A digital approach to client segmentation

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For adviser use only


If you want to segment your client bank – how do you do it? By level of assets? Objectives? Portfolio complexity? There are plenty of ways to categorise clients in order to give them the service that best suits their needs and their budget. One approach that firms may particularly want to consider is digital segmentation.

Digital segmentation is essentially categorising clients from a technology perspective. Just like other businesses, financial advisory firms are starting to explore how technology can allow clients to be further supported in a way that’s most intuitive and convenient for them.

Harnessing platform technology

A firm’s chosen online investment platform will, of course, play a central role in determining what technology proposition it can offer, and how this could be tailored to different client preferences.

Crucial considerations are:

- To what extent can the adviser tailor the level of online functionality available to clients? Do you want to allow clients to view their portfolio and its latest valuation online to accessing information on recommended funds; do you want clients to making fresh contributions into their account or do you even want clients to be able to transact themselves – these are all essential questions to ask.

- Can the client-facing portal integrate email queries or web-chat, and is it fully optimised for tablet and smartphone?

- Can the platform enable documents to be shared on-screen to allow advisers and clients to view and discuss them remotely?

- Can the platform be integrated with the back office valuation feeds so that online reporting can include off-platform, as well as on-platform, assets? Perhaps most importantly of all, what is the quality of online experience for the client? Is the platform intuitive and pleasing for clients to use? Can it meet increasing expectations of speed with ‘real-time’ valuations?

Aligning technology and clients

Digital segmentation can also ensure that technology aligns with a client’s other servicing needs and, in this respect, it can be dangerous to make assumptions about preferred client preferences. 87 % of millennials (those aged 18-35) say that they are never separated from their mobile device and, on average, look at their mobile phone 85 times a day [Source: LexisNexis UK Millennial Study 2016]. However, according to US millennial research conducted by the Insured Retirement Institute and the Center for Generational Kinetics in 2015, 87% still want an adviser who will meet with them personally (compared to 89% of Generation X and 92% of Baby Boomers).

The first step is to ask clients how they wish to be serviced, and this is a preference that will naturally evolve over time.  Some clients may prefer face-to-face interaction with an adviser in the early days but perhaps will fall back on on-line servicing as they grow more comfortable with the relationship and the service provided. Conversely, some clients may initially prefer to interact remotely, but meet up with an adviser if their needs become more complex. For example, in the US study cited above, 73% of millennials said they would seek out an adviser if they were to receive an inheritance.

Segmenting your client bank

The truth is that most clients will ultimately need, and expect, a range of ways to interact with you depending on circumstance, time available, and the complexity of the issue being discussed.

This results in huge potential to for personalisation; to tailor the technology offering to different client groups based on their preferences. World-class brands like the Financial Times have done very well segmenting the level of functionality and informational access they offer to different levels of subscribers. This technique could be a compelling means to encourage advised clients to consolidate assets on platform in order to qualify for the next level of service.

Encouraging consolidation can provide several benefits to both the client and adviser. Often, there are pricing considerations, where the overall basis points charge could dramatically reduce. Clients may also qualify for the next level of service, depending on how you currently segment your client bank.

It’s critical to remember is that advisory firms aren’t just competing with each other, but with the digital experience that clients have now come to expect in all aspects of their lives. From Amazon to Ocado and from Deliveroo to Uber, technology and the services it provides is moving at a rate of knots. Consumers already expect the highest level of digital functionality from other sectors, banking being a prime example, so wealth managers and financial advisers can’t afford to be far behind.