Vexed question of dealing with C and D clients

Planning practices should not simply acquire C and D client books from other practices if they are looking to expand, according to the managing director of Encore Group, Graham Peaty.

Speaking at the Financial Services Partners symposium in Melbourne, Peaty told the audience that while people around the industry were starting to talk about “flogging off” C and D tier level clients, the value of books with clients of that level were getting “hammered”.

“Certainly we are starting to see book sales emerge, [but] the prices on those are being severely hammered, and in corporate super [they are] worthless. Three times recurring revenue [for the book sales] is going down to two.

“It’s not just about acquiring some C and Ds. I want to acquire them for a reason – [for example] I want to acquire them to look at the market opportunity in that client base, or if you have some new advisers in your practice and you want to seed some clients in for them and get them operative,” Peaty said.

The model of acquiring C and D level clients just to grow your recurring revenue base and not have to provide any active services to those clients was an “old model”, Peaty said.

He also warned planners not to flog off their C and D clients without thought, because “some planners can manage them very well” and are very careful about how they position their services to C and D clients without creating a greater expectation about increased service.