A wealth management practitioner produces “advice/counsel/wisdom” packaged as a solution to an individual’s needs, anxieties and aspirations. If we focus on the verb “produces,” we appreciate that a practitioner, like a factory, assembles a product solution using advice content as the raw material. This advice product applies to a solution’s two components: wealth planning and investment execution.
You Are an Advice Factory with a Fixed Capacity
Let’s continue with this manufacturing analogy. Your advice engineering touches every area of the product you deliver. In other words, it’s not the tools you use, principally technology and investment products, but how you put them together. As an engineered design, your advice product is your intellectual property and unique to you: what you know; who you are; how you think; what you say; what you do; how you care; why you’re trustworthy. (See my previous blog, “Your Product Is You.”)
Unfortunately, your advice factory has a fixed capacity. At full production, to grow your business leads either to adding capacity (e.g., hiring a partner) or becoming more efficient. The latter is always the first choice before undertaking additional costs and introducing new business risks.
You Are the Differentiation
Apple’s products reach different segments, but each product is delivered with its own messaging, distribution, service and support. While there are numerous laptops, phones and tablets in each of Apple’s competitive segments, what people buy is Apple’s engineering and design prowess.
In a similar way to Apple, your advice/counsel/wisdom leads you to see and do things differently and, as a result, provide solutions uniquely. Your advice, and how you deliver it, is your solution’s differentiation.
Packaging Your Advice Profitably
Your advice/counsel/wisdom is what people are ultimately buying. Financially, the more ways you sell this advice content dictates how vibrant your business becomes.
What emerges is not a homogeneous target market, but rather segments wanting your advice but delivered in a different way. The business challenge is to reach each segment profitably.
Three common ways to segment a wealth management market are wealth, generation/age and life stage. Regardless of segmentation methodology, the profitable path for each segment tailors the messaging, pricing, distribution, service and support, but it remains focused on what all people are looking to buy: your advice/counsel/wisdom.
Market Segmentation Dos and Don’ts
- Do treat each segment as a separate division
- Do account for each segment’s P&L
- Don’t permit operational creep (such as giving high-labor services to low-cost segments; using too much automation for high-fee clients)
- Don’t put client referrals (children and friends, for example) into the client’s segment if they’re more tightly matched with another.
A High Volume Segment Example
Likely, your current service is oriented to a HNW client expecting a high-touch, intensely tailored wealth planning and investment solution. For this package, such a client is willing to pay a full price. Since you’re already familiar with this segment, let’s look at adding a new segment: individuals with wealth below your current AUM boundary.
Advice delivery. Establish an automated investing method (such as a robo-adviser), but one that allows you to incorporate your own advice content: risk questionnaires, scoring, models, IPSs, proposals and operations (including fee billing, custodian, performance reporting, etc.). While the delivery form is different from the high-touch segment, the core service—advice—remains the same.
Pricing. Use a value-based pricing approach that sets the expectation that your advice product will be delivered using high-volume methods. Keep in mind that this segment’s profits come after adding your own fee and subtracting the robo-adviser platform cost.
Meetings. For one-on-one meetings, use a tool such as GoToMeeting and use the video option to keep the personal approach. For face-to-face meetings, use in-office group sessions in which you organize clients into affinity groups based on common interests such as age, location, job type or family structure for education, planning and updates.
Ongoing contact. Communicate educational topics, updates, notices, planning topics and so forth using email and social media. Also, use semi-annual surveys (consider SurveyGizmo or SurveyMonkey) to capture opinions and gain feedback as a means to fine-tune your offering.
Client service. Use a client portal for investment updates, document delivery, document uploads, planning and profile edits/updates, meeting/event scheduling and Q&A.
Finding new ways to package your advice product leads to accelerated business performance. Given that automated delivery methods and web-based servicing are here to stay (and increasingly accepted), the sooner you package your advice for different market segments the more valuable—and protected—your business becomes.
Wealth Planning Consulting Inc.
Princeton Junction, New Jersey