FA Magazine September 2024 | Page 37

COVER STORY

In our experience , a professional would not really have more than 1,600 hours to work with clients if they were to spend another 200 hours improving their own expertise and managing their team , plus 200 hours marketing and developing new business .

But that result conflicts with what we hear from wealth managers and financial planners when we talk about the needs of client relationships . When consultants such as Julie Littlechild ( the founder of Absolute Engagement ) have tried to quantify the number of hours needed to service a client relationship , usually the result is between 20 and 40 hours per year . That ’ s much more than the 13 we came up with .

The Good Ol ’ Client

The reality is that it ’ s only the first year or two of our client relationships that are the most intensive and consume a lot of time . This is when the initial financial plans

FIGURE 3

Median Revenue Per Client Household

By firm size category .

14k

10k $ 9,897

$ 14,864 get created and dozens of hours go into the financial planning software . This is when the original portfolio is conceptualized and traded , with the taxes carefully managed . This is where life insurance policies are examined and perhaps purchased . This is when estate plans are set . Later , the software will rebalance and trade . Later , the financial planning package will keep updating . Later , the plans set continue to do their job .

In other words , it is likely the first year that requires the 40 hours . The relationship then settles in the grooves and needs much less . And it ’ s those established relationships that then drive our profitability .

Yet every firm has two limits : 1 ) its capacity to service existing clients and 2 ) the time and staff to on-board new clients . The second activity is much more time-consuming than the first . We might already be stretched on our service ability , and we have very little time to on-board .

In previous articles , we ’ ve rung the alarm bells about the industry ’ s slow growth , specifically the 5.7 % net new client growth in AUM . The sluggishness might be due in part to our lack of marketing time , but it ’ s also because we simply don ’ t have much time or staff to on-board clients .

Data Source : Ensemble Practice LLC , BlackRock study , True Ensemble Data Insights SEPTEMBER 2024 | FINANCIAL ADVISOR MAGAZINE | 35