As financial planning firms grow more efficient with the use of technology, it is becoming increasingly possible for advisers to manage a large number of clients. However, the limitations are the time taken to service these clients and the cognitive limit to the number of people with whom an individual can maintain stable social relationships.
“I feel that I am incredibly inefficient. I just can’t find the time to deliver the portfolio reviews to all my clients as promised. What is wrong with my strategy?”
Ah yes, the capacity conundrum. It is the bane of all Type-A financial advisers. If we work harder and longer hours, there is nothing we can’t do. Well, British anthropologist, Robin Dunbar, seems to disagree with this.
In the 1990s, Robin Dunbar found a correlation between brain size and the cognitive ability to maintain social relationships. Dunbar says that the limit “imposed by neocortical processing capacity is on number of individuals with whom a stable inter-personal relationship can be maintained” and the number lies between 100 to 250, with a more commonly used value of 150. The implication of the research is that no matter how efficient the firm becomes, there is a cognitive restriction on the number of clients an adviser can manage.
Challenges of working with too many clients
If the abovementioned problems seem familiar to you, chances are that you have way too many clients beyond your capacity. When you try to serve too many clients, something will suffer – likely the quality of your client experience or your sanity. A more insidious drawback of committing to too many clients is the inhibition of your ability to grow. It is not uncommon for you to think that the more clients you take on, the better you’ll be at your job. Because, a 100% of your time is to manage client relationships, right? Wrong! Mapping out your client’s financial goals and sourcing out recommendations for them demand a whole lot of your time too.
Ensure that your efficiency is at its maximum
Know your capacity (in hours)
How many hours do you allocate to managing clients per week?
Fill your calendar up according to those allocated hours, and you will have an estimate number of clients you can manage. Be sure to include time for activities other than managing clients, in order for you to build and grow your business. Reframe your tasks and responsibilities before slotting in appointments into your calendar.
Know the amount of effort you invest in each client
To manage client expectations, you need to be mindful of the expectations gap – the gap between what the client was sold and what is actually being delivered. The effort you personally invest in your clients has a substantial impact on your capacity. The amount of effort required by you is dependent on the expectations of your clients and the extent of your communications. You can track the time and effort invested in each client by taking note of the following:
Once you understand the extent of your commitments to your clients, you can take the appropriate steps to change your situation if you have undertaken more clients than your capacity will allow. Think of adding resources, delegating more effectively, or reducing frequency of contact. In reality, the exact capacity of an individual planner will vary. It is essential to note that Dunbar’s limit seems to apply to the total number of relationships we can maintain – it does not only refer to clients. Each adviser will have to balance his or her personal and professional relationships.
The takeaway is that advisory firms and advisers ought to realise that even as technology helps us to get more efficient, there appears to be limits to the number of social relationships anyone can maintain. To ignore this threshold and try to grow your client pool beyond the saturation point might create a scenario where not all your clients receive the same depth of client relationship.