent income and has fewer than 50 clients a year, Kean says each client has to be consistently deeply profitable. The amount of clients who remain active across the spread of the year is also important.

He says: “This is the time of the year where clients appear out of the woodwork and you start to wonder if you can manage them all; by August you are usually thinking you could fit a few more in, which is why you should always reassess.”

How should advice firms pay their staff?

With business models varying greatly between clients who outsource the majority of their work both in and out-of-house, The Ideas Lab consultant Roderic Rennison says advisers should look at available working days and hours in a year, then calculate their available time, inclusive of potential holiday and sickness absences, and then work back from a maximum potential client figure.

He says: “The average that you could really expect one planner or wealth manager to really fully service is 100-125 and that is if they have deep client relationships, but it also depends on the complexity of those clients. Any more than 250 clients without a highly sophisticated system sounds quite challenging.”

Larger IFAs may also have set-ups inclusive of relationship managers who manage the clients, while the advisers purely conduct advice.

Rennison says: “From a regulatory point of view, advisers should be sitting down and reassessing frequently under their client agreements. As an adviser, you should always carry out what you said you would for your clients.

“This is where advisers need to look at what they are actually providing for their money and the FCA is increasingly looking at intermediaries to see what they are doing to justify their charging in terms of what tangible work they deliver.”

Mark Meldon of one-man-band Meldon & Co reached a total of 826 clients this week, but says only around 140 are active, and just 90 of those require year-round attention.

IFAs target small pots for drawdown advice

In addition to some outsourcing to Bristol-based Rathbone Greenbank Investment Management, Meldon manages some Sipp money for these 90 ‘highly active’ clients.

He says: “Small is beautiful. With better use of technology, one could probably service more clients, but then there’s taking the bespoke approach with each client and the time spent building from the ground up if you’re not an adviser using model portfolios. It is time consuming, but that is the model that some people like to work by.”

Director of Susan Hill Financial Planning Susan Hill says 150 is a sensible maximum for one adviser. She says: “I prefer to have quality over quantity. It all depends on the adviser, but there is definitely a maximum. I take on about 20 new clients a year.”

With increasing pressure from the regulator on fee structures and charges, Hill says advisers should be able to prove their client book is manageable.

She says: “The FCA will be continuing to really look into ongoing service fees and ongoing client charges in the next year, but if you have 1,000 clients, then realistically you’re not going to be able to service them.”

Like in accounting, broking, or fund management, Rennison says breaking work down on a time basis allows advisers to assess what they want from their client base in terms of income, and time-versus-money effort.

He says: “If you are only going to meetings and then outsource to paraplanners who will totally prop you up, you are just working a production line where everything is done by technology or someone else, and therefore you could probably have more clients. The average intermediary adviser probably handles 100-125 active clients, but there is a wide variance and there always will be.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Why does every body assume that client service is having face to face meetings with clients. The number of clients depends on how service is delivered & the quality of an advisers support system & processes. With technology, good processes & an efficient, quality staff there should be no limit to the number of clients that can profitably be handled. Stop thinking that quality service equals drinking tea with clients.

    • David Stoddart 6th April 2018 at 8:05 am

      Agree Tony as long as the client is receiving a service i.e. review of their financial plan/goals, how changes in legislation have impacted on them etc etc and not just an update of valuations!!

  2. Robert Milligan 5th April 2018 at 1:56 pm

    What you need is around 250 good on-going active clients and around 300 inactive sitting in the back ground, with mortgages and life policy’s that need reviewing as and when, aim at doing ten advice appointments per week, employ three administrators and one Para-planner, this will probably take thirty years to acquire, it did me.

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