How to Build Profitable Client Segments Using a Client Model

As you think about your own firm, I want you to think about why you became a financial adviser.

If you are like most of the successful advisers I work with, you did not choose this path so you could develop operational processes or plan the smallest details of your next client appreciation event. I am confident that you chose this path to make a difference in the lives of your clients and to enjoy your own professional and personal success. Build a business that provides a flexible work schedule with the ability to spend more time with family.

You can devote more time to your purpose if you spend less time running your business. Undefined marketing plans and ill-planned strategies will affect your bottom line and take away from spending time with your clients. Integrating the right practice management solutions can help you spend more time meeting with the right clients and creating your own vision of success.

Everyone wants excellence, value and feeling like a part of something bigger than they are. These desires are universal and powerful. I believe the key to making a business successful is alignment. At the end of the day, we all want to make a difference in clients lives and grow our practices in the process. The disconnect we often experience comes in the fact that nobody told us how to actually run a business—let alone profitably!

We are confident in our financial planning skills and technical knowledge, but that is not enough. Running a business goes beyond our professional competence, building a successful practice is about running a business better in order to achieve your goals.

Shifting to Working ON Your Business

What does that look like—running a business better in order to achieve your goals? It is understanding what needs to change in your firm, identifying solutions and then implementing those solutions over time that makes the difference.

Similar to your clients, the implementation piece is critical. How far would your clients get in pursuit of their financial goals if you did not help them implement the recommendations in their financial plan? As advisers we are often consumed with working in the business that working on it becomes an afterthought. Given how the current pandemic has exposed the operational cracks in many industries, maintaining this mindset can prove to be costly both short and long term.

Which Way Do You Want to Grow Your Practice?

Taking on any client who comes your way—regardless of size or fit—makes sense in the early years of your business as you grow your practice. This is often necessary when you are just getting started and do not have an established book of business. The truth is you have bills to pay and a lifestyle to maintain. For firms with a specific growth plan, this is not a successful formula for long-term client profitability. Servicing a varied group of clients with diverse needs is very hard to do well—and it’s almost impossible to do profitably.

Through the client model, it is realistic for advisers to restore a healthy balance among their client relationships, quality of service and firm profitability. Developing a standardized way of service where clients are treated fairly (but not equally).

Three Components to Building a Client Model

Understanding the client model takes two areas into consideration: The client base analysis and the service model. The client base analysis assesses firms’ clients, services, fees capacity and profitability. The service model defines and formalizes what services a firm will deliver to each client segment, frequency, who will deliver the services and how.

To begin analyzing your own client base, I recommend the following:

(1.) Segment your client base into annual revenue-based segments. Review your existing clients and divide them into segments. For example, A-B-C tiers. From this list, identify the annual revenue-based segments in your firm. See the sample revenue tier below: 

  • Tier A: $ 20,000+
  • Tier B: $ 10,000 to $19,999
  • Tier C: $ 5,000 to $ 9,999
  • Tier D: $ 2,500 to $ 4,999
  • Tier E: $ 1,000 to $ 2,499

(2.) Define the services to be delivered. A formalized service model will create a suite of services that identifies exactly what is being provided to each client segment. Are there instances where you are providing services for clients who are not paying for that service? Far too many firms provide the same level of service to all clients. This is often whatever the clients ask for when they call; or a level of service that is not appropriate.

For example, a firm may offer tax-planning preparation for clients in tiers A and B as a part of their service. A client in tier D wants to have their taxes done and since they asked, the firm may feel obligated to offer it for fear of upsetting the client. What is often forgotten is that the client has not paid for this service. It is not a current offering to clients in tier D.

Tier A and B clients may be afforded four review meetings a year, but a tier D client may want to meet five times a year, but their annual revenues do not support that. The current pandemic has created the need for more touch points with clients and when the pandemic is over, you may consider increasing the fees for those clients or potentially referring them out if they no longer are a fit for your service model.

(3.) Define which staff member will deliver the service. Once you have determined what suite of services is appropriate for each client segment, now figure out how to allocate your staff resources to assist in the delivery of service. If you think of the financial planning journey, here are a few steps that must be completed:

  • Prepare and review the meeting materials
  • Perform the client meeting, identify and review follow-up actions
  • Assign follow up actions to designated team member.

Firms should also calculate the average revenues and expenses for each client segment. This provides a full picture in evaluating the profitability of each segment. Firms that take the time to identify how clients are being served will set themselves up to establish a service road map that can impact the bottom line. Clarity of services and client segments can create a win-win for both advisers and clients.

Cameo Roberson, AAMS®, manages a boutique RIA at Atlas Park Finance, helping individuals find their success story through entrepreneurship. Atlas Park Consulting, her practice management arm, helps advisers build infrastructure to maintain sustainable and profitable firms. Reach her at