Client Structure and Concentration: The Risk Hidden in “Good Clients”
Part 3 of the series: What Really Drives the Value of an Advice Business
Most advisers can name their best clients instantly.
They’re loyal.
They’re profitable.
They’ve been around for years.
From the inside, these relationships feel like the backbone of the business. From the outside—particularly from a buyer’s perspective—they can represent a concentration risk that quietly limits value.
In this third article in our series, we look at client structure and concentration, and why a “great client base” doesn’t always translate into a resilient business.
When Strong Relationships Create Fragility
Client concentration isn’t about poor-quality clients. It’s about dependency.
Buyers pay close attention to:
- How much income comes from the top 5–10 clients
- Whether revenue is spread across many relationships or a few large ones
- The impact of losing a single key client
A practice may feel stable day to day, but if a small number of clients drive a large portion of income, the business becomes sensitive to individual decisions.
That sensitivity is risk—and risk affects value.
Client Mix Matters as Much as Client Count
Two practices can have the same number of clients and very different risk profiles.
Buyers look beyond totals and ask:
- Are clients evenly distributed or heavily skewed?
- How demanding are the highest-revenue clients?
- Does servicing intensity align with income contribution?
A well-balanced client base tends to be more predictable and easier to transition than one where a few relationships carry disproportionate weight.
Value follows balance.
Longevity vs Dependency
Long-standing clients are often seen as a strength—and they usually are. But buyers also consider:
- How easily those clients could be retained by another adviser
- Whether relationships are personal or institutional
- Whether client knowledge is documented or held informally
Longevity adds value when it’s supported by structure. Without that structure, it can increase reliance on specific individuals.
Why Concentration Becomes Visible During Transitions
Client concentration often only becomes a real issue during moments of change:
When an adviser reduces involvement
- When ownership shifts
- When service models evolve
- These are exactly the moments buyers and successors are underwriting.
If the business can absorb change without destabilising income, confidence increases. If it can’t, value is discounted.
Why This Matters Before Any Sale
Understanding client structure isn’t only about transactions.
It helps advisers:
- Identify hidden exposure
- Improve sustainability
- Build a business that isn’t overly reliant on a few relationships
Small, deliberate changes over time—such as broadening the client base or embedding servicing more widely—can materially reduce risk.
A Final Thought
Good clients are not the problem.
Over-reliance on a small group of them is.
In an advice business, value is strengthened when income is supported by a broad, well-structured client base that can withstand change.
The less the business depends on individual decisions, the more confident others feel about its future.
Next in the series:
Data Clarity: Why Confusing Numbers Reduce Confidence (and Price)