Segmenting your book to serve clients better

By Mark Burgess | December 2, 2019 | Last updated on November 29, 2023
4 min read
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Being a top advisor team comes down to prioritizing how you spend your time, says Lynette Lewis, head of the North America portfolio consulting group at Russell Investments. Segmenting your book to identify priority clients, streamline investment products and fine-tune your service model is one way to establish those priorities.

Speaking at the Croesus Finnovation summit in Toronto on Thursday, Lewis encouraged advisors to think like CEOs of their practices. The most successful teams spend less time on investment management and more time on business development and prospecting, she said.

“They’re not stock-picking. They’ve outsourced that as much as they possibly can,” she said.

Segmenting your book can help identify the most important clients — those that should be receiving most of your time.

“Typically 80% of the revenue in most advisors’ books of business are coming from the top 20% of clients,” she said. “If you can identify those clients and over-invest in them … that’s the segment that’s going to drive your revenue.”

Building a service model based on this type of segmentation requires advisors to create clear expectations for different tiers of clients, she said. For the high-priority A group, this should mean unique monthly touch points — more than a mass email or shared blog post.

“It has to be consistent and it has to be part of your service promise when you onboard a new client,” Lewis said.

For B clients, the personal contact may be quarterly, and then half that for the C tier.

“It’s being intentional about your service model and then, if you’re a team, aligning the roles and responsibilities of your team members to align with your service model. That’s when you see more consistent growth,” she said.

Tools that allow advisors to check on overall asset allocation and the number of positions are also revealing, Lewis said. Finding a handful of clients are invested across hundreds of positions could be an indication of wasted time.

“If you’re thinking about how you spend your time, is worrying about the suitability of those positions in those accounts a valuable use of your time as a CEO? I would argue no,” she said.

Kendra Thompson, partner at Deloitte in Toronto, also addressed client segmentation at the Croesus event.

“The more insight and intellectual data that you can have so you can see the patterns in your book, see the patterns in what’s happening in the lives of your clients, the more likely you are to connect them,” Thompson told the audience.

She also talked about adapting service models to focus on clients with complex needs who require advice that they’re willing to pay for.

“If you’re truly servicing over 200 clients that are below $1 million, I would be taking serious stock of your book,” she said.

This doesn’t necessarily mean firing clients with fewer assets; rather, firms will need to develop “flexible service continuums” where priority clients remain in dedicated advisory relationships and others receive a mix of branch and robo service.

Thompson pointed to the model being used at Bank of America Merrill Lynch. There are Bank of America retail clients, full-service Merrill clients, and a lot in the middle who receive a mix of the Merrill Edge online investing platform and advisor access.

“When you think about what Canadian banks build, it will look a lot more like B of A Merrill than it does Wealthsimple,” she said.

Thompson warned that current models for serving clients with less than $250,000 invested are weak and vulnerable to disruption. There are few alternatives for clients right now, but that is likely to change.

“That area for the mass and the lower end of affluent is a very hot area for innovation,” she said. “Over the next three to five years, that will change, and you will struggle to justify any fees the way you are today because there will be good alternatives.”

Advisors should be thinking about a much higher account threshold, she said, in order to justify fees.

“There needs to be a reality check,” she said. “You’ll need to have more money and more complexity in the family situations and dynamics in order to justify the type of fee that you’re earning today.”

All clients are millennial women

Much has been written about the sensibilities of millennial and women clients, not to mention their importance in the future of wealth management. Thompson said that even advisors serving other demographics should be taking note, though, because what works for women and younger clients is becoming more popular across the board.

Experts often discuss behaviour such as showing vulnerability, understanding human goals in addition to financial ones and being more present in relationships when serving women. Advice should be more of a partnership than an expert explaining markets.

“When we work with advisory teams that are serving women well, we find they often receive really positive feedback from the men they serve, as well,” Thompson said.

It’s a similar story with millennial clients: the service models associated with young people, such as online platforms and more democratic advice delivery, are resonating across demographics, she said.

Regardless of the targeted segment, Thompson said advisors should be asking: “What are the friction points and paradigms that millennials are challenging about what I do every day, and how can I be proactive in addressing those so that I don’t become irrelevant as the models around me shift?”

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Mark Burgess

Mark was the managing editor of from 2017 to 2024.