Mark KonstasKnow your client. Know your product. This is our daily mantra as financial planners. However, in 2009, more than ever, I feel we need a new element to our mantra: “Know your client service offering (CSO)”.

Every so often an idea sweeps through the industry with so much momentum that it requires some strength and self-assuredness even to assess it critically, let alone – heaven forbid – to decide not to follow it.

One such idea rapidly becoming conventional wisdom is that in order to protect one’s business from the harsh external environment of the global financial crisis (GFC), planners should be looking to expand their CSO into new areas. Top of the list seem to be insurance, estate planning and others – no doubt to the chagrin of long- established experts in these areas.

However, I have serious reserva tions about this new trend – it feels a little like standing in front of an oncoming truck.

How many corporations around the world have announced, “Our strategy to cope with the GFC and world recession is to expand into new areas where we have no experience and no skills”? On the contrary, many corporations seem to be trimming non-core activities and hunkering down to produce and deliver their core offering more profitably.

Whilst financial planning is often referred to as a cottage industry, there is a lot of insight planners should be drawing from this observation. Planners are often guilty of focusing too much on revenue and too little on profits.

It therefore seems like the right moment in time for many planners to be reminded that:

(i) their CSO is a fundamental characteristic of their business;

(ii) it is not all upside to change it. That is, there are also clear dangers; and

(iii) many things, other than expanding the CSO, can be done to fortify one’s financial planning business in these tough times.


Whether by design or by gradual evolution, most practices that are more than a year or two old will have key areas of their CSO that drive their business, not just in revenue but particularly in profitability – the “engine room” of their business. Most advisers would be able to tell you which areas of their CSO fit this category.

Key characteristics of the engine room are services and/or advice areas:

  • • that are in high demand across the business’s actual and target client base;
  • • at which the adviser(s) and/or the staff are highly skilled and experienced; and
  • • where the costs are well known and well controlled, and where production and delivery are efficient.

Engine room services can be delivered in high volume and at high quality. It is beneficial for the client and profitable for the adviser.

Every business will have a different engine room. The classic examples would include a wealth creation practice (for example, focusing on cashflow management, debt reduction, investment and tax planning), a risk and superannuation practice, and a retiree practice, which would probably include estate planning – but these are just examples.


It is not disputed that venturing beyond the established engine room of your business – to offer both new and existing clients new services and areas of advice – may well bring extra revenue.

However, it is also very likely to bring a much higher cost of production and delivery, along with higher risk, in terms of providing advice outside your areas of expertise and experience.

A fact you must recognise is that you may be choosing to expand into an area where you are up against well-established, skilled and experienced advisers, and they are searching for new clients, potentially in an area where you have little experience and limited skill.

You also have limited understanding of the costs of offering the service and your ability to do so profitably. How good does this idea really sound?

If, realistically, it is going to take you six to 12 months or so to “up-skill” and embed this new service into your CSO and into the dynamic of your business, will you still want it by then?

Or, if times have returned to normal, will you just fall back on what you know and are good at? You could easily waste time, effort and cost – most particularly if the new offering is purely a response to the GFC.


Remember that many other strategies are available to you to fortify your business in these tough times.

You could work harder at getting referrals from your clients, you could look to buy a client book, you could invest in some IT-based software to enhance your management information about your business – just to name a few.

Most importantly, many of the things you can do involve taking a leaf out of the corporate world’s book of behaviour. That is, look to cut costs. However, to start with, look to understand your costs, not just in aggregate, but across each service you offer.

You may well have unprofitable services that can be scrapped. If so, then overnight, without relying on anyone else, you can make a move that increases your profitability.

Tidy up your service offering so that you and your clients know in detail what services you are promising within each segment of your client base. This in itself will make you more aware of your profitability.

In my experience, this exercise can be most easily approached in the following way.

Down the right-hand column of a page, list all the services and advice areas you would like to provide to your very best “AAA” class clients. Then estimate the time and cost of providing each item in the column. (Also, make an approximate allowance for general fixed office costs to pro-rate across all clients.) To the total cost, add on your target profit margin. You have now defined your offering to your top client segment.

In order to generate other client segments of the offer, simply move left into new columns, dropping out services as you go. As you do so, both the range of services and the cost declines, producing your client segments. Build as many segments as you like. I have three segments, but pick your own number.

The key point is that you will have a suitable revenue or price point for each segment of your service offering.

You also have a very well defined list of services, so that: (i) the client knows what to expect (and what not to expect); and (ii) you know what you have to deliver.

You can also use this tool right up front to set the client’s expectations. You will find it eliminates unhappiness over fees and “what am I getting for this?”. You will also find it makes it easier to deal with client expectations of getting extra things for free.

The columns of the matrix you have created by this exercise should not just cover advice areas, such as investments and insurance et cetera, but also service delivery, such as the number and frequency of meetings, an outline of your portfolio management services, client access to other staff and other items (such as newsletters, seminars et cetera) – whatever is needed to cover all the detail of what you wish to offer.

Most importantly, once you have control of your costs, you have control of your bottom line. You can much more easily identify unprofitable services and scrap them.

You are also in a much better position to understand the potential profitability of adding a new service area, where it fits into your broader offering and to which client segments you will offer it.

It might even prevent you from making a big mistake on your CSO that will cost many hours and dollars, only to be scrapped in 12 months’ time.


Think of your CSO as a fundamental underlying feature of your business. It is what you do well.

Before expanding your CSO, ask yourself a question: If this new CSO area is so great for my business, why haven’t I done it before now?

Personally, I have recently (about 12 months ago) sold my business and am starting again from scratch in 2009. However, my experience over the five years it took to build up the last business was that, over time, our CSO did not get wider. In fact, it got ever narrower, due principally to our unrelenting focus on profit instead of revenue.

In my new business, the CSO is very well defined and understood by me, and in time will also become as well defined and understood by my new staff and my new clients. Not with a blowtorch could you convince me to change it, GFC or otherwise.

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