Segment and target for success

In these uncertain economic times, many businesses, including the practices of thousands of financial advisers, are struggling.

Although asset values are up from their financial crisis lows, many clients are taking withdrawals from their accounts to pay expenses, lowering assets under management. At the same time, expenses are rising.

As a result, many advisers have made client acquisition a top priority.

When times are tough, the tendency is to take on any client you can. In the long run, however, this method of client acquisition can be detrimental to your bottom line, as well as to your psyche.

Advisers who build a niche and stick with it not only brand themselves as experts in their field, they also tend to have healthier P&Ls.

This doesn’t mean narrowing your focus so much that only a small sliver of people qualify as prospects. For most advisers, it is as simple as determining who you want to have as a client and who you don’t.

A wonderful client of ours, Steve, a 20-plus-year industry veteran, personifies this example. Although always great at acquiring new clients, his business was still not at the level he desired.

SUBPAR CLIENTS

During an initial strategy session, we uncovered that while Steve’s calendar was packed, 80% of his client meetings were with people who fell far below his definition of an ideal client.

He had been working to fill his calendar and his practice, yet had completely neglected target marketing. Once we developed a strategy focused on prospecting and marketing to his ideal prospect — which included a social-media component and ensured that none of his other clients or referrals were neglected — Steve quickly was able to make changes that resulted in a very positive bottom-line result.

In short, Steve is bringing in the same number of new clients, but they are much larger.

Here are a few lessons from his experience:

Target your marketing. The importance of having a clearly defined target market can’t be overstated. Look at your top clients, not only the wealthiest but also the ones with whom you most enjoy working. What qualities do they have (income, net worth, occupations, ages, families, referral habits, etc.). Compile a list of the characteristics you would like to see in your ideal client.

Segment your client base. Based on your target market, determine what your A+ and A-level clients should look like, as you should concentrate your active prospecting and service primarily on your top tier. Also spell out the criteria for B and C clients, as they still will be part of your client mix. This segmentation process not only will help your prospecting efforts, it will be valuable to you as you develop client loyalty initiatives.

Partner up. Most the resistance we get to segmentation comes from the fear of turning prospects away. The good news is, you don’t have to. Refer those prospects to a junior associate at your firm. Further, if your calendar is filled with client review meeting with B and C clients, consider bringing on a junior adviser to bridge the gap. Your clients will receive the service you promised, and you will free up time to work with top-tier individuals.

Start the year off right. The first quarter is the perfect time to prospect with top clients and centers of influence. Let them know that you are taking on new clients, and share with them precisely the type of client to whom you would like to be introduced.

Leverage social media. With clearly defined target markets, you are poised to gain referrals to the type of client who matches your expertise and with whom you will enjoy working. Social media provides the best ways to get introduced to these prospects. Using LinkedIn and other professional social-networking sites should be made part of your routine. Conduct advanced searches using your target market criteria, then determine who in your network can make the introduction.

For too long, advisers have been happily accepting as clients anyone who comes their way. New advisers trying to gain traction may have no other choice, but for the majority of seasoned advisers, and even most new advisers, being selective not only brings greater professional satisfaction but also produces a more robust and profitable practice. Why not give it a try?

Kristin Andree, who can be reached at [email protected], is president of Andree Media & Consulting.