I’ve heard many people quote Dunbar’s number when anchoring to a belief that financial advisers can manage up to 150 relationships.
It may well be the reason why, when participants in our ‘Advice Operations Research Report’ were asked what they felt was the maximum number of ongoing service relationships they could handle per adviser on their current operating model, the average figure quoted came in at 148*.
Malcolm Gladwell raised awareness of Dunbar’s philosophy in his bestselling book The Tipping Point, where he dubbed it the ‘rule of 150’, and I’ve heard more than one trusted industry expert that I respect refer to this rule when discussing adviser capacity. BUT – here’s where the point has been somewhat missed – Dunbar referred to social relationships in this way, not business relationships.
The number was first proposed by British anthropologist Robin Dunbar in the 1990’s, and in fact, was debunked in a 2021 study from Stockholm University that indicates that a cognitive limit on human group sizes cannot be derived in this manner.
Whilst most financial advisers pride themselves on having deep, intimate relationships with their clients – and indeed, the best financial advice can only be given from a deep understanding of both the technical and statistical data of their client and knowledge of their preferences, tolerances, hopes dreams and behaviours – this is not limited by a primate’s ability to recall human interactions.
Great advisers have excellent file notes, great data in customer relationship management (CRM) software, platforms, and workflow management systems where they can automate certain activities for clients. Each time they interact and/or provide advice to a client, they’re able to pull up their portal to refresh their memory on the client’s situation, preferences, advice strategies and previous conversations. Those that have configured their CRM’s and data well can even quickly recall their clients’ values, goals and behaviours in an instant.
(*Author’s note: the quoted figure of 148 from our research this was the average – 21 per cent of participants felt they could handle more than 160 client relationships (on an ongoing agreement) right now, and almost all of those also had some risk-only policy holders (not included in that 160-plus). We know firms that are delivering excellent service to over 200 clients per adviser. One has managed 300 clients for the past nine months, without missing any obligations and without working weekends – albeit they’re in the process of transitioning some to a new adviser. My point is, serving more than 150 clients well is not impossible, and why aspire to be average anyway?)
It’s time we stop limited thinking in advice. We know that there are limited number of professional advisers at least for the foreseeable future while we educate and grow our future leaders… so in the meantime, we need to think differently about how we can increase the capacity of an advice team. We love solving these challenges with advisers. The solutions vary in each firm depending on their starting point, but here are four of the most obvious areas for attention:
- Ensure your business delivers a team-serviced approach. Don’t confine the clients’ interactions to the adviser only – ensure they’re comfortable speaking with other team members for administrative, logistical and relationship discussions.
- Put the infrastructure and habits in place so your licensed advisers only do the things that are restricted to a licensed adviser. File note documentation, strategy modelling, appointment bookings, information follow-ups are but a few of the tasks that firms are reallocating (to onshore staff, offshore staff and technology) to free up time and capacity for their advisers to serve more clients.
- Ensure your business follows consistent processes to complete all client work; optimise these processes to remove as much reliance on the adviser as possible, and automate as much as you can.
- Have a robust investment philosophy that is consistently applied across your client base and use managed accounts to execute it. That’s a bold statement – but we found managed accounts are one of the keys to a high performing firm – when you consistently implement them across over 70 per cent of your client base.
Consider what your current limit of clients per adviser is and start thinking about what you can do to double that figure. The future health of our community’s finances – and your own balance sheet – will be so much greater for it!
I’d argue that done well, utilising a team serviced approach, excellent technology and systems and organisational design, advisers are not limited to 150 clients.
Sue Viskovic heads up Elixir, a specialist consulting division of Vital Business Partners with a team of experienced coaches located around Australia.
Considering that in Australia there are conservatively over one million Businesses and a minimum 12 million Adults who would need help in Wealth Protection and Wealth accumulation / Retirement advice, then based on 150 clients per Adviser, we would need 86,667 Advisers to service this market.
Even at 300 clients per Adviser, we would still need 43,333 Advisers, which begs the question, why are the current upfront and ongoing Education requirements such a turn off for people wanting to come into the Industry, as clearly it has been a total disaster with the supposed “improvements” that were forced upon existing Advisers and new entrants, resulting in a collapse of the experienced Adviser pool and a pittance of new entrants who do not cover a fraction of the continuing exiting Advisers.
A relevant metric would be what number of Advisers are needed to service the market and move in a positive direction to get to that number.
Instead, what Western democracies do now, is play the fiddle while the economy burns.
We have a surplus of ideologists and desk bound theoretical experts, who espouse a perfect world without ever having lived in the REAL world and whose knowledge of what goes on outside their cloistered walls, could fit on a postage stamp.