Matt Linnert says a client’s attitude towards your service is a good indicator of likely profitability.
Have you ever considered segregating your client base according to “Type One: I have to” clients and “Type Two: I want to” clients?
Type One clients are the clients who use your service because they have a sense of obligation.
For example, they have to have insurance because they feel obliged to provide for their kids and/or spouse in the event of illness, injury and/or death. They invest in superannuation because the Government makes them, and therefore they have to. They use financial planners because they know nothing about investing, and come to the conclusion that they have to use someone, and have to trust someone.
When you call to invite them in for a review meeting, they say, “Do I have to?”
These clients have a low level of engagement with your service, and are a significant risk to your business should the opt-in regime be carried through.
Further to that, the “Type One: I have to” clients are less likely to provide referrals, they will be less tolerant of changes to the way you do business, and they are a greater flight risk.
Such clients can also be emotionally draining as they are typically less respectful of your advice and expertise, and more questioning of your integrity and value.
Type Two clients are the ones who use your service because they are making a conscious choice that doing so is valuable and worthwhile for them.
They use insurance because they want to make sure their family is protected in the case of illness, accident et cetera. They want to ensure the cover and policy used are appropriate to their needs.
They invest in superannuation because they are committed to growing their asset base. The fact that the Government requires them to do so seldom enters their thinking.
They take responsibility for their financial affairs and want external support to help them achieve what they want. They don’t look for an adviser to do what they are not willing to do. They use an adviser because it gives them leverage – not because they are looking to absolve themselves of responsibility.
They see value in the advice process and in using professionals who have experience and knowledge in areas they do not. They believe in interdependency and teams.
“Type Two: I want to” clients want to learn and are interested in meeting regularly, even if the advice is as simple as “let’s keep going”.
These clients have a high level of engagement with your service, and are likely to be receptive to open discussions about ways to improve and enhance your services and business practices.
The “Type Two: I want to” clients are more likely to provide referrals – like friends, peers, and colleagues. They eagerly encourage their family to engage with your service, as they understand the value for their loved ones – leading to client retention across generations.
Should a “Type Two: I want to” client be considering taking their business elsewhere, they are likely to invite you into the discussion and decision-making process, rather than sending you an email saying they are out, or leaving it to the new adviser to let you know about the change.
Knowing whether the client sitting opposite you is Type One or Type Two provides immediate and valuable insights. For example, asking a “Type One: I have to” client for a referral is unlikely to yield reward for effort; however, asking for a referral from a “Type Two: I want to” client is much more likely to yield return, making such an effort valuable and commercially sensible.
But it goes further than that too! Knowing whether your client portfolio is overweight in Type One clients enables you to pre-empt what strategies will and won’t work for your business, and what needs to be done to reduce risk should initiatives such as opt in go ahead.
Interestingly, while these different types of client can be stable, they are certainly changeable with some considered and consistent training and education. How to take a client from “Type One: I have to” through to “Type Two: I want to” is a topic for another day.
Matt Linnert is a co-founder of www.moneypersonality.com.au and www.innergi.com.au
