Client minimums at a small RIA: setting one, applying it fairly, and recording the exceptions
A client minimum is the smallest relationship, usually measured in household assets or annual fee, that a firm takes on. A small RIA should set one in writing, make sure its brochure and website describe it the same way, apply it at the household level, decide how it treats existing clients below it, and record every exception with the reason and who approved it. Review the exceptions once a year.
Many small firms say they have a minimum. Fewer can say how many clients are below it, or why. The founder's first clients, a friend's children, a client whose account shrank after a large withdrawal: each exception made sense when it was made. Five years on, a fifth of the client list is below the minimum and nobody decided that on purpose.
How should a minimum be set?
| Decision | Common choice |
|---|---|
| What it's measured on | Household assets, or a minimum annual fee |
| Level | Based on the work a typical client needs, not just a round number |
| Applies to | The household, with all its accounts counted together |
| Where it's written | Your procedures, and described consistently in your brochure and website |
| Exceptions | Allowed, with a reason and approval recorded |
How do you handle exceptions?
- Record each one on the client's record: the reason, who approved it, and the date.
- Common reasons: family of an existing client, staff and their families, a legacy client, a client expected to grow.
- Note whether a different fee applies, and record that too.
- Review all exceptions once a year.
What about clients who fall below it later?
Values fall and clients withdraw money. Decide a policy in advance: many firms keep existing clients unless the relationship is no longer workable, and say so in their procedures. If you decide to part ways, follow your agreement and give proper notice.
A worked example
Take a hypothetical two-person RIA with a household minimum. In its annual review, the operations lead lists every household below it: 14 of 70. Nine have a recorded reason, mostly family of larger clients. Five don't. The advisor reviews those five: three are kept as legacy clients with the reason now written down, one is moved to the firm's minimum annual fee with notice under the agreement, and one, who rarely engages, is helped to find a better-suited service. The brochure description is checked and matches.
What are the common gaps?
- A minimum on the website that the client list doesn't reflect.
- Exceptions with no recorded reason.
- Applying the minimum per account when the brochure says per household.
- No policy for clients who fall below it later.
When is this overkill?
If you don't have a minimum, you don't need the routine. If you do, a yearly check keeps it honest.
How Advorra fits
Advorra keeps clients and households with their accounts together, and billing with exclusions on each account, so you can see household totals and the billing set-up for each relationship in one place. See the product page, or read about negotiated fees and exceptions and ending a client relationship.
One thing to do this week: count how many of your households are below your stated minimum.
An operations guide, not legal or compliance advice.
Questions advisors ask
Do we have to disclose a minimum?
Firms commonly describe minimum account sizes and any exceptions in their brochure. Make sure what you say matches what you do; your compliance consultant can help with the wording.
Should the minimum apply per account or per household?
Most small firms apply it per household, so a family's accounts count together.
What about existing clients below the minimum?
Decide a policy: keep them as they are, move them to a different fee, or help them find a better fit over time. Record what you decide for each.
Who should approve exceptions?
The owner or lead advisor, with a short reason recorded each time.
Is this compliance advice?
No. It is an operations guide.
See it on a demo firm
Advorra is practice software for independent RIAs: clients, models, IPS, billing and compliance records in one place, on top of the custodian you already use. Built by The CollabHub.
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