Business owners often build their firms idealistically, with a clear vision regarding their clients and how they’d like to serve them. In the early stages, most aren’t afforded the luxury of being overly selective as they struggle to achieve scale. This can lead to “service model drift” that only becomes evident when owners look to scale the quality of services they deliver to an expanding client base, all while migrating away from handling the heavy lifting themselves.
As a business matures from a small book to a team-based practice, periodically assessing and segmenting your client base can amplify growth by aligning the business back around to its most important asset – the client.
Better service creates more referrals
General consensus in the wealth industry is that more than half of new clients are generated through referrals, yet few actively strategize on how to energize that channel. One way is to better understand who you are currently servicing and identifying the services where you excel. Whether you realize it or not, you’re likely segmenting your clients based on how you service them. You may have a high growth client, a high potential client, a high fee client, and clients who warrant extra attention. A better way to segment your client base might be by asking yourself these questions:
- Who are the clients we excel at serving and what are their needs?
- What clients are we spending the most time with and how does that align with fee revenue?
- Are we providing the depth and breadth that the majority of our clients need?
By focusing on the client’s needs, you’ll identify any outliers that need to be addressed, deepen the client relationships that matter most to the business, and enhance satisfaction with your firm, ultimately improving customer retention. Happy clients create more “right fit” referrals.
Tailoring and targeting increases new business
Achieving single-digit growth in line with increases in the market, plus the occasional referral, has been par for the course historically. But for firms looking to accelerate double digit growth, it quickly presents a challenge. To borrow from Michael Kitces “the growth-iest firms rely the least on referrals.”1 Firms must look outside to create new relationships and expand their reach. Start by understanding who you are trying to reach, where you can find them, and how to reach them.
- Define the who. Tailored messaging speaks to the needs of those you want to serve in a relatable voice..
- Optimize the where. How can you best reach these clients? Is your next “A” client coming from the country club down the road or through directed advertising on LinkedIn?
- Outline the how. Focusing on a particular market lets you quickly connect with, onboard, and emphasize what matters to them. If you focus on growing your high-net-worth clientele, speak to your premium investment services and exclusive events. Expanding to younger clients? Speak to financial planning services and take a digital-first approach.
Understanding who you serve today, who you serve well, and what their unique needs are allows you to level up your game in reaching your next vintage of clients.
Intentionality enables scale
In a relationship-based industry, delivering exceptional client service is the hallmark of a great firm. The challenge arises in scaling these efforts beyond the original partners. By segmenting your clients and fully defining your service model for each, your team can more effectively plan for long-term growth, allocate existing resources more efficiently, and better plan for and compensate for the development of your team. Here’s how:
- Grow your team. Is your next hire an advisor who is a “rainmaker,” or are you better served to find a candidate who can take client load away from an existing advisor?
- Align your team. What are your most profitable client types? Align your team structure to support this model, whether solo, senior/junior, specialist or hybrid.
- Upskill your team. Are there service capabilities your clients may desire but are not yet receiving from you? Do you have “the right people in the right seats?” Perhaps your next hire is a specialist in alternatives or trust and estate services.
Client segmentation for wealth advisory firms can be a valuable strategy for Registered Investment Advisor (RIA) firms looking to improve their marketing, resource allocation, client satisfaction, and competitive advantage. The most beneficial firms are those that approach the business of the business with intentionality. By working to understand and support the unique needs of your clients, you can differentiate your firm from others, tailor your services, and grow your business.
Creating the trust needed to start a wealth management relationship is a massive effort. Putting even half of that effort into understanding and serving clients better will ensure your firm reaps the reward of that effort tenfold.
Investment banking services in the USA offered through MarshBerry Capital, LLC, Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, LLC, 28601 Chagrin Blvd, Suite 400, Woodmere, OH 44122 (440) 354-3230
