CLIENT SEGMENTATION: There’s more than one way to slice the pie

Segmenting Clients It’s a lesson you probably learned a long time ago: When it comes to financial services, one size does not fit all! But that doesn’t make it any easier to for independent financial advisors to satisfy clients whose needs, ages, incomes, future goals and past experiences differ as widely as the weather from the Florida Keys to the North Pole.

The obvious solution is client segmentation. First, you identify your ideal client. Having done that, you work to develop the particular skills and expertise to address their needs. Of course, deciding to specialize in retirees or small business owners or even widows means assigning yourself a niche that may or may not be self-sustaining. It also means you’ll probably have to eliminate some existing clients who don’t fit that ideal profile.

One of the more popular ways successful advisors segment their clients is by net worth. In fact, many financial services gurus believe that the key to attracting high and ultra-high-net worth clients is establishing a minimum required investment in the upper six-or even seven-figures. After all, money goes to money, right? A recent study by Toronto-based consulting firm PriceMetrix supports this theory, reporting that in only 3% of cases did a wealth management relationship that is currently HNW begin with an investment of less than $500,000.

But not all industry executives agree with this asset-based perspective. Another way to segment your business, they point out, is to look at a client’s present attributes and future prospects ─to identify clients whose current means may be moderate but who have the potential to become sources of sizeable income—and investment—in the future. To make effective use of this method requires identifying characteristics like behavioral demographics and lifestyles as well as the likelihood of career advancement, the sale of a business or even an inheritance. In other words, you really have to know your client!

Now that financial planning has entered the holistic era, and you are theoretically spending more time pursuing and establishing meaningful client relationships, this method of segmentation should be particularly effective and─for those planners and wealth managers who enjoy the process─a source of real satisfaction. It can also be the key to sustaining a practice into an agreeably profitable future.

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