Client Pruning: Is there an algorithm for this?

ans2389's picture
Rank: Senior Baboon | 175

Hi, all. I was wondering if any of you have ever been in or seen a situation in which one FA's book had just gotten TOO big and he or she needed to decide which accounts to keep and which to pass on to younger financial advisors. How did they decide? Was there some kind of a science to it? How would you go about deciding what is a good client from a bad one?

My thoughts were, analyzing production credits gained from a clients transactions and dividing that by the amount of "effort" it takes to maintain the client. This effort could be defined by "Number of minutes spent on the phone per week" etc.

Any ideas? Especially on how to quantify "effort" spent on a client? Is it time? Exasperation levels? Does this client's "effort" level fall if he buys the FA a nice gift each christmas? Haha. All joking aside, and input (even jokes) is greatly appreciated.

Comments (9)

Jul 26, 2012

list your factors in priority order and I'll put together the logic for an algorithm to do this. You can have a crack at scripting it, and i'll fill in the blanks. Not doing your job for you, unless you want to pay me :)


Jul 26, 2012

I believe there is a more human component, where they need to see which of their clients responds well to having a new adviser. I doubt they want to lose the business for the firm.

Jul 26, 2012

I believe there is a more human component, where they need to see which of their clients responds well to having a new adviser. I doubt they want to lose the business for the firm.

This. PWM is 90% a relationship thing and the only reason they're coming to you is because they know you and like you and trust you...and where you live, and how to hunt you down and skullfuck you if you screw them. Beyond that, just factor maintainance vs return and go from there.

Welcome to McAdvisors, can I take your order?

Aug 1, 2012

I just wanted to update... I figured it out, and it went well.
I based it mostly off of client attention required versus production credits generated. I used salesforce to record how many times people had called within the last year versus how many production credits they had earned. Their production/attention ratio was one score. We also created a score for "likeability of client" (asshole clients aren't worth 10,000 PCs), a score for whether or not this client had the potential to lead to more clients (i.e. if they have wealthy family, friends, etc.) and last but not least, a score relating to the clients' level of uncertainty regarding moving to another manager. Basically whichever clients got the lowest 20% of the combined scores were passed along to junior FAs (except for a few cases in which the client and FA were very close).

Thanks for all of your input!

Aug 1, 2012

you plan to sell the algo? start up?

Best Response
Aug 2, 2012

God, this make me glad I was in the game when I was. We didn't need any complicated algo's to determine a client's worth. I had a simple three strikes rule. If I called a client and made a recommendation and the client refused to trade, that was one strike. Three of them and he was fired and shitcanned to a junior FA who couldn't find his ass with both hands.

And as for worrying about whether or not the firm loses business, get serious. That's your book, fuck the firm. You built it, you can do what you want with it. You really need to re-define your relationship with your employer.

You don't work for them, you work for your clients. You pay your firm for a desk and an execution platform. They fucking work for you, because if you're worth a shit you can always take your show on the road and generate revenue for a rival firm. Your firm should be kissing your ass if you're a hitter.

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Aug 2, 2012

I guess the places I've worked have been structured differently, but we don't have any complicated way of valuing a client based on "production credits". The fees are set before hand, so the only guess work you need to do with a client is how much more money they might bring over for you to manage in the future. I'm assuming your work is more tied to recommending trades for clients to make to generate revenue, is that right?

Secondly, after you've been working with clients for years you get a pretty good feel of how much time and energy they take. For some clients you really enjoy meeting with them and develop a solid relationship over the years, which in my opinion, is the real goal of an advisor.

Aug 2, 2012

Why the hell would you even need an algorithm for this? Do you have an algorithm for how often you should tell your mom you love her?

It's about relations with people. Just go through the list and decide for yourself who you want to hold on to. Who did you enjoy working with? Who are the guys that treat you like shit and argue with you when you talk to them?

Some could also suggest you 80-20 it. Figure out who brings the most money with the least effort and then go through that list and see if you would be satisfied with just those people. If you would get pleasure out of working with them while still making money. If not, stick to some smaller guys that bring less profit but more happiness.

"You stop being an asshole when it sucks to be you." - IlliniProgrammer

Aug 2, 2012