Segmentation of clients is essential as it brings down the cost of servicing and increase the efficiency level of the IFA’s set up.
Aggressive batsmen are not necessarily the most successful batsmen. In fact, the most successful - the highest run getters have been those who have left more deliveries than they played.
Some companies are very selective while acquiring clients and many of them make it very clear who they want as their clients. At the same time they try to give a subtle message to those who they don’t want as their clients e.g. television ads of luxury homes, high end cars, exotic locations etc.
Does this strategy work in financial industry as well? The answer is ‘YES’. Private banks communicate this very clearly. For instance, HDFC Bank has a normal savings account and depending on the relationship size, they upgrade the customer to classic, preferred, imperia and private banking etc. The communication is very clear to the clients - depending on the size, the facilities change.
The bigger the relationship, better are the resources available to them. There are few banks which just don’t onboard clients where servicing client is not profitable.
How is all this relevant to an IFA’s business?
People for the last 10-15 years have been in the race of acquiring new clients. It is an ongoing process, where they keep acquiring the new ones and keep losing the old ones as the unhappy client moves out because of a variety of reasons. I also believe that prospecting has to be a regular thing but not at the cost of losing the old clients. Instead, if the relationship is nurtured in a way that irrespective of market conditions the relationship grows and brings in new prospects, that’s a great situation to be in.
Can an IFA decide who is my client and should one define the categorization of clients? I strongly believe ‘YES’. It brings down the cost of servicing and increase the efficiency level of the set up. It is very important to categorize the clients. Your preferred customer should get preferred treatment. That relationship needs to be nurtured properly; the references of such clients are strong references.
If an IFA is able to decide what kind of clients he/she deals with it becomes easier to acquire those clients. At the same time it’s better to tell the prospect of your client segment. It helps in setting the right expectation from the day one and the size of relationship one wants to have over a period of time.
For categorization, one should look into the database and scan each and every existing relationship. The size of relationship at the beginning and the current size of the relationship need to be checked. If the size has not increased one should identify the reason and work on it; if it has grown then how one can strengthen it further. However the focus needs to be on strengthening. Rewarding those clients by value added services could be one of the ways.
It’s not that IFAs have not done these exercises before - I know a few IFAs who have implemented this strategy and today they have emerged as winners despite all odds. It is a process helps in growing the business/revenue irrespective of market conditions.
Segmentation of the clients is essential. Identify a prospect, acquire and nurture it. Give your business a professional look.
The views expressed in this article are solely of the author and do not necessarily reflect the views of Cafemutual.
