Segmentation: The Key to Success

To build a strong service proposition, it has become evident that most IFA’s not only need to ensure the advice process works properly but that the client is getting the appropriate service. As advisory firms start to change their business model in light of the impending Retail Distribution Review, they need to consider a robust approach to managing client relationships and this approach should be built around their Contact Strategy and Marketing Plan.

1st – The Exchange have published their white paper research on the “Future of Distribution” in the financial services marketplace. This research highlights over 30% of the FSA regulated firms surveyed were of the opinion that Client Segmentation was the business area which required most change. It also highlights 51% of the firms claimed by 2012 the focus would be on face to face advice for High Net Worth Clients.

Developing the right approach to client relationship management will help demonstrate to the client the value of the relationship with the IFA and assist in building long term relationships. This is what lies at the heart of relationship marketing and is why Client Segmentation is so important.

Initially it will be necessary to consider the structure of your client base. Once the groupings have been decided you then need to start the communication process with the clients. As the relationship develops with the client and their circumstances change it will be necessary to review the client segments.

The challenge for the IFA today is to accurately segment their client base. Subjective segments based around the last time they saw a client or what they bought is not enough. It is also important to distinguish between segmenting a client base to understand the financial behaviour of a client and using basic client information to flag a birthday or policy anniversary.

Identifying High Net Worth clients will become more business critical as will identifying other types of clients who will become high net worth in the future. Technology has an important part to play in this process to ensure the segmentation exercise can be done as time efficiently as possible.

The ideal position is an approach which allows the IFA to produce an un-biased segmentation of their client bank and then measures ongoing customer satisfaction to not only demonstrate a client is being treated fairly but also as a means of continually shaping service proposition, generating new business and obtaining introductions to new clients.