After I sold my financial advisor practice I went into practice management consulting. In other words, I learned all the things that I should have known when I was running a practice. I wish I knew more about segmentation And completed segmenting my clients on an annual basis. this does not mean getting rid of the bottom 20% of your clients every year. It does mean defining who your ideal clients are.
Key practice management process annually
Financial advisors who segment their clients earn 33% more than advisors who do not segment. A key practice management metric is segmented clients. However, segmenting the right way will show you where your revenue is coming from. We know your top 20% represent 70-80% of your revenue. Don’t make the mistake of building more than 2 segments. Ideal clients and non-ideal clients.
The first and most common mistake financial advisors make with segmentation
Did you know that 75% of financial advisors do not have a clear ideal client definition? Start by scoring your ideal clients out of 10 in the following categories
Client name Eg Smythe
- ____ 1. Comprehensive advice
- ____ 2. Brings all documents
- ____ 3. Consolidates business and delegates to you and your team
- ____ 4. Wants planning and advice
- ____ 5. Listens to you and wants to learn more
- ____ 6. Understands your fees
- ____ 7. Generates ideal revenue of $
- ____ 8. Has future potential revenue for themselves or their family $
- ____ 9. Introduces you to the family / family members with potential
- ____ 10. Introduces you to other people (referrals) and wants additional planning coordinated with professionals (your _ network of professionals)
Clients with a score of 10 out of 10 are ideal clients and potential ideal family clients
Define who your ideal clients are and what the ideal revenue is from an ideal client and an ideal family. these people are financial delegators which means they delegate everything to you to take care of and value time more than money. having a clear set of criteria will help you segment better.
Segmenting mistake number 2
For the last 33 years, I have focused on practice management I have seen read, and heard everything there is about segmentation. most of it is a make-work project. Experts tell you to identify A-B-C-D clients and I have three and four different types of categories of clients. None of that is necessary you have ideal clients and families Anne non-ideal clients and families.
Your goal should be to increase the ideal clients and families and decrease the non-ideal clients and families so that you end up with 100% ideal families you want to work with. stop the nonsense of categories gold silver platinum. How many ideal client families do you work with now and how many ideal client families would you like to work with in the future.
Segmenting mistake number 3
Not having a process or a program to take care of non-ideal clients. Some financial firms have programs to pass along non-ideal clients. if you do not have a program make one by finding an “overflow financial advisor”.
Someone who has the capacity to take on additional clients and service your non-ideal clients and families. Everyone deserves a comprehensive financial plan you just can’t deliver it to everyone.
The overflow advisor can be a partner and associate another advisor in your firm or someone down the hall or someone locally who you know the angle to be part of your practice or team or not part of your practice or team. Ask your firm how joint codes can work for you when you segment clients.
The key in working with an overflow advisor is the introduction. introducing clients properly and positioning the new advisor has more time to deliver more value and what that value will look like for them is critical. clients deserve more than just an email.
Segmenting mistake number 4
Financial advisors often make one of two big mistakes in segmenting and time management. They either pay too little attention at the risk of losing clients or they work too hard at trying to keep the wrong ones. Where do you spend your time?
Once you segment, you will spend more time with your best clients, and less time with non-ideal clients. You will feel confident that you will keep the right clients, and the non-ideal clients who have too big expectations will be addressed.
For example, on Friday you are going on holiday with your family for two weeks. You get two phone calls, one from an ideal client and one from a non-ideal client. The ideal client says ”have a great holiday let’s connect when you are back”. Your non-ideal client says ”wow must be nice to take two weeks’ holidays” Simple segmentation that will also increase the value of your overall practice and peace of mind!
The next step?
So how can you start segmenting your clients? Start with 2 segments. Ideal and non-ideal. It can be quite simple, start by creating an excel spreadsheet and add in the following categories listed in this blog, or create your own. Create a scoring method and determine if they are ideal clients or non-ideal.
Now the hard part comes in. Creating two plans, one plan for ideal clients, processes, and systems, and one plan for non-ideal clients processes and systems. You have to have a plan for each. Once you create those plans, it will become clear how you are going to grow your business at 15% or more on an annual basis and tackle capacity.
