The vexing question of how to handle so-called C- and D-class clients has a new solution with the development of a program by DeltaPlan Financial Services.
The program invites financial planning businesses to “sell” their lower-value clients to DeltaPlan in return for a 50 per cent share in the future revenue that DeltaPlan generates from those clients.
DeltaPlan’s program aims first to retain the clients it acquires, then to engage them, and ultimately to provide additional services and coaching, including advice where appropriate, thereby increasing revenue.
Liability ruled off
Liability for any advice previously provided to clients by the vendor firm’s licensee is ruled off at the date of the clients’ transfer, and liability for any advice provided to clients from that date resides with Matrix Planning Solutions, DeltaPlan’s licensee.
DeltaPlan principal Peita Diamantidis says moving on C- and D-class clients enables planning firms to focus on the highest revenue-generating clients, and potentially to attract more of that sort of client, while continuing to generate revenue – including any future increases – generated by the DeltaPlan engagement program.
Diamantidis says the logistics of identifying and migrating clients is relatively straightforward, provided the both the planning firm and its licensee are willing participants.
Start with commission
“You start with your commission system,” she says.
“Generally you’ll be able to run a report that goes bottom-up, by average value per annum. You start the analysis and look at the percentages: any good commission system will break up where your bottom 80 per cent sits and your top 20 per cent sits, and what the amount per annum that line is. For some it might be $1000 a year; for some it might be $200 – whatever the magic figure is – and then take that list, check there isn’t someone’s great aunt or somebody’s kids [on it], and then the dealer group can move them across.”
From that point on, DeltaPlan assumes responsibility for engaging clients, acquiring any additional contact or other information it needs, and mapping out potential services to offer in future.
DeltaPlan principal Warwick Hearne says moving “passive” clients off a financial planning business’s books can radically transform that business.
“Think about the different shape of your business, which has got 90 per cent of the revenue it had before, but only [say] 200 clients, not 1000,” he says.
Safeguard for hidden ‘gems’
Hearne says there is a safeguard for planning firms if they mistakenly transfer a client who later turns out to be a hidden “gem” – or, as he puts it, “if one of them wins the lottery”. DeltaPlan’s systems are not set up to handle high-net-worth clients, and it will hand the client back.
DeltaPlan has to date aggregated about 10,000 clients from 13 firms, and is preparing to offer its engagement program more widely. Diamantidis says the success of the program depends very heavily on the technology that underpins its systems and enables it to engage and communicate with clients efficiently and cheaply. She says it the technology is exclusively best-of-breed, open-architecture, cloud-based software.
The process of moving clients from the initial retention and engagement phase, potentially as far as providing advice, is undertaken under the “Zaptitude” brand, and includes a book written by Diamantidis called Finance Action Hero, designed to provide clients with the knowledge and information they need to engage most effectively with a financial planner or other adviser.
