Global best practice (Marketing Hub 13-07-2010)
Part 2: Deep client focus – 13 July 2010
The first Global Best Practice Idea for financial advisers is to have a ‘deep client focus’. This sounds like a statement of the obvious – because it is – but you would be amazed how many firms cannot quickly elaborate on what their main client segments are and, more importantly, what the top five concerns are for each of these segments. Without this depth of knowledge you are truly flying blind.
To obtain the depth of knowledge required involves some key steps:
- Do more for fewer clients – that is, segment your client base and focus your energy on those clients who value what you do, whom you like and who will pay you for a good quality job.
- Understand the client’s key issues – by completing a top five issues analysis for your top 20 clients. This simple exercise will reveal much of what you need to know to build great service offerings for your whole client bank.
- Packaging and differentiation of services – it is imperative that, once you understand the different needs of your different client segments, you do something with the information and differentiate the offer to each group. This is the step that makes the biggest impact on profitability – increasing it by 137% in UK advisory firms.
- Understand the difference between external and internal service standards – allowing you to present a great public face (external) but still delivering something that is systemised with some built in ‘wow’ factor (internal).
- Use technology to manage the client relationship – allowing for differentiated communication and servicing strategies for each target segment.
Take a look at the client segmentation chart below. This is the first step in the process. Categorise your existing clients using these criteria. Remember, global best practice suggests each adviser within your firm can service between 50 and 150 clients – that’s it. So work out how many active clients that will allow you to have and force yourself to choose.
|
Category |
Client description |
Level of service/action |
|
A* |
Top value to the business – the top 5% of clients |
First-class service |
|
B* |
Next most valuable – the next 20% of clients |
Business-class service |
|
C* |
The rest who meet minimum criteria |
Standard-class serviceStandard-class service |
|
D |
Anyone else who can’t be turned away |
Reactive service only (clients managed, not serviced) |
|
X |
Have to go – you know right now they are unsuitable |
Polite and compliant 'goodbye' |
|
P |
Prospects |
Keep on the boil |
*Active clients
The two preferred methods for segmenting clients are either recurring revenue or assets under management (AUM). Recurring revenue works well if you are several years into the transition process and have plenty of recurring revenue already. AUM works best if you are earlier in the curve. If you use AUM as the criteria don’t worry whether or not you are getting paid on the AUM at this stage – you are just trying to identify who has potential so you can develop appropriate service levels later.
Generate a list that orders the clients from highest value to lowest value (using either recurring revenue or AUM) and then apply the segmentation criteria shown in the segmentation chart above.
We’ll take this idea further in the next article.
Brett Davidson is chief executive of FP Advance (www.fpadvance.com) and can be contacted via e-mail on enquiries@fpadvance.com. To book for FP Advance’s final RDR Readiness Programme for 2010, please visit www.fpadvance.com/services/training-services
Part 1: Introducing global best practice – 29 June 2010
Welcome to the latest series of articles for Marketing-hub.co.uk from FP Advance. Over the coming weeks and months we will be working our way through some hugely valuable information, so be sure to log back into the site regularly for these fortnightly instalments. This information will be presented to you piece by piece so you can absorb the content and take some of the ideas and put them into action back in your business.
Our theme for this series comes from FP Advance’s market-leading Business Fitness Report, which helps advisers identify the true drivers of profitability within their businesses. Individual firms that complete the report can gain a sense of how fit their business is across 32 key performance areas and diagnose their own next steps.
The consolidated data, which you will see here from time to time, provides a valuable insight into what is really happening within UK financial services businesses. No one else provides this degree of insight around business profitability drivers so cost-effectively for advisers.
This series of articles will be focused on ‘The top five global best practice ideas for financial advisers’. This is based on our knowledge of what great advisory firms do around the world using our global network of consulting contacts.
These top five ideas are:
- Deep client understanding: the best firms understand the needs of their clients at a much deeper level than the average firm. We’ll find out how they gain that knowledge and give you some practical tips on how you can do the same.
- Powerful client experience: it is simply a given that you know your stuff technically. But the top firms focus on delivering great technical advice in a tight, fun and educational way that clients can enjoy rather than endure.
- Pull marketing: finding enough of the ‘right’ types of clients is the number one challenge for most firms. Chasing down leads, cold calling, or direct mailing are all hard work and so the best firms don’t do any of that. Instead, they use a pull marketing strategy that has clients coming to them. That’s much more fun and we’ll show you how to do it effectively.
- Effective business planning: firms that get this right don’t have 50-page business plans gathering dust on the shelf all year. They produce a one-page document that everyone in the firm can understand. Not only that, they manage the business to the plan every month. Doing this correctly increases profits by 600% compared to firms that don’t plan.
- Strong systems and processes: it goes without saying that good systems lie at the heart of every great business. This doesn’t reduce the customised element of your service – it increases it. Good businesses customise the 90% so they can bespoke the 10% that really matters for their clients.
This article was first published by Marketing Hub
