We live in a world where you no longer have to buy a newspaper or magazine—you can program mobile apps to curate news content to align with your personal areas of interest, enabling you to only receive articles about sports, specific aspects of the financial markets, and anything else you want to read, without having to skim through lots of irrelevant stories.
Similarly, smart websites like Amazon remember a user’s previous purchases and browsing history, which makes it easy for them to offer an experience tailored to the needs of each customer.
In light of this new reality created by consumer websites and mobile apps, financial advisors have the opportunity to adjust their service models to ensure they can deliver a customized level of service, and experience, that their clients want. Historically, advisors would segment clients by levels of service based on investable assets or net worth. Just because a client has $5 million in investable assets doesn’t mean they necessarily want to have a conversation with their advisor every month, or meet with their advisor on a quarterly basis.
Advisors need to take a step back and ask themselves, “Did I create my service model to best serve my clients, or did I create my service model to best serve my business?” The traditional method for client segmentation was designed for the latter, not the former, leading many advisors who follow it to incorrectly prioritize certain clients over others and utilize their time less effectively. However, by adjusting their service models to align with modern customer expectations, advisors can use their time more productively across their client base, as well as improve both their clients’ experiences and the capacity of their businesses to effectively manage a greater number of clients.
Rethinking Client Segmentation
A dynamic service model is one that benefits your clients and your business.
Like any business owner, an independent advisor is always tempted to allocate time and resources to clients based on the amount of revenue they bring into the practice. The thinking behind the traditional client segmentation process goes like this: “This client is generating this much revenue, and is more valuable than another client who’s generating less revenue for my business, so I can afford to spend more time on meetings and calls with the more profitable client.”
But there’s a key flaw in that rationale. In general, clients that have more investable assets and higher net worth, and therefore constitute a larger revenue stream for your business, have less time to spend collaborating with an advisor on investment decisions and strategies. In most cases, they choose to work with an advisor because they save time by having an expert manage their investment accounts, help them make smart financial decisions, and create a financial plan for meeting their financial goals. The time they save allows them to focus on what they do best—running businesses that they’ve built from scratch, for example.
Furthermore, according to our survey, only 12.9 percent of investors who work with advisors wish to hold longer or more frequent advisor meetings.
Keeping these investor preferences in mind, advisors can change their service models so that all clients can be provided with the specific experiences they want. For example, if your service model involves meeting with clients for annual reviews every December or January, there are only about 40 working days in those two months due to the holidays, which makes it very difficult to conduct annual reviews with the majority of clients (let alone all of them).
However, if you utilize virtual tools to conduct short periodic check-ins with clients throughout the year, you can become much more scalable as an advisor. This method would enable you to provide the necessary attention to all of your clients without the long annual or quarterly reviews that most clients don’t find to be an optimal experience.
To be sure you are providing a personalized experience for each client, you can ask them if they prefer periodic check-ins or quarterly/annual reviews, and then build your relationships accordingly.
In a world where consumers expect a highly customized experience, regardless of whether they shop online or in stores, advisors need to be able to understand and deliver the type of experience their clients want. A service model designed to primarily benefit an advisor’s business won’t cut it anymore. In order to survive over the long term, advisors have to operate under a model where clients can receive the service experience they find most convenient and useful, regardless of their investable assets and net worth. When your clients benefit, your business benefits.
David Lyon is CEO and founder of Oranj, a Chicago-based provider of digital wealth management solutions for financial advisors.