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Maintaining quality client relationships is paramount to success for a financial advisor team. As advisors expand their clientele, they often face the challenge of providing personalized service while managing a growing number of accounts. At Supernova Consulting, we have a developed process built around what is known as Dunbar’s Number.
The "Rule of 150," or Dunbar’s Number, popularized by British anthropologist Robin Dunbar, suggests that individuals can effectively maintain only about 150 stable relationships. Applying this principle to financial advising can help advisors manage their client networks more efficiently.
The Rule of 150 is based on the cognitive limit to the number of people with whom one can maintain stable social relationships – relationships in which an individual knows who each person is and how each person relates to every other person. For financial advisors, this rule can be interpreted to mean that managing beyond 150 client relationships may compromise the quality of service and attention each client receives. At that point clients end up being customers that can ruin your brand.
When advisors take on the clientele of another financial advisor – perhaps due to a merger, acquisition, or retirement – they might find themselves managing well over the suggested 150 relationships. This can lead to several challenges:
- Reduced personalization. Each client has unique needs, goals, and preferences. Managing too many clients can make it difficult to tailor services to everyone, leading to dissatisfaction and attrition.
- Increased operational burden. More clients mean more administrative tasks, more emails to answer, more calls to make, and more reports to generate, which strain resources.
- Risk of errors. With an increased workload, the likelihood of making errors in client accounts or overlooking critical details in financial plans goes up.
What is the solution for managing excess clients?
- Apply the 80/20 rule, which suggests that 20 percent of your efforts should lead to 80 percent of the total results. Supernova uses eight criteria to assess whether the 80/20 rule is being followed: production, assets available to manage based on your minimum number, likeability, trustworthiness, accepts advice, profitability, opportunity for future growth and/or are they a center of influence?
- Segment your clients by ranking them based on your screens. This allows for more focused and effective management of different groups, ensuring that all clients receive the attention they require. You can apply the Supernova “stairstep to the stars” approach by giving smaller clients to another advisor who has a different minimum.
- Utilize technology to automate routine tasks such as scheduling, communication, and data analysis. Customer relationship management (CRM) systems can help keep track of client details and interactions, improving efficiency and reducing the chance of error.
- Expand your business by hiring associate advisors or support staff to take on the extra load then identify the clients they will be assigned to. This can help maintain the quality of service by ensuring that all clients have a go-to person for their needs.
- Consider outsourcing tasks like compliance, administration, and even certain aspects of client communication to specialized firms. This can free up time to focus on core advisory activities.
- Implement a structured onboarding process for new clients to ensure that all necessary information is captured accurately and efficiently. This sets the tone for the relationship and helps in managing expectations. Let prospective clients know what your minimum is and the level of service they can expect from you.
- Apply 12-4-2 to all clients, which is the level of service Supernova recommends, instead of using a tiering system. Interact with each of your clients at least 12 times each year, including four quarterly reviews and two full reviews of their portfolio. When you establish monthly contact with your clients you ensure their loyalty and commitment to your practice. You can also reach your clients in other ways through client events, invitations to a weekly market update call, a regular firm email on the state of the markets, tickets to events you sponsor, or a gift on their birthday or at the end of the year.
While the Rule of 150 is not a strict boundary, it serves as a useful guideline for financial advisors aiming to maintain high-quality, personalized client relationships. Our research shows it will increase your client retention rate, grow your business and give you a better quality of life.
By implementing strategic solutions such as client segmentation, technology adoption, and appropriate staffing, advisors can manage larger volumes of clients without compromising on service quality. Ultimately, the goal is to ensure that each client feels valued and well-served, fostering long-term loyalty and business success.
Cindy Beuoy is COO of Supernova Consulting Group. The Supernova Consulting Process is a practice management model used by financial advisors to bring balance in their lives, increase client satisfaction and grow their practice. Find out more or set up a free consultation: visit our website: www.supernovaconsulting.com or contact: [email protected].
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
