Originally published on Money Marketing
17th January 2025
https://www.moneymarketing.co.uk/opinion/roderic-rennison-why-having-a-client-first-mindset-matters/
Practically every financial-planning firm owner that I have ever met will tell me that their clients are not only their most valuable asset, but that also that they deliver outstanding client service.
I have no issue with the value that their clients bring – up to a point – which I will elaborate on, but the services delivered are sometimes, on closer analysis, not always “outstanding”.
Let me first address the value that clients bring. Not all clients even generate an income if they are ‘legacy’ clients, and not all generate a profit, or at least a minimum level that the owner would like to see or should be seeking.
The solution is not only to segment clients in sufficient detail to be able to know what income each client, or family or other grouping generate, but also to have minimum income and profitability targets in place to compare clients to.
Not all clients generate an income if they are ‘legacy’ clients, and not all generate a profit
We regularly encounter owners looking to sell their firms where perhaps upwards of 40% to 50% generate only 20% of the overall income and less than 10% of the profit. Looked at from another better-known perspective, it may be that, say, 20% of the clients are generating over 50% of the income.
There are two main solutions; the first is to find ways to improve the profitability of these clients, which may be by using technology to deliver a digital rather than a face-to-face solution. This may also be combined with allocating clients to newer advisers who deal with the clients remotely.
The other is to consider selling those clients that do not meet whatever size and profitability criteria are used, and there are now a growing number of specialist acquirers focusing on this part of the market.
This leads on to my second point. Are all the services currently provided actually of interest and relevance to the clients that they are being delivered to, and are there segments of the client base that want fewer services, at least at certain stages in their lives? And how does a firm find out?
The obvious answer is to ask the clients what they want by ascertaining what they value most and least. In my experience, only a relatively small minority of firms do so. I accept that any client consultation exercise has to conducted in a considered way, but the dividends that it is likely to pay are potentially considerable, and “chime” well with the Consumer Duty regulations.
With selective external support, the results can often be revealing, and most importantly of lasting benefit to the firm because more focused and deeper client relationships that are created.
So why am I and my fellow partners at Catalyst Partners so interested in these aspects? It is simple. Making the effort to reconfigure the client base and proposition prior to a sale is likely, in some instances, to make the firm more attractive to a wider range of acquirers a number of whom will only acquire firms where the “hard yards” have been undertaken.
This exercise will be all the more beneficial if the level of charges is also reviewed to ensure that is at a level to pay for the services being provided.
Are all the services currently provided actually of interest and relevance to the clients that they are being delivered to?
Just because the owner(s) of a financial-planning firm contact us to say that they are ready to sell, we would not (in our view) be providing a professional service if we do not conduct a detailed appraisal of the firm to determine of the value could be increased by taking specific actions first.
This appraisal is one of the tangible ways in which we can assist our clients in addition to providing comprehensive support from drafting the Sale Information Document to guiding and supporting them through all aspects of the sale process.
Yes, the work in re-configuring what services it delivers to which of its clients will involve some time and effort. But if they result in a firm with a greater value that appeals to a wider spectrum of (quality) acquirers, that is to everyone’s benefit – most importantly, to the firm’s clients who will already be served in the way(s) that appeal to and suit them best and make them more likely to remain with the acquirer post-sale.