Old Mutual International’s Mike Leeson and Mimi Pienaar discuss the importance of knowing what is on a customer’s mind in our second of three articles looking at business transition principles.
There are many areas advisers will need to look at when evolving the way they do business.
We have identified six key issues: business planning, understanding the customer, investment planning options, profitability analysis, people assessment and operational efficiency.
In our first article of this series we looked at business planning; this month we focus on understanding the customer and the importance of customer segmentation.
The international advice market is evolving and a new type of customer is emerging.
Greater access to information is driving customer awareness and, as customer expectations evolve, there is demand for greater transparency and value.
Advisers need to consider how they can meet these demands as the future success of their business will depend on retaining and growing their customer base – and ensuring the services they offer are suitable for each individual customer.
To keep pace with the evolving needs of customers, advisers must ensure they develop a business model that places the customer at the centre of their business.
They need to know what type of customer they want, what services these customers truly value, how they can offer such services, what the cost of providing those services are and what they need to charge customers to make it commercially viable.
Not all customers are the same, and businesses need to identify the different servicing models required to suit different needs.
Some businesses are currently unaware of the similarities and differences in their customer base or the link to profitability.
By understanding more about the types of customers they have and the services they offer, the firm can start to shape their proposition and service accordingly.
An adviser proposition cannot be all things to all people. By identifying their strengths and building
a business based on those strengths, they will create a more customer-focused and profitable business model.
Business constultancy Masthead’s head of practice management, Mimi Pienaar, has worked with OMI for more than three years, developing a practice management business development programme that helps adviser firms build sustainable business models.
She says: “Once a firm has identified its strengths and decided on its target market, it can then identify the customer profile it wants to attract. It may have existing customers that do not fit the profile, and decisions may need to be taken on whether the firm continues to service these customers.”
“The different services offered by the firm will need to be reviewed, along with identifying the services they want to offer. A business needs to design the advisory service it wishes to offer – typically this is linked around the financial planning process,” she says. “The service needs to include everything the firm does for a customer. This enables a firm to cost the service. Segmenting customers is a crucial step. Advisers should use a consistent model to identify criteria and use around four or five criteria that are understood by everyone. “Advisers are increasingly looking at the different types of investment approaches available to their customers and are formulating these into distinct service levels. It is then up to the customer to decide which service suits them, with help and guidance from their adviser.” It should not be assumed that someone with a larger portfolio needs or wants discretionary fund management or that someone with a small portfolio does not want a bespoke portfolio of funds. Pienaar says: “Having a segmented customer proposition like this can help advisers ensure they are offering different investment solutions to meet different customer requirements. It can also ensure the adviser is paid an appropriate fee for the services they provide and can help build overall profitability and sustainability of the business. “Understanding what the customer really values, knowing how to deliver this at a price they are willing to pay and at a level that maintains profitability for the business, is critical for businesses in transition.” – via international-adviser.com