Advisors are constantly looking for ideas to grow their business. While it is important to achieve scale, sometimes advisors tend to ignore an important aspect of their business, which is how can they enhance the engagement with their existing clients.
There are two ways to grow your assets under advisory – generate new clients or try to get a higher wallet share of existing clients. Today, we will explore the second option.
The number of clients you wish to cater to depends on your resources. It makes sense for individual financial advisors who have a small team size to cater to a limited number of clients meaningfully rather than onboarding new clients whom you would not be able to service well.
Similarly, if you have just started your advisory practice, you would do well to begin by catering to say 20 to 30 clients. Having a small client base has many benefits
Take the case of Vinod Jain of Jain Investments who cut down his client base from 11,000 to 6,000. Now, he plans to reduce his clientele to 600! “We realized that one executive cannot handle 40 clients. We had 11,000 clients in 2008. Now we have around 6,000. We increased our minimum ticket size to Rs. 25 lakh. For younger aspiring executives we accept SIPs starting from Rs. 25,000 per month. We cater to a homogenous set of clients. Reducing the number of clients has helped us improve our service standards. We don’t invest in marketing as we get referrals,” says Vinod.
Giving extra attention to existing clients will help you deepen your relationships. Also, you would be able to understand their needs better and offer customized solutions. This in turn would help you gain their trust and credibility.
Let’s look at another example of a Mumbai based advisor Vinayak Sapre who is a one-man army. He caters to 50 clients. “Having a limited set of clients helps you become more focused. You get to know your clients well. Ideally an IFA having no staff can cater only to 50 to 70 clients. With the help of technology one can cater to more clients. However, advisory practice is not about money. It’s about understanding the psychology of clients. One can give online access to clients but it is also important to meet them personally. You never know if your client has got a promotion, inherited wealth or a won a lottery,” says Vinayak.
In the race to generate new leads advisors should not compromise on providing the best services to their existing clients. After all your initial set of clients have trusted you with their money when you had just ventured out. You already have their trust. Generally, it is easier for you to pitch for new business to your existing clients than to new prospects. Converting prospects into clients can take considerable time and effort while increasing wallet share of existing clients would be more of a cake walk.
Needless to say if your existing clients are happy with your services, they’ll refer your name.
Mumbai based financial planner Partha Iyengar who caters to five clients says that currently IFAs don't have the right technology to cater to a large client base. “Catering to 500 clients with limited technology and retaining them is a tall order. There is no software in the market which does portfolio rebalancing. It is done manually. If you have a large client base then portfolio rebalancing would be a challenge. In my case I focus a lot on life planning. It takes a lot of time to understand the psyche of clients. Thus we don’t onboard more clients,” said Partha.
Another important point to ponder is how many clients are ideal? You need to work out your business economics well. Catering to 500 clients with an average ticket size of Rs. 2 lakh would fetch you a trail income of Rs. 10 lakh annually (assuming 1% trail). On the other hand, can you downsize the client base to 250 clients and increase minimum ticket size to Rs. 4 lakh to earn the same revenue? Catering to 250 clients effectively would be lot easier than servicing 500 clients.
Let us know your thoughts.
