All too often, financial advisory practices don’t have a good handle on the composition of their current client base or an understanding of the types of clients they’d like to have and are best equipped to serve, otherwise known as their ideal client type.
Don’t get me wrong — most of the advisors I’ve worked with do have an idea of who they are working with, which is helpful. But most haven’t done the work of actually analyzing who their clients are — slicing and dicing their client base by age, marital status, occupation, geographical region, retirement status, etc.
The results may surprise you, or they may not. But conducting such an analysis is an important step because it removes the guesswork. For example, you may be working mostly with retirees versus those who aren’t retired. Or, you may just have the perception that you are working mostly with retirees; the reality may be that pre-retirees make up more of your assets under management.
It’s critical to conduct this analysis as one of the first steps in creating a client-centric financial advisory practice. That’s because you can’t center your practice on clients if you don’t know who they are, what they want and why they are doing business with you. Other early steps include determining your ideal client type and then analyzing any discrepancy between your current client base and your ideal client type.
Here’s how to work through this process:
- Current client base: The actual analysis isn’t that hard, especially if you have a CRM. The variables you want to slice and dice by depend on the type of clients you tend to attract and will differ from practice to practice. And different variables will be important in different cases. For example, if your practice focuses around divorcing women, you might want to evaluate your practice demographics through lens such as divorced or separated; retired and pre-retiree; those with children at home and those with an empty nest; those remarried or coupled and those who are not; those with jobs outside the home and homemakers, etc.
- Ideal client type: With that analysis in hand, it’s time to move on to the second piece of the puzzle, determining your ideal client type. When I work with advisors, I encourage them to think about their favorite clients. What is it about those clients that you love and what, if anything, do those favorites have in common? What types of work or clients make you want to jump out of bed and get to work as as quickly as possible, versus the types of work or clients who you’d rather stay in bed to avoid? This work is important, because when you understand the price attached to working with people who you don’t really click with or spend time doing work that doesn’t really engage you, you’re wasting valuable time and energy.
- Understanding the gap: When you put these two pieces together, you’ll get a sense of where your current reality is in connection to where you’d really like to be. You may have several ideal client types, which is okay, especially if they are closely related to each other. Once you understand who you love to work with and how big (or small) a percentage of those types make up your practice currently, you can take steps to engage in marketing that will attract more of the clients that you want. You’ll also need to figure out how to handle those who don’t fit into your sweet spot.
This understanding of your clientele and your ideal client type is essential to creating a practice that is more firmly focused on clients and to successful growth.