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Do You Have a Technology Segmentation Strategy?

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From the November 2016 issue of Investment Advisor.

It is common for advisors to have a client segmentation strategy, offering services that address clients’ specific needs based on their occupation, net worth or family situation. Do you take the same approach with how you offer your technology services? Too often, we simply provide the same technology platform to every client. This is a missed opportunity if your technology investments do not realize their fullest potential.

It is not hard to create a technology segmentation strategy, but it does require some thought. You need to evaluate not only the technology you can deploy, but also the types of clients you have now and the type you want to have in the future.

If you already have a client segmentation strategy, a first step is to add various technology solutions to the existing segmentation categories. Initially, you might think that all clients need performance reporting, financial planning and account aggregation. However, you could be overlooking opportunities to offer differentiated services within the technology solutions directly. For example, you could offer a more detailed reporting and reconciled account aggregation tool for certain segments of your client base. In addition, maybe you are willing to customize some of your technology to meet specific client needs within a segment.

You might expect that clients in each segment have different technology needs, and that these needs would directly influence why a particular client uses more or less of your technology solutions. It might be a red flag if a client placed in your “high value” segment isn’t using the tools offered by your firm. Technology segmentation can play a role as you target new client groups and their specific technology needs, too. Be ready for movement to occur between your technology segmentation groups. This will certainly happen, so it is important that it is an “additive” experience versus a complete change for the client. You want the experience to be like upgrading to the next iPhone — generally it is relatively easy to move your old data to the new device.

A well-defined technology segmentation strategy improves adoption rates when it is time to introduce new technology tools to your clients, as you can be much more deliberate in picking the right group of clients when you roll out a new feature. For firms that have several hundred clients or more, you should consider running a beta test with your selected client group prior to introducing the technology in a true production environment. This will help you gather valuable feedback that will ultimately influence how you move through the process and include your other client technology segments.

Your technology segmentation strategy can also include enhanced services that you offer directly to your clients. Similar to how companies offer employees expanded benefits beyond health care and insurance, you could do the same for your clients from a technology perspective. For example, advisors should have enough experience with cybersecurity best practices to share ideas with their clients. Or you might consider hiring an IT consultant to create a client-friendly communication program. For your best clients, you might even consider offering technology services and support through a consumer-focused company like Best Buy’s Geek Squad or Amazon Home Services. For as little as $10 per month, your client will have a resource to call for their technology questions. This is not a bad idea if you find that your firm is often the default “technology support” for your technology-challenged clients.

Finally, creating a technology segmentation strategy could actually help you reduce your technology expenses by allowing you to discontinue services to clients that aren’t important to them. You have client segmentation for a reason: to better and more efficiently serve your clients. Ultimately, you want to ensure that your technology segmentation strategy supports this goal.

— Read Technology Integration Critical to Compete With Wirehouses on ThinkAdvisor.