The importance of segmenting clients into different tiers (e.g., A, B, and C clients) has long been discussed in the industry, along with different ways to segment those clients on criteria ranging from revenue and profits to referrals and the ease of working with them. The concept is relatively straightforward: to improve the efficiency and profitability of the firm by appropriately matching the depth and level of services to the client's value to the firm.
Yet despite the prevalence of the advice to segment clients, there is remarkably little written about how exactly to differentiate those tiers of service. After all, if financial planning is "holistic" by nature, it's not exactly conducive to higher and lower service tiers. A doctor that just does "half a check-up" for C patients would be guilty of malpractice, and for many financial planners there is concern of similar risks to do a less-than-complete job for clients.
Nonetheless, there are ways to effectively segment clients without giving bad or "incomplete" advice. This can be done either by simply defining and limiting the scope of the engagement in the first place, adding more services or perks for top-tier clients (as opposed to "taking away" from bottom-tier clients), or just differentiating in how those services are delivered and how much additional support is provided along the way. Later in this post, we'll provide a sample of what a segmented client service offering might look like when it's all put together.
Segmenting Through Service and Delivery
When aiming to differentiate services across segmented client tiers – i.e., what will be done for "A" clients that won't be done for "B" and "C" clients – the first opportunity is to vary what services are actually offered (and at what cost), who delivers them and how they are delivered.
For instance, an advisory firm might charge "C" clients for financial planning services on an hourly as-needed basis, but provide financial planning for a flat (quarterly or monthly) ongoing retainer fee for "A" and "B" clients. Or a firm that charges AUM fees might charge separately for financial planning services for "B" and "C" clients (recognizing that may limit how many clients use it), but include financial planning in the AUM fees for "A" clients to encourage them to utilize the service (and get value from it).
Another way to segment client service – similar to how it is done in many other industries – is based on the experience level of the advisor (and/or operations staff) doing the servicing. For instance, "C" clients might work with the firm's newest advisors (implicitly having less experience), "B" clients might work primarily with one of the firm's more senior staff financial planners, but "A" clients can have access to a partner (in a larger advisory firm) and senior advisor team. Or "A" clients might be serviced by the most experienced member of the operations team, who provides a higher-touch service, while "B" and "C" clients are served by a pooled operations staff member or team.
Along similar lines, firms can also differentiate across segments by limiting the scope of the financial plan engagement itself. For instance, "C" clients get an accumulation/decumulation plan and are referred out to an insurance agent and estate attorney (for insurance and estate assistance); "B" clients get a full comprehensive plan including a review of insurance policies and the current estate plan, along with tax planning support, and are then referred out to an insurance agent or estate attorney or accountant for implementation; and for "A" clients, the (senior) advisor will review all insurance, tax, and estate planning documents, along with P&C coverage, and go along with the client to the meetings with the insurance agents, estate attorney, and accountant to act as the central quarterback for the entire process.
For some firms, the segmented differentiation in service may come in how often the advisor meets with clients, and/or how meetings are done. For instance, "C" clients get one in-person review meeting and one (outbound) phone call per year, with email access with a 72-hour response time; "B" clients get two in-person review meetings, four (outbound) phone calls, and 24-hour email responses; and "A" clients get up to four in-person review meetings, monthly (outbound) phone calls, and unlimited telephone and same-day email responses on demand/as needed.
Firms might also differentiate in how those "in-person" meetings happen; for instance, "B" and "C" clients might have meetings virtually (e.g., Skype or GoToMeeting) or in the advisor's office, but for "A" clients the advisor will come to meet at the client's desired location.
Segmenting Advisory Clients With Perks
Beyond deep differences in client service levels and delivery, another way to look at segmenting clients is by providing forms of "perks" – in other words, rather than focusing on what will not be done for "C" clients, the point is to focus on what else can be done in addition for "A" clients (recognizing that some level of client perks can be a positive for improving retention and driving referrals at all tiers of the practice!).
