The way an adviser segments their clients depends on the individual business and client bank, says Alan Dick, partner at Forty Two Wealth Management, “although the reality is it will usually end up being a mix of several factors”.
“The old quick and dirty assets-over-£X doesn’t cut it. We aim to create a clear picture of what our ideal client looks like. We start by looking for clients that we actually like, respect and trust. We are going to have a long term relationship working together for many years so we want it to be based on mutual respect and fun.”
Mr Dick says he and his colleagues grouped clients by age groups, level of income, level of investible assets, net wealth, interests, location, career/occupation, while also considering things like their ability and willingness to refer, and “the things that keep them awake at night and the things they dream about”.
Phil Billingham, director at Phil Billingham Partnership, says its like “separating out a jigsaw puzzle”.
“You should look for the things in common. Certainly, profitability and income will be one factor, but look at relationships and where the client is in their life as well. Clients who are just ‘accumulating’ will have different needs than those who are at the point of retiring and need to pull an often complex set of circumstances together. Think of divorce or selling businesses as similar type of events.”
He also suggests it can be useful to take a ‘modal’ approach, using a cluster or scatter graph. You can then chart clients on an X and Y axis, and see which ones lie together.
To collect the necessary information from your clients, the financial planning approach is best, adds Mr Billingham. “Just ask. Seriously, clients will tell you almost everything – even the things you did not want to know.
“If, and only if, they understand you are asking not to sell them something, but to rather to understand them, and that the information will be considered, thought about and used for their benefit in some way.
“Questioning skills are old fashioned but valuable skills. Listening skills even more so.”
To ensure information is accurate, even the intangible hopes and fears, Mr Dick says his firm conducts at least one planning meeting with every client every year. Data is updated during and after the meeting and reflected back to the clients in the meeting minutes and/or a financial plan.
But you can only go so far with this, cautions Mr Billingham. “We don’t use clients to obtain anything to do with products and funds, we go straight to the provider with either a change of agent authority, or an information authority, depending where we are in the relationship.”
