Start drafting your New Year’s resolutions

Time flies when you’re having fun, so we must have had a good time in 2007. The year went very quickly and, yes, 2008 is just around the corner. So we should start planning for next year now, however hard that may seem.

In between all the holiday season parties and time off with the family, we need to focus on what we want to achieve in 2008 and how we’re going to kick it off with a new burst of enthusiasm.

It is an old truism that if you keep doing what you have always done you will get the same results. This applies just as much to a successful business as one that needs a kick along. All businesses need to think about what they have done and whether it can be done better.

The key driver for change this time is that the overall financial services landscape has changed. The advice process has shifted from product to the actual advice given.

The other shift has been from product providers taking the investment risk to the client wearing that risk.

For an adviser this presents opportunities. The key is focused advice.

That is, in a world of information and of time-poor investors, the adviser can now add real value and, therefore, differentiate themselves in the already crowded advice market.

The smart way is to find a niche and work it by becoming an expert in a specific market and developing that market.

The outcome is that the advice process, the communication process and strategy become more standardised.

The hard part, of course, is to pick/discover what niche we would work best in.

Finding the right niche

It might come as a surprise, but you probably already have the tools to help you decide.

A good start can be found in an existing database. An analysis of past work will show where the greatest success has come from previously. Clearly, this is an indicator of where future success might lie.

Don’t just evaluate on the funds under management (FUM) of clients, as there are other factors to consider. It may be a personal relationship and the demographics, geography, behaviour and psychographics of that relationship.

The table presents a checklist that can work as a guide. This should help build a pattern of past success. It should also highlight the type of clients that may be more difficult and expensive to deal with in terms of costing unproductive time and effort.

Defining past success and identifying the niche or ‘ideal client’ can make the process more comfortable and repeatable going forward. It can make the job a lot easier.

If a pattern does not emerge then there are still opportunities.

If that is the case, then there is the chance to identify the ‘ideal client’, their industry sector, age and other demographic factors. Again, it is about making life profitable and simple.

Dividing it up

Grouping clients into segments allows a clearer picture to emerge, and it leads to the development of relevant and meaningful service and advice offerings.

For example, the ‘ideal client’ may be ‘young professionals’ segmented further down based on the past success of being 30 to 40 years old, married with a small family, earning over $80,000 per annum and in the construction industry’.

Having identified the ‘ideal client’, the next step is identifying the ‘offer’ and the area of expertise. This can allow tailoring advice, the best way to communicate with the client and how to deal with and explain any particulars of their job description to the underwriters. Once the ‘ideal client’ is established and identified, it is easier to seek referrals and focus all marketing activities.

On the life stage

The various life stages within groups are changing. Once these were broadly based on age. But not today.

Today there are people over 60 years old still working full time, there are young children to older parents and mature aged persons still with a mortgage and a family to support.

Assumptions cannot be made based on age alone about a potential client’s approach to investment behaviours, attitude to risk etcetera. However, as a rule of thumb, those who are outside the usual demographics are also the ones most likely to need advice.

Where to start in 2008

A matrix can be a useful tool to segment the client base to allow for the identification of the ‘niche’ market so that you can tailor your service offering and advice process. The diagram has the axes of X axis ‘client relationship’ and Y axis ‘revenue to business’.

In this example, which quadrant are you more likely to get along with? Which has the most potential to be your ideal client and grow?

The axes can be variable and quite different. For example, depending on your target market and bearing in mind the behavioural aspects of your market, you may choose:

> X axis low to high advice needs; or

> Y axis low to high value to business.

This segmenting allows you to focus on the clients who are providing the higher revenue to your business.

Don’t forget the 80/20 rule, 20 per cent of your clients are providing 80 per cent of the revenue.

According to Ray Henderson of Business Health, a principal of a financial planning business can increase its annual profit by up to 80 per cent if it is effectively segmenting its client base.

The unique offer

The advice process is a continuum from first contact with the client through to the implementation process.

The advice offer is all the added benefits around those activities leading up to the implementation, or not, of the Statement of Advice (SOA).

It is also around the pricing of that advice. How much perceived value can be added is dependent upon the perceived strategic benefit to the client.

This comes down to the quality and depth of advice and the time spent exploring and identifying each client’s needs and objectives.

To be different, the advice and service offerings need to be meaningful and valuable to the client. Not all clients want the same offer. It should not be assumed that the level of FUM equates to the level of service and benefits required by the client. Their needs may be broader, requiring consideration of life stage and/or the behavioural aspects of the client.

The service offer is that ongoing part after the implementation of the SOA. It has to relevant to be valuable to the client.

By focusing on a niche market the offer can be sharpened so it is perceived as being a value add, not an additional cost by the client.

For success, a ‘meaningful’ service offer should have elements of:

n advice-related activities, such as:

* scheduled reviews;

* performance/economic reports; and

* analysis of current versus planned position, and so on;

n relationship building;

n education; and

n communication.

In summary, sometimes there is the need to take time to save time. There are the clichés about ‘working smarter not harder’ and identifying the problem but not the solution.

My suggestion is to take time out to think and have an ‘outside-in’ view of the business. Look at it, and you, from the customer’s eyes and accept any criticism.

In business today, successful businesses specialise and focus on specific markets and package their business for each market segment. It is about marketing, service principles and learning.

All successful businesses are constantly evolving to meet changing customer needs. So should your business.

Rosemary Palmer is the adviser marketing manager for investments at Tower Australia.