How small a client is too small for financial planning?

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When it comes to building a personal financial planning or wealth management practice, many practice management consultants suggest serving primarily wealthy clients.

The rationale is that the more complicated the client’s financial life, the more they may need someone to help guide the family through the maze of economies, laws and generations. As you know if you are a regular reader of this column, I concur. But not all practitioners have wealthy, complicated clients. That leaves two questions: How do practitioners either build a PFP business around a smaller and middle-market client base, or how does a firm with a diverse clientele build a service model to include all clients?

It may be best to start this issue for firms with a diverse clientele, as the solution may have some overlap for the firms with a predominantly smaller clientele. A firm that is planning to serve a wide array of clients, from small and simple to large and complex, should have well-developed service models. These service models should be built in such a way that the scope of work meets the clients’ needs and desires for all size clients. These engagements should be priced so that the work is equally or more profitable than other services provided to the client.

A service model for a high-end client may include a detailed list of services as outlined in the American Institute of CPAs’ PFP Service Guide, delivered in a proactive and holistic manner. Additionally, it should be proactive in that the advisor doesn’t sit around and wait for the client to tell them when things change. The proactive advisor makes sure that the full checklist of items to review are indeed reviewed as needed.

For example, the high-net-worth client will appreciate your independent review of the renewals for all of the family’s property and casualty coverage. In most cases, the agent doesn’t bother to review the new policies with their clients and you know that most clients simply look at the package to see how much the premium has risen. They then pay the bill and stuff the renewal in a folder that they may or may not find when you ask them for it. An independent review of each new policy may prevent a lapse of some coverage or a change in benefits that your client may have misunderstood in a quest to save a few premium dollars.

Even though you may build out a few service models, that doesn’t mean that your clients will flock to the services that best fit their situation. Some are content with their current relationships (whether they should be or not) and some may want to do their own planning where they will eventually find out what they didn’t know the hard way. As we’ve said in many columns before this one, you also need a marketing and communications plan that will keep these services front-of-mind for your clients. Have the conversations with each client when you are engaged on other matters to see how you may be of greater service and create a tasteful, regular newsletter or something else of interest to your client base just to keep you front-of-mind.


The bigger question is whether it is wise to build multiple service models for varying client needs. That is a decision that needs to be made firm by firm, based on the firm’s existing clientele and the demographic that the firm seems to serve best.

My answer may surprise you in that I say yes. Even if you choose to build an exclusively high-net-worth client base, you still need to be able to serve simpler clients. Perhaps it will never become a focus or niche market of yours, but it is helpful to your high-net-worth clients. I’ve found over the years that high-net-worth clients like the idea of their children, parents and siblings getting their financial house in order. Our service model, while dedicated to high-net-worth clients, included a mantra that if it is important to our clients, then it is important to us. If our client wants us to talk to their child about their 401(k) or their employee benefit choices, it is our pleasure to do so.

In fact, family is so important to our typical high-net-worth client that we now proactively seek out ways to simplify and help the financial lives of anyone that is important to our best clients. To that end, a service model to efficiently serve simpler clients becomes important. In our case, these engagements do realize less revenue-per-hour ratio than our traditional high-net-worth client, but we feel it is significant to the overall health of the high-net-worth client relationship and the beginning of intergenerational planning.

In the case of working with our high-net-worth clients’ children, we typically meet them as a part of a family meeting that we frequently suggest. At this meeting, we talk generically about what we do for the family and what their roles may be in the financial lives or estate plans of their parents. Some clients want a detailed review for their children, and others want a cursory overview of the parents’ situation and the contingency plan for illness or death. In all cases we will address the children’s roles in the parents’ estate plans. This, if it has not already happened, often begins the relationship with that next generation. We ask what they’ve done for themselves for estate or contingency plans, and that alone usually starts the conversation.

From there, we do frequently roll out proactive and holistic financial planning, even though it may be overkill at this stage of their lives. Albeit much simpler than their parents, we believe that this is a great time for them to learn and to get their financial house in order and keep it that way forever. This engagement will become the foundation for completely understanding their parents’ situation now, and in the future as situations change.


The firm with a client profile that is clearly less complicated can profitably offer financial services — but maybe not proactive and holistic financial planning services. When you look at the PFP Service Guide, you’ll see that the time commitment for a smaller client is still rather substantial. That doesn’t mean that your clients do not need the services, but it may mean that they don’t want to pay much for them. Some will and some won’t.

One of the things that would keep me up at night is the question of who you are, in the eyes of your client. If your client feels that you are their financial planner, then you may be held to the standard of care as defined by the Certified Financial Planning Board. To make sure that there is no misunderstanding regarding the nature and extent of your services, use specific, tailored engagement letters that spell out what services you are providing.

What may be more of a hit with smaller clients are segmented planning services where the scope of your planning engagement is limited to a specific topic, such as estate planning or an investment review. Personally, I have a hard time with these types of engagements as I can’t control my desire to review and advise on all of the ancillary issues that we would discover in the course of a segmented engagement.

Structuring compensation is also a tricky topic. In light of the fiduciary rule that will someday appear as enforceable law (one way or another) and the fiduciary requirements of the various licensing boards, you need to structure compensation in such a way that it is fair to your clients, disclosable, and in their best interests. Most CPA financial planners are hardwired that way, but there are still brokers out there calling themselves advisors and selling investment vehicles for a commission. That in and of itself is not a sin, but allowing a client to think that they are receiving financial planning services when they are not could be problematic for you.

A simple example could be this: A small firm suggests that a client open an IRA with a specific investment company in exchange for a commission. The broker advisor blows the beneficiary election and the client’s heirs complain that their tax bill was far greater than it should be because their dad’s financial planner didn’t do their job in planning for beneficiary elections.

Just this week I saw a case where a trust was named as the contingent beneficiary. The trust, unfortunately, would have caused immediate taxation of the proceeds to the beneficiaries based on the language within. Issues like this can arise where there is a mismatch of the services you are providing and the services that a client thinks they are getting from you.

Again, the final word of caution for practitioners with smaller clients is clarity. Be clear about the services you are delivering. Use engagement letters, and in some cases I’d even ask those clients who refuse to engage with you for proactive and holistic planning services to sign a disclaimer, acknowledging that you are not their financial planner and that you have been engaged to assist on certain specific matters only.

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Wealth management Financial planning Client strategies High net worth