Skip navigation
yellow-man-black-group.jpg farakos/iStock/Getty Images Plus

How Important Is It to Define Your Ideal Client?

Knowing the type of client you are looking to serve will allow you to design the best products and services needed by them.

When an RIA owner asks us to perform an Operational Diagnostic review of their business, they typically have two burning questions:

  1. Have we chosen the proper technology tools and organizational structure to support our firm’s growth?
  2. Do we have the right employees in the right seats, and are they engaged and committed to our firm’s mission?

The first step in our process is always to request a high-level overview of their marketing presentation to a prospective client, which surprises the owner a bit. He or she usually looks a bit confused and says, “We’ve asked you to conduct an operations and technology assessment, not a marketing assessment—our marketing presentation has nothing to do with it,” to which we always reply, “Your marketing presentation has everything to do with it!”

Until we understand how the firm has defined its value proposition for the specific market segment it is interested in serving, we cannot determine if the technology choices and the staffing decisions are appropriate. And frankly, long before we arrive on the scene, we don’t know how the RIA itself can make any of these decisions without first defining who they are trying to serve. We have previously written about the importance of identifying your ideal client before choosing the proper technology tools for your business, but it goes beyond just the technology stack. 

Michael Kitces was recently a guest on Mindy Diamond’s podcast, and he spoke to this common mistake made by RIAs. “I see many firms ask, ‘What’s the (best) technology?’ and not, ‘What’s the (best) technology for this clientele?’” He continued, “They ask, ‘What’s a good marketing strategy?’ but not ‘What’s a good marketing strategy for whom?’” Michael drove the point home when he said, “If you don’t get clear on what the vision (for your business) looks like in the first place, it’s almost impossible to build any traction toward anything in particular.”

We believe that before advisors can determine the proper technology tools, organizational structure, staffing needs, and marketing message for their business, they must first ask themselves:

  1. Who is our ideal client?
  2. How do we want to deliver our services to that ideal client?
  3. What is the most profitable way in which to deliver those services in that fashion?

That last question will drive pricing decisions, as well as help RIAs determine the proper expenses needed (people and infrastructure) to deliver service to those clients. A $100 million household will have different needs and service demands than a $100,000 household, so the RIA should structure itself appropriately for the type of client it is looking to serve.

When Tony Parkin and Nikolee Turner of Schwab’s Business Consulting & Education Division were guests on the COO Roundtable podcast, I asked how an incoming COO could assess the organizational structure of the firm they just joined. Nikolee pointed out how “critically important it is for firms to understand who they are trying to serve, who their ‘ideal client persona’ is. By understanding the ideal client persona, they can design the other pieces and parts of their business around that.”

Nikolee then added some hard data supporting her advice. Citing Schwab’s benchmarking data, she quoted that firms that have a documented ideal client persona to guide them add 28% more clients annually, which represents 45% more assets. Tony then made me feel good about our decision to kick off Operational Diagnostic reviews with questions around a firm’s marketing presentation when he stated that Schwab’s Business Consulting & Education Division goes “a step or two beyond where most people do with the concept of an ideal client. For many of our consulting engagements, whether they are marketing related, strategic planning related or some work we’re doing around journey mapping, we won’t get into the meat of that work unless the RIA has that ideal client persona very clearly identified because: What are you building to if you don’t know who you’re trying to serve?  We think it’s incredibly important.”

When I joined Merrill Lynch in the late 1990s, I went to the largest advisor in the office and asked for the secret to his success. He said, “Before I picked up the phone and started randomly calling prospective clients, I spent hours upon hours searching for wealth in the most off-the-beaten-path areas.” He fell upon radio towers. “These radio tower executives had never had a financial advisor reach out to them before—they were more than happy to take my call and accept a meeting.”

As Kitces stated to Mindy Diamond, “You can’t be the best ‘everything’ for everyone, because ‘everyone’ has a lot of different needs.”  Attempting to meet the varying needs of a broad base of clients will frazzle your employees and destroy your profit margins.  Michael continued, “You can be the best at something for a few people, however.” 

As stated earlier, the ideal client persona will drive more than just your sales and marketing strategy. Knowing the type of client you are looking to serve will allow you to design the best products and services needed by those clients, which allows you to price those services in a profitable fashion. Healthy profit margins provide job security for your entire team. It all starts with the ideal client, and the business then needs to work backward from there.

Matt Sonnen is founder and CEO of PFI Advisors, a consulting firm that helps financial advisors build more impactful and profitable enterprises. He is also the host of the popular COO Roundtable podcast. Follow him on Twitter at @mattsonnen_pfi.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.