Opinion: A bigger book ain't always a better book

Opinion: A bigger book ain't always a better book

Opinion: A bigger book ain

and in time. If you go through the exercise I would venture to say that you will be quietly amazed by your average spending per client. And we haven’t discussed the lost opportunity costs….

A quick example to make the point.  Let’s say you send:

   -  A greeting card once a year
   -  A couple of newsletters a year
    - Review letters and reports mailed once a year
    - Disclosure twice a year
    - Maybe a seminar for clients, and
    - Perhaps one invitation to a function each year

These things are pretty typical and can easily add up to a cost per client of $150-200 in direct servicing costs. Apportion out your fixed costs among the clients….often another $150/head fairly easily. Staff time dealing with a couple of calls and emails a year?  Another $50-75.  Adviser time?  Another 2 hours a year – call that a minimum $300.

So, the client is costing you perhaps $800 a year to keep.  (Can you AFFORD to bring on more?)

The really interesting part though is when you begin the process of segmenting your client base and working out what each segment brings in revenue each year.  Your very top end clients that follow your advice and think about their affairs will be presenting you with average revenue of $1,200-$2,000 p.a. on a reasonably consistent basis.  Every 2-3 years there will be a big bit of work done with them that provides a lot more.  And they will, if the relationship is nurtured well, provide you with more clients of that type.  The lifetime value of these clients can be immense.

However, at the other end of the scale I regularly witness advisers holding on to smaller clients.  Perhaps they purchased something from the firm 9 years ago, or sought some advice and paid for their plan 4 years ago, or were handled as a bit of a pro-bono exercise.  When you drill down and look at the on-going value these “clients” present the numbers are startling.  It is not uncommon to see an average revenue per client below $100 p.a. at this end of the client base.

(See page 2)

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