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Industry Spotlight > Women in Wealth

Evaluating Client Goodness

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If you have not yet read my September Research article, “Brace for Impact,” I strongly recommend you do so immediately. “Impact” is an interview with Lou Harvey, chairman of Dalbar. Lou spent the summer digesting regulations from the SEC and IRS, as well as reading the Dodd-Frank bill. I have posted a copy of the article at Momentous change is headed our way. To help you deal with the changes coming, I have also posted two white papers, “Transition to Fee-Based Advisor” and “Solid Gold: Client Retention Formula.”

With the article you’re now reading, I add a spreadsheet to help you properly evaluate “client goodness.” This evaluation is essential in knowing where to start or pick up your conversion to fees — and that is something about which you have little choice, as is made clear in “Brace for Impact.”

Simply converting an existing asset base to fees is an open invitation to participate in the hated income reduction plan. You must increase assets. Some of these must come from existing clients. The rest, of course, comes from prospects.

Key question: where do I start?

Answer: Evaluate the goodness of your clients. The “bottom-up blend strategy” strategy that I discussed in my white paper, “Transition to Fee-Based Advisor” would have you first convert certain smaller clients. If you start at the top of your book, you will certainly participate in the income reduction plan.

If we are going to start at the bottom, where exactly? That nasty little client who snaps at you every time you call? Or that nice little old lady who loves you? My recommendation: start with the little old lady, and other nice, small clients. Least assets, least effort. Sounds like a good plan.

Client Goodness Defined

No question about it, some clients are better than others. But a reasonable question is: What makes a good client?

Is it liquid net worth, i.e., investable wealth? Is it revenue? Is it quality of the relationship? Is it AUM?

Yes, yes, yes and yes.

While it is all of these, over the years I have focused on two of these qualities: quality of the relationship; and liquid net worth.

By assigning each client two different grades, one for relationship, and one for wealth, you will not only identify your best clients, but you will get an idea of where, in your bottom tier, to start.

The names I have assigned these “goodness” standards are:

Book — this measures the quality of the relationship. This comes from old terminology that still survives. People used to have physical notebooks, an A-book, B-Book, etc. But no one ever defined exactly what an A-client is.

I decided to resolve the issue and define an A-client as a responsive client. Bs, Cs and Ds are progressively less responsive.

“Book” then has nothing to do with size. It measures the quality of the relationship only. I use an ABCD grading scale for quality of relationship as follows:

A: responsive, does what the FA recommends when advised. No selling is required. Almost all referrals come from A-clients.

B: a bit cautious. This client will follow advice about half the time, but often wants “to think it over.”

C: cautious. only follows advice about 20 percent of the time. Frequently requests info in writing.

D: negative, either client to FA or vice versa. Rarely returns calls. Rarely comes for reviews. The relationship is soured, if not gone.

Wealth — this is your estimate of the client’s liquid net worth. Important note: It’s not just what they have invested with you. It is total liquid net worth.

To measure this quality, I recommend a 12345 scale.

1: top 5 percent
2: next 20 percent
3: middle 50 percent
4: next 20 percent
5: bottom 5 percent

Depending on whether you live in a wealthy market, or poor market, your choices could be defined as:

Palm Springs El Paso, Texas
1 $2.5 million+ $500K+
2 $1 million $250K
3 $500K $125K
4 $250K $75K
5 $100K or less $25K or less

Keep in mind: these are your choices in your market.

The optimum client is, therefore, an A1–wealthy and responsive.

But your A1s are NOT the starting point for your transition. Obviously, when you grade your clients on these two standards, you are being mostly subjective. There is no objective measure of “goodness.” But you make subjective judgments all the time, don’t you? (“Bob Barking is a real jerk! And his wife Woofie! Spare me.”)

Convert to Fees

The quality of the relationship, combined with your estimate of liquid net worth, gives you an excellent idea of where to start or continue your conversion process.

Let’s drill a little deeper into the concept of an A-client.

This client has decided you are his or her trusted advisor. That’s what “responsive” means. The client trusts you enough to always, or almost always, follow advice. It also means you are sole provider for all financial services this client requires.

No one needs more than one trusted advisor in a category. You have one primary care physician, one dentist, one CPA. A client with an FA who is trusted advisor has one financial advisor.

OK, OK. I know there are exceptions. Your client has to keep some money market balances at the local bank where the business credit line is. Another client’s son is just getting started in the business.

But for the most part, an A-client is one with no other sources of financial services or products. You are sole provider.

So, as you call in your A5s, A4s, B5s and then B4s, you would expect to convert these assets easily and quickly.

But to do this, we need an organized system to evaluate client goodness.

Measuring Client Goodness

I have created a spreadsheet for you so you can evaluate client goodness. In addition to evaluating Book and Wealth, I have also added Source (where a given name came from), and Employment Status. I have posted the spreadsheets online in Office 2007 and Office 2003 format.

Your first call should obviously be to Adam Smith and Rebecca Jones. I would then work my way to my A4s and then back to B5s and B4s.

In addition to the table shown above, in the spreadsheet you will also find some “bonus tables.”

Book-Source: This shows you where your ABCD clients come from.

Wealth-Source: Looks at the same data except from the Wealth field point of view.

Emp Status-Wealth: Shows the wealth rating of various employment statuses.

Emp Status-Source: Shows where your various employment statuses came from.

Why do all this? If you understand where your business sources are, you might find more where this came from.

The spreadsheet is available free at

Bonus Concepts

The optimum clientele consist only of A-clients. To capture all client assets you must have all A-clients.

The reason FAs want to get rid of clients is because they are hard to manage. They are not therefore A-clients. Small A-clients are easily managed.

Bill Good is chairman of Bill Good Marketing. His Gorilla CRM System helps advisors double their production or work half as much. Visit His seminar program, “No More Pies!” helps advisors manage ETF portfolios by using technical analysis. Visit


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