Running a financial planning practice means really getting to know your clients, as you explore their goals and aspirations and craft a plan to help them get there. Yet as an advisory firm grows, while it may be possible to know all the clients, it becomes increasingly difficult to know all the clients, and how they impact the advisory practice itself. In other words, you may be spending so much time focused on the trees (clients), you begin to lose perspective on the forest (practice) itself.

Accordingly, prudent business management suggests that from time to time, it’s necessary to take a step back, and look at the broad base of clients across the practice. How much revenue does each client generate? How much time does it really take to service them? If you convert the dollars paid and time spent into an hourly rate, do you know which clients pay you the equivalent of $150/hour, or $250/hour, or $500/hour? You may know who your biggest and smaller clients are, but which ones are the most profitable and generate the greatest revenue for each hour of time you spend working for them?

Ultimately, what one does with this information is up to the advisor. Some may view it as an opportunity to improve and refine their practice, refocusing on the ‘best’ clients and culling the worst, or to lift up their minimums to ensure they’re generating a certain amount of revenue for their time, or to hire staff members to delegate less profitable tasks (or segment clients altogether!). Others may choose to do nothing – at least for now – beyond observing the health of their practice. But in the end, time is your most limited and valuable personal resource as an advisor, so it’s crucial to measure and manage how it is being spent!

What Do Clients Really Pay For An Hour Of Your Time?

Most advisors are well aware of who their “biggest” clients are by revenue, but surprisingly few know who their most profitable clients are as a business owner. Especially for firms that have multiples ways to get paid by clients (e.g., hybrid advisors, or those that charge an array of fees for various services that not all clients utilize), or who have multiple staff members who support a particular client (which means there may be a lot of work happening on behalf of the client that the advisor is unaware of!).

Because ultimately the biggest constraint on most advisors is their time, the first key to understanding client profitability is to understand how much time is being spent on each client, relative to the revenue the client pays to the firm. Unfortunately, in practice few advisory firms truly track the amount of time that is spent on each client (in no small part because of the extra time it takes to track time in the first place!). Nonetheless, some estimate of the time burden that each client puts on the practice can be developed, simply based on the quantity of activity that was done for the client.

For instance, if you simply go through the activity that was performed on behalf of each client over the past year, you can assign an estimate of time for each key task:

Task Time
Meeting in the office 2 hours
Meeting out of the office 3 hours
Client phone call with advisor 30 minutes
Client email/response with advisor 15 minutes
Research to answer FP question 1 hour
New financial plan 15 hours
Financial plan update 5 hours
Minor staff service request 30 minutes
Major staff service request 2 hour

Obviously the numbers of the chart above may be adapted slightly based on your habits and work style with clients. And even after some adjustment, the results won’t be perfectly accurate for every client interaction throughout the year. But the goal here isn’t to conduct an impossibly detailed absolutely precise analysis of the time that was spent on each client. Instead, the first step is just to get reasonably close.

For instance, if Client A had 3 meetings (all in office), 1 plan update, 2 phone calls, 2 emails with one question that had to be researched, and 3 service requests (2 major and one minor), the total time for the year was approximately 18 hours. If the client generates $5,000 of revenue for the firm, the client effectively paid the firm $278/hour. By contrast, if less intensive client B had only 1 meeting (at the client’s home), 2 phone calls, 2 emails, and 2 minor service requests, but only pays the firm $2,500/year, client B’s payments actually amount to a whopping $455/hour. In other words, client B may be a much “smaller” client that is half the size of A, but may actually be 50% more profitable! (And even if the estimates from the chart are ‘off’ by an hour or two, the results won’t be substantively different!)

A Deeper Look At Client Profitability

For a solo advisory firm, looking at client revenue/hour essentially is a measure of the profitability of the client, since the only cost to service the client is the advisor’s time. Accordingly, if the advisor’s goal is to generate at least $300/hour for their work, this implies that for Client A there needs to either be an adjustment to the fees being charged, or the advisor needs to find a way to do less time-intensive work with the client, to get the client to the desired level of profitability.

In a practice with additional staff members, though, it’s necessary to not only allocate time per client and tie it to their revenue (to determine the client’s revenue/hour) – it’s also necessary to assign a cost for the time of your staff. For instance, while you might target that your time is worth at least $300/hour, your operations staff time might be targeted at only $50/hour (note: this doesn’t mean you pay your staff $50/hour; this means you’re trying to generate at least $50/hour of revenue for their work so you have a profit as a business owner after you pay them!). If we assume that all service requests are handled by staff, then the actual breakdown of time for clients A and B above are:

Client A Client B
Task Advisor Time Staff Time Advisor Time Staff Time
In-office meetings 6 - 0 -
At-client meetings 0 - 3 -
Plan update 5 - 0 -
Phone calls 1 - 1 -
Emails 0.5 - 0.5 -
Research questions 1 - 0 -
Major service requests - 4 - 0
Minor service requests - 0.5 - 1
Total 13.5 4.5 4.5 1

Accordingly, if the staff member’s time is valued at $50/hour, then the reality is that with client A, there was 4.5 x $50 = $225 of revenue allocable to the staff member, leaving $4,775 of revenue allocable to the advisor’s 13.5 hours, for an advisor revenue of $354/hour. By contrast, client B had 4.5 hours of advisor time and $2,450 of revenue (after subtracting the 1 hour of staff time), resulting in a whopping $544/hour to the advisor.

Viewed in this manner, the reality is that client A may still be reasonably profitable for the advisor (bear in mind these are gross revenue/client estimates, and don’t include any of the other costs to run the business either!), but the situation highlights the importance that the advisor continues to ensure as many service requests as possible can be fielded by staff.

Managing To Client Profitability

Notably, the example above also illustrates the value of having a deeper support team for the advisor. For instance, imagine the advisor has hired an associate planner, whose time is valued at $100/hour, and who can handle the financial plan update work being done for client A, along with researching related financial planning questions. In this scenario, the operations staff handles 4.5 hours of work at $50/hour, the associate planner handles 6 hours of plan update and FP research work at $100/hour, and the remaining 7.5 hours with the client is allocable to the advisor, now exclusively tied to meetings, phone calls, and email correspondence with the client. The end point: now the revenue tied to the advisor’s 7.5 hours is $4,175, for a revenue/hour of $557. In other words, by hiring an associate planner to handle some of the work so the advisor can focus on the most profitable tasks, client A is now as profitable for the advisor’s time as client B!

More generally, this example also highlights the value of delegating work to staff members, so the advisor can focus on his/her highest, best, most profitable tasks. Not only is the advisor now effectively generating more revenue per hour being spent with client A – in line with client B – but also has freed up 6 hours of capacity to take on another client that may potentially be worth another $500/hour. In other words, one of the most straightforward paths to greater profitability for advisors is simply to do everything possible to ensure the advisor is delegating $50/hour tasks and only working on $300/hour (or $400/hour or $500/hour) duties, trying over time to both free up more hours to work with clients at that price point, and to raise the price point that clients pay.

Similarly, such an exercise also can help to highlight clients who are especially profitable – or especially unprofitable – for the firm, as well as clients who perhaps should be ‘segmented’ out to a different service model. For instance, a client that generates ‘only’ $200/hour undermines the profitability of the lead advisor, but improves the profitability of the ($100/hour) associate planner, and becomes a prime client to be transitioned to the associate! That could be a “smaller” client who requires limited time and generates limited revenue, or alternatively might be a much “larger” client who pays a larger fee but requires so much time the client is still actually less profitable for the lead advisor!

The key outcome: clients can be segmented not by which are “bigger” or “smaller” clients, but simply by appropriately matching the fees the client pays, the time it takes to service the client, and a staff member for whom servicing that client can/will be profitable for the business. In other words, consider determining best and worst (or your “A/B/C”) clients not by the total revenue they pay each year, but the revenue/hour the advisor generates while working with them!

Using Your CRM As A Practice Management Tool

Of course, the caveat to all of this is that it starts first with knowing how much time is being spent on each client performing various tasks, or at a minimum the sheer amount of tasks being done (so that they can be applied under the grid noted earlier). So how does all of this get tracked? Ideally, in the advisor’s CRM software!

In point of fact, many advisory firms already track this kind of activity in their CRM – not for the purposes of determining time spent per client, but simply to document the work being done for clients for compliance purposes (or in the case of a firm with multiple staff members, simply so that everyone knows what the other people are doing for that client). Nonetheless, the reality is that once the information is being captured in the CRM, there’s an opportunity to extract information about the work being done for and on behalf of clients, to get a better understanding of how much revenue really is – or isn’t – being generated by each client, and whether the work being done is commensurate with the fees being paid, and the staff/team member doing the work.

Accordingly, the reality is that CRM software shouldn’t just be viewed as a compliance or “CYA” tool; it is actually a powerful practice management tool, when used as such. Some CRM solutions go so far as to actually have time-tracking tools built in to more accurately track the time being spent by the team on various clients, but absent that feature, it’s still possible to get some understanding by simply generating a report of the activity occurring on behalf of clients, and “scoring” it accordingly using the aforementioned grid (if you don’t know how to get a report from your CRM that details the activity being done on behalf of your clients, figure out how, assign a staff member to do so, or get a consultant or the CRM’s own support team to help!).

The bottom line, though, is simply this: as an advisor, time is your most valuable and limited resource. So it’s absolutely crucial to know how much time you’re spending with your clients, what they’re really paying you per your unit of time, whether the work being done for clients is being allocated appropriately amongst your team, and whether it’s time to change the fees you charge particular clients or to delegate/re-assign/segment the work being doing for them. Of course, as an advisor – and especially if you’re the business owner – you always have the choice to continue to do work with “less profitable” clients, for any number of personal reasons. But if you aren’t at least measuring the profitability of your clients for you, it’s impossible to make an educated management decision.

So what do you think? Have you ever tried to measure the revenue and time you spend with your clients, to estimate your revenue/hour for each client relationship? How do you value your time? Are you maximizing the time you spend on your highest-value work with clients? What were the results when you went through your own client base to determine your revenue/hour with each client?

  • James Werner

    We have done this exercise in the past and continue to do so. I don’t think it has as much value in determining the most valuable clients as profitability varies from year to year. It does unquestionably point out the least valuable/profitable accounts. The greatest benefit to our firm is that the calculation necessitates that we get input from staff regarding time commitments to clients. Often times clients that advisors perceived as most valuable were much less so when taking staff time into consideration. Clients that required more advisor time were sometimes perceived as less valuable until we factored in the lack of requests made on the staff from these clients.

    Even an exercise as simple as naming the top 10% of clients in the firm has yielded vastly different results from planner to staff.

    One interesting caveat.. Clients that heavily utilized staff tend to still be less profitable, but are also less advisor dependent and more likely to bring value to a potential buyer. Every three years or so, we do a simulated sale, where we look at the clients and guage likelihood of transitioning. Our less “profitable” clients tend to score very highly on this measure. I wonder if other advisors are seeing similar trends?

  • Jim Stackpool

    When determining profits and pricing for services firms using the cost of delivering a service is usually not as effective as using the value of delivering a service The thinking that once costs of services are known then pricing is known and then value is known can be reversed to firstly determine the value then pricing then costs. Here the value is largely intangible.

  • Coach Maria Marsala

    It “pays” to have a team, not only for the time and monetary saving directly related to the FA not doing certain tasks, but also because happy team members, of any title, become your best sales force in the community.

    I’m with Jim, I actually have something on my website about the cost of my services is not determined “by the hour” — but by the value provided to my clients personally and professionally.

    IMO, it’s also important to segment a client base on “some” sort of parameters with the FA having more 1:1 time with the AAA clients.

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  • Kurt Thoennessen

    This is a great discussion Michael. I am a property and casualty insurance advisor and we look at the same metrics you are speaking about with our client base. We have actually segmented our client base and developed different business strategies for each segment. So far the plan is working and we are seeing great results in our targeted niche, which is personal insurance for affluent individuals. Your other comment about using CRM is huge and we focus a lot of energy in this area. There are so many tasks in our businesses that can be automated with CRM software, it just takes time to think through the workflows and actually implement them. This is something I am very passionate about since I know that when I spend time cultivating highly profitable relationship amazing results will follow. Thanks again.

  • fifocoralMartin

    Great informative article,i agree with the tips and tricks to maximize profits through managing clients with the above mentioned ways

  • Meredith

    Can you recommend which CRM that makes it easy to track amount if time spent on tasks for each client?

    • Michael Kitces


      I believe Junxure CRM has some of this functionality built in (see ). I’m not certain offhand which other CRM platforms do as well.

      Another option would be to use a more generalized time tracking software and simply add a field to your CRM to record it.
      – Michael

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Michael E. Kitces

I write about financial planning strategies and practice management ideas, and have created several businesses to help people implement them.

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