“George, this isn’t working” was not what I expected to hear from my client shortly after he had implemented the new practice-management strategy we had designed together.

“What do you mean, it isn’t working, Randy?” I asked.

“It just isn’t working,” he said. “I’m not seeing enough people. I’m not as busy as I used to be. We’re not making enough money.”

At that point, his associates, who were also in the room, started to laugh. “Randy,” one of them said, “Business is on track for a 30% increase over the same period last year; we don’t have annoyed clients waiting in the reception area because your appointments are running an hour behind. Even your wife told me the other day how happy she is that you are less stressed and spending more time with the family. Randy, it is working.”

Randy is a very successful investment advisor at a large bank-owned firm. In less than 10 years, he has built a practice that generates annual revenue of more than $2 million. He has three co-producers and three office staff. However, he was personally serving 200 to 300 of the team’s 800 clients. Always in a hurry, often frantic and frequently tired, he couldn’t see how he could grow his business because he just didn’t have the energy.

That was when we devised a practice-management strategy. And Randy was correct in his statement — he wasn’t seeing as many people as he used to and he wasn’t working as hard (he was managing only 70 client relationships). But he was making more money, had happier clients, was having fun and was enjoying a healthier quality of life. What did it take to make all this happen?

No more than putting in place an effective and efficient client-relationship plan, the essence of which can be summed up in a marketing, sales and service matrix similar to the one illustrated here (at right). The matrix appears simplistic, but the effort and thought required to determine the specific components — the appropriate marketing activities, the sales opportunities and the service standards for each segment — can be substantial, not to mention the challenges of implementing it.

The cornerstone of the entire exercise is a client-segmentation strategy, which should have both quantitative and qualitative aspects to it. Quantitatively, revenue and assets under management are common measures. Qualitative ones consider attributes such as the client’s willingness to accept advice and give referrals. It can also be useful to consider that clients tend to interact with their financial advisors on four levels. The weakest is based solely on product.

In Randy’s case, he determined that about half of his 800 clients looked upon him simply as an outlet for the purchase or sale of securities. He earned commission on every trade but when he did the calculations, he found this group accounted for less than 5% of his total revenue. He classified these clients as “Ds”.

Next up the chain were about 200 clients who had come to Randy with some fairly straightforward planning needs, such as retirement, managing an inheritance or severance payment, or estate planning. Because products were chosen to complete a plan rather than just a transaction, the relationship was probably more enduring and of higher value. On average, these “C” clients generated twice as much income (10%) as the D clients.

Continuing the trend to stronger interaction, Randy categorized his “B” clients as those with whom he had an ongoing implementation strategy. A plan had been developed that would unfold over time; there would be additional contributions, consistent reviews and regular updates. These were good relationships that Randy valued highly. He determined he had almost 130 clients who met these qualifications and calculated they were responsible for about 20% of his total revenue.

That left 70 clients in Randy’s top tier. These were the people with whom he had a trusted relationship; they seldom made a significant financial decision without discussing it with him. Randy was surprised to discover that this relatively small number of “A” clients accounted for almost two-thirds of his overall revenue. Clearly, they were extremely valuable clients.

It wasn’t hard to figure out what Randy had to do if he wanted to grow his business without burning out. He had to focus his time and effort on his highest-value clients to maximize the opportunities within those relationships to consolidate assets, cross-sell additional products and, most important, obtain referrals and introductions to other A-type people. At the same time, a way had to be found to serve the remaining clients.

@page_break@That methodology is broadly outlined in the sample marketing, sales and service matrix.

Let’s jump to the marketing section. Marketing activities (and budget) should be divided into internal (existing clients) and external (prospective clients). Wisely, Randy allocated the majority of his marketing resources to his A clients. The specifics are omitted because of space but it is fair to say that his A clients got the best of everything when it came to marketing activities. He also organized his sales priorities into six broad product and service categories, and set an objective to have at least three to five of them in the hands of A clients.

On the service front, he ascribed platinum standards to his best clients and defined precisely what that meant in terms of access to Randy, assigned support staff, appointment convenience, service turnaround time and so on. With all three of marketing, sales and service commitments defined, Randy knew exactly how to maximize the relationships with his highest-value clients.

The same process was followed for the B, C and D clients, with each segment receiving a subset of the attention accorded to the next higher level. Randy’s co-producers assumed responsibility for the Bs and Cs, and the licensed staff for the Ds. A communications plan was created to help wean everyone but the A clients from Randy. Admittedly, it did not work perfectly at the beginning, as smaller clients who previously had had ready access to Randy balked at the new relationship. And Randy had to overcome his “they helped me get-to where I am today” concern about handing off long-time, low-value clients.

In time, however, the other producers were able to gain the confidence of most of their new clients, and overall client morale improved because many clients were getting much better service than they had when Randy was dealing with them.

Client-relationship maximization was at work. IE