Your Client Service Matrix Pt II

In my experience, one of the hardest things for any financial advisor / team to do is to "give away" clients [no matter how small. "But, I've known her for years," they say. Or, "Yes, they only generate a few hundred dollars each year in gross revenue, but they don't take any time to service. It's like found money." Note: at this point they notice that their sales assistants are rolling their eyes because they are the ones spending hours servicing these small client. Hours they then do not have to service the large clients that pay the rent.

The thing to remember is that your practice/business has changed over the last decade. When you first started in the business you were like a new intern, fresh out of medical school. You took anyone as a client because you had to create your business and were not very sophisticated. Now here you are, a decade later, more like a brain surgeon. Over your career you have amassed a wealth of knowledge and experience to help your clients deal with their most sophisticated financial needs and problems. For this service you charge a significant fee -- just like the neurosurgeon. However, just like the surgeon, you can only really effectively help a limited number of clients. Neurosurgeons do NOT take patients with hang nail or acne or other minor medical problems. They send them to the pharmacist who gives them the level of service and support they need at the appropriate price.

There are two reasons the neurosurgeon doesn't see them; 1) he would have to charge them the same fee for his time as someone with a brain tumor, and 2) the time spent with them would mean someone who really needed him wouldn't get helped. You are no different! The reason you shift your lowest client households to someone else is because you owe it to them AND to those clients who have problems that need someone with your level of experience and expertise to solve [and who can afford to pay for it]. There is a third reason, of course. These clients expect Ritz Carlton service and are willing to pay for it. If they don't get it because you and/or your staff are too busy taking care of small clients, they will go somewhere else.

Remember, the only thing that really sets you apart from and above your competition is YOU and the consistent service you provide. Good luck. Thanks. kfg

Your Client Service Matrix Pt I

Now that you've analyzed your clientele, you're in a good position to determine the amount and type of service you wish to provide to each level of client. As you answered each of the questions needed to analyze your clientele you should have developed a sense of where each household fits within your business model. If not, go back and assign points to each of the most important questions on the list, i.e.,

1. What is the size of the assets I manage for this household -- total for all of the accounts? [Give one point if they are median size or larger and 2 points if they are significantly larger.]
   
2. What percentage of this household's total investable assets do I manage? [Give 1 point for 50% and 2 points if over 80 percent.]
   
3. What is the realistic potential for increasing that percentage? [Give 1 point if the potential is over 70 percent.]
   
4. Realistically, for this client household, what is the likelyhood that they will significantly increase their assets with me in the future? [Give 1 point if over 70 percent.]
   
5. How much time does this client household require to serve? [Both your time AND your staff's.] [If this household is median or below, deduct 1 point if it is the same as that required for a top client and 2 points if it is higher. Add 1 point if it is significantly less.]
6. What kind of referrals has this household provided in the past? [Give 1 point if they actually give good referrals. No points for referral potential.]

Do this for each client household. Next, add up their scores and divide your households into five segments based upon their total scores. Seriously examine the revenues generated by the lowest two segments when compared to the time and effort they require of you and your staff [time and effort you are not spending either prospecting or taking care of your top clients]. Remember, the quality and consistency of your service is your most important that sets you apart from your competition for your clients. Now, migrate those bottom clients to another advisor -- perhaps someone new who needs to build up their assets -- or to your firm's service center for small accounts. In the end you'll be doing them a favor. Thanks, kfg

Step One: Analyze Your Current Clients

The first step in re-starting your prospecting efforts is to analyze your current client households. To do this, you'll want to ask yourself a series of questions about your clients and your current and future business, such as;

1. What kind of business am I currently doing -- e.g., transactional? fee based? Trust? etc.
2. What kind of business do I want to do in the future?
3. How many households am I / my team currently serving? Remember, ideally around 100 households per financial advisor to provide premium service.
4. What are the average and median sizes of the assets I manage for the households I serve?
5. What percentage of each household's total investable assets do I manage?
6. What is the realistic potential for increasing that percentage?
7. Realistically, for each client household, what is the likelyhood that they will significantly increase their assets with me in the future?
8. What is the breakdown by revenue of the households I serve [this is another way of expressing question #4]?
9. How much time does an average top client household require to serve? [Both your time AND your staff's.]
10. How much time does an average bottom client household require to serve? [Again, both your time and your staff's.]
11. What kind of referrals has each household provided in the past?
12. What is their realistic potential for providing good referrals in the future?
13. What is the demographic breakdown of my current clientele?

That's a lot of questions. However, too few financial advisors /teams take the time to regularly analyze their business to determine how they are generating revenues, the quality of service they provide to all clients, etc. Unfortunately, the first wakeup call for many is clients leaving for advisors / teams that provide better service.

Answer these questions about your clientele and, based upon the answers, segment your households into five groups. Remember the 80 / 20 rule ; you receive 80 percent of your revenue from the top twenty prercent of your clients. How much time and potential revenue are you wasting on the bottom twenty percent of your clients? Next time, we'll discuss how to improve both your efficiency and your client service matrix. Thanks. kfg

Prospecting in Today's Economic Environment

Let's face it, too many of us have stopped prospecting. Since our recent Black Swan many already successful financial advisors / advisor teams have hunkered down and focused on trying to keep as many clients [and their assets] as possible and avoided the heartbreak of rejection that inevitably comes with prospecting. After all, enough advisors are retiring or moving to other firms that you could always increase your book of business by avoiding risk and waiting for "new" clients to be assigned to you by your manager [of course that assumes that these new clients aren't already irritated with their past advisor/team and/or the firm].

Those with this attitude not only miss great opportunities, they also often find themselves unable to adequately service the clients they already have. Twenty-seven years ago [when I started in the business] virtually all revenue was transactional and you needed to build not only a large clientele, but also large positions in selected securities which turned over on a regular basis. This meant taking virtually anyone who could proverbially fog a mirror as a client and holding on to them until they or you died. This also meant that most of your clients "only heard from you when you had something to sell." For many advisors [we were called account executives then] the result was often a letter placed in their permanent file by smaller clients who NEVER heard from them because they couldn't ethically justify turning over their positions.

So what? What's that have to do with today? Today most revenues are generated by fee-based business, whether you use professional money managers or select all the securities yourself [or some combination of the two]. Most of the larger firms have conducted research that indicates that a good financial advisor can provide Ritz Carlton levels of service to only 100 relationships and still have time to prospect. That's right! Only 100 per advisor [so if you are on a team with two other advisors, your entire team can effectively manage and service only 300 households]. How many households/relationships do you currently manage in your book?

I have worked with hundreds of advisors / advisor teams who had five and even eight hundred households on their books per advisor and couldn't understand why they and their staff were constantly overwhelmed. Take some time this weekend to really examine your clientele. On Monday we'll discuss taking control of your business so you can increase not only the assets you manage but also the revenues you generate by working smarter, not harder. Thanks. kfg

Paperwork

Great! You've thought through all the questions we posed, found one or more people you're comfortable working with for the long haul and made your own personal commitments. Now comes the legal part. Like a marriage, a partnership is contractual obligation freely entered into by all parties. Also like a marriage, legal formalities are put in place to protect all parties. That's one of the reasons why many people decide to just live together. However, in most forms, there are added benefits to making the relationship contractual instead of just one of convenience -- e.g., some firms increase the way gross revenues are compensated for each member of a formal team vs. an informal team. You'll want to discuss this with your manager, the legal department and possibly your own lawyer before making a final decision. In the meantime, it can be useful to work together informally for a period [you might think of this as the engagement] to see if you really are compatible on every level.

Once you're ready, your manager can provide you with forms already created by your firm's legal department. Read them carefully and have your own lawyer read them and comment BEFORE you sign. Then, when you're ready, sign the papers and begin your life together. Note: if you haven't already done so previously, you might find this a very opportune time to bring in a professional coach to help you get your new partnership off the ground [they can often help avoid many misunderstandings and bumps in the relationship as you get your team started. Good luck. You've got a great adventure ahead. Thanks, kfg