Segmenting, a Key Practice Management Strategy for Financial Advisors

Financial advisors who segment their clients earn 33% more than advisors who do not segment. A key practice management metric is segmented clients. However, segmenting the right way will show you where your revenue is coming from. Don't make the mistake of building more than 2 segments. Ideal clients and non- ideal clients.

 

I Don't Have Time to Segment   Financial advisors who are successful at attracting ideal clients are faced with one challenge. The challenge is segmenting your clients. If you are growing, then segmenting your ideal and non-ideal clients is an annual process if you are growing at 15% or more per year. Why do you segment? Segmenting is a tremendous opportunity to grow your practice. Segmenting will help you focus your time and energy on your ideal clients.   Get Rid of Guilt   Have you ever felt guilty about not servicing or communicating with some of your best clients who pay you the most fees? Be honest! I ask advisors in workshops across the country and they always say what I felt as an advisor, guilt towards servicing your ideal clients more. How can you get rid of that guilt? Obviously by servicing your top clients more. But if you are past capacity and lack the time, then you probably do not even have the time to segment your clients, once, let alone on an annual basis. Your non-ideal clients sometimes take up all your time and energy, leaving you scrambling to service your best clients in the way you would like to.   Why Segment?   Think of segmenting from a simple exercise of ideal clients and non-ideal clients. Not potential ideal clients but defining your clients as they are today. There are several advantages to segmenting including:   Your clients sometimes want to know where they stand as a client- tell them you are one of our ideal clients and we only have 50 or 75 ideal clients. Your staff wants to know who to pay close attention to- let them know who the ideal clients are today. Your revenue will increase because you are spending more time and attention to your ideal clients. You attract all of their assets and give them the service to get their financial planning, investment, and goals in order and keep them on track to reach their goals.   You earn more by segmenting your clients annually. According to Business Health Pty Ltd of Australia, 62% of advisors segment their practices. Those advisors that segment their ideal clients from their non-deal clients earn on average 33% more than those advisors who do not segment. This is a from their research warehouse of USA advisor database (Source Business Health Pty Ltd. 2014 US Advisors Key Value Drivers USA* The Value of Practice Management).   How Do You Segment?   While there are several different methods to segment clients, the key metric to use is revenue. Top financial advisors know that everything must be measurable: segmenting by revenue per client on an annual basis is the number one measurement to use. Besides revenue, the most common ways advisors segment their clients is part subjective and part numerical. For example, some advisors put the word” influence” on a client’s benchmark. Does this client refer ideal clients to your firm and is he or she influential with others? Other measures you can use to segment include: Do they have all of their business with you or do they work with two advisors? Do they trust your advice and implement your advice? Are they open when discussing goals and have 3-4 or more goals planned out with you? Have they house-hold accounts with you, meaning you work with the whole family? Do they know how to refer business to you and are have? Do they generate sufficient upfront fees and ongoing fees/ commissions for planning and advice? Agree and like your communication approach? The Next Step?   So how can you start segmenting your clients? Start with 2 segments: Ideal and non-ideal. It can be quite simple, start by creating an excel spreadsheet and add in the following categories above and or create your own. Create a scoring method and determine if they are ideal clients or non-ideal. Now the hard part comes in. Creating two plans, one plan for ideal clients, processes and systems, and one plan for non- ideal clients processes and systems. You have to have a plan for each. Once you create those plans, it will become clear how you are going to grow your business at 15% or more on an annual basis and tackle capacity. Good luck in growing your practice!