Business Development: Developing your Client Proposition. For financial advisors only

Transcription

1 Business Development: Developing your Client Proposition For financial advisors only

2 What will your Client Proposition look like? It is important for all businesses to identify the needs of their clients and meet these in a manner that delivers business profitability and a mutual ongoing and lasting benefit for both the advisor and client. This booklet takes you through the process of establishing your business vision, segmenting your client bank, developing a client proposition and determining how you ll be rewarded for your efforts. Please note this communication isn t for private customers and shouldn t be given out to, or relied on, by them. Vision What is your business vision? Document your vision Customer segmentation How well do you know your client bank? Make the most of what you ve got What is the segmentation? Why you should segment your client bank How to segment Segmentation template Client Propositions Remuneration What is a client proposition? What are the core components? What information do you need before you start How many different propositions do you need? Remuneration options Fees or retainers? Pricing your proposition Your action plan Why plan? What should your plan look like? Business plan tracker Your next steps

3 Vision What is your business vision? Could you write down exactly what it is you do in your business? What are the key things you do for clients what do clients want from you? This should drive the description of what you do. Now take a step back, and ask yourself what aspect of your business makes you happy, motivated and gives you the drive to succeed? What business structure can you grow, evolve or develop that makes you happy and motivated in the thousands of hours you ll spend in business? The starting point has to be clarity about what you do now, who you do it with, who helps you and what you get in return for the effort you put in and for the services you provide. Write this down, avoid the jargon and then give it the vision test: Vision test What is it that you actually do? Which products or services do you offer your clients? What are you known for and what do you stand for? What s your role in the business? How do you spend your time? Describe your existing clients Who are your potential clients? What services are you giving? How useful is this service and is it really needed? What alliances have you established to enhance the service you provide for clients? What areas of advice are you involved in? What are your areas of expertise? What market sectors are you involved in? What s your web presence like? Let us look at each stage in more detail. 1

4 Document your vision Once you ve written down the answers to these questions, it s time to begin to document the vision you want to build for your business. You need to make it real you need to write it down. Take some time to think about this, and complete the following template to create your own vision statement. Vision statement Create a vision statement by filing in the blanks below. Have another person read it back to you. Vision statement (first draft) Within the next (insert time period): Into a successful (type or description of business you want to build): Providing (description of products and/or services) To (describe your clients and customers) Review what you ve written and give it this test: Does it seem real? Does it motivate you? Will it enthuse new and existing clients? Is it achievable at a profit going forward? Do this with everyone who will help implement the vision. If it fails any of these criteria, start again. 2

5 Customer segmentation How well do you know your client bank? Considering that all your customers are the same and providing them with an identical service is one of the cardinal sins of business. But how many of us have taken one of the most decisive steps on the road to business transition and segmented our client bank? Over the years you ve built up a client bank, but do you know: Which of your clients are profitable now? Which of your clients will give you your future profit? Which of your clients want in in-depth dialogue and relationship, and which want a lighter, more transitional engagement? If you can answer any or all of these questions, you ve probably started to segment your client bank. If you can t, imagine the power of a client bank where you do know the answers to these questions and can plan your future activity using this information. Make the most of what you ve got Ask any marketeer and they ll tell you that it is more profitable to deal with existing clients than to attract and sell to new ones. Why then do many businesses seek new clients while ignoring the value within their own business? The answer for many is that they just do not know what they have got. Many advisors say that they cannot afford the time to segment their client bank. A counter argument is that the time invested in understanding and segmenting your client bank is some of the most valuable and profitable time any business can invest. Target those suitable for the right solutions available Develop a proposition based on the needs of the client Create a vision based on fact, not a gut feeling I am sure you would agree that this would be a benefit to any business and ultimately its customers. What is segmentation? Academics define customer segmentation as the practice of dividing a customer base into groups of individuals that are similar in specific ways relevant to marketing, such as age, gender, interests, spending habits and so on. Using segmentation allows companies to target groups effectively, and allocate marketing resources to best effect. To put it another way, customer segmentation is the most effective way of identifying the clients who can provide you with most profit going forward. It can also help you identify the clients that are costing you time and money. Once you have segmented your client bank and are clear about your most profitable segments and those who drain your resources, it is time to define a profitable proposition to deliver what all companies strive for: the right message to the right people at the right time. So how can you do that simply and efficiently for the benefit of your clients? If it is done properly, customer segmentation can help a business to: Understand the clients that it has Identify unprofitable clients Concentrate planning on profitable clients 3

6 Why you should segment your client bank To put it simply, if you know who makes you money, deal with them. If you know who costs you time and money, either adapt the way you work with them or end the relationship. Segmenting is built on the concept that people make purchases or decisions for one of three reasons: They either need to satisfy a need Solve a problem, or Make themselves feel better 5. Be clear on the differences between the segments you have established. This will help you develop a marketing, service or charging proposition tailored to them. Remember, there is no set segmentation model. It differs from one company to another, because it needs to flow from the goals and visions of the company. If you want to segment your clients and I would urge you to consider this why not start by completing our segmentation template? Not all products and services will fit into every category, so your first step is to decide which one of these three purposes your business vision fulfils. Then you need to be able to market your product or service according to your customers wants and needs. You have then segmented your client bank, so you can achieve the right message to the right people at the right time. How to segment Whether you are marketing ice cream, fast food or financial services, you need a common-sense approach to segmenting clients. Here are five golden rules used by marketeers around the world, in a myriad of industries, to segment their client banks. 1. Be specific about the clients in each segment. Avoid broad terms such as A, B and C or gold, silver and bronze. Write a descriptive narrative for each segment, saying what appeals to them, what puts them off, what stimulates and motivates them. This information will help you visualise each segment and provide ideas for whatever proposition you want to develop for it. 2. Do not go segmentation-crazy stick to a manageable number of segments. 3. Measure, measure and measure again. Be clear about who makes you money, and who costs you money and time. 4. If you identify clients that cost you time and money, change the way you deal with them or think about ending the relationship. 4

7 Segmentation template: an example Segment name High value Aspirational Transactional Description Clients who provide me with the greatest opportunity and offer highest long-term value to my business Growth segment with potential to develop into high value clients over time Pay-as-go clients, driven by a product need rather than the requirement for a financial solution What benefits do they want from you? Holistic financial planning advice and an ongoing relationship Planning for the future within their means Relationship not exclusive Advice on a product by product basis What do they look like demographically? 50+ AB professionals Higher rate tax payers Not averse to fees BC1 Moving into higher rate tax band Some objections towards fees Could fall into all categories; interaction driven by need. What special behaviours differentiate them from other segments? Wealth protection Desire to cascade wealth through generations Looking for one-to-one relationship and proactive advice solutions Wealth creation Family protection Long-term financial planning Media savvy Social media experienced Web/media savvy Driven by cost rather than value driven Good at shopping around/no loyalty Your own Segmentation Template Segment name High value Aspirational Transactional Description What benefits do they want from you? What do they look like demographically? What special behaviours differentiate them from other segments? 6

8 Client propositions If things don t change, they stay the same The advisor landscape is changing to maximise the opportunities this creates, you need to consider: Where you want your business to go The customers you will focus on The services you will offer How you will be remunerated The combination of these items creates your client proposition. What is a client proposition? A client proposition is what you say you will do for the client or customer, something they value and are therefore prepared to pay for. Ask yourself: Do I have a client experience? Will clients pay a fee or a retainer for this? Is it a real value to me and the client now and in the future? It is about providing the right solution to the right clients at the right time, in a consistent, repeatable manner. What are the core components? Your proposition is made up of several core components. Step 1 The first step is to ask yourself: what is it I do?. By understanding what you actually offer your clients, you are part of the way to identifying your proposition(s). Step 2 What is your business objective? Have you got an action plan in place? You need to understand where your business is heading and be able to map the route to make sure you meet your end goal. Step 3 Have you segmented your client bank? What customers do you want to focus on? Are you clear what each segment requires and how you will charge each segment. Step 4 What do your clients value? What differentiates you from the competition? You need to demonstrate what you will do to help your clients and what benefits you will bring to them. 6

9 What information do you need before you start? You need to manage by fact. You have to make sure that you have the answers to the following questions: What do your clients want from you and your business? What do your clients need from you and your business? What do your clients expect from you and your business? What do your clients value from you and your business? What can you afford to provide your clients and customers? If you do not have the answers to these questions, start asking both clients and prospective customers you may be pleasantly surprised. How many different propositions do you need? The number of propositions is determined by the number of client or potential customer segments you are focusing on. You are likely to have a variation of similar themes, but ultimately the key measures are the value of each proposition to the customer and revenue of each proposition to you. What you could end up with is something like this: Segment name Relationships Campaigns Transactional Charge basis Flat fee Lower fee and bespoke Bespoke Key services Full wealth management Focused financial planning Product-led Face-to-face? Quarterly Yearly As required/chargeable Phone Dedicated helpline Generic helpline No phone support /Web Personal website Offered Mandatory self-service Client reporting Six-monthly full financial plan Yearly review Review on demand And so on... In summary, to create your client and customer propositions you need to: Be clear about what it is you actually do Determine how to differentiate yourself from the competition Understand how you add value Decide what client and customer segments you are targeting Finally, you must start thinking about how you will charge these segments. Business vision + Customer proposition = Profitable relationships Remember, the products and services that succeed are those that offer a benefit to consumers that is greater than the perceived cost. With the right client and customer propositions in place, you can create relationships with profitable, loyal clients and potential customers, and make yourself their Trusted Advisor as a result. 7

10 Remuneration Remuneration Options How will you be paid for the work you do in a new model world? As you can see, there are various ways in which an advisor can receive remuneration going forward: Fixed fee Agreeing a fixed fee for the year or for a particular project can help the client budget for the cost. However, you need to consider the fee level carefully and build in a contingency sum to cover unexpected events that may require you to do additional work. Benefits Negatives Complete your own remuneration pie chart now. The client can budget for expected costs. You can predict cash flow and manage the business accordingly. Such fee clarity gives the client certainty and engenders trust, which leads to repeat business. You may charge too little for the work involved. A competitor could undercut you. It is awkward to go back and ask for a higher fee if the work involved leads to a loss for your business. Time related This is the most commonly used fee structure. In this structure, each member of the firm has an appropriate hourly charge rate. Any work completed for a client or customer is logged on a time recording system and invoiced, normally each month. The client receives an invoice and usually an activity-based breakdown of the fees charged. Most advisors find the fees and retainer elements of the wheel the most challenging so we will spend some time focusing particularly on this. Fees or retainers? Once you have decided to operate on a fee basis, you need to consider the fee structure your business wants to use. Benefits You get to invoice completed work quickly. It gives the client fee transparency. It is clear to everyone what is being paid for. Negatives As the level of fees will fluctuate monthly, this could have negative impacts on cash flow and affect medium to long-term planning. The client has no control of the amount invoiced so cannot budget accordingly. Administering the production and issuing of monthly invoices takes up time. 8

11 Fee per client or customer This option is only really suited to group pension clients. A fixed fee per head is charged to cover all the work for each member. The level of fee may range from and is usually invoiced quarterly with a reconciliation exercise at the end of the year. Retainers The advisor agrees a yearly fee budget in advance with the client, who pays an amount each month, normally by Direct Debit or standing order. At the end of the year, the advisor compares income received to time charged. If there is a shortfall, the client makes a balancing payment to cover it. Any surplus may be offset against the next year s fees. Benefits Negatives Benefits Negatives It is easy for clients to budget for defined and expected costs. You can predict your levels of income, which aids cash flow. As the level of fees will fluctuate monthly, this could have negative impacts on cash flow and affect medium to longterm planning. The client has no control of the amount invoiced so cannot budget accordingly. This is easy to explain and operate, and clients can budget for defined and expected costs. You can predict your levels of income, which aids cash flow. It can also turn unprofitable clients into profitable clients. You have to be careful as the retainer may not cover the work done or the time spent with the client. If so, consider additional fees. If your retainer is too high you may be undercut by a competitor. This is easy to explain and operate. It takes time to administer the production and issuing of monthly invoices. Any shortfall can be invoiced at the end of the year, or any surplus offset against the next year s budget. You need to explain to the client what is covered by the retainer and they have to understand this. Additional services not covered by the retainer can be invoiced separately. As you can see there is no one ideal model. You need to decide what is best for your business and your clients and customers. 9

12 Pricing your proposition existing clients Our template gives you an indication of how you might want to manage the logistics of making sure you capture all the work completed for clients. Existing client s activity Client report Client visit Valuation Proactive phone contact Reactive phone contact Quotation Application processing Travel Meeting Account management Provider relationship Internal staff liaison Total Number required Time in hours actual Advisor Paraplanner PA Admin 10

13 Pricing your proposition new clients Our template gives you an indication of how you might want to manage the logistics of making sure you capture all the work completed for clients. Existing client s activity Initial meeting Initial report Valuation Fact find Travel Quotation Application processing Travel Presentations Recommendation report Travel New business processing Provider relationship Internal staff Liaison Total Number of hours required Time in hours actual Advisor Paraplanner PA Admin 11

14 Your action plan We all know the great Henry Ford quote when launching his Model T Ford: You can have any colour you want as long as it is black. However, you may not have heard this: If you think you can or think you cannot, you are right. Essentially, the great man of industry was saying that if you put your mind to something and believe you can achieve it, you will. If you do not think you can accomplish it, you probably won t. Why plan? Do any of these sound familiar to you? I don t know how to do it This one is easy to overcome our Business Planning Guide can take you through each of the seven stages of successful business planning. I am too busy to put a plan together Do you mean you are too busy to avoid failure, or too busy to exploit some of the great opportunities out there? Or is it all in your head and you just need to write it down? If you think that planning is a luxury for big companies and not for your business, I would urge you to think again. Step back and remember: the future of your business is important make the time, it deserves it. I can handle any changes that come along This objection best describes what is wrong with many business people. They think things will just go on as normal and change won t affect them. However, the biggest threat to your business is events you have not anticipated or planned for. Changes can have a dramatic effect on our personal and business life. That is why successful people set goals and have a plan. They try to anticipate what these events might be and their impact. They plan for them, take control of their business and define the vision they want to create. All this takes a plan. My business is successful, so I do not need a plan That is what they said at Lehman Brothers, Anglo Irish Bank and Quinn Insurance. Regardless of what objection you might have to business planning, I am guessing by now that you want to at least try to put a plan together or amend your existing plan. Company vision and goal setting Strategic direction Environmental analysis Market opportunities Tactical opportunities Business objectives Strategy and tactics Marketing plan Financials and measurement 12

15 Reading through your finished action plan, it is easy to feel overwhelmed by all the things you need to do. That is why it is important to identify people who can help you make plans and put them into action. If you run a small business yourself, get friends or family to read over what you have written. If you work for a large organisation, set up a project team to launch the business plan. Business plan tracker You may find this matrix useful to help you keep track of who is doing what and when. Stage Owner Due date Progress/comments Company vision and goals Strategic direction Situational analysis Market opportunities Tactical opportunities Objectives Strategy and tactics Marketing plan Financials and measurement

16 Your next steps Our business consultancy team can also help you: Develop your business action plan Enhance professional connections Reach the customers that offer the greatest potential for your business Maximise the profitability of your business using our resource team Highlight the most effective marketing strategies for your business. Take a look at our guides to see what we have to offer: Business Development - Planning Guide Business Development - Marketing Planning Business Development - Developing Your Client Proposition Personal Client Agreement Professional Introducer Agreement To see how Trusted Advisor Group can help you move your business in the right direction, visit: Trusted Advisor Group 49 Dawson Street Dublin 2 el: Stephen Browne: Website: info@trustedadvisorgroup.ie Adapted from the Aegon series of Business Development Guides for the Trusted Advisor Group ILA (REV 03-14)