Give Yourself A Raise

Raising your account size is primarily a matter of focus and clarity about what you really want. Many advisors I have worked with have stated minimums of around a half million dollars. They will take great clients with smaller accounts, but we have found that just stating a minimum account size usually raises the averages.

One of my clients created a new brochure in which he wrote, “The people who can benefit most from our services normally have at least $750,000 of investable assets.” This actually represented just a small handful of his clients, but what surprised him was that when other clients read the brochure, they gave him additional money to manage. It turns out they didn’t want to be “below average.” So oftentimes, raising your account size is simply a matter of asking for it.

The second way you can raise your account size is by targeting more effectively. Focus on niches where the average account is larger. You can do this by targeting companies whose average rollovers are closer to a million rather than to $100,000. One of the advisors I work with in Texas tapped into such a company by targeting its engineers.

The engineers all had stock options that had vested in their plans. Their rollovers were $1 million to $2 million. By targeting more carefully and asking for larger accounts, you will find that they magically get bigger.

Offer More

The third way to increase your income it to add additional products or services that you are not currently offering. This might be life planning, business consulting, or long-term care insurance. It might be doing college funding analyses. If you are looking at offering additional products or services, make sure that they’re easy for you to implement or that one of your staff people can do it.

Oftentimes we counsel advisors to sell tax practices because the average hourly income is much lower than in the fee-based business and it’s a declining business. So if you add additional products or services, make sure that they’re ones that your clients want and are willing to pay for.

Outsource Estate Planning

The fourth way to increase your hourly income is to outsource estate planning for all of your wealthier clients. Estate planning is a constantly moving target and is a separate profession in itself. Depending on the political winds, the rules keep changing. If your wealthier clients need estate planning, rather than trying to become an expert, you’re much better off outsourcing that in a joint venture relationship. I look at this as different from adding products or services because you are sharing in revenue that you don’t have to spend time generating.

Add Clients

The fifth way is simple. If you can make your systems run more smoothly or avoid servicing a large number of small accounts, you’ll have time to spend with additional clients without working more hours. It behooves you to transfer your smaller accounts to someone else.

Putting It All Together

Let’s take a look at a typical financial advisor’s practice and see what would happen if she could optimize these five areas just 10% over the next year (see chart above). This advisor has 150 accounts with an average of $200,000 per account. Her average fee is 150 basis points, and she earns $3,000 a year per account. With 150 accounts, that’s $450,000 per year in gross revenue.

To keep things simple, let’s assume that this advisor has two employees, an administrative person and a paraplanner who handles client services. The total expenses for the business are $225,000. That leaves a net income for this advisor of $225,000. The advisor and staff typically spend an average total of eight hours per year per account.

Since there are roughly 2,000 hours in a year, that leaves this advisor about 800 hours, or roughly 40% of her business time, for Management, Marketing, and Improvement Time. This works out to be $188 per hour while this advisor is working in Golden Time.

Now let’s assume that this advisor can increase her average account size, her fees, her product or service revenue, and her firm can generate $300 a year per client from outsourced estate planning. Let’s assume she can also get her eight client-service hours a year down to seven for each client, thus gaining the ability to add 10% more clients.

If she can improve each of these five areas by only 10%, she will enjoy a huge increase in her net income. When the average account increases from $200,000 to $220,000, the average fee increases from 150 basis points to 165 basis points, bringing fee revenue per client to $3,630, up from $3,000. If she adds $300 in additional services and $300 in outsourced estate planning, that’s that’s $4,230 per account per year. Multiply $4,230 by 150 clients and our advisor now generates $634,500 per year as opposed to $450,000.

Cutting her hours spent on each client from eight hours to seven allows her to take on 10% more accounts, giving her 165 clients. Multiply that by $4,230 and you’ll see that her gross revenue has now grown to $697,950. That’s significantly higher than the original $450,000. Her net income will grow from $225,000 to $472,950. That’s the power of incremental improvements in the five key areas of your business.

This has been one of the more difficult markets that I’ve seen in my 21 years in financial services. But since you can’t control the market, this is an excellent time to focus on the things that you can control, the efficiency and productivity of your business. By using these five different ways to increase your income, you can create a more productive, efficient business and make a dramatic increase in the quality of your life.