The popular ways of dealing with less profitable C and D clients are to bundle them up and sell them to someone else or to raise your annual fees. But in the future, advisers may increasingly use technological solutions to boost their efficiencies and reform the price of advice.

That’s the view of Paul Harding-Davis, general manager of Brisbane-based AdviceIQ, who is also an advocate for superannuation funds providing limited advice to Australians with lower balances to invest.

He says many advisers have over the years accumulated, say, 200, 300 or 400 clients. “That’s very difficult to service well and meet all the current requirements, so they need to either find a way to increase resources or sell the C and D clients.”

He believes firms need to have a minimum annual fee that ensures that ensures they can run their business on a healthy margin. If clients aren’t willing to pay it, he says you have a discussion with them and part ways (if there’s no strategic long-term reason to keep them).

Harding-Davis says practices may find some technological solutions that will dramatically increase their efficiencies and ability to service less profitable clients in the future. But he says: “Realistically, there’s not a lot of that around yet. In this country, some people are getting closer to achieving breakthroughs. However, we are yet to see it really transforming the price of advice.”

Jenny Brown, CEO and founder of Melbourne-based JBS Financial Strategists, says generally, her company’s C and D category of clients are those who are not engaged, are low fee-paying or aren’t prepared to pay their fees.

Questions Brown’s practice will ask to evaluate a client include whether they refer new clients to the practice, are they great to work with or is the practice always chasing them to return paperwork and the like.

“Often a change of adviser or practice can turn a C or D client into an A or B client. Every adviser or practice has a different definition of what the category is,” she says.

Brown says potential clients referred to her business are asked a lot of questions in the initial conversation. “We also offer an initial meeting via zoom/teams and spend 60-90 minutes with them ensuring they are the right type of client for us at that point,” she says.

“We ensure they have sufficient wealth or cashflow to be an ideal client within a couple of years and drill down into what we provide in terms of service, how we work and the fees we charge.