Client Segmentation – A key element in attracting more ideal clients

This is part of a series of blog posts in which Mark Bradley (as my co-author) and I will attempt to examine and unpack some of the common areas of practice management which financial advisers, who are often also business owners, need to act upon on as they strive to build and run a world class financial advice practice and deliver a superior client experience.

This article has been adapted from one that first appeared in the Trade Press publication.

Understanding your client base and attracting appropriate clients is key to business growth and sustainability. Adviser/client relationships should be mutually beneficial. As Seth Godin mentions in one of his books: “Everyone is not your customer.” Yet there are many advisers who spend little or no time segmenting their client bases or developing an ideal client profile.

Before delving into some of the practicalities of carrying out a segmentation exercise, it’s important to reflect on some of the potential benefits. While not an exhaustive list, the following are worth considering:

  • More enjoyable and focused client engagements
  • An emphasis on attracting appropriate clients
  • The development of an ideal client profile
  • Differentiated service levels per client segment
  • Greater business profitability
  • Operational efficiency (including differentiated service levels)
  • Happier clients
  • Referral generation

There are several factors to bear in mind when embarking on a client segmentation exercise. While there is no set rule, it should be repeated from time to time, perhaps every two or three years.

Profitability is a key element to consider. It is therefore important to understand how much it costs to both onboard and retain clients. The value of such an exercise should not be underestimated as it has benefits beyond segmentation.  

The lifetime value (LTV) of clients should also be taken into consideration when analysing a client base i.e. what the future profitability of clients may be. By way of example, a 90 year old client with significant assets under management (AUM) would appear to have a low LTV. In contrast, a 35 year old professional with less significant AUM but good career prospects may have a high LTV.

Segmentation is in the first instance an objective exercise, but it does require a subjective overlay at times. There are various methods that can be followed. Purely segmenting clients based on AUM doesn’t necessarily provide meaningful results so it’s worth considering monthly contributions, including for risk products, in addition to AUM.  

Another technique would be to use profitability as the only criteria. As indicated above, this would require clarity about the costs associated with onboarding and retaining a client (a comprehensive exercise in its own right).

Here’s an example that may provide clarity:

XYZ Wealth Managers is conducting a client segmentation exercise. They have decided to use Bronze, Silver, Gold and Platinum as classification categories.

Mr. Jones, a well-paid executive, has a strong relationship with his financial adviser, but doesn’t take up an excessive amount of the advisory firm’s time. Most of his significant investable assets are housed in his employer’s corporate retirement fund. The adviser would only ever manage these funds were Mr. Jones to leave his current employer and preserve the accumulated wealth or at retirement in 10 years’ time. Through the firm he makes ad hoc contributions to a smaller investment and pays for substantial risk cover. Mr. Jones passes on high quality referrals to the firm from time to time.  

The firm undertakes to categorise Mr. Jones, with the following being a likely outcome:

Based on annual revenue, Mr. Jones is classified as a Silver client. However, it does not cost much to look after Mr. Jones and as a wealthy individual who is likely to remain a client of the firm well into retirement, significant revenue will be generated in future. Substantial revenue is also being generated from the clients referred to XYZ Wealth Managers by Mr. Jones. The firm therefore decides to categorise and treat Mr. Jones as a Platinum client.

It is from the this exercise that one would develop an ideal client profile. Using the above example, XYZ Wealth Managers would generate a list of all its Platinum clients. There may only be 10 or 20, or perhaps just 5. The firm would indicate with which of their Platinum clients they most enjoy engaging. Once that list has been agreed, the next step is to identify which characteristics these ‘most enjoyed’ clients have in common. They may reflect a relatively narrow age band, one or more life stages, a specific occupation set, particular circumstances and problems the firm is adept at solving, etc.   

Importantly, once the segmentation exercise has been completed and an ideal client profile determined, make it known to everyone in the firm, but also to your ideal clients. There is nothing wrong with telling ideal clients that they are the type of client that the firm enjoys engaging with most and offers the greatest value. And beyond them, share with the firm’s strategic partners (accountants, attorneys, etc.) and referral sources who the firm is best positioned to assist.

Client segmentation and developing an ideal client profile are necessary steps in attempting to maximise resources and enhance business efficiencies. The result is improved client service, greater client loyalty, a business with more ideal clients and potentially happier advisers and staff. It may require some hard work, but the rewards make it worthwhile.    


If you are interested in participating in a series of idea sharing calls where we will discuss the topics contained in this blog post in more detail, where you can share your experiences with peers who are on different stages of their journey as a business, then please register your interest by emailing