Should you give all of your clients the exact same level of service? Even if you wanted to, would it be best for your practice?
Instead, consider segmenting your client base. “Advisors talk about it, but very few actually do it,” says Mike Greene, senior vice president of the Advisor Business Development Group and Financial Planning for Ameriprise Financial Services.
Many advisors simply don’t know how to offer different levels of service, says Ron Carson, founder of Peak Advisor Alliance.
First, work through a segmenting exercise to separate your very best clients from the rest. Use the segmenting worksheets provided by Loring Ward and Peak Advisor Alliance.
80/20 Rule
Steve Atkinson, executive vice president of Advisor Relations for Loring Ward, recommends segmenting clients using the “80/20 rule” -- that 80% of effects come from 20% of causes. (In this case, the argument is that the majority of your revenue comes from a smaller group of top clients.)
Mathias Hitchcock, vice president of practice management and consulting for Fidelity Investments, says that generally the top 20% of your clients will control about 60% of assets under management, while the bottom 20% will only control about 5%. Another way to think about it: The average account size of top clients could be 12 times that of your bottom clients.
Whatever the breakdown, segmenting your clients can be illuminating. “This analysis will help spur thinking on segmented service models, given these often drastic differences in clients served,” Hitchcock says.
Next, think about how to work with these top clients. “Once you know the experience that you want for your very best client, you can adopt different ways of serving the different segments that you already have,” says Greene.
Communication is one area where you can offer different levels of service. “When you know which clients are bringing in the majority of your revenue, you can construct an effective client communications strategy to ensure you regularly keep in touch in a variety of ways with your top clients,” Atkinson says.
Segment by Age
Another way to segment your clients is based on asset concentration by age, says Hitchcock. Divide your clients into age groups -- under 30, 30-49, 50-69 and over 70, for example -- then calculate the percentage of your firm’s AUM controlled by each group.
Why does age matter? “Older clients tend to be wealthier, making them more attractive,” Hitchcock says, “But having too many clients over 70 can be risky, as they will tend to be in distribution mode.”
The main benefit of segmenting your client base is increased efficiency. Advisors who do this can look forward to organized client communication, increased productivity, the ability to set account minimums and the opportunity to further discover strengths and opportunities, says Carson.
“With this exercise you can really see who your clients are and develop realistic expectations for the amount of time you should be spending with them.” Atkinson says.

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