Simple Business Development Strategies for Professional Advisers

Products are tangible. You can see them, feel them and usually sample or test drive them before you buy. Services, on the other hand, are not. Typically it’s only after a service has been performed for you that you know if you like it, can see how it works, and you’re able to decide if it will solve your problem or produce the results you’re looking for.

When it comes to the provision of financial advice, there is a major shift taking place away from product-based transactional services and towards client-centric strategic advice. As with any change, there are early adopters, who have grasped this evolution, and moved ‘ahead of the pack’ however evidence suggests that there are still many who are struggling with this, and its implications for their existing business models. This mindset shift is however, one that the retail client is also yet to fully accept… Many examples exist of clients who struggle to accept the concept of a ‘fee for advice’ in the absence of a transaction (this will be the topic of a future article)

There is an old saying in marketing, ‘People do business with people they know, like and trust.’ This is particularly relevant for services, and thus with this in mind, below are some simple business development strategies for professional service providers:

• Be Inspiring:

How you come across and relate to a prospective client or centre of influence will often be the difference between an enquiry and a business relationship. When you’re genuine, positive and passionate, and display enthusiasm and confidence in your value proposition, prospective clients will find you inspiring and an engaging person to do business with.

• Have a professional online presence:

Having an online presence not only gives you credibility as a business, but it reduces your need to personally address frequently asked questions, over and over again. Although people often still rely on recommendations from people they know and trust (family/friends/colleagues) when choosing a service provider, a ‘Google’ or other online search is the most popular way people do their own research to help them choose among service providers. Ensure your online presence is modern, easy to navigate and clearly articulates your value proposition and ideal clientele.

• Encourage referrals and word-of-mouth business:

It’s often said that the best client is one that is referred from another ideal client.  While the author’s recent work involving a number of client surveys by professional services businesses indicates that many clients are prepared to refer, (particularly to a business that they trust and that provides a good service experience), asking for a referral is still something that many service professionals do not do often. Regularly ask for referrals from your existing clients and actively refer your clients to others whenever possible. This will help grow your network and encourage the people you’ve referred business to, to look out for business to refer to you.

• Form strategic alliances:

Create relationships with other business owners with a similar target market and ask them to refer their clients to your business when they notice an opportunity and offer to do the same for them.

• Become an expert in a particular niche:

When you’re viewed as an expert in something, often you will find that even people within your own profession/field will refer business to you when their clients need assistance that’s outside their area of expertise. Another benefit is that the media will often seek out your comments for news items.

• Speak at conferences or events:

Sharing your expertise with others through speaking is another way to be more visible and to demonstrate your credibility to potential clients. People are more likely to remember who you are once they’ve seen you speak at an event.

• Network with your target market or potential business referrers:

Choose networking events where you’ll either have an opportunity to meet your target clients or potential strategic alliance partners or referral sources and actively connect people whenever you see an opportunity to do so.

• Get published / Use Media:

Write articles and where possible publish them through multiple mediums. A newsletter, blog or even a regular column in a local newspaper will increase your credibility and encourage clients to want to do business with you. Prospective clients or centres of influence may peruse your blog to get a feel for your experience and knowledge.

• Follow up effectively:

After meeting a potential client or centre of influence, ensure that you follow up by arranging a subsequent meeting, phone call or coffee. Stay in contact by inviting them to join your newsletter mailing list or ask them to be your guest at an upcoming event. Whichever approach you employ, build a sales and marketing plan that you action easily and on a regular basis. Remember, it’s often said that the best time to be marketing is when you don’t need the business… If you’re always adding to the pipeline you will rarely find yourself short of opportunities.

While it’s not rocket science, and as outlined above there are many simple strategies one can employ to assist with the business development function, it is all too often the case that practitioners get caught up in their day to day work, in particular when things are busy, and don’t think about business development until things quieten down. Remember, business development requires lead time, and new clients take time to convert, so to reiterate, the best time to be marketing is when you don’t need the business. Keep it simple, and regular.

Client Segmentation

Many financial professionals have traditionally taken great pride in treating all their clients equally, and providing the same excellent service, regardless of their value to the firm. However, in a modern, competitive business environment, is this approach realistic? Regardless of whether one is an advisor with a mature practice (often reflected by a large book of clients and struggling to keep up service levels while remaining profitable), or an adviser with a relatively young practice that is looking to grow over the coming years, a more pragmatic approach to managing your clients is highly beneficial. Properly segmenting your book of business, or reviewing your segmentation framework is an extremely important element of robust business model.

Client segmentation can provide an excellent way to serve each tier of client, leaving you room to develop your most valuable clients while avoiding burnout. Categorizing your existing client relationships and developing internal service models for each one allows you to prioritize how your team’s time is spent. While some segmenting methods focus on the dollar value of each client, there are multiple approaches (some very simple, some much more complex) financial advisers and other financial professionals can take to evaluate clients. An ideal segmentation model remains flexible enough to evaluate each client’s present and future potential while clearly quantifying the cost to serve.

In brief, the purpose of client segmentation is to:

• Divide your existing client base into smaller segments that allow more efficient service
• Determine which segment(s) to target your business development efforts towards

Most financial advisors can easily name their top clients, but in order to segment a whole book, a more formal approach is required. In order to segment effectively, one needs to develop an intimate understanding of how much each client generates in revenue as well as be able to quantify the time and effort it takes to serve each client in order to develop an accurate measure of profitability for each.

There have been numerous articles and studies aimed at estimating average cost to serve various client demographics, but the reality is, costs to serve is dependent on a number of practice specific elements, and as such, undertaking a genuine costing exercise is beneficial for all business owners.

To obtain the information one needs to begin (or review) the segmentation process, consider the following questions:

1. How much revenue does each client generate?
2. What is the cost-to-serve for each client?
3. Which clients are most profitable?
4. What are the practices growth areas?
5. What qualities does practice’s ‘ideal’ client have?

Once adequate information has been collated for analysis, one needs to determine what metrics will be used to guide the segmentation process. Many advisors have historically used simple calculations based on funds under management (FUM). In an old world of commission-based revenue models, this was often sufficient, however in a new world of fee based advice, there are alternatives that are better suited to the revenue models of the modern practice, which can capture more detail about the current and potential relationships with each client.

Whichever methodology one chooses to employ, it is important that one allows enough flexibility in the model for special cases or niche clients that may offer opportunities for future business. The following are a few of the most common metrics the author sees used in segmentation methodologies:

1. Segment by Revenue to the Practice – This methodology is very popular with practices that employ an asset based remuneration model. Under this method, clients are segmented by the total revenue the practice receives from the client, and it will often result in a similar client breakdown to segmentation by assets under management. Similar to the assets under management methodology, there is potential to push a wealthy client into a lower service bracket if one purely considers revenue received and overlooks wealth not under advice. Whether it is the sole driver of the segmentation model or an overly to other metric, the revenue metric is one that should definitely be considered.
2. Segment by Total Client Net Worth. Segmenting clients by their total net worth, including assets held elsewhere is a popular way to segment a book, particularly among advisors who charge fees based on total wealth. For example, many HNW clients hold significant wealth in real estate, but may ask the advice of a financial professional, even though the assets are held away from the firm. The advantage of this system is that it doesn’t privilege clients with more assets under management over wealthy clients with significant outside assets.
3. Segment by Total Client Investable Assets. Another popular metric is to segment clients by total financial assets, including those held in outside accounts. Many clients choose to spread their financial assets among multiple advisors and investment accounts. One reason some do so is to maintain direct control over some portion of their wealth. The benefit of this segmentation approach is that it allows you to include assets that you could bring over.
4. Segment by Assets Under Management. This is the simplest and most common approach used by advisors to segment their books. Under this method, clients are segmented by the financial assets directly held by your firm. The obvious downside of this metric is that you will not account for client assets held elsewhere, potentially pushing a wealthy client into a lower service bracket and risking the future of the client relationship.
5. Include other metrics. While the metrics listed above use various measures of client assets, there are many more that one can use. Here are a few more metrics one should keep in mind:
   • Complexity of client advice
   • Type of Advice
   • Client Life Stage
   • Advocacy (Number of referrals provided)
   • Professional or important affiliation
   • Cost to serve (be sure to get input from all client-facing members of your team)

A simple segmentation matrix is outlined below as an example:

A client segmentation project is an excellent way to determine a practices most profitable clients, evaluate where to focus marketing efforts, and quantify how much effort is required to serve the client. While many financial professionals spend most of their time and money on general business development efforts, a targeted approach can increase one’s return on marketing investments, and improve the overall profitability of the business.