Effective practice means leaving some clients behind, says Cerulli

Financial advisors would be better off refusing to serve clients who don’t fit their niche than taking on all comers, Cerulli Associates said in a recent study.

Because their resources are limited, advisers must choose their clients wisely, the research organization said in the latest Cerulli Edge: US Asset and Wealth Management Edition released today.

“Serving too many non-ideal clients can hurt advisor productivity,” Cerulli said. Sixty-four percent of financial advisors said their most prevalent productivity challenge was serving non-ideal clients. The study included 2,000 financial advisors.

“While it can be difficult for advisors to turn down non-ideal clients, particularly early in their careers, it becomes much more beneficial to focus as the practice develops and only serve investors who fit. to their target customer profile,” says Céruli. Therefore, having a clearly defined “ideal customer” is crucial.

On average, practices serve 142 clients for each revenue-generating advisor. As firms grow, they must be careful to overextend advisor capacity and dilute the client experience by accepting too many clients outside of their core market, the study found. Cerulli has found that many advisors, even those who have been in the industry for decades, struggle to articulate their practice’s ideal target market.

“Many default to generic categories such as ‘retirees’ which are far too broad to have any meaningful application to their business development efforts or differentiating value,” said Marina Shtyrkov, associate director of Cerulli, in a communicated. “Wealth management firms should encourage advisors to identify their niche early on and think about how they can uniquely serve this client segment in ways that other advisors cannot.”

Advisors entering a second career in the financial industry likely have knowledge from their previous profession that can help them serve particular clients. This expertise should be clearly articulated and used to serve customers.

The amount of resources available to an advisor can also be boosted by the effective use of technology. “Technology can help firms manage a higher volume of client relationships without compromising quality of service or taxing the bandwidth of individual advisors. While technology tools offer the promise of efficiencies, many practices are not taking full advantage of the full feature set,” Cerulli said.

According to the study, 69% of advisors believe they can make better use of their existing technology stack.

“This high percentage underscores the continued opportunity for technology vendors who can truly make their platforms the path of least resistance for advisor adoption and implementation,” Shtyrkov added.

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