First off, let me make myself abundantly clear. I am an activist for advisers' utilizing account minimums within their business models. My firm utilizes account minimums, and I have often publicly advocated the need for them in your practice. However, during all of the coaching sessions and conference presentations what many may have missed is that every day I am trying to drive down my account minimums.
Recently, four financial advisers joined my colleague Paul West on stage at Excell Fall 2014 in Omaha, Neb., to discuss the topic of account minimums. Two advisers currently had account minimums implemented and two did not. What I walked away with was the reminder account minimums are sometimes only good on paper — and not always good sense for your clients or your business.
BECAUSE PEOPLE MATTER
I became an adviser for similar reason many other advisers did – I wanted to help people. And I am sure Greg Hoffman of Hoffman Financial Resources, is no exception. He runs his practice out of a smaller town in Missouri. After reviewing his business model a few years ago, Mr. Hoffman enacted an account minimum for the first time since opening his practice.
After one year, he removed the account minimum.
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“I was literally sick to my stomach, it's just not me. It's just not in my DNA to tell somebody they are not worthy of our services.” Facing people in the community he had turned away did not make sense to him. “I feel like some of those people need help as much or more than the people with millions and millions of dollars,” Mr. Hoffman shared from the stage. “Because these people come to you trying to do the right thing. They are trying to get the good start. And they are trying to get where they need to go.”
Mr. Hoffman realized that on paper having an account minimum made perfect sense but, in practice, he was losing more than he was gaining.
“The staff-to-client ratio is not what it could be or should be, but this is what works for us.”
PAYING IT FORWARD
It's no secret I am passionate about succession planning in the industry. And any time I speak of account minimums and succession planning in the same conversation it's usually to reiterate my stance that account minimums are a critical component to maintaining a firm's valuation. But Jim Cruzan of Kaydan Wealth Management reminded me that smaller accounts can have their place in a practice and have a big implication on your long-term success and your succession plan.
“I am here today because 31 years ago someone hired me,” said Mr. Cruzan. “I still get a kick out of servicing a small account.”
Mr. Cruzan's firm had a hard account minimum. Like me, he found accepting anything lower would result in the account operating as a loss — and he had employees to pay and a family to provide for. Mr. Cruzan saw a real need in those looking for guidance, “Those folks that haven't accumulated a lot of money are going to face some real serious decisions. And we want to be a part of that conversation,” he said.
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Mr. Cruzan opened a second firm, Green Shoot Financial, with the tag line “Where futures begin.” No account minimums, period. What did he gain from pursuing this business model? An unexpected lifeline.
“It really helps us in terms of training our younger advisers on smaller accounts,” said Mr. Cruzan. “We can give them an opportunity to work with very small accounts. They get skilled in asking questions. They get skilled in knowing that listening to their client is problem solving — and then they move them up the food chain.” Today, Green Shoot Financial is working on building the next generation of millionaires.
Paying it forward works for Mr. Cruzan. Can it work for everyone? Absolutely not.
Does having a second advisory business model with no account minimum work for me? Not today, but that's not saying it may not work in the near future.
Ron Carson is president and CEO of Carson Wealth Management Group
