1.     Your client who starts with little might come into a larger sum of money and continue to trust you with their affairs.

2.     It’s never a bad deal to keep a small account owner happy for the sake of maintaining a good name.

  • In 2015, referrals provided 75 percent of new assets for RIAs.

  • 52 percent of advisors expect referrals from existing clients to be their top driver of growth in the next 5 years, more than any other factor according to a 2016 RIA Trend Report.

And there are a lot more small accounts available in the marketplace and far fewer advisors willing to manage these accounts. A study by PriceMetrix revealed the average Revenue on Assets (RoA) was highest for small households, suggesting there’s a lot of money to be made on small accounts.

The key is being able to manage small accounts just as efficiently and cost-effectively as larger ones.

Four Keys To Managing Small Accounts

1. Cover costs up front. Termination rates can be higher for smaller accounts. Often in these cases, investors who have less experience or room for risk are less willing to wait through a long-term strategy’s development. Consider creating a higher setup fee and offsetting it with lower fees down the road to secure your income and incentivize your clients to stay. Be clear and consistent when communicating with clients about your pricing philosophy. You may also want to pursue an asset-based pricing platform that avoids ticket charges on trades, which can erode smaller accounts.

2. Set a minimum. Advisors managing small accounts typically set a minimum of around $5K-$10K per strategy. This is so the account can accommodate a diversified strategy. If the account is too small, assets can’t always be allocated to all components of the model.

3. Boost efficiency with the right technology. Using a model-based trading platform enables you to make decisions at the model level, not the individual account level. This means trading and rebalancing each account—regardless of size—shouldn’t take up more of your staff’s time. A model management approach also helps you get the best prices by trading at the omnibus level (all account-level trades can get aggregated into one model-level block trade).