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Journey Strategic Wealth

How to Ensure You're Segmenting Properly

Segmenting your clients is an absolute necessity if you want to grow, but doing so without a plan for scale will stagnate your business quickly.


Advisors spend an inordinate amount of time trying to craft the “perfect” client segmentation strategy. Most end up with a four-tier system (e.g., ABCD) that they then transpose into their CRM. When asked about how it’s working for them though, many solopreneur advisors will share the following: 

  • “It still feels like we give basically the same service to all clients.” 
  • “We’re comfortable with our criteria for each segment, but we continue to quickly run out of capacity.” 

The truth is segmentation is helpful only if you also have significantly differentiated service tiers and a plan for scale that includes adding or partnering with other advisors. Without the latter two, your segmentation criteria are irrelevant. 

As you review your own client segmentation and service strategy before year-end, here are several points to keep in mind to ensure the practice is poised for profitable growth. 

Do not assume the four-tier (ABCD) approach is best. 

Put simply, it is difficult to properly implement and maintain a four-tier strategy if you are a solo-advisor practice. You must have additional service advisors on staff and/or a subscription-oriented, low-maintenance service strategy for lower tiers. Consider the following: 

  • If you are a solo advisor in growth mode, leveraging a four-tier segmentation, assess the revenue being generated from lower tiers, and the approximate time you and your team spend with each tier. Estimate how much a new associate hire would cost and when you would break even on the investments. Make sure to make assumptions about how many new top-tier clients, and how much revenue, you could generate if you added an associate. 
  • If you would like to scale back and maintain a smaller book of business, consider your options for either partnering with another firm, merging, getting acquired or monetizing part of your practice (i.e., selling a portion of your book.) 
  • Perhaps a two-tier, “A and everyone else,” strategy makes more sense. In this structure, you would identify a group of your very best clients and provide a comprehensive, hands-on experience for them. Everyone else would receive their scheduled reviews and curated content and resources throughout the year. 

Ensure that your service models are truly different from one another. 

However you decide to segment, the service you provide must be scaled across tiers and should require varying levels of manpower. Take time to write out the service items and deliverables provided to each segment each year. For example: 

  • Top clients receive semiannual business reviews, a comprehensive summary of all their achievements annually, one conference call a year with you and their accountant, invitations to two private client events, and “surprise and delight gifts” twice throughout the year. 
  • Midtier clients receive an annual review, a summary of their achievements, and a “surprise and delight” gift once a year. 
  • Bottom-tier clients receive two phone call reviews with an associate advisor throughout the year and full access to all self-directed tools. 

Have a plan for scale involving additional advisors and varying service models. 

Eventually you are going to have to add advisor talent to manage your growing book. Rather than looking for rainmakers who can bring in revenue, you should first look for relationship managers who can help service and retain clients (and revenue). 

You will also want to consider whether you need to change your service and fee structure for lower-tier clients. If your lower-tier clients have less in investable assets but still require planning and advice, perhaps you could introduce a flat fee or subscription fee for advice. This ensures that you are being compensated properly for providing ongoing support regardless of their asset level, which can be phased out over time. 

Ask yourself the following before making any hiring or service decisions: 

  • If I had the choice to work with only one type of client, what type of client would that be? Which types of clients do I definitely NOT want to work with? 
  • Do we have the revenue currently being generated by the clients I do not want to work with, to cover the cost of an associate handling them? 
  • What other ways can we ensure that we are properly scaling lower tiers? Are there digital advice options available at my firm? What would it look like to introduce subscription fees to lower-tier clients so that we can service them profitably? 

While it may seem daunting to overhaul your segmentation and service strategy, know that there is no single right way to structure your book. Start by looking only at your top clients and slowly move down the list! 

Penny Phillips is the co-founder and president of Journey Strategic Wealth. 

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