“Without segmentation, there is no Supernova. . . . Segmentation of an unmanageable client load is not a best practice worth observing and adapting. It is an absolute. There is no other way to implement Supernova – no other way to succeed unless you can deliver exceptional service and then transform you client’s inevitable satisfaction into growth.” This is a quote from Rob Knapp’s book, The Supernova Advisor.
If Segmentation is so important, why do financial advisors have a difficult time making the decisions to bring the practice down to a maximum of 100 households? The answer is usually that they don’t wanting to hurt client’s feelings. A normal comment is, “I have had this client for a long time. They were among the first accounts I opened”. If that could be part of your thought process, you might look at the process differently if you think about the following:
1. While the ultimate conclusion is that some relationships are going to be leaving your practice, don’t lose sight of the fact that you are now going to have more time to spend with your very best relationships; the relationships that are providing the vast majority of your revenues.
2. How many relationships could reassign if you were not afraid you would hurt their feelings? While there will be some people who are disappointed, there are more than you might think who will take the news with indifference. Chances are you haven’t been spending a lot of time with these people in the recent past.
3. How many clients do you have who if they transferred out, you wouldn’t care?
4. What if you reassigned clients that are “day spoilers”? You know who I am talking about. Your CSA says, “Mr. __________ is on the phone” and your face wrinkles. (I recently was told by a team that they had reassigned a client who produced revenues but made everyone in the team miserable. The senior FA said the process was a morale boost for every team member.)
5. What if you reassigned clients generating less than $1,000 in revenues per year? If your payout is 40%, this relationship provides $400 in income before taxes and expenses. By providing outstanding service to your core clients, do you think you could replace those smaller relationships with more business from clients and the referrals they will provide?
6. How many clients could you reassign if you told them that your practice had grown to the point that you cannot offer the level of service you want to provide?
Segmentation is about getting down to your core in order to provide unparalleled service. The payoff for segmentation is increased business, extremely satisfied clients, more referrals because you have extremely satisfied clients and a calmness to your practice. A concierge practice for a limited number of people is the beginning of a great brand.