View more on these topics

Customer connection

The Business of Advice book and website looks at how to manage and grow advice businesses. In his second article, author David Shelton talks about how firms can benefit by gaining a detailed picture of customers

AAs the market consolidates and competition for clients increases, the need to understand the value in your client base is essential. This will help you retain clients and give you an indication of the real value of your business.

The crucial tool in knowing your clients and ensuring they get the right service is to profile your client base by splitting existing clients into well defined categories.

If your client data is up to date, comprehensive and held on a modern back-office system, you can get a detailed picture with relative ease. All good back-office systems enable you to profile by age, product holdings,
investment values and other variables, provided you have collected the data. In practice, the data is not always
sufficient so you may require a short-cut approach.

There are two ways that give workable results:

  • Profiling by client value
  • Profiling by adviser perception

Profile by client value
This is very effective because it concentrates on the value of clients to your business. Most businesses have a record of the annual recurring income for each client (renewal commission, fund-based commission, fees, etc) and will typically split their client base into three parts. Start with the following segments and adjust if necessary:

  • Over £1k pa
  • Between £500 pa and £1k pa
  • Less than £500 pa

This provides an overview of how many clients fit into each band. You may need to run the exercise several times to achieve a typical profile which has 20 per cent of the client base in the top group, 50 per cent in the middle and the rest in the bottom.

Clients in the top group are likely to get a proactive service with a lot of contact, whereas those in the bottom should be handled on a transactional basis. This approach will enable you to tailor your service to the value of the clients and reduce cross-subsidy and loss-making business.

It is inevitable that profiling in this manner will place some clients at the margin of the bands in the “wrong” group. There are many reasons for
moving clients up and down but you must have a consistent approach.

Changes should be done with all advisers present and should never involve more than 10 per cent of the active client bank (the top two groups).

Profile by adviser perception
This is a rough and ready method and should only be used as a last resort although it has the benefit of implicity. The challenge is for all your advisers to agree on the criteria for each segment.

If your business has a policy of dealing with clients by category, it has to recognise that the “top clients” of a junior adviser are important to that adviser and pitch the level of service and contact accordingly.

It will always be a matter of judgement as to what level and quantity of service you provide to different groups.

In the absence of useful data, there is a framework that will help this process but it is only as good as the knowledge of the clients held by the advisers. This is based upon client loyalty, determined by the number of transactions.

Advisers can normally identify all their advocates and supporters and many of the dormant customer group. By elimination, this leaves the client group in the middle. With this model, the differences between the client groups of individual advisers have to be accepted but at least it enables categorisation to take place.

The real value of this model is its practicality because there are clear implications for how each group should be treated.

Few businesses have perfect data so you have to work with what you have got. If your initial profiling exercise has many gaps, it gives you a start so that you can refine the data as time passes and as you collect data at each client meeting.

On the basis that most of the important clients will be contacted and seen over a two-year period, you will quickly end up with sound data for the important clients and a more robust client profile.


David Shelton
Head of IFA consultancy service

Scottish Widows


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm