Revamping the Client Segmentation Process

Michael Futterman, Head of Knowledge Labs® Professional Development, explains how a refined segmentation strategy can help advisors create a service model that drives client loyalty.

Busy is not the same as effective. In our “always-on” environment, we are constantly trying to keep up with what’s in front of us at any given moment. This approach does not lend itself to long-term planning, daily stress management or reflection on the question, “Am I doing the right things to create success in my business?”

When I speak to financial advisors about their most pressing concerns, the conversation usually revolves around questions related to growing their business, managing their team and servicing existing clients. And while these are the topics that matter most, the vast majority of advisors report that they simply don’t have enough time to address what they think is important on a daily basis because they are too busy reacting to things in the moment. Perhaps that’s why, when I ask them to explain how they manage who they spend time with, I’m often met with a blank stare… or something akin to that look the dog gives you when he hears a high-pitched noise.

Action Without Purpose Is Wasted Energy

When advisors are reactive all the time, they put their most valuable assets – time and energy – at risk. One way to overcome this tendency is through segmentation.

Segmentation is often misunderstood as simply grouping clients into Platinum, Gold and Silver or A, B, C levels based on things like assets under management or trailing 12-month revenue. While this is a good place to start, modern advisors can and should go much deeper with their segmentation strategy.

Most modern businesses today use some form of data mining to curate the client experience rather than letting it be done ad hoc. Whether it’s your favorite restaurant keeping track of your wine and meal selections or Amazon feeding you “suggestions” on items you may have an interest in, all our service providers are intently and deliberately listening to what we are telling and showing them in an effort to anticipate and better respond to our needs.

Advisors can apply a similar “listening” technique to go beyond the traditional segmentation process and craft a more robust, defined service model that drives client loyalty and focuses their team’s efforts for maximum productivity.

Here are a few suggestions on how advisors can use data to ensure every interaction and activity serves a purpose:

  • Start by including qualitative attributes in your segmentation exercises. These could include the quality of the client relationship or the referral source but should be determined based on the specific goals of your business.
  • Next, layer in “psychometric” qualities. Ask yourself, “What are these clients’ personal areas of interest? What do they value most? How do their personalities and preferences dictate the way I engage with them?”
  • Use your findings to tailor your services matrix around specific groups of clients. Hopefully, a distinct pattern of clients will have emerged after completing the first two steps of the process, providing clarity on the best ways to engage with each client.

The deeper you delve into each client’s qualitative and psychometric attributes, the more effective your resulting segmentation process will be. Of course, as with most exercises that are designed to help you address the most important aspects of your business, you should plan to revisit, refine and repeat this process regularly to ensure it’s keeping up with the changing needs of your business and your clients.

By creating a segmentation strategy that’s based on what makes each client unique – rather than focusing strictly on financial data – advisors can ensure their team members are managing their time and energy effectively. More importantly, they can deliver a differentiated level of service that gets to the heart of what each client needs and expects.