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Can Typecasting Your Clients Grow Your Advisory Business?

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Changing the fundamental way you view your clients can be the key to boosting your business and breaking your business plateau. The Financial Planning Association (FPA) Business Solutions 2011 Conference, held March 3-5 in Boston, provided a number of tips for advisors who want to perk up their business. The strategies laid out at the conference centered on the common themes of segmenting a book of business and creating an ideal client profile.

Client Segmentation

Client segmentation–classifying clients based on how close they conform to your “ideal client”—“is one of the top priorities to driving profitability,” said TD Ameritrade Institutional’s director of product management, Mike Watson. Watson believes that creating a focused service model permits advisors to offer a narrower range of services, thus allowing them to better manage their time and ensure clients’ needs and expectations are met.

While client segmentation can be based on quantitative data, don’t take any shortcuts. Segmentation based merely on outward appearances can skew your client pool away from the ideal. For instance, if you have a client who is otherwise an ideal client, but who requires an extraordinary amount of attention or is generally difficult to interact with, you may be unable to provide satisfactory services to the client and may be losing valuable time and money.

Surrounding factors also must be taken into consideration. A small business owner of a hair salon who does business in a wealthy neighborhood may be more of an ideal client than a client who owns a large-scale business. For example, the value of potential referrals from


the salon owner may outweigh the value of the client who has a large, booming business, but is not a great referral source.

Ideal Client Profiles

To identify the ideal client, Dan Inveen, principal and director of research at FA Insight, suggests focusing on a variety of characteristics, including the client’s (1) level of investible assets; (2) life stage; (3) income; (4) occupation; (5) geographic location; (6) industry of employment; (7) specific technical advice needs; (8) specific affiliation; and (9) whether the client is a self-employed business owner.

(FA Insight is a partner of Investment Advisor and AdvisorOne in its research efforts; see this invitation to participate in its 2011 Study of advisory firms.)

Watson suggests using additional characteristics, such as the strength of the advisor-client relationship, referrals, trust, and future potential. He recommends that advisors rank clients on a sliding scale from 1 to 4 to assess which clients are more ideal than others.

A balance of these criteria can enable advisors to create clearly defined target markets, which increases efficiency and improves marketing success.

While also emphasizing the importance of creating ideal client profiles, Todd Fithian, managing partner of the Legacy Companies, explained that advisors must also be trustworthy and confident.  Generally, a trustworthy advisor is one who is credible, reliable, and understands his or her clients’ needs and expectations. A confident advisor is one who is trustworthy, has a clearly defined business vision and structure, is competent, and has a management system geared towards the desired outcomes of the advisor-client relationship.

To sum up, targeting your efforts by identifying the “ideal client” and segmenting your book of business can boost your productivity and streamline your efforts to reach your goals. It can also have the side-effect of increasing your satisfaction with your work and improving your work-life balance. 


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See also The Law Professor's blog at AdvisorFYI.