Bridging the revenue gap. How your lower portfolio value clients can actually unlock real value.
Unlocking the True Value of Low-Balance Clients
How a 15% growth opportunity is hiding in plain sight and what advisers can do about it.
When it comes to growth opportunities, it’s easy to overlook low-balance clients. Many advisers see them as a cost to serve or a legacy book that is tied up in goodwill, reputation and long-standing relationships. However, the truth is that lower portfolio value clients that no longer fit your firm’s growth requirement drain time without adding much to the bottom line.
When I read the recent NextWealth’s Organic Growth report, I started thinking… what if we’ve got it all backwards?
In this report, there was a quote that really stood out to me: “We worked out we needed 15% growth just to stand still because of withdrawals and deaths.” This is an eye-opening figure, driven by client withdrawals and natural attrition. And still, many firms continue spending time on clients who fall far behind their profitable threshold.
Let’s do the numbers to understand the uncomfortable maths behind the missed opportunity.
We analysed the numbers with IFA partners who are on our Enhance service. Assuming a firm carves out 30% of the lower end of their existing client bank – assuming a firm has an average of 100 clients per adviser (usually, this carve out percentage is slightly higher) – and reallocate their capacity to looking after higher balance clients, the revenue uplift from this 30% they are seeing is 300%.
If that doesn’t stop you in your tracks, it should.
A case study: Using the Enhance model, a firm calculates that the bottom end of their client bank (around 30 clients) is time-intensive and not profitable in terms of cost to serve. They decide to carve out this suboptimal segment generating around £22k revenue (based on a fixed fee model) to free up capacity to engage more profitably with higher-value clients.
These 30 clients take up around 8 hours each to service on average and generate around £750 per client. The adviser, allocating 8 hours of time per client, is operating at a loss of overall revenue and not just the 8 hours spent (£800 equivalent) vs. revenue generated per client (£750). They are also using a grand total of 240 hours per year at a very conservatively estimated hourly rate of £100, which is 240 hours of time lost or drag tied to goodwill.
If instead, they reallocate these 240 hours to 30 optimal, high portfolio value clients they are seeing a revenue generation of £3000, per client, per year, pushing their revenue from the existing £22k to £90k per annum.
By carving out the lowest-value third of clients, advisers recover significant capacity. Reallocating this capacity to more profitable clients or new high-value client acquisition enables the firm to generate approximately £90,000 in revenue – a 300% uplift on a third of their lowest portfolio value client bank.
This figure is a direct bridge to that 15% quoted in the report by NextWealth and is just the beginning of a growth trajectory for this firm.
It demonstrates that strategic client segmentation is not just about efficiency, but actually a proactive revenue strategy.
Reassigning these clients doesn’t mean abandoning them and is actually optimising your business while ensuring your clients continue to be cared for.
We’ve spent years talking about segmentation, digital engagement and improving the client experience. But doing nothing about the clients you can’t profitably engage with doesn’t just cost future revenue, it corrodes the client relationship and firm reputation.
Clients who don’t receive proactive support are more likely to lapse or move advisers. The “silent churn” from these clients typically doesn’t get flagged until it’s too late, when the assets are gone.
We built Enhance to give firms a smarter, more scalable way to serve lower-value clients, without blowing the cost-to-serve model. More importantly, it helps close the advice gap.
By Andy Wealthall
