Appropriate client profiling can help you increase your productivity and effectiveness. In this article, Jigar Parekh, Zonal Head - Alternate Channels, Prudent CAS Ltd, shares some useful thoughts on client profiling
Client profiling is one of the most crucial and important parts of any business. Categorizing clients on the basis of some pre defined criteria helps in designing a more effective marketing strategy. It not only saves time but also helps in increasing the business from existing and prospective clients.
Even though client profiling is very useful, it is not done by a majority of IFAs. In many cases this is due to lack of knowledge about how useful it could be.
IFA can categorize his/her clients on various parameters. Once the client is identified, IFA can decide his/her strategy for dealing with the clients accordingly. We would discuss two important categories in this article.
Category of clients:
1. Advisory Based:
These are clients who are seeking the full advice of IFA before taking any financial decision. They rely on the IFA for any decisions regarding their personal finance and investments.
When it comes to advisory based clients, the main focus of IFA should be on advising on all possible aspects of personal finance and investment of the client because the client relies on the IFA. They would be much more loyal to one IFA and would be very much reluctant to change their financial advisor. Proper advice and using the financial planning would help gaining the loyalty of this set of clients. For the growth of business in long term the advisory based clients are the most suitable.
2. Transaction Based:
These clients are more self-reliant as far as the investment and personal finance related decisions are concerned. More than advice, they need the IFA just for the assisting him/her for doing the transaction.
If the client is transaction based client, IFA should not waste time in sharing much knowledge and advising the client because that would be nothing but the waste of time and that might also result into losing client. This kind of a client is very happy when he finds that his/her IFA is punctual in completing transactions and providing the photocopies and acknowledgement slips and doing the proper database management for them. They would be helpful in generation of revenue in short run.
Identifying the Client:
Identifying the client type requires a specific skill as there is no readymade method which can help you doing so. IFA need to observe the client during personal meeting very closely and try to figure out whether the client is advisory or transaction based. It is easy to categorise the existing clients but it’s very difficult to judge the prospective client whom you are meeting for first time.
Let me illustrate this with an example. Let us say, an IFA is travelling on a train. During the conversation with a fellow passenger, he is asked to suggest some good funds. IFA gave him choices. First choice was that the IFA would ask him couple of questions about the time horizon of investment and expected return and then would suggest a few suitable funds. The second choice IFA gave him was that the he would require much more information like the objective of Investment, the future financial goals, current investments and liabilities etc., and then he would suggest the investments which are best suitable for him. If passenger opts for the firstt choice then he is transaction based client or otherwise he is advisory based.
