Journal of Financial Planning: January 2024
Greg Opitz is an executive business coach at Carson Coaching (www.carsoncoaching.com). He formerly served as managing director of certification services at the Certified Financial Planner Board of Standards. He likes to say he spent four years educating advisers, seven years certifying them, and now he helps them enhance their business and their lives. Carson Coaching is the official coaching partner of the Financial Planning Association.
I think about how there are so many things in this profession that are simple and basic, but hugely powerful. Then I think about how things evolve and mature and become even more impactful if you implement and execute them at a high level. Client segmentation is an example of this.
Many of you already consider the big five in client segmentation (and if you don’t, we’re taking a deeper dive later in the article): (1) amount of current revenue; (2) amount of current assets; (3) potential future assets; (4) whether they are a center of influence; and (5) how much you like working with them.
Those are generally the five things we build our client segmentation around. But with that in mind, there is a sixth element that is important to enhance your client segmentation process: do you have a relationship with both spouses and all the family members? Meaning are you connecting with both partners and all the family members—especially the daughters.
At our company’s conference this year, our Chief Strategy Officer Burt White took to the stage to talk about demographic trends and shifts. A few notable trends he mentioned included that women are more than 50 percent of the population (Statista 2023), they make up more of the college-educated workforce (Shmerling 2020), they live longer than men (Pew Trusts 2023), and in the next decade they will control $30 trillion in assets (Baghai, Howard, Prakash, and Zucker 2020).
Given that, I love to use the word “intentional” to describe how your client segmentation process should go. As a coach, I use this word more and more frequently. How intentional are you in really focusing on the women in your client relationships—the female clients you have now and the women in the opposite-sex couples you serve?
Being intentional with this next generation of clients ties together successful client segmentation, your value proposition, and the client experience that you want to deliver.
The Sixth Element: The Intentionality Behind Both and All
Many of my clients have shared stories with me about how they are intentionally focusing on the women in their couple clients. One member said, “When the couple comes in, I always greet the woman first. We give her a hug first, say hi to her first, put her at the prime spot in the table, or if we have a round table, she sits to my right.”
The point is that this adviser was being more intentional in making sure the female client is the major focus and understands that they value her and the value that they provide, which is hopefully centered around goals-based planning.
Intentionally focusing on your female clients is critical. If you are a female adviser or if you have female advisers on your team, even better; you can better connect with them. Many of you have heard me say that the perfect adviser is a female CFP® professional who was a psychology major. First, women are just better advisers than men. They have better emotional intelligence and they’re better at planning. And women who have a background in psychology in particular have superior emotional intelligence. Plus, CFP® professionals are competent.
Harvard Business School says emotional intelligence, or EQ, is your ability to be aware of and manage your emotions (Landry 2019). But I think about it as someone who understands people and helps them avoid doing the worst things at the worst time and who understands behavioral finance, has empathy, listens well, and connects with people.
Whether you’re a male or female adviser, you may have female advisers on your team. I suggest you get them involved in a more intentional way with the wives and the daughters of your best clients. Being intentional in this way can make it so that as you, unfortunately, have male clients who pass away, it can be a revenue boost, not a detriment to your firm.
Business Acumen in Times of Loss
Adding the sixth element that helps you explore whether you are close to both partners in a client relationship and their heirs is about having business acumen—even in times of sadness and loss.
I never want to minimize the death of a client because for many of you, your clients are more longtime friends than clients. I know how difficult it is for many of you when clients pass away. With that said, you still want to apply business acumen when it happens.
Sometimes when a client passes away, it’s not in the best interest of the firm to continue to work with the spouse or the children for several reasons. Maybe you don’t have a relationship with the spouse, or you don’t like them, or the assets will be divided up into multiple accounts and it wouldn’t be beneficial to the firm to keep them.
So you have to ask yourself: when a client’s spouse does pass away, will you maintain a relationship with the surviving spouse? For many of you, the answer is yes.
A coaching client of mine told me that last year was a rough year for them emotionally because six of their clients passed away. However, he noted, “In all six cases, we’re now generating more revenue than we were before the person passed away. Why? Because we’re picking up all the assets from the surviving spouse. We’re getting the sons and daughters to maintain accounts and move their other accounts over to us. And all the life insurance proceeds are coming to us because the surviving spouse and children are moving their accounts over to us.”
If you have good relationships with the couple and the children, you’re including them in the planning, and you’re thinking about them in an intentional way, you can keep existing business and grow your business.
Client segmentation is connected to planning. It’s connected to the great story you’re telling through planning and developing relationships with them.
A Dive into the Big Five
We briefly touched on the big five in client segmentation in the beginning, and we spent the first part of this article on the added sixth element of being more intentional in serving both members of a couple and all members of the family. But let’s take a deeper dive into the big five—the first three of which are quantitative and the last two are more qualitative:
(1) Amount of current revenue and (2) amount of current assets. This is easy information to pull from your broker–dealer report. This shows you the amount of revenue and amount of assets that your existing clients have.
(3) Potential future assets. You get this quantitative number because you’re doing great planning, and you know your clients. You know that they have a business. You know they have a 401(k) when they retire. You know they have a piece of land they’re going to sell or an inheritance around the corner. You know those things because you’ve done amazing planning and built those relationships.
Oftentimes, the greenest grass is right below your own feet. For many of you, this third item on the big five is the greenest grass you’re ever going to find. Your clients already like and value you. This item represents the wallet share capture, which is still about 50 percent of new business (revenue) in this industry.
You want to intentionally focus on other assets out there that you can get from existing clients. That’s why segmentation is so important, and why this third item is so critical: it’s going to generate business growth. But that doesn’t happen magically. It only happens if you know it’s there. It happens because you water the grass with the great relationship—that’s where the grass is greenest. This third part is where you do the harvesting.
(4) Centers of influence. This segment is those clients who refer other people. Around four out of every 10 clients can be a good center of influence; if they know other people like themselves and are willing to refer, you want to invite them to your client events, ask for referrals, and invite them to serve on your adviser council so you can replicate those folks.
This is your organic growth strategy to generate new assets because the majority of new assets for your business are likely to come from referrals and wallet share from existing clients. Those two items coupled together will likely be a source of 80 to 90 percent of new business.
(5) How much you like them. Life is too short to work with people you don’t like. I always think it’s good to put down and categorize people that you really like—the people you see more as friends than clients.
Keep It Simple
I’m a big fan of keeping it simple. William of Ockham is often attributed with the Occam’s Razor principle, which states that in most cases, the simplest idea is the best answer. So when it comes to client segmentation, keep it simple. Take the original big five of client segmentation and add in the sixth element to better connect with both partners and their families.
Successful client segmentation is about building and cultivating relationships. You can become the trusted adviser both for your current clients and the next generation of clients.
Strategy is easy and execution is hard. This is still an execution industry. None of the big six is strategically brilliant. But this is a great example of something that everybody can do—there’s no reason anybody reading this article shouldn’t be doing this. This isn’t beyond anybody’s ability. This is stuff everybody can implement and benefit from if you just do it.
References
Baghai, Pooneh, Olivia Howard, Lakshmi Prakash, and Jill Zucker. 2020, July 29. “Women as the Next Wave of Growth in US Wealth Management.” McKinsey and Company. www.mckinsey.com/industries/financial-services/our-insights/women-as-the-next-wave-of-growth-in-us-wealth-management.
Landry, Lauren. 2019, April 3. “Why Emotional Intelligence Is Important in Leadership.” Harvard Business School. https://online.hbs.edu/blog/post/emotional-intelligence-in-leadership.
Pew Trusts. 2023, February 27. “Women Now Outnumber Men in The U.S. College-Educated Labor Force.” www.pewtrusts.org/en/trust/archive/winter-2023/women-now-outnumber-men-in-the-us-college-educated-labor-force.
Shmerling, Robert M. 2020, June 22. “Why Men Often Die Earlier Than Women.” Harvard Health Publishing. www.health.harvard.edu/blog/why-men-often-die-earlier-than-women-201602199137.
Statista. 2023, October 6. “Total Population in the United States by Gender from 2010 to 2027.” www.statista.com/statistics/737923/us-population-by-gender/.