Client Segmentation Remains Untapped Opportunity

By Cyril Tuohy

InsuranceNewsNet

Using more finely tuned approaches to customer segmentation remains an untapped opportunity for many advisors, new research shows.

A survey of 391 advisors has found that only 14 percent of respondents segment their clients based on personal attributes, and only 2 percent segment on the basis of clients’ investment goals.

“These statistics demonstrate that advisors frequently segment by what is important to them, not their clients,” John Anderson, head of SEI Practice Management Solutions with the SEI Advisor Network, said in a news release.

Despite the existence of more finely tuned segmentation buckets, 32 percent of advisors segment their clients based on investible assets, and 19 percent segment their clients on the basis of the amount of revenue a client generates for the advisory, the SEI study found.

The SEI survey, published this month, also found that advisors want to narrow their focus. The survey found 37 percent of advisors have a general idea of the audience they want to target, and 30 percent have a specific idea of the people they want to target.

Assets under management and revenue are only two of the most popular buckets by which to segment clients. Clients can also be grouped on the basis of influence, referral activity and the amount of time required to service a client.

In a separate study released earlier this year by the Financial Planning Association’s Research & Practice Institute, 71 percent of the 411 advisors polled said they segment their clients. Of that group, 44 percent update segmentation ratings on a consistent schedule, the survey found.

Segmentation strategies allow advisors to tier services with the goal of generating more revenue per client.

The Financial Planning Association survey found that 82 percent of advisors who segment their clients also tier their service levels.

Advisors who segment and tier their services have face-to-face meetings, on average, 2.9 times a year with top clients, 1.6 times a year with mid-level clients and only 0.7 times a year with low-priority clients, the Research & Practice Institute found.

These advisors also held other forms of client reviews, turning to telephone and Web-based channels, for example, an average of five times a year with top clients, 4.4 times a year with average clients, and 1.6 times a year with low-priority clients, the Research & Practice Institute survey found.

By contrast, advisors who do not segment or tier their services have face-to-face meetings twice a year on average.

Advisors who don’t segment use other forms of review with clients three times a year, on average, the RPI survey found.
 

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.