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I am often asked, “What does it take to succeed at the highest level?” by both new and not-so-new entrants to the financial industry.
Some important insights into that question were provided to me by PriceMetrix, an industry leader in advisor productivity. Launched 10 years ago, today it works with 20,000 advisors from 20 firms throughout the United States and Canada.
Recently, PriceMetrix released a thought-provoking analysis of the role that smaller households play in hindering advisors from achieving peak levels of financial success
Analyzing the books of 8,000 advisors from 15 firms, they divided client households into three categories:
- Small – under $100,000 in assets
- Medium – assets of $100,000 to $1 million
- Large – assets over $1 million
Is it all about the money?
A note on making the right decisions for your business:
Many factors drive advisor satisfaction beyond simply making money, not the least of which is feeling good about the difference we’re making in clients’ lives – and it would be wrong to suggest that maximizing income is all this business is about.
That said, when making business decisions on things like the kinds of clients you focus on, it’s important to understand the tradeoffs you’re making along the way.
Four key conclusions
PriceMetrix drew four key conclusions from its analysis:
- Most advisor portfolios are concentrated in small households
- There’s very low probability that small households will grow over a five-year period
- With tenure in the business, most advisors shift to larger clients – the faster this happens, the more quickly advisors move to higher levels of production
- Reducing small households can significantly improve productivity
The role of small households
PriceMetrix quantified what many advisors had suspected – on average, smaller households represent a disproportionate number of clients relative to the revenue they generate.
Here’s the data for the average advisor on small, medium and large households:
|
% of |
% of |
Small accounts (<$100K) |
52% |
9% |
Mid-sized accounts ($100K - $1M) |
42% |
44% |
Large accounts (>$1M) |
6% |
47% |
In other words, the average advisor could give up the bottom half of his or her clients and lose less than 10% of revenue.
