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Building the Business 101: Assessing Your Clients' Value

How to determine a client's value to your practice.

Veena A. Kutler and Annette F. Simon, 04/26/2007

This monthly series of articles describe the many steps and occasional missteps we have taken in building our financial advisory business, Garnet Group LLC. Currently, Garnet has eight staff members, more than 90 clients, $300 million in client net worth under advisement, and offices in Bethesda, Md., and Boston. Veena Kutler, CFA, and Annette Simon, CFP, are the principals managing the Garnet office in Bethesda.

In our previous column, we discussed client categories and described our process of classifying our clients into five broad categories: busy professionals, retirees, legacy families, business owners, and young families. As we explained, defining categories provided insight about why our clients were coming to us and helped us to target future growth by focusing our marketing efforts on three of the five categories.

In this article, we will continue with a discussion of client assessments and the value that each client relationship brings to our practice. 

The Garnet Client Assessment
Our two offices serve more than 90 clients, and we appreciate every relationship. But quite honestly, we are quants at heart and feel compelled to understand the unique and relative value each client contributes to our practice. We recognize that value goes well beyond revenues or even pure profitability. In our view, value encompasses other factors, including the difficulty or ease of the relationship, the quality of interactions between the client and our staff members, and the client's ability and willingness to refer additional business to Garnet.

Does client assessment make a tangible difference in our practice? We believe so for two reasons:

  1. While our goal is to provide superior service to all clients, some clients are true friends to our business and we want to recognize that.
  2. By identifying clients who seem to be an extraordinary fit with our practice, we learn how we should target our marketing efforts to acquire similarly outstanding clients.

Does Client Assessment Turn People into Numbers?
Our approach to wealth management has always been holistic; from day one, we see and treat our clients as individuals and not as numbers or accounts. As we began our client assessment, we had to ask ourselves whether we were in danger of losing that client-focused mindset.

As we began fleshing out the criteria, however, it became clear that they were based on factors well beyond asset value or fees paid. We were seeking to build a profitable client base we can enjoy working with, one that would help to keep our staff happy and willing to stay in the business for many years.

After much discussion, we came up with the following criteria for rating our clients:

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