5 Questions to Ask When Reviewing Your Book of Business

Posted by Maria Considine King

May 5, 2015 at 10:00 AM

questions to ask when reviewing your book of businessI'm a first-generation Scot, and one of the common phrases from my childhood was "to be at sixes and sevens." My mother would say it when I seemed at odds with myself—unsure what to do next or confused by my choices. The remedy was to review my priorities and decide on the next step.

In business, you certainly don't have to get to "sixes and sevens" before reviewing your priorities! Instead, consider using regular milestones (e.g., quarter's end) to determine if you're on track. To aid in this process, I've compiled questions to ask when reviewing your book of business. Since your roster of clients is likely your main priority, evaluating your book can be a particularly enlightening and effective exercise—one that can, in turn, lend clarity to other initiatives.

1) How Many Clients (and Accounts) Do You Have?

A general rule of thumb is that one advisor can comfortably handle 150–175 household relationships.

If your book is larger than that, you run the risk of overextending yourself and your staff on service issues. This may limit your ability to:

  • Nurture existing client relationships
  • Offer additional or higher-touch services
  • Grow the practice

If your book is smaller than 150 households, it's likely that you put the quality of your client relationships above all else. The downside to this tactic is that you may be trying to do too much to keep your clients happy. The effort you put into your existing relationships is unlikely to be scalable and may actually inhibit growth.

But no matter the size of your book, being able to scale your services is critical to growing your business. And to achieve scale, it's necessary to categorize your clients.

2) Have You Categorized Your Book into A, B, and C Clients?

If you haven't yet started the process of categorizing your clients, you can begin by creating an ideal client profile to pinpoint the type of client that will contribute to your business's growth. You'll want to consider the various attributes of "your ideal client":

  • Planning needs
  • Assets under management (AUM)
  • Annual revenue generated
  • Product and service mix
  • Demographics (age, marital/family status, career status)
  • Personal interests
  • Effectiveness as a referral source

Once you've defined the attributes in your ideal client profile, decide which ones are nonnegotiable. Then, use the remaining attributes to define your B and C clients. Also, be sure to note the client categories in your CRM system.

If you've already categorized your book, you still have to ask yourself a couple of questions. The first is, "Do you have a tiered service matrix to help you focus your time and energy on the highest-quality clients?" On average, advisors have about 2,000 hours per year to give their clients, which isn't a lot of time when you think about spreading it across all of your households! To make the most of those hours, it's important to define the services you provide to each client category, once again using your CRM to keep track of the details (e.g., length and frequency of meetings).

The second question to ask is, "Do you have a fee matrix to properly align your fees (AUM and consulting) with your client categories?" Once you've answered these questions, you're ready to move on to the next step.

3) Which Clients Give the Most Referrals?

When reviewing which clients give the most referrals, consider whether those referrals are high quality. That is, do they reflect your ideal client profile?

  • If clients give you high-quality referrals, you may wish to conduct an annual referrals program around these clients.
  • If clients aren't giving you referrals consistently, they simply may not be aware that you're open to talking with prospective clients. Have a conversation about referrals with your clients at least once a year.

4) Which Clients Provide the Most Revenue?

It's important to determine both the nominal and proportional annual revenue you receive from each household.

How reliant is your business on your top clients? Here, you want to be aware of concentration risk inherent in too few high-revenue clients.

Are there clients in your book who generate less revenue per year than you expected? Make note of any clients who realize net negative revenue or revenue that equates to less than two hours of your time. You may consider rightsizing your services to these clients or encouraging them to find an advisor better suited to their needs.

5) What Are Your Revenue Sources?

Here, you'll want to look not only at nominal dollars but also at their proportional influence on your practice.

  • Be aware of concentration risk among your revenue streams and product lines.
  • Look for opportunities to mine your book for potential unaddressed needs (e.g., insurance policy reviews).

Next Steps

This review should provide valuable perspective on your book of clients and their overall effect on your business in terms of both time and revenue. It can also help you identify potential weaknesses or risks within your practice. After conducting the review, revise your business plan to include strategies and goals to maximize strengths and opportunities, as well as minimize threats and weaknesses.

To be sure, your clients are more than the dollars they generate or the services they require. Asking these questions, however, can help you make informed decisions about your book of business that will pave the way for your practice's future growth.

Are there other questions to ask when reviewing your book of business? How often do you conduct these reviews? Please share your thoughts with us below.

Ideal Client Worksheet

Topics: Practice Management

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