Client Engagement

Most of us are familiar with the Pareto principle – also known as the 80-20 rule – which states that roughly 80% of the events come from 20% of the causes.

In financial planning, this rule of thumb suggests that if you’re not segmenting your client base to work out which clients are most profitable, you’re probably spreading yourself too thin, to the detriment of both your clients and your business.

Recent research by CoreData found that on average, advisers claim that approximately 47% of their client bases are ‘A’ or ‘B’ clients. The mean minimum level of investable assets required to be classified as an A/B clients is $374,900 – a not insignificant number given the current market environment.

So where does that leave the rest?

Well, some 40% are considered ‘C’ or ‘D’ clients, and a substantial 20% are dormant.

Dormancy means different things to different people, but in a post-FoFA world, it means both opportunity and risk – particularly if you consider that some or all of those dormant relationships may fit your practice’s definition of an A/B, if you were able to reengage them.

Advisers are divided over the definition of a ‘dormant client’; almost two in five (37%) say that dormant or inactive clients are those they don’t meet with face-to-face at least once every two years – a definition closely aligned to the Government’s Opt-in requirements.

A further quarter claim inactive clients are those that they have no ongoing contact with beyond the initial consultation (25%), or clients that they don’t hear from or contact but who are paying a commission (26%).

However you define dormancy, the key question is: is there a benefit for your business in waking up these inactive clients and if there is a business case, how can you do this?

Client engagement has always been critical but is becoming ever more so and hinges on your ability to build trust.

Trust is nurtured through a demonstration of three key components: credibility, reliability and intimacy. Without any one of these pillars, trust is destroyed – and intimacy is next to impossible to achieve if you’re not talking to your clients.

Your dormant clients may well be dormant for a reason; perhaps they no longer fit with the profile of client you’re trying to attract; perhaps they’re unprofitable; or perhaps they were so demanding that you felt you were expending too much resource for little financial reward.

But if you haven’t at least considered the potential in re-engaging the 20% of clients that you’re not talking to, you could be leaving a chunk of money on the table.