During my first year or so as an independent advisor my average client relationship was around $1.3 million. Then, with the assistance of The Great Recession, specifically as new clients came aboard after taking a rather severe hit in their portfolios, my average is now closer to $500,000. One of the key questions an indie advisor must address is that of a minimum AUM level. Should you turn down clients who have less than $X? Considering that it takes about the same time and effort to manage a $100,000 portfolio as it does a $1 million nest egg, I'd say you must initiate some minimum.

My minimum was $250,000 before 2008. Now I set it around $150,000. That's not to say that I wouldn't accept an account of $125,000, but as a rule, I'd like to see at least $150,000. If the client has slightly less, but have a healthy income and are able to make ongoing contributions which would bring their account to the minimum AUM, then I would probably accept it.

I remember reading a survey a number of years ago which found that clients with less than $100,000 were much more likely to call you on a more frequent basis than those who had greater wealth. In short, the smaller accounts may take more of your time and pay you less, which is not exactly a recipe for success.

Then there's the financial planning client. Should you accept every prospective planning engagement? Absolutely not! In my experience, planning is clearly the more labor-intensive, lower-margin offering. Therefore, I only do this for clients for whom I manage money or those who have a significant net worth and would greatly benefit from this type of service.

They may have their assets held elsewhere, but if they're well pleased with my planning acumen, they may consider me in the future. Also, comprehensive financial planning is the only process which requires you to gather such a great deal of information that you should become the advisor who possesses the greatest understanding of the client. That puts you in the driver's seat.

There are certainly advisors who reject the notion of creating financial plans as it is way too time consuming and contains a lower profit margin than managing assets. However, if you consider the opportunities that planning brings, the ancillary business that would not have materialized without it, planning's profit margin just may be greater than you think.

Thanks for reading!