Business Development:Developing your Client Proposition

For financial advisors only

It is important for all businesses to identify the needs of their clients and meet these in a manner that deliversbusinessprofitabilityandamutualongoingandlastingbenefitforboththeadvisorandclient.

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.

What will your Client Proposition look like?

• Whatisyourbusinessvision?• Documentyourvision

• Howwelldoyouknowyourclientbank?• Makethemostofwhatyou’vegot• Whatisthesegmentation?• Whyyoushouldsegmentyourclientbank• Howtosegment• Segmentationtemplate

• Whatisaclientproposition?• Whatarethecorecomponents?• Whatinformationdoyouneedbeforeyoustart• Howmanydifferentpropositionsdoyouneed?

• Remunerationoptions• Feesorretainers?• Pricingyourproposition

• Whyplan?• Whatshouldyourplanlooklike?• Businessplantracker

Vision

Customer segmentation

Client Propositions

Remuneration

Your action plan

Your next steps

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• Whatisitthatyouactuallydo?

• Whichproductsorservicesdoyouofferyourclients?

• Whatareyouknownforandwhatdoyoustandfor?

• What’syourroleinthebusiness?

• Howdoyouspendyourtime?

• Describeyourexistingclients

• Whoareyourpotentialclients?

• Whatservicesareyougiving?

• Howusefulisthisserviceandisitreallyneeded?

• Whatallianceshaveyouestablishedtoenhancetheserviceyouprovideforclients?

• Whatareasofadviceareyouinvolvedin?

• Whatareyourareasofexpertise?

• Whatmarketsectorsareyouinvolvedin?

• What’syourwebpresencelike?

Vision

Let us look at each stage in more detail.

1

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

Createavisionstatementbyfilingintheblanksbelow.Haveanotherpersonreaditbacktoyou.

Vision statement (first draft)

Withinthenext(inserttimeperiod):

Intoasuccessful(typeordescriptionofbusinessyouwanttobuild):

Providing(descriptionofproductsand/orservices)

To(describeyourclientsandcustomers)

Document your vision

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Review what you’ve written and give it this test:• Doesitseemreal?• Doesitmotivateyou?• Willitenthusenewandexistingclients?• Isitachievableataprofitgoingforward?

Dothiswitheveryonewhowillhelpimplementthe vision. If it fails any of these criteria, start again.

Howwelldoyouknowyourclientbank?

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: • Whichofyourclientsareprofitablenow?• Whichofyourclientswillgiveyouyourfutureprofit?• Whichofyourclientswantinin-depthdialogue

and relationship, and which want a lighter, moretransitional 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 profitabletodealwithexistingclientsthantoattractandsell 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 clientbankissomeofthemostvaluableandprofitabletime any business can invest.

If it is done properly, customer segmentation can help a business to:• Understandtheclientsthatithas• Identifyunprofitableclients• Concentrateplanningonprofitableclients

• Targetthosesuitablefortherightsolutionsavailable• Developapropositionbasedontheneedsofthe

client• Createavisionbasedonfact,notagutfeeling

Iamsureyouwouldagreethatthiswouldbeabenefitto any business and ultimately its customers.

What is segmentation?

Academicsdefinecustomersegmentationasthepractice of dividing a customer base into groups of individualsthataresimilarinspecificwaysrelevanttomarketing, such as age, gender, interests, spending habitsandsoon.Usingsegmentationallowscompanies 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 provideyouwithmostprofitgoingforward.Itcanalsohelp you identify the clients that are costing you time and money.

Once you have segmented your client bank and are clearaboutyourmostprofitablesegmentsandthosewhodrainyourresources,itistimetodefineaprofitableproposition to deliver what all companies strive for: the right message to the right people at the right time. Sohowcanyoudothatsimplyandefficientlyforthebenefitofyourclients?

Customer segmentation

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4

Why you should segment your client bankTo 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:• Theyeitherneedtosatisfyaneed• Solveaproblem,or• Makethemselvesfeelbetter

Notallproductsandserviceswillfitintoeverycategory,soyourfirststepistodecidewhichoneofthesethreepurposesyourbusinessvisionfulfils.Thenyouneedtobeable 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 financialservices,youneedacommon-senseapproachto segmenting clients.

Herearefivegoldenrulesusedbymarketeersaroundtheworld, in a myriad of industries, to segment their client banks.

1. Bespecificabouttheclientsineachsegment.Avoidbroad terms such as A, B and C or gold, silver andbronze. Write a descriptive narrative for each segment,saying what appeals to them, what puts them off, whatstimulates and motivates them. This information willhelp you visualise each segment and provide ideas forwhatever proposition you want to develop for it.

2. Donotgosegmentation-crazy–sticktoamanageablenumber of segments.

3. Measure, measure and measure again. Be clear aboutwho 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 aboutending the relationship.

5. Be clear on the differences between the segmentsyou have established. This will help you develop amarketing, service or charging proposition tailored tothem.

Remember, there is no set segmentation model. It differs from one company to another, because it needs toflowfromthegoalsandvisionsofthecompany.Ifyou want to segment your clients – and I would urge you to consider this – why not start by completing our segmentation template?

Segmentationtemplate:anexample

Segment name High value Aspirational Transactional

Description Clients who provide me with the greatest oppor-tunity 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 meansRelationship not exclusive

Advice on a product by product basis

What do they look like demographi-cally?

50+ AB professionalsHigher rate tax payersNot averse to fees

30 – 45+BC1Moving into higher rate tax bandSome objections towards fees

Could fall into all categories; interaction driven by need.

What special behaviours differentiate them from other segments?

Wealth protectionDesire to cascade wealth through generationsLooking for one-to-one relationship and proactive advice solutions

Wealth creationFamily protectionLong-term financial planningMedia savvySocial media experienced

Web/media savvyDriven by cost rather than value drivenGood 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 demographi-cally?

What special behaviours differentiate them from other segments?

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6

‘If things don’t change, they stay the same’

Theadvisorlandscapeischanging–tomaximisetheopportunitiesthiscreates,youneedtoconsider:• Whereyouwantyourbusinesstogo• Thecustomersyouwillfocuson• Theservicesyouwilloffer• Howyouwillberemunerated

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:• DoIhavea‘clientexperience’?• Willclientspayafeeoraretainerforthis?• Isitarealvaluetomeandtheclientnowandinthefuture?

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 1Thefirststepistoaskyourself:‘whatisitIdo?’.Byunderstandingwhatyouactuallyofferyourclients,youarepartofthewaytoidentifyingyourproposition(s).

Step 2Whatisyourbusinessobjective?Haveyougotanactionplaninplace?Youneedtounderstandwhereyourbusiness is heading and be able to map the route to make sure you meet your end goal.

Step 3Haveyousegmentedyourclientbank?Whatcustomersdoyouwanttofocuson?Areyouclearwhateachsegment requires and how you will charge each segment.

Step 4What do your clients value? What differentiates you from the competition?

Youneedtodemonstratewhatyouwilldotohelpyourclientsandwhatbenefitsyouwillbringtothem.

Client propositions

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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:

• Whatdoyourclientswantfromyouandyourbusiness?• Whatdoyourclientsneedfromyouandyourbusiness?• Whatdoyourclientsexpectfromyouandyourbusiness?• Whatdoyourclientsvaluefromyouandyourbusiness?• Whatcanyouaffordtoprovideyourclientsandcustomers?

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 focus-ing 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

Email/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:• Beclearaboutwhatitisyouactuallydo• Determinehowtodifferentiateyourselffromthecompetition• Understandhowyouaddvalue• Decidewhatclientandcustomersegmentsyouaretargeting

Finally, you must start thinking about how you will charge these segments.

Business vision + Customer proposition = Profitable relationships

Remember,theproductsandservicesthatsucceedarethosethatofferabenefittoconsumersthatisgreaterthanthe 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.

Remuneration OptionsHowwillyoubepaidfortheworkyoudoina“newmodel” world? As you can see, there are various ways in which an advisor can receive remuneration going forward:

Complete your own remuneration pie chart now.

Mostadvisorsfindthefeesandretainerelementsofthewheel 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.

Fixed feeAgreeingafixedfeefortheyearorforaparticularprojectcanhelptheclientbudgetforthecost.However,you need to consider the fee level carefully and build in acontingencysumtocoverunexpectedeventsthatmayrequire you to do additional work.

Benefits Negatives

The client can budget for expectedcosts.

You may charge too little for the work involved.

You can predict cash flowandmanagethebusiness accordingly.

A competitor could undercut you.

Such fee clarity gives the client certainty and engenders trust, which leads to repeat business.

It is awkward to go back and ask for a higher fee if the work involved leads to a loss for your business.

Time relatedThis is the most commonly used fee structure. In this structure,eachmemberofthefirmhasanappropriatehourly 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 invoiceandusuallyanactivity-basedbreakdownofthefees charged.

Benefits Negatives

You get to invoice completed work quickly.

As the level of fees will fluctuatemonthly,thiscouldhave negative impacts on cashflowandaffectmediumtolong-termplanning.

It gives the client fee transparency.

The client has no control of the amount invoiced so cannot budget accordingly.

It is clear to everyone what is being paid for.

Administering the production and issuing of monthly invoices takes up time.

Remuneration

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Fee per client or customer

This option is only really suited to group pension clients.Afixedfeeperheadischargedtocoverallthe work for each member. The level of fee may range from€50-€250andisusuallyinvoicedquarterlywithareconciliationexerciseattheendoftheyear.

Benefits Negatives

It is easy for clients to budgetfordefinedandexpectedcosts.

As the level of fees will fluctuatemonthly,thiscould have negative impactsoncashflowandaffectmediumtolong-term planning.

You can predict your levels of income, which aidscashflow.

The client has no control of the amount invoiced so cannot budget accordingly.

Thisiseasytoexplainand operate.

It takes time to administer the production and issuing of monthly invoices.

Retainers

The advisor agrees a yearly fee budget in advance with the client, who pays an amount each month, normally byDirectDebitorstandingorder.Attheendoftheyear, 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 offsetagainstthenextyear’sfees.

Benefits Negatives

Thisiseasytoexplainand operate, and clients canbudgetfordefinedandexpectedcosts.

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.

You can predict your lev-els of income, which aids cashflow.Itcanalsoturnunprofitableclientsintoprofitableclients.

If your retainer is too high you may be undercut by a competitor.

Any shortfall can be invoiced at the end of the year, or any surplus offsetagainstthenextyear’s budget.

Youneedtoexplaintotheclient 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.

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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

Number required Time in hours – actual

Advisor Paraplanner PA Admin

Client report

Client visit

Valuation

Proactive phone contact

Reactive phone contact

Quotation

Application processing

Travel

Meeting

Account management

Provider relationship

Internal staff liaison

Total

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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

Number of hours required

Time in hours – actual

Advisor Paraplanner PA Admin

Initial meeting

Initial report

Valuation

Factfind

Travel

Quotation

Application processing

Travel

Presentations

Recommendation report

Travel

New business processing

Provider relationship

Internal staff Liaison

Total

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Your action planWeallknowthegreatHenryFordquotewhenlaunchinghisModelTFord:‘Youcanhaveanycolouryouwantaslongasitisblack’.However,youmaynothaveheardthis:‘Ifyouthinkyoucanorthinkyoucannot,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?

Doanyofthesesoundfamiliartoyou?

I don’t know how to do itThis 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 togetherDoyoumeanyouaretoobusytoavoidfailure,ortoobusytoexploitsomeofthegreatopportunitiesoutthere? Or is it all in your head and you just need to write it down?

Ifyouthinkthatplanningisaluxuryforbigcompaniesand 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 alongThis 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,thebiggestthreattoyourbusinessiseventsyou 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 forthem,takecontroloftheirbusinessanddefinethevision they want to create. All this takes a plan.

My business is successful, so I do not need a planThat 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 existingplan.

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Company vision and goal setting Strategic direction

Environmental analysis

Market opportunities Tactical opportunities

Business objectives

Strategy and tactics

Marketing plan

Financials and measurement

Readingthroughyourfinishedactionplan,itiseasytofeeloverwhelmedbyallthethingsyouneedtodo.Thatiswhyit 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

Youmayfindthismatrixusefultohelpyoukeeptrackofwhoisdoingwhatandwhen.

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

www.trustedadvisorgroup.ieAdapted from the Aegon series of Business Development Guides for the Trusted Advisor Group

Tel: Stephen Browne:

E-mail: Website:

01 905 5812086 6816898info@trustedadvisorgroup.iewww.trustedadvisorgroup.ie

ILA 10790 (REV 03-14)

Your next steps

Our business consultancy team can also help you:

• Developyourbusinessactionplan

• Enhanceprofessionalconnections

• Reachthecustomersthatofferthegreatestpotentialforyourbusiness

• Maximisetheprofitabilityofyourbusinessusingourresourceteam

• Highlightthemosteffectivemarketingstrategiesforyourbusiness.

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:

www.trustedadvisorgroup.ie

Trusted Advisor Group

49 Dawson StreetDublin 2