Mark Lewin (left), Jenny Brown and Cameron McLean

An ideal financial planning client has between $2 million and $8 million to invest, is happy to pay substantial annual fees, takes advice, turns up to annual reviews and is a pleasure to deal with, according to Back Office Hero principal Mark Lewin.

These clients should produce an average profit margin each of $7000 based on them paying fees of between $8000 and $35,000 a year and will be likely to happily refer new clients to the firm, he tells Professional Planner.

The former Markson Financial Planning owner arrived at these profitable parameters over 25 years, selling “B and C-grade clients” in his practice to “someone who could love them more”.

He recently sold his 122-client business to the highest bidder based on these disciplined parameters and an efficient back office and now consults to other planners to improve the profitability of their businesses, he says.

Lewin said planners should “be turning away 60 per cent” of potential clients because they were unlikely to meet the above criteria.

“I sacked my brother as a client because he didn’t come to an annual review,’’ Lewin says.

“A businessman has to run that business profitably, running a tight ship and have rules. [Not making an appointment] was a waste of time for back-office staff.’’

Lewin says if a client relationship sours causing staff to leave, it was okay to sack the client

“It’s in the best interest of our clients that we do have happy staff and we all have time to get to know our existing clients,’’ he says.

Perth-based Acumen Wealth Management senior adviser Cameron McLean says his firm did turn away about one in five potential clients because the fees outweighed the benefits of the financial advice for them.

“We have to make sure that the client can afford it and that we have to show that they are going to get value for money,’’ he says.

A client with about $100,000 in superannuation, $200,000 in home equity and at least $100,000 in annual income was likely to benefit from advice and be a profitable client, he adds.

Rising business and compliance costs prompted Acumen to remove a flat $3000 a year fee or one per cent of their balance a few years ago which had “taken a lot (of clients) off the books” as a result.

“We dropped the volume of clients as it was more profitable for us to have fewer clients and increase the cost but would provide more focus,’’ he says.