At Axial Financial Group in Burlington, Mass., clients are divided into three groups: A, for those with assets under management of $1 million or more; B, $500,000 to $1 million; and C, less than $500,000, with each group receiving a different level of service.

The arrangement works well, says Paul E. Miller, the company’s managing principal and portfolio management director. But it was no small job to create and implement it.

“Segmenting is an all-hands-on-deck effort,” Miller says. “It starts with strategic planning and risk assessment. Then it takes the better part of a year to a year and a half of constantly reinforcing what you’re doing, both internally and externally.”

Yet Miller thinks the time was well spent. He’s among a host of advisors who advocate segmenting clients: dividing them into groups by whatever metrics make sense, then treating those groups differently as a way to improve both a planning practice and its clients’ experiences.

“The planners who set segments and stick to them without a doubt benefit,” says Christine Gaze, president of Purpose Consulting Group in New York. “Clients feel their conviction, and that leads to goodwill and referrals. It creates clarity around prioritization and around the client experience.”

Segmenting clients is a way to increase revenue and improve practice efficiency — giving high- and low-complexity clients the services they need, and charging them accordingly.

Segmenting can also help set a positive cultural tone for a planning firm, weed out undesirable clients, engage and keep a more diverse client base, plus create a plan for planner training, business continuity and succession.

Yet while the value of segmentation is fairly noncontroversial, the details can be critical. When should a planner segment out various clients? What are the right criteria for each group, and what services should each group receive?

The answers are as various as the practices that employ them.


“The way the model is set up in the industry, when you first start out as an advisor, you try to get as many clients as you can, focusing on assets under management and revenue,” Gaze explains. As a practice grows, however, it gets difficult to give each client the same level of service. 

A segmentation strategy often begins by looking at the firm’s clients and considering the natural financial breaking points. But some planners may want to consider other criteria.

“Eighty to 90% of business comes from referrals, but planners rarely count the number and dollar value of referrals,” Gaze says. A planner might choose to quantify referrals by keeping track of their source and outcome, then place clients who give valuable referrals in a higher segment than if measured only by assets.

She also suggests that planners be transparent about their segmenting strategy because it gives clients an impetus to eventually invest more money with the practice. “Consider how to handle these people so that when they have a windfall, they don’t feel as if they should then graduate from your practice,” Gaze says.


At the most basic level, segmentation offers higher-bracket clients more planning time, access to more senior planners or a combination of the two.

Relationships can be comprehensive or modular, says Kol Birke, a financial behavioral specialist at Commonwealth Financial Network. “Rather than cutting out small clients, it can work for some practices to have one fee for an investment plan, another fee for a financial planning relationship,” he says. “It lets your clients self-select to taking up more of your time and paying for it, or ramping down.”

One such tiered plan might offer investment-only service, basic financial planning or comprehensive planning — each with a different price, meeting frequency and time investment from both planner and client.

“The trend seems to be that you charge a fee for assets under management, which declines as the assets go up,” Birke says. “You also charge a financial planning fee that depends on complexity. The vast majority of advisors forgive the financial planning fee with sufficient assets under management.” That level varies, he says, depending on how much time the advisor spends on the relationship and how much compensation she feels is fair.


Nicholas Cosentino, president and CEO of Financial Foundations in Framingham, Mass., says his firm segments both service and fees the way a law firm might — based largely on the seniority of the planners doing the work.

The company pairs up a senior and an associate advisor for each client, with the junior partner learning from the senior while also gradually handling more tasks, questions and backup. But not all senior advisors are created equal. “The more complicated the situation, the more senior the advisor,” Cosentino says.

Clients with more complex financial lives pay a higher hourly planning fee to access the most senior advisors, as well as asset management charges, billed as a percentage of AUM.

The arrangement has a human capital benefit as well, Cosentino says: “I’m bringing on younger people and building longevity into my organization. This is my succession plan.”

Miller’s Axial uses another version of the time-seniority mix. The top client group gets its planning from one of the firm’s co-founders or senior advisors. Other groups get help from less senior professionals. “At our A and B levels, clients get a full financial plan,” Miller says. “At the C level, it’s less financial planning and more asset management. We might deal with things that come up, but the service isn’t as proactive.”

Clients in the top two segments might get two to three reviews annually. The firm might also provide education about financial strategies, meet with client attorneys and accountants and make sure to-do lists are done.

Fees are customized, but all clients pay a percentage of assets under management. Wealthier clients pay lower rates, but higher totals.

Miller’s firm centrally manages portfolio models and incorporates recommendations at all client levels. “It’s not that the highest-net-worth clients get the benefit of a bias that we like, and the lowest-net-worth clients don’t,” he says.


Sometimes advisors need to go beyond segmenting. When Justin Waller, a planner with the H Group in Chico, Calif., started his practice in 2000, he says, “I worked with anyone who would fog a mirror. When you’re a beginner, you ... take what you can get.”

In 2009, he had 243 clients and managed about $47 million. But the following year, Waller was recruited to work with another firm; the workload dictated that he couldn’t take all his clients with him, so he trimmed the list and segmented his services. A year later, he moved back into a solo practice, but kept his list just as lean.

He now works with closer to 60 clients, he says — but his net income is actually larger, because he needs a smaller office suite and support staff. “I wanted to make sure that I was working with clients who I looked forward to working with,” he says.

Ingrid Case, a Financial Planning contributing writer in Minneapolis, is a former editor at Bloomberg News and author of Your Own Two Feet (and How to Stand on Them): Surviving and Thriving After Graduation.

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