Low-value clients provide new opportunities

“Sven,” I said, “it is always such a delight to spend time with you that I can tell right away that something isn’t right in your world. What’s up?”

“The truth is that I’m not having enough fun lately,” he replied. “You know me: I love this business and my clients. But, recently, the excitement seems to have gone out of it for me.”

“By my observation, Sven, you should be pretty happy,” I said. “Eighteen months ago, you started to transition your top clients to fee-based compensation for managing their assets, and that process has gone very well. Almost all agreed to the arrangement, and the conversion is pretty much complete. That must be pretty satisfying — to have your top clients acknowledge the value of your advice that way.”

“Yes, of course, it is. But there’s a downside to that I hadn’t anticipated,” he said.

“And that is?” I asked.

“Quite frankly, I miss the thrill of the sale,” Sven admitted. “I used to float on air when I got a big commission cheque. I’d buy a gift for my family or treat myself to celebrate. I know the fee-based approach is right for my clients, as well as for my business, in the long term. But it doesn’t provide the same emotional high that a large commission does.”

“I hear what you’re saying, Sven. However, we specifically decided that you would offer the fee-based arrangement only to your top 50 clients,” I reminded him. “You have another 350 clients who still deal with you on a commission basis. What are the sales possibilities with them?”

“There is always something happening in someone’s life that causes them to need my advice and the products I offer,” he said. “But you showed me how to focus on my high-value clients, and today they represent 80% of my income. Are you now saying I should spend more time on the lower-value clients?”

“You’re right, Sven, we did put together a strategy to leverage the great capital you have built up in your high-value clients. However, that was not to be to the exclusion of the rest of your book of business. The overall objective is to make every client relationship profitable. There are only two ways to do that — keep your cost of serving them commensurate with the revenue they contribute or increase the amount of business you do with them.

“We created a service-level agreement for each segment of your client base that addresses the first issue. Higher-value clients receive higher levels of service, yet even your lowest revenue-producing clients have their service needs met, albeit by your staff rather than you. That’s one of the ways we were able to free you up to work at the highest level of your capability with your best clients.”

“That leaves making additional sales as the alternative,” he said, “but those more or less just happen. I’m not really proactive in pursuing them.”

“Well, I think you should be,” I said. “Granted, those sales may not fall into the mega-commission cheque territory. But my guess is that if you put enough of them together, they’d add up to something that would excite you.”

“No doubt they would,” he replied. “But what do I sell to these clients?”

“You tell me. What have you got to offer?” I asked. “Is there anything new in your kit bag that you haven’t presented to every one of your clients? Tell me about the major product or service categories you could offer to your clients.”

“Well, I have the fee-based structure using our in-house managed-money accounts, mutual funds, fixed-income products and fee-for-service financial planning. Oh, yes, there are the insurance products, too,” he said. “Although I haven’t done much insurance in the past, I’ve been thinking that it is something I should take a closer look at. Many of my clients probably would have an interest in critical illness and long-term care insurance, due to their age.”

@page_break@”Do you consider yourself knowledgeable enough to be able to advise them on those products?”

“Yes, I do. I have been studying the various companies’ contracts as I considered my personal insurance situation. Besides, the insurance company representatives and our own in-house insurance expert are always offering to help me get into that market. I would be adding value to my relationship with my clients. And, by the way, they tell me the commissions can be quite good.”

“Terrific! How about a campaign to introduce CI and LTC coverage to every one of your clients whom you think could qualify?” I suggested. “This is an important and urgent matter for them. If you’ve been studying the field, you know the statistics. The odds of a critical illness or the need for long-term care are quite high for people in their mid-50s and older. Wouldn’t that describe many of your top 50?”

“Yes, it would,” he replied. “And I bet some of them have a need for estate planning that may well require the purchase of life insurance. It’s not my area of expertise, but there are qualified people I can call on to work with me on this.”

“So, here is my suggestion, Sven. As part of the service-level agreement you created for your top clients, you committed to conducting face-to-face periodic reviews with each of your A+ clients — that is, your top 20 — twice a year. That means you will be seeing each of them sometime in the next six months. Put this topic as a priority item on your meeting agenda; then, two weeks in advance of the meeting date, send them information on the subject — perhaps an article that speaks to the incidence of critical illness or the cost of long-term care. Attach a handwritten note that simply says, ‘I’ve done a lot of research on this for my personal life situation and it caused me to think of you. Let’s take a closer look at this when we get together.’ “

I also suggested that Sven do the same thing for the other 30 clients in his top 50 — his A clients.

“Your service commitment to them was once a year, face to face. Add those two groups together and you will be having one or two conversations per week over the next six months with your top clients on the topic of CI and LTC insurance. Of course, if the opportunity arises to have that discussion before a scheduled meeting, obviously, don’t pass it up. Do you think anything could result from a plan like this?”

“You bet it will!” he said. “What about the rest of my clients?”

“In keeping with the best practice of aligning your marketing activities to the economic potential of each client segment, I recommend you organize one or two seminars on the topic. Have your in-house expert or a company representative speak. Some advisors have also asked someone from an insurer’s claims department to describe some of the claims they have paid out. It’s a very powerful message.

“You can invite all your other clients or limit it, for example, to your B and, perhaps, your C clients. For anyone who is neither top 50 nor warrants an invitation to your seminar, simply send them information on the subject with a “Call me if you are interested” message. This will keep your marketing costs in line with the potential of your lower-tier clients. How do you feel about this, Sven?”

“This is great. I am going to set a sales target for the six months with monthly milestones,” he said, his enthusiasm restored. “If I hit the milestones, my family gets a reward; if I achieve the six-month goal, I get something special for myself.

“I’ll enjoy the thrill of the sale along the way and, most important, I’ll be doing my job as an advisor by encouraging my clients to evaluate whether this type of product should be part of their overall financial management. I feel great! Say, did I tell you the one about…” IE

George Hartman is a coach and facilitator with the Covenant Group in Toronto. He can be reached at george@covenantgroup.com.