Can you afford not to segment your clients?

Not all clients are equal. Can you really afford to treat them as if they are?

Since the launch of Consumer Duty last July, client segmentation has become more critical than ever. Many IFAs still do not segment their clients, despite the evident need to focus on their most valuable ones.

The Duty is costing IFAs both time and money. Having been an IFA myself, I understand the time constraints that come with the job. Engaging with clients and understanding their needs takes time, which is now more precious than ever, especially with the increasing regulatory burdens.

So, why is segmentation so important?

Consumer Duty mandates that IFAs adopt a customer-centric mindset, emphasising the importance of culture in achieving “Good Outcomes.” Requirements like “Fair Value” demand an assessment of current costs reflected in total client fees as well as efficient, effective record-keeping for all business decisions impacting client outcomes. This means more time and effort are required.

It’s easy to continue working as you always have, but properly segmenting your client base could be one of the most productive exercises you undertake.

Identifying your most (and least) valuable clients will clearly show where to focus your resources. It ensures all clients receive the service they are paying for and helps eliminate over-servicing, making your business more sustainable in the long term.

We suspect many IFAs have not yet segmented their clients because they don’t want to face the hard facts. Sacrificing longstanding relationships for profitability is a difficult prospect.

However, we would never simply advocate turning away lower-value clients, not just because they might become core clients in the future. As experts in this field, we can show you several cost-effective ways to service smaller clients. With technology and a lighter touch approach, you can keep your client base intact.

We can also demonstrate a method for you to dispose of a portion of your business (no matter how small) while retaining the clients you wish.

Segmenting your clients is now a necessity. Your ability to provide quality service while maintaining profitability depends on it.

As independent consultants to the retail financial services industry, our Consultancy Department  well-positioned to help you explore your options.