While it would seem too good to be true, some financial advisers find themselves with so many eager new clients that their firm does not have the capacity to bring them on board right away.
Carolyn McClanahan of Life Planning Partners said she recently had new clients on a waiting list for a year until she made the difficult decision to boost her annual minimum fee to $10,000 from $5,000 for new clients. That slowed down the growing list some. Now it's about a three-month wait.
“We are telling clients to please slow down on the referrals,” said Ms. McClanahan, who is the director of
financial planning at the Jacksonville, Fla.-based firm. “We want to make sure we're doing a great job for current clients, and it's a lot of work to bring on a new client.”
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Firms that find themselves in this tricky, and most would say envious, position of a client onboarding backlog must decide whether to become more selective about the clients they accept or add more advisers or support staff to handle the overcapacity.
In addition to increasing her fees, Ms. McClanahan is now planning to hire another part-time person to help with office work, as well as adding a fourth adviser to the practice. Her firm provides high-touch financial life planning services to about 82 families, and continues to add one to two clients per month.
Adviser David Demming said his firm, Demming Financial Services Corp. in Aurora, Ohio, has had delays in adding new clients for years.
“We have to tell clients to get in line, you'll have to wait,” he said. “And they do.”
His firm does not impose a minimum fee for clients — and doesn't plan to do so — even though he said he knows it adds to the inefficiencies of the firm.
“If a client is referring her grandkids, I don't want to tell them to go away,” Mr. Demming said. “That's who will end up with the money anyway.”
His firm has four full-time advisers and soon it will be five, he said. The firm serves 650 families, adding 35 to 50 new clients a year, and a majority of the clients are served by Mr. Demming himself, who meets with clients six days a week and workday evenings.
Having so many clients to onboard and serve has created other issues at Demming Financial Services, such as delaying improvement projects.
For instance, the firm's been paying for eMoney financial planning software for a year and no one has had time to implement it, Mr. Demming said.
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Sometimes advisers are surprised by a sudden rush through their doors.
Abacus Planning Group recently had to stop onboarding new clients after an influx of 10 in three months overtook their capacity. Cheryl Holland, president of the Columbus, S.C.-based advisory firm, said she worried about potentially compromising the quality and timeliness of advice to existing clients if she didn't “put up a gate” for now.
Nearly every potential client appreciates that existing clients come first, and they want to join a firm with that philosophy, she said.
“I am never clear if having a waiting list is poor planning on our part or just the nature of the lumpiness of new business,” Ms. Holland said.
One thing the firm has done to help smooth out the onboarding process is to hire a “first-year coordinator” who works with support advisers to help the financial adviser create the content and analysis for the first six meetings with a new client. It has doubled the firm's in-take capacity, she said.
At times, a crush of clients can even lead advisers to rethink their entire practice.
Neil Maxwell, founder of Maxwell Wealth Planning in Parker, Colo., said he used to be in the situation of having a giant client backlog. At that time, he served 350 households with just one full-time assistant.
“I decided that it wasn't possible to add value to that many clients, and so now I serve 19 high-net-worth clients,” he said. “It's freeing and I recommend it.”
