Early in a firm's life cycle, a founder might take on nearly any client (and their fees) just to generate enough revenue to 'keep the lights on'. However, as the firm grows, some of those early clients may no longer be profitable to serve – especially if they generate lower fees than newly onboarded clients. Which leaves the firm founder faced with a difficult decision: Should they continue serving these unprofitable (or less-profitable) clients or 'graduate' them to a different service model?

In this guest post, Tim Goodwin, founder of Goodwin Investment Advisory, shares how his firm approached this challenge. He explains how they identified which clients were no longer profitable, developed an alternative service model to offer these clients, mentally prepared for the transition, and effectively communicated the changes.

Tim's first step was calculating the cost to serve different client segments – grouping clients with similar complexity levels and analyzing both direct costs (e.g., staff time, technology, and custodial fees) and indirect costs (e.g., rent, marketing, and training). These expenses were then divided across each segment, providing a clear view of which clients were paying below the true cost of service.

While many firms may continue serving a certain number of unprofitable clients (such as friends or family members of the advisory team), too many can strain firm resources. These clients require higher-paying clients to 'subsidize' their services and can negatively impact profitability – particularly during market downturns when AUM-based revenues decline. Yet, while it might seem logical to let go of unprofitable clients, in reality, doing so can be emotionally challenging. Many advisors often feel a deep sense of loyalty toward longtime clients who supported the firm in its early days, and the idea of ending those relationships can feel personal – more than just a business decision that might be financially necessary.

To address these various challenges, Tim's firm designed a new service pathway rather than outright 'firing' its unprofitable clients. Clients were given the option to either stay with the firm by paying the firm's new minimum fee ($1,000 per quarter), transition to an on-demand hourly service model that allowed them to make the choice to stay with the firm and opt for the model that best fit their service needs, or leave the firm altogether on their own volition. Importantly, the firm communicated these changes with care to ensure a smooth transition – reaching out via personal phone calls rather than less personal emails. As a result, many clients expressed gratitude for being given a graceful way to either move forward with or leave the firm, appreciating the respect and transparency shown throughout the process. At the same time, the firm saw its profit margin rise from 7% to 23% over the course of two years!

Ultimately, the key point is that refining a firm's client base – while aligning service models with long-term sustainability – can benefit both advisors and clients. With a thoughtful and empathetic transition process, firms can benefit from more engaged client relationships, more manageable workloads, and a thriving, profitable business!

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In order to deliver the best service to their clients, financial advisors often take on responsibilities beyond giving financial advice, including compliance, marketing, team management, and other operational duties. With only so many hours in a day and demands coming from every direction, it can be challenging to prioritize the most important things for growing an advisory firm. As a result, advisors can find themselves busy all day, month, or even year without making meaningful progress on their most important goals.

A key challenge in regaining control of time is identifying exactly where the time is going. Job responsibilities often shift as firms grow and scale, with new tasks added faster than they are delegated, automated, or eliminated. Over time, this can easily lead to overwhelm – or, eventually, even burnout. While this risk can be prevalent in any role, founders and lead advisors may be particularly susceptible due to the sheer number of responsibilities they manage.

To regain control, advisors can begin by tracking their time with various software tools such as Toggl or Harvest. Many of these tools are easy to integrate into daily workflows, requiring minimal effort to log and categorize tasks. Simply recording hours worked and categorizing tasks can help advisors get a clear picture of the total hours they're actually working, where the time is going, and how long each task takes. Over time, patterns may emerge, revealing potential opportunities to reduce inefficiencies such as task-switching and interruptions of deep work periods. Additionally, time-tracking can provide valuable qualitative insights, such as identifying which weeks felt energizing versus overwhelming – and why.

For advisors who tag and categorize their work effectively, time-tracking can yield even deeper insights. For example, they might discover they are spending significantly more time on administrative tasks than expected, suggesting a need for support staff or automation. Comparing activities against benchmarking studies (such as the Kitces Research on Advisor Productivity) can reveal additional areas for improvement. Advisors can also gain further insight using tools like the DRIP matrix (Delegate, Replace, Invest, Produce) to categorize tasks based on their energy requirements and revenue potential, helping to identify which activities to delegate, eliminate, or prioritize. This structured approach provides clarity on which tasks are most energizing and income-producing – and which are not – helping advisors realign their efforts for greater productivity and satisfaction.

Regaining control of one's time is not a quick process. The difference between a productive advisor and one who is struggling often comes down to making small, incremental changes in how their time is managed. However, by using time-tracking software and staying committed to improvement, advisors can gain clear, actionable insights that lead to significant progress over time. And with a positive attitude and determination, even small adjustments can lead to meaningful results!

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