Matt Linnert looks at future trends in segmenting client bases.
If I were a financial planner and you were my client, what is the most important thing you would want from me? Or in other words, what would you value the most?
This question was asked of hundreds of financial planners and PDMs while I was presenting at Zurich’s roadshow last year. Without doubt the most popular reply was, “for you to know me, the person”.
Assuming we know our client because we know their assets, liabilities, age, occupation and marital status leaves us open to many costly problems.
Knowing the deeper workings of clients delivers value in many ways. It enables the delivery of value propositions that ring true for the client more so than the firm. It can shorten meeting times while maximising engagement; and it takes clients from being interested to being advocates.
When we assume all clients are virtually the same, we end up with a narrow breadth of service offer. Over time, many prospective markets are left untapped because their needs and values do not match the service.
As an example, look at stock standard lines and recommendations of the financial planning industry, such as, “if you fail to plan, you’re planning to fail”.
Believing that everyone who succeeds has clearly built and followed a long-term plan is a fallacy. There are millions of wealthy people who would have been lucky to plan anything beyond 12 months their whole lives. They are likely to be opportunistic and quick moving. They trust their instinct and like to seek advice from others who are willing to change tack and entertain the variety of opportunities available.
They may buy a long-term plan to begin with, but are unlikely to stick with such an organised and structured approach, even though it may make sense from an analytical perspective. Such people can be wonderfully lucrative clients to mentor and advise; but try to plan their next 20 years and you’ll be sure to lose them.
A service more suited to these types is a regular meeting designed to review new opportunities, current portfolios, exposure to risk, and cash-flow positions for the next 12 months to, say, two years. This is a significant contrast from today’s longer-term focus, which in some ways is designed to take the focus away from short-term returns. But for people of this type, their focus does go to returns when they feel restricted from being actively engaged with their financial affairs and financial adviser.
Of a different nature is the innovative and analytical client who doesn’t want the slow and steady accumulative plan over 15 years. They want to maximise opportunities, leverage where appropriate, and accelerate the achievement of their goals. These people aren’t sold on financial security and stability; they don’t value it. They value freedom and optimisation. They aren’t sold on regular and reliable savings, and they aren’t sold on stock standard sales pitches. They value intellectual banter and challenging the norm. They want you to think for yourself, to research where needed, and to think outside the square.
The above examples are looking at clients’ needs and wants through their values, personality and behavioural preferences. It involves taking a personal approach to getting to know your client, rather than a factual one.
Through such understanding, I believe firms and advisers will be able to clearly articulate value in a way that deeply synchronises with the client. Communications will be delivered, with the help of technology, at a fraction of the cost of print media, while being significantly personalised and hyperlinked.
It will be a natural extension to review services, packaging and presentations so they are aligned to the client’s deepest preferences for obtaining and dealing with financial information and advice.
Taking this human behavioural approach will extend the reach and attractiveness of financial services to currently disengaged corners of the market, while deepening the perception of value from existing clients.
Due to these commercial benefits, and the need to stand out in a maturing industry, it won’t be long before financial services companies will be segregating their clients based on deeply held behavioural preferences and patterns as well as the facts of age, assets and liabilities.
Matt Linnert is a co-founder of www.mypersonality.com and www.innergi.com.au
