The Facts About Client Segmentation (and Why You Should Care)

The demand for greater levels of high-touch client service is costing advisors more than ever. It’s time to face the facts about client segmentation and learn how implementing a differentiated client service model benefits both you and your clients.

According to a YCharts1 survey of high-AUM investors, two-thirds say they hear from their advisor infrequently and 75% expect their advisor to reach out with regular proactive communication.

Unfortunately, many advisors still resort to old-school ways of servicing clients with infrequent in-person meetings and quarterly PDF investment reports. The key to success is to offer more proactive, high-touch outreach to clients. How can we do that in a scalable way to accommodate clients’ needs and wishes?

There’s really good news. The environment has never been better to put into place a differentiated client service model that offers frequent proactive outreach AND that is scalable.

It’s time to face the facts about the benefits of client segmentation and evaluate how implementing a differentiated client service model could benefit you and your clients.

Fact #1: Some clients are more profitable than others

You know all about the 80/20 rule: 80% of a firm’s revenue is driven by 20% of its clients. A Schwab study puts an even finer point on it: 38% of an RIA’s revenue comes from 7% of its clients on average2.

Profitability metrics should be a wake-up call for today’s investment professionals. Smart advisors realize the top 10% of customers are nearly 7 times more profitable than the bottom 10%. In fact, Fidelity’s robust RIA benchmarking research uncovers that 51% of an advisor’s clients are unprofitable3. To service those relationships the same way we take care of our top clients isn’t right - for our employees, ourselves, or even our clients.

Fact #2: Focusing on your most profitable clients yields the greatest results

Despite knowing that our revenue and profitability are heavily skewed toward a small segment of clients, most of us find it very difficult to implement a servicing program that aligns accordingly. If we are to effectively manage our client relationships and grow our business, we must develop a prudent, sensible approach that focuses on our most profitable clients.

The number of clients the average advisor has to serve jumped 32% (2014-2020)4. The only way to effectively succeed in managing that growth is to segment our clients AND tailor our services to each tier.

Creating a tiered approach to servicing clients brings value to an advisor’s business including:

  • Higher AUM
  • Improved profitability
  • Better growth
  • More high-value clients
  • Better referrals
  • Increased compensation

Based on Fidelity’s research, a 5-advisor firm could drive total compensation higher by $700K+ per year with client segmentation.5

Fact #3: Implementing a Differentiated Service Model (DSM) is the key to growing an advisor’s business

Scaling the delivery of client service is the holy grail for most professionals. A Google search for “how to effectively scale client service” yields over one billion results.

As a trusted investment professional, your business’s greatest asset is YOU. There is only so much of you to go around. Multiple studies show that the #1 pain point for advisors and a huge obstacle to growth and profitability is our inability to scale our services. This makes sense when you consider we spend two-thirds of our time on client activities.

New Technology Makes Client Segmentation Easier

Why do only 37% of advisors segment their business6, and far fewer actually link service to those client tiers? Likely because advisors are wired to provide the same service to all their clients and until recently the tools and technology to frequently touch clients haven’t been available.

Well, new tools exist now. And client expectations for how they want to be serviced are forever changed. The time is right to embrace a segmented client service model and prepare to grow.








7 Client activities includes meetings, meeting prep, client servicing tasks and other client-related activities.

Other actives includes investment management, administration, professional development, other non-client-related activities.

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