A smart way to modernize a financial planning practice is by systematically determining one’s ideal client through segmentation and then developing a niche around that profile.

“The challenge for advisors is that they must differentiate themselves from the competition,” says John Bowen, founder and chief executive of CEG Worldwide in San Martin, California, who coaches top advisors. “To accomplish this, they need to segment and monetize their practices effectively, which means understanding who they should work with, so they can add value that brands them as the go-to advisor.”

When segmenting clients, advisors should be thoughtful of who they want to work with, Bowen says.

A recent CEG Worldwide survey asked 803 advisors who they wanted to work with, and four-fifths said successful small-business owners.

“If you want to move upmarket and work with the wealthy, you should follow their lead,” Bowen says. “This puts you right in the line of money with over 2.2 million households of successful business owners with $1 million or more of investable assets.”

Many advisors segment clients by total assets under management, revenue, future revenue potential, centers of influence potential, and ability to refer clients.

But Erin Tamberella, founder of coaching Executive Transformations in Pensacola, Florida, and the author of Plateau to Pinnacle: 9 Secrets of a Million Dollar Financial Advisor (Mill City Press, 2015), thinks that this kind of book segmentation is only an initial step.

She helps advisors identify their “natural clients,” or those who are a natural fit and the type of people they really want to build their books around.

“I have them set lunches with some of these ‘natural clients’ to pick their brains on how they can not just get a referral here and there, but how they can really establish themselves as the advisor to this particular group of people,” Tamberella says.

Katherine Vessenes, a CFP and the president of Vestment Advisors in Chanhassen, Minnesota, segments clients, but has “gotten much more picky about bringing them on.”

“If I take on a client who is very high maintenance or very unpleasant, it’s a ton more work for the team and it’s not as profitable – or fun,” she says. “If a person is not a good fit for us, and I can frequently tell in the first meeting, I don’t take them on as a client.”

If a prospect has been referred to her by a good existing client, Vessenes sometimes refers that person to someone else on the team, particularly younger advisors who need to build their books of business.

“I always hold an initial meeting with a person who has been referred by a beloved client, as a courtesy,” she says.

“If we don’t end up taking them, then I can tell the referrer that I met with their friend and tried to do as much as I could for them in the initial meeting. I have never had a referrer be upset if we don’t take on their friend,” Vessenes says.

This story is part of a 30-30 series on savvy ideas on modernizing your practice.

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Katie Kuehner-Hebert

Katie Kuehner-Hebert is a freelance writer in Running Springs, Calif. She has contributed to American Banker, Risk & Insurance and Human Resource Executive.