Smart growth starts with the right clients

By Paul Bebber
22 November 2016

It’s the million (billion!) dollar question: how can you drive sustained growth while bolstering margins and profitability?

Success isn’t a question simply of adding assets and customers. It’s about smart growth.

Cost management can help. But that will only get you so far.

Ultimately, it comes down to serving the right clients better. It’s what wealth management has always been about. But now even more so. In this digitalised, information-burden age, customers are becoming ever more demanding about the speed and personalisation of service they receive.

To achieve a sustainable competitive advantage, you have to pinpoint your target market, then give them what they want, when they want it. Make clients feel valued. Foster trust and they will remain more loyal. Maybe even refer you to their family and friends.

So how do you do that?

We are all individuals

Customer segmentation. Which clients are most valuable? Can you offer them the right products and services via the right channels at the right time?

Sounds obvious, but it takes detailed analysis. To play to your strengths, you have to know what they are.

I see too many wealth managers still classifying clients according to traditional, limited methodologies, usually by grouping them into buckets based on AUM and the revenue they generate, then offering each segment a standardised menu of products and services.

This blanket approach doesn’t cut it anymore .

Instead, I’ve found the most effective segmentation models take into account a wider range of qualitative and quantitative factors. Elements like:

  • Total wealth
  • Demographics
  • Career status
  • Risk profile
  • Tax status
  • Preferred fee model
  • Communication preferences
  • Cost to serve

The Pareto principle

Armed with these insights, you can customise your offering to focus on delivering the right type and level of services for your segment sweet spots. From there you’ll be well-placed to differentiate your offering, justify your fees, capture a greater wallet share, and attract and retain clients.

Proper segmentation may not be easy. But can you afford not to do it?