Assets per client for a financial adviser and capacity limits

3 days ago
3 min read

Introduction

An advice practice has a hard capacity limit. Annual reviews, suitability work, compliance and correspondence cost roughly the same per client regardless of how much that client has invested, and an adviser can only hold so many relationships properly.

That means average assets per client is the number that decides whether the practice works. Two hundred clients at a low average is a great deal of servicing obligation for a modest recurring income, and it crowds out the capacity to serve anybody well.

Advice, charging structures and disclosure are heavily regulated and the rules differ by jurisdiction. What follows concerns practice economics rather than regulatory requirements — check your own obligations before changing how you charge.

1. Assets per client for a financial adviser sets your capacity

The constraint is relationships, not pounds.

Calculate assets and revenue per client

Total funds under advice divided by client count, and the same for recurring revenue. Most practices know the totals and have never looked at the averages. The averages are what tell you whether the model works.

Work out what servicing a client actually costs

Review meeting, preparation, suitability documentation, compliance, correspondence. Below a certain asset level a client cannot cover that. Work out that level explicitly rather than sensing it.

2. Segment the book honestly

Not every client should receive the same service.

Build service tiers by what you can sustain

Full ongoing advice, a lighter review service, and transactional. The tier should match what the recurring income supports. Write down what each tier actually includes.

Deal with the clients below your threshold

Move them to a lighter service, refer them elsewhere, or charge appropriately. Continuing to promise full service you cannot deliver serves nobody. It is also a compliance exposure.

3. Consolidate what clients already hold

Most clients have assets you are not advising on.

Ask about everything, not just what they brought

Old pensions, dormant policies, workplace schemes, cash sitting idle. Clients frequently do not think of these as assets to be advised on. Ask the question at every review.

Explain the case for consolidation properly

Where it is genuinely suitable it simplifies the client's position and raises assets under advice. Where it is not, say so — this is squarely a suitability matter.

4. Extend across the household and the generation

One client is rarely one relationship.

Advise the couple, not the individual

Household planning is better advice and roughly doubles the assets in the relationship. Most practices advise one spouse and never meet the other.

Meet the adult children

Intergenerational transfer is the largest event in the book and the point at which most practices lose the assets entirely. Being known beforehand is the whole defence.

5. Charge in a way that reflects the work

Percentage-only charging misprices both ends.

Consider fixed fees for the work that is fixed

Report writing and initial planning cost the same regardless of portfolio size. Fixed fees for fixed work is increasingly the norm.

Set a minimum fee, and be willing to state it

A stated minimum is clearer and kinder than accepting clients you cannot serve properly and quietly under- servicing them.

Conclusion

Calculate funds under advice and recurring revenue per client, then work out what servicing one actually costs you — below a certain asset level a client cannot cover the review, the suitability work and the compliance that come with them.

Segment the book into service tiers your income can sustain and deal honestly with the clients below your threshold, ask about the pensions and policies clients did not bring to you, advise the household rather than the individual, get to know the adult children before the transfer happens, and consider fixed fees for fixed work with a stated minimum. Confirm your own regulatory position on charging and disclosure first.