Smart advisors attempt to treat all clients in similar fashion and that’s as it should be, but there’s nothing wrong with putting clients into various groups. In fact, the endeavor known as segmentation can pay big dividends for advisors and clients.
On the advisor side of the equation, segmentation can increase efficiency and profitability (what’s not like about that?) and create more opportunities to facilitate growth. For clients (they need to win in this scenario, too), segmentation can lead to more personalization and more personalization means clients feel more valued.
There are various ways to properly execute segmentation, but one of the foundations of this endeavor must be clarity. Without it, complexities and confusion take over and segmentation fails. Here are some tips for getting started.
Think of Segmentation as a Road Trip
The road trip analogy is relevant here because segmentation involves selecting various lanes in which to travel and, as Brie Williams, Global Head of Advisory Solutions and Wealth Intelligence as State Street, points out, it also involves mapping your client base.
“Use your CRM or a simple spreadsheet to assign current clients to segments,” observes Williams. “Aim for three to five core segments to keep it manageable, and add qualitative context where needed. Consider running a pilot test and adjust as you go.”
Lane selection, or as Williams puts it, selection of “segmentation lens,” runs deeper as it’s a multi-faceted process. However, it’s not burdensome to put into action. It involves points such as segmenting clients based on behavior/level of engagement, client complexity, life stage (retired/near retirement/young workers, etc.), long-term potential and, of course, the client’s asset level and their revenue-generating potential for the practice.
“Layering in behavioral, complexity, or life-stage insights can help you uncover service mismatches or growth opportunities that might otherwise be missed,” says Williams. “For example, a client with $500K in investable assets who consistently refers new clients may deserve more attention than a $1.5M client who engages minimally and does not make referrals.”
Think of it as analytical, data-intensive approach, but one that’s rooted in enhancing connectivity with clients.
Communicate and Define
After the above boxes are checked, advisors can proceed to the defining portion of the segmentation equation, which is vital. It involves breaking clients into segments based on factors such as how much communication they need, the services the clients are demanding or expecting, how much all that client communication and expectation-meeting will require of staff and various ways of enhancing the overall client experience.
From there, the all-important communication build-out occurs. Just remember that when it comes to properly executing segmentation, Rome wasn’t built in a day.
“Plan how to communicate your segmentation approach. Internal teams will need training on the new method; clients will need to know about changes in service,” concludes Williams. “While each will need tailored messages, be sure to use benefit-oriented language for both so that each person can see what’s in it for them, and how the transition is focused on value creation. “
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