Know Who Contributes To Your Profitability

“Segmenting is the crucial first step in the strategic marketing process. All customers are not the same.” —Joanne Scheff Bernstein

Know who contributes to your profitability by conducting a detailed assessment of your book and your clients. We describe exactly how to formally segment your book, analyze the results, and develop a structured client contact plan.

A client segmentation analysis will identify:

• The ~20% of your book that is responsible for ~80% of your assets and revenue.
• The distribution of clients by value to the business.
• The service levels that should be applied to each client tier.
• The communications plan that should be applied to each client tier.

How can I enhance the value of segmentation? Have an in-depth understanding of:

• Which clients require/deserve the most retention efforts? It is reported that acquiring a new customer can cost five times more than retaining an existing customer. In addition, the success rate of selling to a customer you already have is 60-70%, while the success rate of selling to a new customer is 5-20%.
• Which clients provide growth opportunities for assets under management, revenue, and return on assets? It has been estimated that some clients have 4 or even more advisors. When I was at a wirehouse, the firm always estimated the FAs held about 50% of their client’s assets and most FAs claimed they held almost 100% of their client’s assets. Many clients have assets away.
• Which clients may be candidates to be transformed or transferred to increase their value or reduce their costs to the business? Analyses usually show some clients have an ROA of less than 50 bps and in too many cases, less than 25 bps. The question is what to do and is it worth doing?
• Where should you focus introduction/referral efforts? Our methodology for determining the client’s value to the business not only considers assets and revenue but four other factors including whether this client is a source of introductions.
• Where should you focus marketing efforts? Segmentation also considers how clients were acquired so we can see what methods have worked in the past.
• What specific communications protocols should be followed? A solid approach to segmentation employs a contact disciple that can ensure appropriate contact for 100% of all clients including what, when, who, why and how. “...loyal clients are much more likely to perceive that their advisors contact them appropriately. Just 35.3% of moderately satisfied clients believe that their advisors contact them appropriately, compared to 83.7% of loyal clients.”
  

• What you really know about your top clients? One study showed that while 68% of FAs said they had a friend relationship with their clients, only 28% of clients believed they had a friend relationship with their FA. There are many examples of disconnects between what your client thinks and what you think they think.

Client segmentation analysis can be used as a starting point for determining team workload and can also be used to develop client costing and profitability.

David I. Leo, Formal Book Segmentation Snippet 3

David Leo is Founder of Street Smart Research Group LLC. He is an author, speaker, coach, consultant, and trainer to financial professionals. David is an experienced business manager who works solely with Financial Advisors, Planners and firms who want to organize, structure & grow their businesses by attracting, servicing, and retaining affluent clients.

​If you have questions or would like assistance in personalizing and implementing approaches from The Financial Advisor’s Success Manual, schedule a free 45 Minute Strategy Session at https://calendly.com/davidileo or contact me at David@CoachDavidLeo.com or visit my website at www.CoachDavidLeo.com

My book is available at Amazon at https://www.amazon.com/Financial-Advisors-Success-Manual-Structure/dp/0814439136