This document discusses segmentation and client service models in financial planning firms. It provides perspectives from several financial planning firms on how they define and segment their client bases to improve business efficiency and client services. Key approaches mentioned include segmenting clients based on the type and level of services needed, revenue generated, and ideal client profiles. Firms emphasize the importance of clearly defining service packages for each segment and ensuring services are valuable and profitable. It is noted that segmentation helps distinguish transactional clients from those seeking ongoing relationships.

1. Success looks different for every financial planning firm. But a Professional
Planner/MLC Advice Partnerships forum has identified some of the common
elements. And it all starts with the client. Simon Hoyle reports.
Y
ourdefinitionofsuccessdependson
yourobjectives.Butsuccessforeveryone
alsohassomecommonelements;and
infinancialplanningsuccessinvariably
startswiththeclient.
Inpracticemanagementterms,thatmeans
segmentingclientsintorelevantanddistinguishable
groups,andensuringthattheservicethefirmoffers
toeachsegmentisbothvaluedbythatsegment,
andprofitabletothebusiness.
Butneitherofthosestepsisnecessarily
straightforwardoreasy,particularlyforagroup
ofindividualslikefinancialplanners,whobytheir
verynaturearepredisposedtohelpothers.
SteveBeattie,directorandseniorpartnerof
WealthManagementPartners,sayshiscurrent
approachtodefiningfourclientsegmentsbegan
whenhisbusinessstartedin2003.
“Overtheyearsthat’sbeenevolving,”hesays.
“Thecomponentsoftheservicepackageare
reviewedeachyearandcosted,soweensurethat
there’sprofitabilityintothepracticetodothat.
Andsowe’vebeendoingitsincewestartedand
continuetoevolvethatandrefineittomakesureit
staysrelevant,givenachangeofclientneedsand
changesintheurbanenvironment.”
Segmentationposesadifferentchallengefor
PeterKirby,principalfinancialadviseratLifeRisk
Management.LRMisaspecialistriskbusiness,
anddealswithanumberofreferralpartners.
ForKirby,segmentingthosepartnersisas
importantassegmentingtheclientstheyrefer.
“We’vegotabout15referralpartnersthatrefer
tous,sowesegmentthemA,BandC,”Kirbysays.
“TheAs[are]whereweactuallyworkoutoftheir
officesandhaveastrongcommercialrelationship,
withrentandspaceoutoftheirofficestomakeitall
commercialandproper.Soabitofadifferentmodel
thantheaveragefinancialplanningfirmthatprices
andsegmentsupfront.”
AnneGraham,managingdirectorofMcPhail
HLGFinancialPlanning,says:“Wehave,say,three
servicelevelsandwepriceeachlevelaccordingto
theservicethatwe’reofferingtheclientandthat
theclientagreesto,andourpricingisbasedona
feebasis.
“Thefeehasbeencostedoutaccordingtothe
servicethatwe’reproviding,andsomeclientsmight
fallintothesegmentof,say,theAclient,butthey
mightbepayingB-clientfees,butthat’sbecause
they’reastrongadvocateoragreatreferreror
they’vegotbusinesswithoneofourotherareasof
thebusiness.Soit’snotalljustaboutfees,butthat
hasastrongelementinthematrix,”shesays.
“Inourcaseoftentheissueisn’tthatthey’re
payingtoomuchforwhatthey’regetting;
they’reoftenpayingtoolittleforwhatthey’re
getting,becausewe’reveryhelpfulpeople.So
wetryandreviewitregularlytomakesure
everything’sinline.”
BASED ON REVENUE
PaulHardick,directorofFirstCapitalFinancial
Planning,saysthefirmhasappliedasegmentation
modeltoanexistingclientbase,andthesegments
arebasedonrevenuetothebusiness.
“We’vebeentryingtoprice[ourservice]
accordingly–sosimilartoeveryoneelse,except
wejuststartedoutwithalltheCs,”hesays.
It’scommonthatasegmentationapproach
AS EASY AS
A, B AND C
Participants
Duncan McPherson
head of licensee and
productivity, MLC Advice
Partnerships
Anne Graham
managing director,
McPhail HLG
Financial Planning
Terry Powell
managing director,
PrincipleFocus
Private Wealth
Bob Neill
director,
Seaview Consulting
Sue Viskovic
founder,
Elixir Consulting
Peter Kirby
principal financial
adviser, Life Risk
Management
Jim Stackpool
founder, Strategic
Consulting and Training
Adam Tucker
medical director,
Beddoes Institute
Paul Hardick
director, First Capital
Financial Planning
Steve Beattie
director and senior
partner, Wealth
Management Partners
16 PROFESSIONAL PLANNER August 2014 www.professionalplanner.com.au
FORUM
IN OUR CASE OFTEN
THE ISSUE ISN’T THAT
THEY’RE PAYING TOO
MUCH FOR WHAT
THEY’RE GETTING;
THEY’RE OFTEN
PAYING TOO LITTLE
FOR WHAT THEY’RE
GETTING, BECAUSE
WE’RE VERY
HELPFUL PEOPLE

2. PETER KIRBY
A non-principal-
reliant business, with
strong growth on
revenue and profit
year-in, year-out; that
is providing a service
to clients that they’re
proud of; that is seen
as an industry leader,
and seen by the clients
as someone that they’ll
refer their family and
friends to. Simple.
ANNE GRAHAM
A successful business
would be a business,
and not a cottage
industry – a practice
run like a business.
A successful business
would be where you’re
growing the skills of
your team and your staff
and they’re happy to
come to work, but it’s
also a client-centric
business, and it goes
without saying that
you’re making a good
profit.
STEVE BEATTIE
When the great-
grandchildren of the
clients of the business
are dealing with the
third-generation
owners of that business.
I don’t think I’ll be
around to see that,
but it would be nice if
I was. We’re running
a business and it’s got
to be sustainable well
beyond the people in
that business – the
staff, the clients and the
owners – and for that
to happen the business
has to remain relevant.
TERRY POWELL
A successful business
would be a specific,
consistent, methodical
approach delivered
by a talented team of
people, and the basic
starting point is to help
our clients identify and
gain clarity around the
financial outcomes that
are important to them.
Ultimately I’d like to see
our business identify
other innovative
thinkers and build a
national business all up
and down the eastern
seaboard of Australia.
PAUL HARDICK
I see it as the
merging or acquiring
of accountancy under
financial planning
and possibly mortgage
broking to form these
larger, independent
groups as opposed to
institutions and unions
and industry funds.
Obviously you want
your profit margins…
but that comes from
the quality of the advice
reputation. It’s the
independence phase
that I think people
are going to really
appreciate.
PLANNERS DEFINING SUCCESS
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3. evolvesovertime,saysTerryPowell,
managingdirector,PrincipleFocusPrivate
Wealth.
“We’vestillgotanucleusof‘oldworld’-
typeclients,whicharemoretransactional,
butwe’removingmoreandmoreawayfrom
that,”Powellsays.
“Itmightbeeventuallythatwe
actuallyhavearelationshipwithanother
organisation,[and]weoutsourcethosetype
oftransactionalclients.Butatthemoment
it’sabitofamix,butwe’reevolving.
“Themoreandmorethebusinessevolves,
themorebeliefwehaveinit.
“Wetrulybelievethere’senormousvalue
inwhatwe’redoingorwhatwe’reoffering
andthenultimatelyit’sintheeyeofthe
beholderastowhethertheyseethatornot.
Butwe’reseeingthatthat’simproving
allthetime.”
Afterafirmhassuccessfullysegmented
itsclientbase,thenextstepistodefineand
thenpriceaserviceofferingtoeachsegment.
Grahamsaysthatifafirmidentifiesclients
thatareunprofitable,thenthesmart,though
sometimesdifficult,responseistomove
themon.
“I’dprobablydothateveryfewyears,”
Grahamsays.
“You’vegottotreatclientswithrespect
though;youcan’tjustignorethemorturf
themout.Andalotoftheolderoneshave
beenreallyloyalandhelpedusgrowthe
business,so…Icouldn’tberecklesswith
them.”
RUTHLESSNESS
Kirbysaysacertaindegreeofruthlessness
isalsoneededwhenbuyingormerging
businesses.
“Whenyoumergefourbusinesses
togethertherewasquiteabigtail,sowe
wentthroughthattransitionofsellingthose
clientsthatweren’t,Iguess,advocatesofour
businessandweren’tonourongoingservice
structure,”hesays.
BobNeill,directorofSeaviewConsulting,
saysthere’sastrongmarketatthemoment
forbusinesseslookingtobuy“blocksof
clients”thatotherfirmsmightregardas
unprofitable.
“Youeitherneedtomakeadecisionas
abusinessthatyoucreateacapabilityto
providedifferentlayersofserviceordifferent
typesofservicetothatcaptiveclientbase,so
yourbusinessmodelaroundserviceprobably
changes;oryoucouldbecomequiteclinical
aroundthesortofclientsyouneedtofitinto
yourservicemodel,”Neillsays.
“Farandawaythemostprofitable
businesseswe’veworkedwithsegment
beforetheclientevencomesinthedoor.
Theywalkintoaclient,theyhaveonepage
thattellstheclientwhattheydoandthree
pagesthattelltheclientwhattheydon’tdo.
Theysayifyou’relookingforthiscollectionof
activities,thenwe’renottheadvicebusiness
foryou.Verydelineatedaroundwhattheydo,
andthey’rehighlyprofitable;highlyefficient;
very,verylowturnoverofclients.”
JimStackpool,founderofStrategic
ConsultingandTraining,saysifsegmentation
doesnothingelse,itshouldhelpabusiness
distinguishbetweentransactionalclientsand
clientswhowantanongoingrelationship.
“It’sabsolutelycrucial,becausethe
industry’sstillrunningonthetransactional
clientasitsbase,”Stackpoolsays.
“Wewanttobeabletodetermineinthat
first15minutesorhalfanhour,areyouhere
forarelationshiporareyouhereforthe
transaction?
“Yougetsomecomplextransactions,
whichmighttakeacoupleofyears,butI
don’tthink[thoseclientsare]goingto
paytheongoingfee,astheygetmoreand
moreopentootheroffersandcheaper
deliverymethods.”
TWO WAYS
Theheadoflicenseeandproductivity
forMLCAdvicePartnerships,Duncan
McPherson,saysthere’stwowaystolookat
thereasonsforsegmentingaclientbase.
“There’ssegmentationforyoutoruna
moreefficientbusinessandthenthere’sa
segmentationthatfocusesonthecustomer
andsatisfyingtheirneedsandtheirlife
stage,”hesays.
“Businessesneedtobereallyclearon
whattheirpurposeis,tobeabletomake
surethatthey’remeetingthebusiness
outcomesbutalsoreallyfocusingvery
stronglyonthecustomer.They’retheones
whoarereallydrivingthis,alotmorethan
they’veeverdone.
“That’swheretechnologycanenablealot
morethanitusedto,tobealittlebitmore
agile–youknow,walkandchewgum–when
you’redealingwithclientsinanumberof
differentways.”
AdamTucker,medicaldirectorofBeddoes
Institute,saysthatfromamarketingpoint
ofview,issuessuchasvaluepropositions,
idealclientsandsegmentationare“all
philosophiesorapproachesortechniques”.
“Butthereareotherwaysofusing
segmentation;andincreasinglywhatwe’re
seeingissegmentationnotdoneonarevenue
basisbutusingbehaviouralendpoints:Iam
tryingtogrowaclientfromCtoB,fromBto
A,etcetera,”hesays.
“Butwhatwedon’tseeisalotof
businessesactuallysayingnotoclients,
becauseweknowthenumbers,don’twe?
Imeanyougetabunchofclientsinthetop
end[ofafunnel]andthedropoutisvery
small.Yousayyestojustabouteveryone.
“It’svery,veryimportanttoknowwhat
stageofgrowthyourbusinessisat.Areyou
early?Areyoumid?Areyoumature?The
answerhasdifferentimplications.Andsoone
ofthechallengesthatpracticeshaveishowto
integratetheadviceandthetransactionofthe
adviceandtheinsurance.
“There’snodoubtthatjustsellingproducts
iswaymoreprofitablethansellingadvice,
buthowtoactuallymakeadviceprofitableis
reallythechallenge.”
SAYING NO
SueViskovic,founderofElixirConsulting,
sayssaying“no”toclientscanbedifficultand
awkwardforfinancialplanners.
“Butwhentheygetahandleonitandthey
understandhowtodoitelegantly–whether
itbereferittosomebodyelsewhocantake
careofthem–thentheygetveryclearonthe
message,”shesays.
Kirbysays“oneofthemostpowerful
thingsisbeingabletopushbackandsayyou
don’tfitouridealclientmodel”.
“Ourfeestructureiswhatitisandifthey
don’twanttopaythatortheydon’twantto
engageusfurtherthenwewalkaway.
“Wesaywe’reherewhenyouneedus,and
theyusuallycallback,sayingallrightIcan
payitnow;buttherearesomepeoplethat
thinktheycandoitthemselvesandthink
theycanresearch[investments],theybelieve
industryfundsarethewaytogo.You’regoing
togetthosetypesofpeople;they’regoingto
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YOU’VE GOT TO TREAT CLIENTS WITH RESPECT THOUGH;
YOU CAN’T JUST IGNORE THEM OR TURF THEM OUT

5. come to advice firms for free advice.
So walking away from a client that doesn’t
fit your ideal model, or doesn’t want to pay
for your fees, is probably a good thing.”
Viskovic says it helps if a firm attracts the
“right” sort of client to start with, and that
includes from referral partners.
“Then you don’t have to say no as often,
because your magnet isn’t attracting the
people that aren’t going to suit the model
that you’re trying to build,” she says.
“The concept of segmentation is different
if you’re applying it to an existing business
that’s built through the legacy of what we’ve
done over many, many years. That definition
of segmentation is totally different to what
you would do for new clients coming in; so
you may say, ‘Well, I work in this specific
niche, these are my skills and my expertise
and the types of clients I
want to work with’.
“Not all clients will want
to engage at the same level,
so then my offer might be
different, depending on the
needs that they have as an
ongoing relationship – and
then it’s priced accordingly.
Not, ‘We price it because it’s
a percentage of what money you happen
to have’, and then we make up stuff to
give you to justify that fee.”
Stackpool agrees that pricing should be
based on value, and that value in a planner-
client relationship exists in the planner’s
skills, expertise and experience, not in the
client’s assets or in the product the planner
might recommend.
He says a planner can “add tremendous
value in five minutes and deserves to get
paid for that, not based upon the hour,
or the product”.
LOCKED ON THE HOURS
“But we’ve left the pricing lever locked on
the hours we’ve worked or the product we’ve
sold,” he says.
“Release the pricing lever and understand
the value you add. I think the business
people of the future are coming to grips
with that – it only took me ‘five minutes’,
but that’s a $10,000 fee, and to have access
to me every year it’s $10,000, just to have
access to me.”
Tucker points out that in any case, advice
“doesn’t actually take five minutes, it takes
10 years to get to that point” of expertise and
experience. That’s where the value is, and
that’s how services should be priced.
Hardick says his firm’s intellectual capital
features prominently in how it articulates its
services to clients.
“We charge them not for hours, or to
show the value – it’s the intellectual capital
to get their outcomes,” he says.
“It’s all in the intellectual capital that they
perceive they’re getting.”
Viskovic says good advice has a high value,
but “I don’t think it means that everybody
will have to end up starting to pay $20,000
a year for advice”.
“It will be based around the specialisation
that people have,” she says.
“People will pay for what they’re getting,
and it will be very specifically related to the
value that people get out of it; but there’s still
going to be a significant profit margin in it.”
UNDERVALUED, UNDERPRICED
Neill says many practices he’s worked
with over the years have tended to
undervalue and therefore underprice their
service, and have been reluctant to address
the problem.
“The conversation goes, I want to be more
profitable, more valuable, so we can put the
prices up,” he says.
“The immediate reaction is, if I put my
price up I’ll lose my clients. But if you have
a conversation with them about how many
clients they physically lost where the reason
was because of the pricing, or they’ve not
won a client because of the pricing, the
proportion is incredibly small.
“I don’t think that businesses actually
appreciate the value they deliver to the
client, and almost without exception there’s
a recoil if you have a conversation about
putting the prices up. But [they] actually
haven’t lost clients because of price. They
might have lost clients for different reasons,
but it’s generally not price related.”
Graham says taking the pricing decision
away from the front-line advice staff is one
way to avoid giving away or underpricing
services.
“Our back office people are the best at
determining the price,” she says.
“I undercharge, and they’ll challenge me
on it. That’s really good. Then you discuss
it and then you’re accountable to the rest of
your team on what price you decided on.
“It also gives you the confidence to have
the discussion with the client, because
I think you’re right, not a lot of advisers
recognise or think that they’ve actually
added value.”
Beattie says having a clear business
structure and objectives also helps in
setting an appropriate price for services.
“If you’re making a transition in the
way you run your business or the way you
operate and you’re prepared to take the pain
of that, it’s much easier to then have those
discussions,” he says.
“If you haven’t gone through
that thought process, and also
the fact that genuinely you want
to help people, there’s always
this balance between geez, they
don’t want to pay that much,
but if I charge them this much
I can make a quid out of it and
at the same time I know I can
help them and they’ll benefit.
“There’s that little bit of altruism that
kicks into that equation. You’ve got to be
also prepared to say, I could really help this
person, probably not make the profit I want
to from this initial relationship, but you
know, I don’t want to let them walk out the
door when I know I can genuinely help and
they’d be better off.”
Powell says a committee approach
“certainly does position you well not to
be attached to the outcome”.
“You’ve got to let go of the outcome and
focus on the process, which is very much
around helping your clients get clarity and
decisiveness about those aspirations they’re
wanting to achieve,” he says.
“Then identify what the complexities are
that are holding them back, which quite
often is behavioural.
“Given the background we come from it
is inherent, it’s almost ingrained within us,
that we have to quantify a value financially.
But if you’re a hammer, everything looks like
a nail. That’s the environment we’ve come
from. So we move away [from that] to the
intangibles.
“You charge where there’s value there
and if you believe you are believed.”
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YOU’VE GOT TO LET GO OF THE OUTCOME AND
FOCUS ON THE PROCESS, WHICH IS VERY
MUCH AROUND HELPING YOUR CLIENTS GET
CLARITY AND DECISIVENESS ABOUT THOSE
ASPIRATIONS THEY’RE WANTING TO ACHIEVE