Global Report

Next: The Wealth Management Firm of the Future

Maximizing Wealth Management Client Segmentation

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Overview

As organic growth through enhanced marketing and more effective client retention becomes a priority for wealth management firms, client segmentation has assumed greater importance. Wealth Management IQ and BNY Mellon | Pershing recently conducted an in-depth survey to discover advisors’ and managers’ attitudes toward and experience with client segmentation.

This report presents the highlights of that research, discusses its implications and offers insights into what advisors and firms will need to know to make more informed decisions about segmenting clients and prospects.

Survey Highlights

Respondents

At a Glance

Webinar

Delivering on the Potential of Client Segmentation

This webinar highlights of the latest research, discuss its implications, and offer insights into what advisors and firms will need to know to make more informed decisions about segmenting clients and prospects.

Specifically, the webinar will cover:

The key benefits of implementing client segmentation
Segmenting clients: Why is it so challenging?
Five key segmentation parameters
How technology is used in segmentation efforts
Does segmentation really work?

David Armstrong - Moderator

Executive Content Director, Wealth Management, Informa Connect

Kristin Letourneau, PhD

Vice President, Research,
Informa Engage

Janet Kelly

Director,
BNY Mellon | Pershing

Implementing segmentation efforts is difficult given the challenges of defining the most meaningful segments. The three biggest challenges in segmenting clients are identifying the best segments, defining the “ideal” client, and finding time and resources. For 86% of respondents, the firm’s client relationship management (CRM) system drives segmentation efforts.

Client segmentation is essential to deliver a high level of customer service to attract and retain todays’ clients. Advisors agree that segmentation improves client engagement, makes personalization more effective and creates operational efficiencies. 43% of respondents believe their segmentation strategies are “very effective” and 51% consider the strategies “somewhat effective.”

Segmentation is useful in tiering service efforts, but advisors are fearful of losing clients to lower-cost providers. Firm segmentation efforts are successful, but advisors would like them to be even more successful. Net wealth and revenue potential are the most-often used criteria for segmentation, perhaps because identifying “ideal” clients is difficult.

“Organic growth is our focus since combining technology and cultures is a challenge when growing through M&A.”

Ina Toderita, Director of Operations, Balentine

Takeaway

Effectiveness of Segmentation

Overall, an air of “if only” about segmentation efforts exists. While the efforts are necessary and successful, they could be even more effective. Just under half of respondents (43%) believe their segmentation strategies are at least “very effective,” while an additional 51% consider them “somewhat effective.” Equal percentages, 5%, consider the efforts either extremely effective or not very effective.

Looking at segmentation through the lens of clients, one in five respondents (19%) have observed a strong correlation between client satisfaction and the effectiveness of their segmentation strategy, while nearly half (49%) report a moderate correlation. Nearly a quarter (22%) have observed a slight correlation and 11% say they see no correlation.

“At my former firm, I hired a support person whose work and relationships with clients were fantastic. We groomed him and now he’s ‘killing it’ as an FA.”

Carina Diamond

Key Takeaways

As firms place increasing emphasis on organic growth, look for more investment in business development and marketing. This is likely to include technology-related spending to support web-based marketing efforts as well as human capital investments in roles that drive growth.
Advisors will continue to increase their investments in technology to improve the overall client experience and improve efficiency.
Human capital needs remain one of the greatest challenges of the wealth management business as competition for talent is at an all-time high and the talent pool does not appear large enough to meet demand.