“I’m sorry, but i just don’t buy into that notion,” said Don Matthews. “For years, people have been telling me to ‘fire’ my smaller clients so I can concentrate on the bigger ones. But I don’t believe I could ever do that.”

Don’s challenge came early in a workshop I was facilitating on building a practice in the high net-worth market. His remarks were in response to my comments that advisors truly wanting to move upscale probably would have to reduce the number of clients they service.

“Why couldn’t you?” I asked.

“First of all,” Don answered, “many of these people are my friends. They got me started in the business years ago and I can’t just toss them aside. Second, they pay the bills! If I were to drop them, my income would fall dramatically. I’d have to become very successful in the high net-worth market very quickly to offset the loss of revenue.”

“I agree that most of your clients likely make a contribution to revenue,” I replied. “Their overall profitability may be in question but, even then, I’d never suggest that you dismiss your client-friends as being unimportant. My experience is that every advisor has clients about whom they feel the same way.

“The challenge is to find a way to provide even better service to them with less of your involvement. In some cases, that means partnering with another advisor who can devote the required time to them or creating a service strategy among your existing staff so every client feels they are receiving ‘A client’ treatment.

“The specifics of how to do that in your practice are something we can talk about, one on one, because each situation is different,” I continued. “For now, I would like your indulgence in walking through an exercise that will demonstrate how your revenue will increase rather than decrease if you take some of the time you are spending with your B, C and D clients and convert it into more time with your A clients. Would that be OK?”

“Sure,” Don said. “If you can show me how to get more from my best clients, of course, I’d be interested. I must warn you, however, a lot of them have their needs fully met. Their planning is done, there is no more money to invest and their insurance programs are as good as they are going to get.”

“That’s great, Don,” I said. “I would have expected them to be well taken care of, knowing how diligent you are in your work. I also think you know where I am going with this, don’t you?”

“You are talking about getting referrals from them,” he said.

“That’s partially right,” I said. “What I actually want to explore is how to get more personal introductions from your top clients. Introductions are so much more powerful than referrals. With a referral, the prospective client still has to make some judgment about you when you make that first contact. If one of your best clients, however, introduces you face to face, your credibility is instantly about as high as it could be. I know you have the results of that benchmarking study we did for all the top producers in your firm. Can you recall how many A clients you indicated you have, according to the criteria you set for your practice?”

“It was 40,” Don said. “I remember because it is the same number as my age, and I wondered how many A clients I would have by the time I was 50. Would it be 50? Would I have 60 by the time I was 60? I think the number should be a lot more, don’t you?”

“Actually, no, I don’t,” I said. “Most of the top advisors with whom we work only have 40 to 60 ‘trusted advisor’-type relationships, regardless of whether they have 200 or 2,000 clients. That seems to be about all they can manage on such an intimate level.

“What happens is that as they add more high-value clients, they keep raising the bar on what it takes to be, for example, an A client. Whereas someone might once have qualified if he or she had, among other things, $250,000 of assets under your management, it might now take $500,000 or more, and so on. As your pool of potential qualifiers grows, you can establish higher and higher standards.”

@page_break@“I guess I have done that intuitively over the years,” Don said, “because many of what I would have categorized as A clients five or 10 years ago wouldn’t make the cut today.”

“Which is another reason to look carefully at all those ‘old friend-clients’ you were so protective of a few minutes ago,” I said. “You are probably still treating them like the A clients they might have once been, even though, by your own measures today, they might not qualify. That is taking time and resources away from your higher-value clients.”

“I can see that more clearly now,” Don replied.

“Good, now let’s address the ‘drop in revenue’ concern you have,” I said. “You currently have 40 A clients. From the benchmarking study, how much of your total revenue did that group represent?”

“About half,” he replied. “Slightly more than $200,000.”

“OK,” I said, “let me do some flip-chart calculations as we go: $200,000 divided by 40 clients equals an average of $5,000 per client. Does that seem fairly typical to you in terms of average revenue?”

“Yes. Some are obviously more or less than that,” Don said. “But, as an average, it’s about right.”

“If you were to sit face to face in front of each of your A clients with a well-prepared script that asked them to introduce you directly to someone like themselves, how many of them do you think would be willing to do so?”

“I’d like to think ‘all of them’,” he said. “But, realistically, I’d guess three-quarters would be willing.”

“So, that’s 30 of your 40 A clients,” I calculated. “And if you averaged only one introduction each, you’d meet 30 new prospects. How many of those would you expect to become clients?”

“With a personal introduction from my best clients, no fewer than two out of three,” Don estimated.

“Which equates to 20 new clients,” I said. “Now, what would expect your revenue from each of those clients to be in the first year? Would it be the $5,000 you currently average from your A clients?”

“No, they usually don’t get to that level until the second or third year,” he replied. “So, I’d say about $3,000 in the first year, $4,000 in the second and up to $5,000 in Year 3.”

“Perfect,” I said. “Now, the next question is: how many of your new clients who come to you via a personal introduction would, in turn, be willing to provide personal introductions to someone else?”

“Wouldn’t the experience be about the same as with my existing clients?” Don asked.

“It should actually be better,” I said, “if you condition your new clients that you are going to ask them for referrals by saying something like ‘At the end of our first year of working together, I am going to ask you for a “quality check” to see how well I have done as your advisor. If you feel I have met or, hopefully, exceeded your expectations, my expectation is that you would be willing to introduce me to someone just like yourself so my business can continue to grow with high-quality clients. Does that seem reasonable to you?’ Most of your new clients will agree right away. For our purposes here, however, let’s use the same numbers.

“My quick calculations show that you would end Year 1 with 20 new A-type clients, for a total of 60, including your original 40. In Year 2, you would add another 20 from your original 40 — assuming you made asking for introductions part of their annual review — and 10 from your new A clients, making a total of 90. In Year 3, the pattern repeats and the total grows to 135. More important, the revenue from these clients has also grown from $200,000 to $405,000, or about double the revenue from your original A clients and equal to your total original revenue.

“In other words, if you only concentrated on obtaining introductions from your A clients and converting those introductions to clients, you would replace all the current revenue from your B, C and D clients in just three years. Does that seem worth doing?

“Now, as a practical matter, it won’t happen exactly as described,” I said. “Your estimates may be off, better or worse than you predicted, and you will, of course, continue to generate revenue from other clients. But the concept is bang on: shift the maximum amount of time you can to leverage the client capital you have already created.”

“And you’ll show me how to do that?” Don asked.

“I will.” IE



George Hartman is a coach and facilitator with the Covenant Group in Toronto. He can be reached at george@covenantgroup.com.