“Coach’s Forum” is a place in which you can ask your questions, tell your stories or give your opinions on any aspect of practice management. For each column, George selects the most interesting and relevant comments from readers and offers his advice. Our objective is to build a community of people with a common interest in making their financial advisory practices as effective as possible.

> The “Preferred” Client Profile

Advisor: The dramatic stock market movements of the past 18 months have certainly highlighted the differences among my clients, in terms of how they handle volatility and their expectations of me as an advisor. As a result, I have learned that there are some people with whom I relate and, consequently, can serve better than others.

My practice is presently composed of clients with widely varying needs and attitudes. I think it’s time for me to be more selective about whom I accept and keep as clients. I know you endorse having a “preferred” client profile, against which I can evaluate current and prospective clients. Would that be of benefit to me at this stage in my career? And, if so, can you help me define what my preferred client profile should be?

Coach says: Congratulations on reaching this point in the growth of your practice. In the early stages of your career as an advisor, it is common and practical (and, often, necessary for survival) to do business with anyone who has a need and some money. But as you develop more experience and start to form preferences about the types of clients you would ideally like to serve, it is not at all unusual to become more discerning.

You start asking yourself: “Am I doing business with the kind of people around whom I want to build my practice over the long term?” As your thinking evolves, you typically narrow your focus from doing business with anyone to seeking out those with whom you truly want a lasting relationship.

Working with a defined set of preferred clients offers a number of benefits, including:

> The opportunity to connect personally with your clients. In most cases, your ideal client is someone who shares your values and with whom you identify. You are also more likely to get referrals from clients who think like you do.

> The ability to solve many of the same types of problems on a regular basis. When you work with clients who have the same issues and needs, your knowledge and experience deepens. You become the professional who stands out in a crowd. The products and services you offer will also be aligned with the specific needs of your clients.

> The ability to streamline your business processes and workflow. Again, when working with people who have similar situations, needs and goals, you will be able to define a process of superior service that you can deliver time after time.

> The ability to create targeted marketing campaigns. You will promote your practice to the right prospects, lowering your overall marketing costs and increasing your ability to attract new, qualified clients to your practice.

Defining your preferred client is both a science and an art. Such clients can be described according to their demographics — age, income, occupation, net worth, life stage and so on. But clients should also be filtered regarding their psychographic characteristics, including values (e.g., their sense of responsibility to others) and the extent to which they will delegate financial decisions (vs do-it-yourself types), as well as their willingness to provide introductions and referrals. Often this subjective judgment adds the more important perspective.

At the end of the day, your preferred client is likely to be someone who:

> is profitable to your business

> is a pleasure to work with

> can benefit from the products and services you offer

> appreciates you as a pro-fessional.

Your preferred client will probably be different from other advi-sors’ preferred clients. That’s not only OK; it’s a good thing if you want to build a strong, distinctive profile.

You didn’t indicate how long you have been in business; however, if you are still relatively new (less than three years), don’t worry too much if your ideal client profile isn’t very clear or even very ideal. As you are tested by experience and discussions with your existing clients — as well as through other activities — you may well find yourself changing focus and steering your practice in a direction that more accurately reflects what you ultimately desire.

Any decisions about preferred clients should always include an analysis of where you are most likely to find people who come close to that profile — in other words, your target market. Although building your business entirely with people who fit your preferred client profile may be highly desirable, it is unlikely that you will be able to do so. But your objective should be to have most clients come as close as possible to that profile.

By definition, then, as you develop your marketing plan, it will be aimed primarily at a target market in which you are most likely to find a large number of people who fit your preferred client profile.

Suppose, for example, that your ideal clients are self-employed professionals over the age of 50 who have annual income of more than $200,000 and who like to delegate their financial affairs to others. These clients are more likely to be found in a target market that includes doctors, dentists, lawyers and accountants than one consisting of teachers and librarians. The latter can also be a good target market, but not for the preferred client profile described above.

Certainly, you can have more than one target market, although I suggest that three is the maximum. Otherwise, you’ll find your resources spread too thinly to be effective. But whether you have one, two or three target markets, they have to meet two significant qualifications: each market must be sizable and must be approachable.

For example, there is no sense targeting undertakers as part of your main marketing strategy if your community has only two or three funeral homes. Similarly, if by virtue of background, experience or preference, either you or the prospect would be uncomfortable in your relationship, it is probably best to choose another target market. A young, rookie advisor targeting the CEOs of Fortune 100 companies might be too intimidated to make a positive impression, and the CEO may not accord appropriate respect to someone whose voice cracks from nerves.



> Tackling Client Segmentation

Advisor: I have just completed my client segmentation exercise and categorized everyone as a Top 20, A, B or C client according to both quantitative and qualitative criteria, as you suggested in an earlier column.

I am uncomfortable, however, about thinking of anyone as a B or C client; they are all important to me, and I think it demeans them to refer to them in this way. I also certainly don’t want to tell anyone they are going to get our B- or C-level service as a consequence of their ranking.

Coach says: Of course, you want everyone to feel they are receiving the best service to which they are entitled, so why not call your service tiers AAA+ (Top 20 clients); AAA (A clients); AA (B clients) and A (C clients). That way, you can legitimately tell everyone they are going to get your “A-level service.” The important thing is that you define your service levels and then make sure you deliver accordingly.

IE

George Hartman is president and CEO of Market Logics Inc. and a senior coach and facilitator with the Covenant Group. Send questions, comments and opinions on any aspect of practice management to george@marketlogics.ca.