Requiring Account Minimums is an Obsolete Practice

Through the use of of technology and automation, having account minimums to segment clients is no longer viable and has become obsolete. At SWS Partners, we don’t turn away potential clients because they do not meet an arbitrary minimum account size. We think our emphasis on the use of technology enables us to offer our services to anyone committed to saving for retirement.

What a novel concept, right?!

Saving for retirement

Rather than focusing on account minimums as an entry point to work with our clients, we have instead sought to provide an a la carte menu of services so that clients have control over how they plan for and manage their wealth. Every service is defined and has its own cost so that clients can vividly understand how much they are paying for each service they utilize.

We view the idea of a minimum account balance as arbitrary, but what isn’t arbitrary is financial planning. Unlike many of our competitors, we don’t require a client to be an investment management client before we will provide financial planning. We tell prospective clients that they can be financial planning clients without being investment management clients.

But they cannot be investment management clients without being financial planning clients. We believe that financial advisory firms shouldn’t treat financial planning as the least valuable thing they offer. In some firms, the focus is on the product before the solution because that is how their financial professionals receive compensation. They give the advice away at no charge after someone had agreed to be an investment management client. Let’s face it, allocating your clients’ assets to mutual funds is not investment management. It is asset allocation that, frankly, was only valuable prior to investors being able to do their own research on Google. Point being, transparency, more than any other impact of technology, has become the driving force behind industry change.

In his new book, Paolo Sironi makes the argument that for wealth management firms, it’s “Go Digital or Die.” As Sironi succinctly points out, “Nowadays, the unveiling of the asymmetry of information is forcing wealth managers to rethink their product-driven approach at a time of declining margins and establish a healthier relationship with customers based on clearer client/portfolio-centric methods.” In other words, those wealth management firms that will survive and thrive in this new world of robo-advisors and technology-driven transparency will be the firms who embrace automation in both their investment operations and digital delivery, and not limit client access based on account minimums.