The 3 Layers of Clients


Amar Pandit
A respected entrepreneur with 25+ years of Experience, Amar Pandit is the Founder of several companies that are making a Happy difference in the lives of people. He is currently the Founder of Happyness Factory, a world-class online investment & goal-based financial planning platform through which he aims to help every Indian family save and invest wisely. He is very passionate about spreading financial literacy and is the author of 4 bestselling books (+ 2 more to release in 2020), 8 Sketch Books, Board Game and 700 + columns.

August 6, 2021 | 3 Minute Read
There are 3 broad layers of clients in our profession according to Dennis Moseley Williams.Â
The first layer comprises people who want something special and will invest more time and money. The middle layer is where people want something unique. The third layer is the one that is focused on costs.
Most US Wealth Firms (including solo RIAs) focused on the first layer. This also meant that every client had a certain account minimum for a certain level of service. They have fewer clients, a high AUM per client household and thus a decent revenue per client.Â
Indian distributors and advisors on the other hand have a portfolio of clients with 10-20% in the first layer, 10-20% in the middle layer and 60-80% in the base layer.
They have too many clients, a low AUM per client household and a low revenue per client. In most cases the top 10-20% of the clients subsidize the base layer clients. Too many clients mean increased costs, inability to give personalized attention to everyone (most of the time is taken by the base layer clients) and many clients who are not happy with the overall service.Â
The client portfolio is completely skewed towards the base layer of clients. A rebalance of this portfolio is the need of the hour.
A few points to ponder. Â
- The best firms have the attention of the first layer clients.
- The value of your firm is dependent on whose attention you have.
- If you need to operate in the base layer, you need huge volumes to make this work else your best clients will subsidize them. The key part to remember here is that no one has yet figured out how to work with the base layer profitably (despite spending billions of dollars to acquire users and customers). Needless to say, operating in this space will require huge investments in people, processes, and technology.Â
- The value for most firms lies in the first and middle layer.
What does your client portfolio look like?
Where do you want to operate?
Similar Post
Nano Learning
A Powerful Lesson
Morgan Housel wrote about an insightful exchange regarding Costco founder Jim Sinegal. When podcaster David Senra asked Charlie Munger why Sinegal rarely gave speeches or interview ....Read More
31 January, 2025 | 2 Minute Read
Nano Learning
The Similarity between Horses and Excel
Henry Ford once said that if I had asked consumers what they need, they would say Faster Horses. However, the reality was that they needed cars. Fast forward today in our industry ....Read More
29 May, 2020 | 1 Minute Read
Nano Learning
The Core Experience
I recently heard someone say in the context of the restaurant industry, “Client service on its own doesn’t drive organic growth if the food or the core experience is not good.â ....Read More
12 July, 2024 | 2 Minute Read
Nano Learning
The Perfect Moment
Have you been waiting for the perfect moment to do something important? If you are like the rest of us, chances are you will say ‘Yes’ to this one. The problem is that we keep ....Read More
21 July, 2023 | 1 Minute Read
Nano Learning
The Next 100 Blows
Do you know what this is? It’s such a mind-blowing concept that your life will change if you truly understand this one. Jacob Riss wrote the following lines – “When noth ....Read More
30 December, 2022 | 1 Minute Read
Nano Learning
Common Succession Planning Mistakes
Choosing a successor is one of the most important decisions you’ll ever make. But it’s not just about picking someone who knows the business. It’s about finding someone with ....Read More
24 January, 2025 | 2 Minute Read
- 0
- 0
0 Comments