The Pareto Principle states that for many events, 80% of results come from 20% of causes. For you, that means that 80% of your revenues come from 20% of your clients. Or conversely, 20% of your clients cause 80% of your problems. This is fairly common knowledge, yet the majority of financial professionals don't fully apply it in their practice. And the consequences of this can be disastrous.
So how do you set up a turnkey client service model that results in your best clients sending you more business and referrals, while you and your staff work more happily and efficiently? How exactly do you segment your client base and put your service model on autopilot? And finally, how do you deal with less productive clients?
The recipe for segmenting your client base is as follows: First, use your firm's back office system to export a list of your clients into a spreadsheet program. Then prioritize the list by revenues; the clients who produced the most revenues are at the top, while the clients producing the least are at the bottom. Next, add up the total revenue for your business and find out what percentage of revenue was actually contributed by your top 20%, 30% and 40% of clients.
Typically, 80% of your revenue comes from no more than your top 40% clients.
Once you've identified clients that provide 80% of your revenue, cut and paste the bottom-tier clients into a separate page in the same Excel workbook.
Now, I won't tell you to kick everyone out but your top tier. That is not realistic. Instead, create a list of reasons why you would continue to work with some of the lower tier clients. Do they have the ability to become a top tier client in the next 12 to 24 months? Are they a family member or friend of someone in your top tier? Do you have a personal relationship that requires you to provide them with financial advice?
Categorizing Your Clients
Now, with the list you have created, examine the lower tier clients and identify those you will keep based on these criteria. Then, include them on the list of top tier clients. You now have a list of clients that you will be working with in the future and a list of clients that you may have to leave. Let's explore how to further segment the list of clients you have identified as your top tier.
We will segment your top tier into three categories. First, identify the A-list. Contrary to popular belief, your A-list clients don't necessarily produce the most revenue.
In fact, A-list clients should be the clients with the most assets outside your firm that you have the potential to move inside: The executive with a huge block of company stock you need to move? The retiree with the big 401(k) still sitting at her company? The person with the large account sitting at a competitor? Move these clients to the top of the list, they are your A-list clients.
Next, identify your bread-and-butter clients. These are the clients providing the bulk of your revenue. They will become your B-list clients. Finally identify all of the people you added to your top tier from your other list, they will become your C-list clients. You've just segmented your client base. The next step is to set up your service model.
Presenting Your Service Model
When you get on an airplane you are offered a choice of first class, business class or coach. Your service model should be set up similarly. I recommend creating a menu in three tiers with different types of services. For example, your top tier service could be meeting face-to-face quarterly with at least three phone calls per quarter.
Services for your second tier clientele may include meeting face-to-face semi-annually, with at least two phone calls per quarter.
Your lower tier clients could perhaps pay a fee for an annual plan. Now, on your spreadsheet program-in the columns to the right-add a column for each month of the year. Then, take your first client and put an "F" in the months you will meet face-to-face; a "P" in the month you will call; and an "L" in the month you will send them a letter or email (birthdays, anniversaries, etc.).
Repeat this for the rest of your client list. When you are through, give a copy of the list to your assistant. Have him or her start scheduling. I recommend staying booked at least three months out. This is your turnkey service model.
Finally, what do you do with the list of unproductive clients? There are four choices: You can meet with them and let them know you are moving to a fee-based financial planning model. Tell them the fee and let them decide if they want to opt in or leave. You can send them a letter explaining how you seem unable to provide the service they need and you are assigning their account to another rep (if your firm allows); you can bundle them and sell them to another rep; or you can choose to do nothing, which obviously I don't recommend.
With this plan, your top clients will get your best service. That should lead to more business and referrals. Now, you have a turnkey service model.
Todd Colbeck is president and founder of
Colbeck Coaching Group, a subsidiary of
General Business Center Inc.
He can be reached at this address.