Close Close

Retirement Planning > Spending in Retirement > Required Minimum Distributions

The Best Minimum Account Size: Zilch

Your article was successfully shared with the contacts you provided.

Should you have a minimum account size? Of course you should, right? That’s how you build a big business, right? You can only manage so many clients, right? Today’s big advisors got that way by setting lofty account minimums, didn’t they?

Well, maybe not. As a matter of fact, at the risk of flying in the face of what everyone knows to be true, let me say, “You should not have an account minimum. Further, that minimum you or your firm has imposed may well be responsible for the industry-wide AWFUL new account opening statistics. Further, today’s big advisors mostly started their businesses when they could open an account for 100 shares of a $10 stock.”

Before I give you my reasons for opposing account minimums, read the story that follows. I asked Bryan Sarff, CFP, with True Private Wealth Management in Overland Park, Kansas, to write his experience in dropping the minimum account size requirement.

A True Story

Sarff wrote: “August 15, 2014, started out like any other day in the financial advisory business. I came into work, checked my schedule, saw who was coming in that day and made sure we were prepared.”

“That afternoon, I was scheduled to meet with a brand new prospect and little did I know that one of my long-standing principles in this business—a principle that had been drummed into me over the past 12 years—would come crashing down that day. I learned a great lesson meeting with this client and I know that my financial practice has been changed so much for the better because of it.”

“This client had been referred to us to get help organizing her financial affairs while she was wrestling with some serious medical issues. We talked and visited about her wants and needs, her children, and her husband passing a few years back; money that she needed for income and assets she wanted to invest. We started talking about putting together a financial plan and many of the goals she wanted to accomplish. We looked over her will and her trust and how her medical issues could affect her estate.”

“We arrived at the end of our meeting to discuss how we could work together. She politely asked me ‘So, what are your account minimums?’ Without thought or hesitation I boasted ‘Our account minimums are $100,000.’ (Doing what I’ve always been taught, but never quite felt right, but I did it anyway because that’s what the big producers said they did.)”

“A blank look came over her face and she said very plainly, ‘I don’t have much more than $100,000 and I’m not prepared to invest all of it with you today. It looks as though I’m not a fit for your business.’ I did what I’ve always done at that point. Told her thank you for coming in and I enjoyed hearing her story. Then I referred her to another financial advisor down the street. (This is what I’ve always been taught to do.)”

“After she left, I went to my next phone call. It was a planning meeting with Bill Good. I recited for him the story you’ve just read. And he said to me in his very stern voice ‘Bryan, you’ve got it all wrong. You should never have account minimums. Call her back immediately and apologize.’ So I did.”

“I called her back and apologized. Told her that I had stuck both feet in my mouth and felt terrible for turning her away. I said that I was sorry for being an ass and was hoping she would forgive me. She thought for a moment, said she appreciated my sincerity. That I had been an ass, but she would forgive me. I asked her if she would consider coming back in to talk again and she said she’d think about it, but probably she’d just find someone else to work with.”

“A few weeks later—after a nice phone conversation with my sales assistant—she was back in my office investing with us the amount she was comfortable starting off with. But the story doesn’t end there.”

“In October, we held a Client and Friends Event where we invite clients to join us for an educational evening and ask them to bring a friend to enjoy a meal and learn a few new things. At our event in October, she brought a referral with her. And not just any referral, but a great referral. An opportunity for us to earn a multi-million dollar account! And then she referred two more friends to us that were looking for help as well. I couldn’t believe it and am still amazed today at who knows who.”

“Needless to say, I have been humbled by this experience. Never again will I have an account minimum. I will always say to new prospective clients ‘We do not have any account minimums. We are looking to work with nice people, who appreciate investing and want our help. As long as you can step over those hurdles, we will find a way to take care of you.’”

“You never know who worked with who 6–9 years ago. You never know who they are connected to or who they know. All you can do is a great job for your clients, give good advice, be a good citizen in your community and stay in contact with your clients. The rest will take care of itself.”

A Concise Argument

Three points:

  1. As Bryan demonstrated, you never know who someone is connected to.

  2. In my opinion, account minimums restrict the flow of referrals. Your client Bob talks with an administrative assistant at his company, Anne. She tells Bob, “I am inheriting some money from my Aunt Sara. I need to talk to someone.” Bob knows you have a minimum but cannot remember what it is. Anne is a single Mom from a modest background and he presumes Aunt Sara left her a few thousand dollars. Bob does not want to embarrass Anne by sending her to you. So he sends her to that “nice young man at the bank.” You don’t even get a chance to meet Anne, who will inherit $1.25 million from Aunt Sara.

  3. Account minimums cut you off from the millennials, the next mega generation only now getting their toes wet as savers and investors. Guess what? They are the next inheritors.

Qualifying Prospects

What kind of people would you like to spend your business life with? How about this?

  1. Someone who needs help.

  2. Someone you believe you can help.

  3. Nice person.

  4. Someone who will follow advice.

Yes, yes, yes I know your firm may not pay you if the person has less than $100,000 or whatever. And you may have to live with that.

In my opinion you have to be in the marketplace, kicking and paddling.

You need to be connected to a lot of people.

Only take people as clients you like and believe you can help.

As Bryan put it, “The rest will take care of itself.”