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A Disengagement Benchmark

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When segmenting a book, one benchmark I recommend in evaluating which clients to let go comes from the 2007 Compensation and Staffing Study of Advisory Firms by Moss Adams LLP. This survey of more than 700 advisory firms showed that the average annual costs to serve clients of mid-size firms, not including any compensation to the owner of the business, was $3,500. That means that these firms should focus on clients with over $500,000 in investable assets to make the average relationship profitable. At that level, most advisors charge an annual fee of 100 to 125 basis points, which would deliver roughly $1,500 to $2,500 of profit. Clients with less than $500,000 in investable assets are likely to be either minimally profitable or unprofitable.–Steve Moore