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Client Engagement Segmentation: Seeing Clients for More than Their Money

By Phil Billingham, CFP

The story goes something like this.

“Dear client, I’m a financial planner, which is different from a sales person. We don’t sell products; we actually care about you, and look after you.”

Then someone like me turns up and asks “How do you classify your clients?” “Well, those with over £500,000 get 4 reviews per annum, and those with £250,000 get 2 reviews…”

So, let me get this right. When we are attracting the clients, we are focused on them. When we are looking at a long term relationship, our focus is with the money? Is that correct?

In short, the question we have is this:

Is the client the client, or is the money the client?

As financial planners, I believe this is our most critical question, and what REALLY sets us apart from ‘distributors’ and product salespeople.

For salespeople and distributors, the money is the client, and so their systems are all about classifying the money (low, medium and high risk, for example, or how much money the client has).

Why on earth do financial planners use product distributors’ templates when they are structuring their service? We are NOT in the “money industry”; we are in the “people business”. So, why do we pretend it is about the money? Why do we classify clients by the money they happen to have invested, or even just have available for investment? Whisper it quietly, but it tends to be the product providers who write about, lecture and publish on this subject.

This is why most client segmentation processes fail. How can we design and deliver service for clients that is meaningful and engaging when our main focus is all about the least important aspect of their lives?

So what can we do? How can we design and deliver a compelling client and service proposition that is all about the client AND is profitable to deliver? Hold on when I say this, but we have to go back to the client, where they are in their lives, and what their relationship is with us.

That means classifying our clients by something other than their money.

This can be in a number of ways, and yes, it will involve watching the trade off between profitability (please note, not just assets under influence or turnover) and cost of delivery. After all, it’s vital we run a profitable business, as well as anything else.

So what else do we use?

Client Engagement Segmentation

Well, what about ‘engagement’? By that, I mean the clients’ engagement with us and what we are trying to do:

  • “A clients” are people who are both profitable, and ‘get’ what we are doing.
  • “B clients” are profitable, but don’t – yet – ‘get’ what we are doing, or where we add value.
  • Clients who are not profitable, but ‘get’ us, are “C clients”.
  • Clients who are neither are “D clients”.

The point of all this is that by adding an extra dimension, we can focus on what clients actually need from us.

“A clients” need us to be engaged, and deliver first class service. In fact, they require us to design our core services to work for them. They are our business, and we need to retain and grow them.

“B clients” need us to engage them. They have bought the product or brand, but not yet the relationship and service. We need to show them the value of this.

“C clients” want to be clients, but we really need to take some cost out of the relationship. Can we simplify things?

“D clients” are ……not really clients. They probably just bought a product at some point. They are not part of our future, nor are we a part of theirs. It’s time to let go. That doesn’t mean they need to be sacked but let them go.

And that’s the point. Client segmentation should tell you how to deal with the client; not their money.

This means that if your model client is less financially sophisticated than others, then your service, disclosure, introduction and review process will be designed and monitored with that in mind. This can easily be tweaked to deal with clients who are outside of that template.

Client segmentation implies 2 things. It implies we need to know what our niche market is, and what our model client is.

You do? Great!

You don’t? Oh. That may be the problem. But that’s a different blog.


2 comments to Client Engagement Segmentation: Seeing Clients for More than Their Money

  • I remember the day someone from a brokerage firm called me to learn why his rep called him to see if he had other assets that could be moved to their company.

    The reason? The firm had determined not work with clients with AUM under 250K. Sometimes firms have to make tough decisions.

    Some reps made the calls, others moved to another company who was happy to have their AUM as part of their firm.

    Segmenting client types is never a black/white process for any industry. In fact, to my recollection, I don’t remember seeing one client create their segment criteria exactly like another.

    Who your niche is, what your goals are — all come into play. You determine the best niche for you; you then create an ideal client profile within that niche and outline all the attributes of your AAA clients — the geographics, psycographics, demographics and even the techno graphics. Your firm markets directly to the AAA clients. While doing that, other client types show up. A firm should have a policy on what to do with the B, C and D clients.

    Some firms keep the D clients, others let them go. Same with C clients. Does that mean that they are not putting the client first? Maybe, sometimes. Maybe not. In order for a company to help people, it builds a brand and we can’t be all things to all people — although many try.

    What happens if you decide that it’s time to segment, and realize that you have no AAA clients? What if all you have are mostly B and D clients? (One client told me that he needed to hire an assistant to take care of them so that he could develop relationships with his AAA clients.

    I don’t think there is anything wrong with being self-less — and thinking about what drives you in your business. W/o clients we have no business. But with lots of crappy clients we have sleepless nights.

    Having a business model you enjoy AND having great clients is the line each business owners needs to find.

    Money comes into play since to run a business long term, you must be profitable. I’d be missing something if I spent more time with my D clients than AAA clients. It’s not that D clients don’t get customer service, they just don’t end up with “the extra touches” that AAA clients may get.

    I read somewhere, maybe “In The Trenches”, that you touch your ideal clients 100 times a year and the D clients 20 times. D’s still get customer service, just less.

  • PHIL Billingham

    Thanks Maria, I think we agree? It’s never just about the money.

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