The firm says that whales and minnows don’t mix, and an advisor's productivity can significantly improve by reducing a high concentration of small households and focusing on higher-income clients.
In its review of HNW households that have advisor relationships, the firm found very little evidence of upward mobility. Among HNW households holding $2 million or more in assets, 75% were already HNW category before beginning a relationship with an advisor. Another 18% of these began the relationship while holding $1 million - $2 million. Only 7% of HNW households began a relationship with less than $1 million in assets and a mere 3% began with less than $500,000 in assets.
Many advisor portfolios are concentrated in small households, those with under $100,000 in investable assets. But the average small household pays their advisor around $30 per month, which does not justify the expense of maintaining or servicing them, PriceMetrix said.
The survey also found that advisors would build relationships with HNW households – and decrease reliance on lower-income clients – as they gained experience.
Advisors with less than five years of experience averaged one HNW client providing a median of $6,000 in revenue. Advisors with 5-15 years averaged three HNW clients providing $50,000. Advisors with 15-25 years averaged five HNW clients providing $92,000. Advisors with more than 25 years of experience averaged eight HNW clients providing $123,000 in revenues.