Identifying reservoirs of new clients in a competitive sector like investment advising is never easy. But if you’ve established inflexible (or even random) new-account minimums, then you may actually be referring viable clients to the competition.

Regrettably, we did this for many years.

Our firm had long had a $250,000 new client account minimum. We had streamlined our processes so that all our clients got nearly identical levels of service. Because our company’s revenue is generated as a percentage of AUM, we believed the $250,000 standard made sense both fiscally and operationally. But was it optimum? Were we missing an opportunity for growth?

When a potential client contacts our firm for the first time, our marketing department collects as much data as possible, including how the prospect found out about us and the amount of manageable assets in the portfolio. Once we took time to look back at that information, we discovered an uncomfortable truth about our company.

Some years back, we began to run Friday reports on that call data. We looked at the number of first-time callers, how many met our account minimum, what their average asset level was, and how many first-time callers scheduled an appointment.

Yet for some reason, we excluded the investable assets of the callers who did not meet our account minimum. And once we added those numbers to the reports, the information was so compelling that we quickly changed our entire approach to client qualification.


Day by day, month by month, we had been turning away tens of millions of dollars of manageable assets.

We also discovered something else about the people we turned away: They had tremendous upside. They were younger than our typical clients, many in the prime of their careers, and were highly motivated savers. Even worse: Many of these “unqualified” callers had missed our minimum by a painfully thin margin. They may not have had $250,000 when they called, but based on their saving habits, they would soon.

The question arose: Would our AUM model still be profitable to us, and beneficial to the client, if we lowered our minimum?

We decided to try to make it work. In 2010, we founded a separate division, with an alternate level of service, designed to meet the needs of clients with $50,000 or more. These clients get annual portfolio reviews with an advisor and have access to a dedicated customer service representative who is familiar with their account. We’ve also increased the minimum for our full-service option to $300,000.

After $95 million in new client assets, we’ve decided to stick with it.

The lesson for us: Just because your current model is working doesn’t mean you should let it stagnate. Those new clients may already be beating down your door.

Pat McClain is cofounder of both Hanson McClain Advisors and Pathway Strategic Advisors in Sacramento, Calif.

Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access