There are numbers to support the fact that advisors should be streamlining the number of investment offerings from their book of business
“Successfully building scale continues to be a challenge for many financial advisors,” says Julie Zhang, practice management consultant at Russell Investments Canada. “Research from Russell Investments has found that each mutual fund eliminated from an advisor's book of business saves them a full day – eight hours – of product due diligence per year.”
In addition to increased efficiency, says Zhang, building scale tends to create the ideal environment for strong performing teams with a strong client-centric philosophy.
The attitude of trying to be everything to everyone seems to be a common theme among advisors, who have an average 520 positions across their book of business, 167 of which are mutual funds.
“A successful client-centric philosophy is grounded in revenue-based segmentation,” says Zhang, a conclusion arrived at after examining data from 41 advisory businesses:
“The number of products that advisors manage on their book also directly impacts scale, efficiency and, ultimately, client satisfaction,” says Zhang. “Advisors should aim to find the optimal set of products that can both solve the investment conundrum of their different client types and create a scalable service model for each.”
In addition to increased efficiency, says Zhang, building scale tends to create the ideal environment for strong performing teams with a strong client-centric philosophy.
The attitude of trying to be everything to everyone seems to be a common theme among advisors, who have an average 520 positions across their book of business, 167 of which are mutual funds.
“A successful client-centric philosophy is grounded in revenue-based segmentation,” says Zhang, a conclusion arrived at after examining data from 41 advisory businesses:
- On average 20% of clients represent 80% of revenue (the 80/20 Rule);
- The bottom 50% of clients represent a marginal portion of revenue;
- 80% of clients in a typical advisors business are over the age of 50 and represent more than 85% of recurring revenue;
- Opportunities for recurring revenue is greatest with clients between the ages of 50-60; and
- Segmenting by client age can enhance profitability and client servicing.
“The number of products that advisors manage on their book also directly impacts scale, efficiency and, ultimately, client satisfaction,” says Zhang. “Advisors should aim to find the optimal set of products that can both solve the investment conundrum of their different client types and create a scalable service model for each.”
