Steve Seid:
Welcome everyone to The Whole Truth. This episode is going to be about client segmentation. It's a part of our broader series around building a proactive service model, or said another way, setting a minimum standard of care for your business. There are four parts to this. The first is segmentation which we’re going to cover today. The second is building a service matrix. The third involves breaking out contacts over time, and finally we go over processes that you’ll use in implementation. Kurt and I will have a variety of different discussions, we’ll go on a few tangents, which we’re apt to do particularly around this subject, but keep the focus on client segmentation which will be your key takeaway. Ready everyone? Let’s do it.
Disclosure:
The views expressed herein are those of the participants and not those of Touchstone Investments.
Steve Seid:
And welcome, everybody, to the whole truth from the Bay Area of California. I am Steve Seid and I am joined by my esteemed, co-host from Atlanta, Mr. Kurt Dupuis.
Kurt Dupuis:
Hey, Steve. How are we doing over there?
Steve Seid:
We're doing well, man. We're doing well. So, looking forward to getting to this. As we mentioned in the last episode, we're going to be jumping into client service. And we talked about some of these concepts, but let's summarize. So, again, this client service series is going to be broken down into a few different structures, depending on where you want to go. And so, let's create and just review those definitions again. So, first is minimum standard of care versus differentiation. Minimum standard of care is just setting up a very basic proactive service model. So, if you want to set up the basics of how you interact and touch and service your clients, how do you do that in a proactive way? Differentiation, which we'll get into the future, not now, is if you want to be really the top of the top in this industry, if you want to create an experience that's different than what folks are getting anywhere else, and that'll be a whole other series. So, Kurt, why don't you kind of quickly again summarize Supernova.
Kurt Dupuis:
Sure. So, quick reminder, Supernova is a book written by Rob Knapp, who is a former executive at Merrill Lynch. And the whole idea is, you have to get smaller to get bigger. So, you have to trim clients. Don't offer a first-class and a coach. You really just offer the first-class, so anyone that doesn't fit that criteria is not going to be a part of the practice going forward. And you just service the heck out of those clients and hope that you find more like that.
Kurt Dupuis:
That's the Supernova approach. We're going to get into that in more detail and how you can go that route, if that is appealing to you. But we want to contrast that with what I think we'd call it, just the standard approach, which is having tiers of different clients that do have slightly different service levels, and levels of attention and your time. Which, would you agree, Steve, most people gravitate towards that more standard way of thinking about segmentation, right?
Steve Seid:
Yeah. Because I think the way I think about Supernova, and maybe this is just in my head, is it does require a pretty robust change, really shrinking the book. I mean, I think that most of the FAs that I come across, they get cut a client here and there, tinker around the edges, but they're not looking to wholesale cut the book. So, that's why we're starting in this way and we want to start in the case that's most relevant to people.
Kurt Dupuis:
Yeah. And we don't care. We're completely agnostic.
Steve Seid:
Doesn't matter. Yup.
Kurt Dupuis:
But, and you read Rob's books, plenty of people have success with that model. And so, we're going to get into it. It's worth discussing. But what we find more often than not is the standard type of thinking about clients as appropriate. And just to give a little bit more structure about what standard looks like, let's say you want to have A, B, and C clients, or gold, silver, bronze. You can call them whatever you want, but you're really fleshing out, "Okay, my golds are going to get this number of talking points. My silvers going to get this number of touches per year. We're going to define what types of touches, in-call, in-person, webinar. So, really thinking through each of those tiers and what that service looks like. That's where we're going with this.
Steve Seid:
Yeah. And so, Kurt's starting where I was going to go next, and that's on the process. So, it starts with segmentation, which we're going to cover and start to get into in this episode. What he mentioned right there was the service matrix. How do you touch your clients? What are the different types of touches? That tends to be a pretty good discussion too because you can get pretty creative about what those touches look like.
Kurt Dupuis:
Exactly. And technology helps a lot or technology can help a lot with that to the extent that you're comfortable with it.
Steve Seid:
100%. So, that's a service matrix. Then you've got your tiers, you've got your number of touches and type. But then, this is the critical part because implementation and processes are everything. It's like, when do you actually do those touches? You've got to break them out over time, in a way that you can do them, and it doesn't massively disrupt your business. And this is where people run into problems. They say, "Okay, we want to do all these touches," but they have no idea when they're going to do them. And business gets in the way and they fall behind. But if you can actually map that out over time, that's how you get someplace.
Kurt Dupuis:
Well, not just map it out, but include it in you and your support staff's process, right?
Steve Seid:
Exactly.
Kurt Dupuis:
Whether it's an Outlook invite, whether it's hard-copy paper that's on your desk every morning when you get down, there's multiple ways to skin this cat. But if you're not executing on the development of the ideas, it's really all for naught. And really, all of this, I think, framework that we talk about a lot is, A, discovery. That's just understanding, what do we want to accomplish? B, plan it out, think through it, put it on paper. But then C is the critical part. It's the execution, if you're not able to execute, again, what are we doing here?
Steve Seid:
Exactly right. But I can tell you this. When you get to the end of this, and you implement it from the design of the model to the implementation, it will absolutely 100% change your life for the better. And I know Kurt and I have both had this feedback. I don't know how I operated before without this. You know what I mean? So.
Kurt Dupuis:
Yeah. Once you've thought through, you've developed a game plan and you get to execution, you don't have to do the whole thing at one time. If you're tiering out clients A, B, and C, we'll just stick with that structure, start with your As. Heck, start with your Cs. We don't care. But if it's more digestible to take a certain portion and implement it with those folks, and then six months later, add another tier, and six months later, add another tier there, there's no deadline on this. It's just important to have a plan and stick to it.
Steve Seid:
Okay, so in summary, here's the process: segmentation, service matrix, mapping out the timing of those contacts, and most importantly, the processes and implementation. That's where we're going to go, and we're going to come back in the next segment and talk about the first one, which is segmentation. This is The Whole Truth. Stick with us.
Steve Seid:
And welcome back, everybody. We're going to get into segmentation right now. We'll echo over and over again, simplicity and staging and things like that. There's a million...
Kurt Dupuis:
Over and over and over again.
Steve Seid:
Over and over, yeah. I mean, there's a million different ways to segment clients. And we've both come across resources that said, "Oh, here's 15 ways to segment your clients." You don't need to do it.
Kurt Dupuis:
Or your firm does it for you and you still don't use it.
Steve Seid:
Exactly. Yeah. But in my mind, the very, very basic way to segment around, a few key categories is all you need. There is no benefit to making things over-complex here. Here are the categories that I use to segment. And then Kurt, you can throw in a couple of other things that people want to consider. But this is what works for me and has worked for my clients over time. Revenue, or however you measure that at your firm in terms of your production, relationship. Do you like talking to that client? Do they take your advice versus those you duck and cover when they call? And the last thing is, opportunity or up side. So, some way to capture the future potential of that client. That is pretty much where I stop.
Kurt Dupuis:
All we're doing is combining in quantitative and qualitative metrics. It's really easy just to say, "Clients with revenues above a certain point, those are my A clients, the next tier," etc., etc. That's all well and good, but that doesn't take into account qualitative stuff. Like, "Hey, I'm a member of the same club as this person. We play tennis together. I like this person. We vacation together. They're a really good reference center for me. Good CLI." There's a number of qualitative-type things that we can and actually have, like we've built out that in spreadsheets when we use this tool, that we'll talk about with clients that we can get as granular as you want. I think, particularly you, Seid, I think what you found out is, less is more. And so, it's important to have some sort of qualitative reference in this process, but there's no need to get more sophisticated than that.
Steve Seid:
Yep. And so, we've got a tool for this and you could reach out to us at TheWholeTruth@TouchstoneFunds.com. If you want to do it on your own, I'll walk through exactly how to do it. So, you want to open up an Excel sheet, you want to kind of grab all your different household or account names, you want to dump those names into the spreadsheet. Next to that column, you want to put revenue or PCs or whatever the way that you recognize it. So then, you've got your revenue and you've got your clients.
Steve Seid:
But then you want to have two blank columns next to it. And those blank columns should say, "Relationship" and they should say, "Up Side." And so, what we like to do is, on each of those metrics, we score 1 to 4. So, it doesn't matter which direction you go, just be consistent. But let's say, 1 is the best, 4 is the worst. So, let's take relationship. Our 1 client, in this case being the best, our clients that are 1s are exactly what Kurt described. I've got a great relationship. They take my advice. I love talking to them. They don't bother my assistants. That is a 1. A 4 is the exact opposite of that, your tougher situations. And listen, 2 or 3s, you got to draw the line somewhere. So, in your mind. And sometimes, people work with this on their assistants too.
Kurt Dupuis:
Yeah this is an art, not a science kind of thing.
Steve Seid:
Yeah. I mean, just draw the lines, right? You sort of, it doesn't have to be perfect.
Kurt Dupuis:
And importantly, ask your CSA of their input because they are going to have wildly different 1s and 4s than you probably are.
Steve Seid:
That's exactly right. The same thing with up side, who are those clients where you're like, "There's a really big potential there" versus the one on the bottom like 4s that may not be as much. And you split the difference. So, that's kind of how you go through and do those qualitative metrics. On the revenue side, so you've got your revenue, you've still got to draw the lines here. What we see in most books is there's a couple that are higher above everybody else. Your best, best, best, most profitable clients. They shouldn't be your only As. You should go down further than that and try to, again, just draw the line and say, above X revenue are my As. Below X revenue are my bottom tier, and then you draw in the middle. Has that been your experience, Kurt?
Kurt Dupuis:
Yeah. And what we're saying is, let's say you have five clients that have very large accounts and revenues are north of $25,000. It would be very easy just to say, "Oh, well, my top tier is those five people, and that's it."
Steve Seid:
Yep.
Kurt Dupuis:
What we're saying is, widen your view of that top tier and continue to service the heck out of those. Because chances are, whatever that stack rank looks like, your 6 to 15, there's going to be some gold mines in there that, had you not been servicing at the highest level that you could, opportunities you might've missed out on, so.
Steve Seid:
Yeah, you have to do that. It's really, really important. So, if you're following along with us, now what you have is, you've got your revenue 1 through 4, you've got your relationship 1 through 4, you've got your up side 1 through 4. Now, you've got to weight those categories. Some people do it equal weight, some people weigh revenue higher. Kurt, what's your experience in terms of weighting? Do you see more people just do it equally? Or I mean, what are your thoughts here or how do you think about it?
Kurt Dupuis:
I think most people tend to put a stronger, heavier weight towards the economics because most people recognize that they're running businesses here. But I think that that qualitative part is always an interesting part of the discovery process, because you really get to understand how the advisor thinks qualitatively about their clients. And do most people... If you are perhaps a very good communicator and you have a very tight-knit group of clients, maybe they all take your advice. Maybe you don't have any bad clients, so the qualitative nature may not be more important. You want to look at it purely by the numbers. But if you've got 150 households and a wide array of backgrounds, a wide array of ages, that qualitative is going to be more and more important, at least based on what I've seen.
Steve Seid:
Yep, exactly right. The two most common are equal weighting. That's just saying, "Listen, these are all important, so we're not even going to bother with a weighting system." The other way is, where people overweigh revenue first, so it's something like 50% is the revenue, 25, 20 to 5 something that looks like that. Okay? So, whichever you choose, you've got your scores, you've got your weightings. Now, you're actually at the point after you do that math where you've got the scores for your total households, and just like you did for the individual categories, you draw lines. You say, above a certain threshold of clients score are my As. Below a certain threshold are my Ds.
Steve Seid:
Now, couple things here. After it's done, give it the logic check because you shouldn't have too many As, you shouldn't have too few As. You should look in individual households and say like... It's almost like a spot check. Should this person be a B? Should this person be an A? Because, at that point, if the answer is to know some of that, you can make some adjustments to your scoring to make...
Kurt Dupuis:
It's like the human overlay, right? This it all kind of spreadsheet logic we're talking about, but make sure your own eyeballs are getting over it and it makes logical sense.
Steve Seid:
Yep. So, once you kind of put your final touches, you've got your segments. Doesn't have to be complicated, but this is a very logical way to do it. And now that we have our As, Bs, Cs, and Ds, we can figure out, what do we actually want to do with these people? And we'll help you walk through that in the next episode. But wanted to spend, this time, on segmentation.
Kurt Dupuis:
Think about what we've just described. We've described how to take a little bit of information, data, and how to organize it in Excel. At the end of the day, this is not earth-shattering stuff, but here's the gap in our role in the world and the clients that we work with. There might be a gap in the use of technology, there might be a gap in knowing what best practices are, and those are the gaps that we're trying to close. So, whether you hear us describe this process and you can go on Excel and you can build this in the next three minutes, awesome. I hope this has been a useful thought exercise for you. If not, reach out to us, email us at TheWholeTruth@TouchstoneFunds.com and we'll help walk you through this.
Kurt Dupuis:
What does this time commitment look like, to really put a thoughtful segmentation exercise through a practice? Steve, what does this time commitment take?
Steve Seid:
It's not crazy. I mean, obviously, the revenue part is super easy. You're talking a few minutes where we're just drawing lines. The part on relationship and up side, that's where you kind of got to go client by client, but this is not something you need to spend hours and hours on.
Kurt Dupuis:
Under an hour?
Steve Seid:
Yeah, you could definitely do it.
Kurt Dupuis:
I think that's fair. Again, you could be as robust and as much in the weeds as you want to, but if you're spending over an hour doing this, I think this sort of misses the spirit of it. Because this is really, it's taking a thought exercise and putting some numbers and some structure around it, is all it is. So.
Steve Seid:
Yeah.
Kurt Dupuis:
I hope this has been useful and I hope you can build this yourself. Or if not, reach out to us, and we'll be happy to walk you through how we do it.
Steve Seid:
And that's the takeaway. The takeaway is, you should go and segment your clients, and do it in this way, or re-look at the segmentation if you've done it before. But that's what we want you to do as a starting point to this whole world of client service. So with that, we're going to close up here. We'll come back with our Costanza Corner. This is The Whole Truth. Stick with us.
Steve Seid:
All right, welcome back everyone. This is the Costanza Corner. I just wanted to share a story from my own experience that I'll tell you a little bit more about me, and hopefully will have the same effect in terms of being uplifting.
Steve Seid:
So, animal welfare is something that's really, really important to me. I met my wife volunteering at the animal shelter. It's just, we spent a lot of time with animal charities and things. By the way, that doesn't mean we hate humans, right? You get that from some people. It's just like these are some of the things that we care about. And a couple of weeks ago, my mother's old dog passed away. She was 18 years old, it was her time. And that's sad. We knew this dog for a really, really long time, but that quickly, not quickly, but over time transitions into something that becomes amazing. Because probably my favorite thing to do, or one of my favorite things to do, is to go into an animal shelter, pick out a dog and walk that dog out for the last time.
Steve Seid:
And I typically look for dogs that need it, whether it's older dogs or just a dog that's been there for a long time, and it's just such a profound experience. I did that. I live in the Bay Area, North Bay actually. And I drove out to Fresno, which is in the Central Valley. I drove out there because that's the part of the state that needs it more, that just struggles with the number of dogs that they get in. So, we drove down there and I got into this animal shelter, which I knew needed it. And I said, "Show me to your dogs that have been here the longest." We went back and looked at a couple. We needed to make sure, it's for my parents, so there's certain qualifications, but I just wanted to share that with you all because I hope at some point in your life, you get to experience the immense joy of walking out with a dog, taking it out of the shelter for the last time and coming to a permanent home.
Steve Seid:
There really is no reason why we need to have the levels of euthanasia that we do in this country. But there's a lot of progress being made on that front. And it was just an amazingly joyful experience for me.
Kurt Dupuis:
Yeah. And I'd say you have been one of those people that have put me over the edge because we don't own any animals. I think I'm more in the business of accumulating children at this point.
Steve Seid:
Yeah.
Kurt Dupuis:
Less so on the animals. But one day, we will get back there and I think we'd go that route too, just hearing some of the stories that you've had in accumulating both animals and a kid, it just makes a lot of sense to me.
Steve Seid:
Yeah. And I always give the advice... People say, "Oh, I want this kind of a dog or that kind of dog," and I don't want to talk people out of it. But I will say, go in there with an open mind. Sometimes you get this amazing...
Kurt Dupuis:
Yeah, try it.
Steve Seid:
Mixed breed or like... You don't even know. Just interact with the dogs. I promise, there'll be a dog that's been there for a while that just needs a shot.
Kurt Dupuis:
Yeah.
Steve Seid:
And it's just, I can't...
Kurt Dupuis:
Just go in and see what it's like.
Steve Seid:
Yeah. I can't tell you the amazing joy that that brings me, to be able to do that. So, thanks, everyone. We're going to wrap it up. This is The Whole Truth. We'll see you next time.
