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.
“Dunbar’s number is a suggested cognitive limit to the number of people with whom one can maintain stable social relationships—relationships in which an individual knows who each person is and how each person relates to every other person.”
Dunbar’s theory was first proposed 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 primates ability to recall human interactions.
Great advisers have excellent file notes, great data in CRM’s and 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.
*Note – the quoted figure of 148 from our research this was the average – 21% 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+). We know firms that are delivering excellent service to 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 qualified 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 >70% 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.
If you agree, and you’re wanting to achieve this goal and more, you should join other like-minded advice firms in our Growth Alliance… where you’ll get all the assistance, motivation and accountability you need to take your business to where you want to go, check us out and book a Strategy Call here.
This article was first published in Professional Planner Magazine on 22 July 2024.