Boosting Productivity

Financial professionals should, in our view, use a segmented approach to client service to create capacity and prioritize their most valuable client relationships.

The financial services industry faces significant challenges coming out of the COVID-19 pandemic. As markets grow increasingly difficult to navigate and client expectations evolve, we have seen that wealth managers feel greater pressure to adapt. Running a successful practice requires more time and bandwidth. To meet heightened demands, we believe wealth managers should think strategically about maintaining and enhancing productivity.

According to Cerulli Associates' survey of practice management professionals,¹ the most common productivity challenges identified are too many clients, ineffective process mapping, delegation, use of technology tools, and difficulty scaling services across client segments. Productivity hurdles can limit practice growth. To get ahead, wealth managers may need to minimize these strains on their capacity.

We have seen that most productive practices often prioritize proactive relationship management for their most valued clients and that a stratified client service model can help accomplish this. It reserves top-tier clients for senior wealth managers best equipped to seek out growth, allowing support staff to step up its client-facing activities, and technology to handle more administrative tasks.

In Cerulli Associates' survey,¹ advisors  identified capacity as a core issue for their practices.  Selectively limiting the client base can be difficult for wealth managers, particularly early in their careers. That’s when a practice may be less defined and capacity less of a concern. Taking on new clients who may not fit their practice can also be easy to justify. However, we have seen that,  as a practice grows, narrowing the focus and deploying time and resources more selectively becomes critical.

In our view, financial professionals should prioritize their most valuable (e.g., platinum) clients and empower junior team members to engage remaining clients. Relying on staff can potentially free up time to develop new client relationships and better serve target clients. Top clients may enjoy an elevated experience, and team members gain valuable professional development.

Segmenting clients and identifying who should receive the most proactive and high-touch support can help, in our experience, determine the right client service strategy. A client segmentation exercise typically begins by defining a target client type and identifying existing clients who fit that profile. A target client type can be based on many factors beyond just AUM or account size, including total household net worth, revenue generated, life stage, referrals, or behavioral tendencies. Advisors can then categorize their clients into tiers (e.g., platinum-gold-silver) and align each tier with an appropriate service model. Additionally, some wealth managers create client personas (e.g., business owners) for a unique subset of their client base that may share similar needs. This potentially allows for further tailoring of their approach.

Here's what the Practice Innovation Index has found to be common approaches to client service.²

We have seen that segmentation helps wealth managers better serve and communicate with each client segment. For example, platinum-tier clients may have access to a senior partner and be invited to exclusive quarterly events, while gold-tier clients are assigned a more junior wealth manager and invited to an annual appreciation event. We believe that an effective client segmentation strategy ultimately helps practices determine how to allocate limited time and capacity across a growing business. It has been our experience that identifying the most appropriate client segments helps firms better customize their client service approach. This more personalized experience may be a key competitive differentiator.

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