Recently, I got into a conversation with some successful advisors about the right amount to spend on client entertainment and relationship-building activity.The number will be different for every advisor, but the consensus was that spending 3 to 5% of gross revenue on client entertainment is a guideline that makes sense. Note that this is in addition to newsletters, luncheon workshops and education events - while clients may appreciate those, they quickly assimilate them as their due.



Once you've set a total budget for client entertainment, the next question is how to spend that amount.

There are a couple of philosophies on this.

One is a big bang event - you arrange one major event such as a golf tournament or dinner, to which you invite a large number or even all of your clients; depending on your budget and client base, you may do this annually or once every two or even three years. A big bang event has the advantage of being efficient in terms of use of time -- but runs the risk that it will not cater as well to your top clients, who represent the bulk of your revenue as it will to the rest of your client base. Top clients often want to feel that they are getting special treatment - and being one of a large number of clients at a dinner or golf tournament fails in that regard.

The other strategy is to take a tailored, personalized approach. Start by setting a budget for each of your top clients - say 6 to 8% of gross revenue for top clients, little or nothing for the rest. Having done that, think about what you could do to build relationships with those top clients, either on an individual basis or in small groups.

For example, you could host a private dinner for six to eight couples, in which the chef stops by for a brief cooking demonstration. You might have a wine tasting for ten or twelve couples, in which the owner of a restaurant walks you through Italian or French wines. Or you and your spouse might host one, two or three couples to dinner and then a sporting event or concert.

The key to making this work is that the activity is directly related to your clients' interests - whether it be cooking, wines or a particular sporting event.

At the core, there are two simple steps to making this personalized approach work:

1. First, set the amount you want to invest in each top client.
2. Having done that, think about the best use of that amount to build relationships with each client.

Start with a list of your top ten or twenty clients - beside each write down the things they love to do and how much you're prepared to invest in deepening your relationship with that client. At that point consider whether you want to do a larger annual event for all your top clients, more tailored quarterly or semi annual events such as wine tastings or a golf outing for smaller groups of clients or monthly activity for one or two clients.

You may not do something with every client every year - depending on the client, it might make more sense to spend a bigger amount every two years than doing something of lesser impact annually.

But by proactively thinking through who to spend your entertainment dollars on and how to spend them, you will get a bigger return from your investment in building deeper relationships.