Client segmentation is far from a new concept for financial advisors. At its best, segmentation allows firms to deepen relationships with clients, optimize service delivery and manage time more effectively to grow and retain a scalable client base. 

Yet, according to Cerulli’s 2022 data, nearly two-thirds of advisors cite “serving too many non-ideal clients” as their top productivity challenge. However, many firms struggle to translate the idea of segmentation into an actionable strategy.  

Here’s how to bridge the gap between knowing what to do and actually implementing it: 

1. Define Your Ideal Client Profile (“ICP”) 

Your segmentation strategy must be anchored by a clear ICP. Without this, segmentation becomes directionless. Start by asking: 

• Who are my ideal clients? 

• What defines an ideal client or family for my firm — financially, relationally and culturally? 

• What revenue levels make a client ideal? 

Building a strong ICP ensures your efforts align with both client needs and your firm’s growth goals. 

2. Choose Meaningful Segmentation Factors 

Once you are crystal clear on your Ideal Client, use that as a lens through which to build out your segmentation strategy.  Beyond the basics like assets under management (AUM) and revenue, consider segmentation criteria that reflect the depth of your client relationships. Examples include: 

• Professional Characteristics: Age, profession or life stage. 

• Behavioral Traits: Frequency of referrals, advocacy for your firm or shared values. 

Remember, softer factors — like emotional connection or shared goals — can often be the “X factor” in creating exceptional client experiences. 

3. Create and Communicate a Customized Service Matrix 

Segmentation isn’t just about categorizing clients — it’s about tailoring your services to meet their needs. This requires clarity, fairness and transparency. 

• Set Clear Standards: Define the level of service for each client segment and communicate it clearly. 

• Prioritize Fairness: While your top-tier clients should receive the most attention and value, all clients should feel appreciated. 

• Stay Flexible: Client circumstances evolve. Your segmentation strategy should allow for fluidity, reflecting changes in assets or client needs. 

4. Plan for Clients Who No Longer Fit 

Every firm will encounter clients who no longer align with their ICP. For ensemble practices, transitioning these clients to junior advisors can foster team development. If you’re a solo practitioner, these conversations can be more delicate but are just as essential. 

By taking these steps, you can turn segmentation into a practical, growth-focused tool. Proper segmentation creates extraordinary client experiences, streamlines communication, likely increases firm revenue and allows you to focus on scaling your firm. 

For Investment Professional use only. Not for use with the public.