Doing more with less

Advisors looking to increase profitability in their practice need to look at refining their client base, according to one industry expert. Julie Littlechild, president of Toronto-based Advisor Impact, says devoting more attention to the client selection process will help advisors boost profits.

Littlechild presented her report, entitled Practice Update: 2006 – Increasing Capacity: Doing More With Less, in Toronto on Tuesday at a conference sponsored by Univeris. The study found that attracting new clients is the main way of increasing practice profitability, followed by other strategies such as culling low-profit clients, time management, and more effective delegation. In summary, 61% of advisors see attracting new clients as a top priority; time management and work/life balance are both at 36%.

However, increasing the client roster does not mean just adding numbers. Refining the client selection process also may increase average revenue per client and save expense dollars by reducing the level of customization and improving overall service delivery. “There is work to do, certainly, in the industry, around defining who the ideal client really is, but we’re also getting a lot better as an industry,” she says.

According to Littlechild’s report, 68% of respondents said that they have defined their ideal client, factoring in such things as investable assets, income, profession and personality type. But less than half of their clients actually fell within those pre-set definitions, the advisors admitted. In some cases there were historical reasons, such as a long-running client relationships.

Similarly, an average 44% of respondents had defined asset minimums for their clients, though those percentages varied depending on channels. For instance, only 32% of MFDA advisors had set asset minimums, compared to 68% working in the IDA world.

Meanwhile, 47% of respondents overall said they were actively culling their client bases of those not fitting the defined profile. Within that number, advisors said they planned to shed, on average, 67 client households.

“Advisors are much more actively trying to adjust their client profile,” Littlechild said. Other strategies for improving capacity suggested by Littlechild included streamlining investment management through strategies such as product selection for smaller clients, which reduces research time, and shifting towards managed products.

Delegation of work responsibilities through the use of junior advisors was favoured by 24% of respondents overall and 43% in the top producer category. Clearly designed, and larger, team structures also pay off in reduced overall cost of service delivery, improved serve and response time and the creation of new capacity, the survey revealed.

Advisor Impact surveyed 1,060 advisors from across Canada in April and May of 2006.

Al Emid is a Toronto-based freelance financial writer