In the world of financial advice, we often categorise our clients into neat segments based on their revenue generation. While this is a practical approach, it tends to overlook some client categories that don’t fit neatly into our standard segmentation.
In this post, we’ll explore these overlooked segments, their unique characteristics, and their potential value to your practice. This blog post builds on Client Segmentation Part I: The Unseen Ripple Effect of Fee Disclosure Statements, which covered some common patterns regarding your core (A, B, C, Platinum, Gold, Silver, etc) segmentation.
Going beyond the core segmentation in this way can ensure you make the most of the diversity that comes from each unique client situation.
1. Core segmentation
Whilst your core segmentation may be a single overarching segment for all current clients, or a balanced scorecard approach, it’s essential that this has a hard minimum that is clearly defined.
This sounds obvious, but as new client segmentations or fee models are applied to existing clients, it’s critical that there is a floor. A clear floor signals to the business that this client must be repriced at the next review or their next FDS anniversary. It also enables the FDS process to have an effective check for where changes in client circumstances may have led to their fees dropping below this threshold.
2. Discounted clients
Discounted clients are those who receive services at a reduced fee for a specific reason, dipping below the above floor. It could be because they are children or grandchildren of current clients, long-standing clients, staff, centres of influence, or clients with great potential. While they might not contribute significantly to your bottom line, they have a good reason to be there, and this should be demonstrable.
Nonetheless, these too should have what I call an ‘absolute floor’, below which even these clients should not be ongoing clients. Instead, they may be ‘Transactional clients’ where best interests duty or very low funds under advice prevents the clients from meeting even this lower threshold.
3. Transactional clients
Transactional clients are those who engage with your services on an ad hoc basis, often for a one-time need with a cost at that time.
They might not be the ‘stay for dinner’ type, more the ‘pop in for a quick cup of coffee’ type, but those coffee catch-ups can pay for themselves and still have the potential for gourmet opportunities.
Importantly, in the context of rising advice costs, they offer a bite-sized serving where a full-course meal might not meet best-interests-duty.
It may be worth keeping your name on the file for these clients for a period and they may still merit a structured support approach, such as an annual check-in phone call to see if they need support.
4. Insurance-only clients
These clients engage with you solely for insurance-related advice or products. Their needs are specific, and they may not contribute as much to your revenue as comprehensive advice clients. However, they are a critical segment because they provide a steady stream of business and can serve up referrals within their specific niche. Plus, they offer the potential for upselling or cross-selling other services when their financial needs evolve.
Importantly, it’s essential to differentiate high-value insurance-only clients, as they should definitely receive regular structured service.
5. Archived clients
Archived clients are those who have ceased active engagement with your services. They can be further categorised into:
- Archived (Do not market): These are past clients or prospects who, for various reasons, you would prefer not to re-engage. These are the ones that stayed far too long past dinner or double-dipped the crackers.
- Archived (Marketable): These are past clients who left on reasonable terms and you would be open to inviting them back to the table. They represent a potential pool of business that can be tapped into with the right re-engagement strategy.
Remember, in the grand buffet of financial advice, it needn’t be just about the main course. Those side dishes can often surprise you with their flavors. So here’s to embracing the full smorgasbord of client segments!
By understanding and serving these overlooked segments, you can structure ongoing activity for clients beyond your bread and butter, keep your menu of services fresh and versatile, and tap into potential sources of referrals and future business.
It’s all about recognising the unique flavour and value each individual brings to your practice, regardless of their revenue contribution. Bon Appetit!
Interested in learning more? Book a virtual coffee and see how we might be able to help transform your business to improve its segmentation, pricing, and offerings.