Are you ready to grow your firm but want to ensure that you maintain the level of service clients expect and value from you? It may be time to take a more strategic approach to your client base. But where do you start?

Effective client segmentation can enhance your scaling efforts and support your enterprise growth ambitions. To start, we recommend four steps to help you evaluate your client base, effectively categorize them, build a dedicated client service model, and implement your strategy.

Step 1: Analyze Your Book of Business

When it comes to analyzing your client base, you can’t measure what you can’t see. Client segmentation gives you clear direction and insight into who your current clients are and what services you can provide them to help your business scale.

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Think in terms of both quantitative criteria (e.g., assets under management and revenue generated) and qualitative factors (e.g., level of trust, coachability, and referral history). Consider what you do for them; does everyone currently receive the same services, such as a financial plan, an annual review meeting, regular outreach, and invitations to client events? If the answer is yes, get ready to shake things up!

Step 2: Implement an ABSLN Segmentation Framework

Once you have a better understanding of your current clients, it's time to start categorizing them. Commonwealth's Business Consulting team often recommends a holistic segmentation method called the "ABSLN" method.

ABSLN Segmentation at a Glance

This method identifies your top clients as "A+," "A," or "B" based on the revenue they generate for your firm. For example, your high-net-worth (HNW) clients fall into the A+ category as they provide a valuable boost and increase of assets. These clients have specific and complex needs, requiring a higher degree of resource and time management from your firm.

Unlike the quantitative categorization of the top tiers, the bottom tiers rely on qualitative criteria. Clients in these segments are labeled "S," "L," or "N."

• S/Strategic: Individuals in this tier have the potential to become ideal clients. Consider young, high earners with strong savings, business owners with illiquid wealth, or HENRYs (high earners, not rich yet).

• L/Legacy: These clients may have a legacy relationship that justifies providing continued service—for example, "A" clients' children, widows, or personal friends.

• N/Non-ideal: These clients don’t fit into any other segments. For them, you could continue offering a reduced level of service, transfer them to an associate advisor, or discontinue the relationship.

ABSLN segmentation offers deeper insight into the kinds of clients currently in your book, which you can then use to identify the types of services you'll deliver to them.

ABSLN in action

I worked with a Commonwealth-affiliated advisor who was wondering whether to hire a service advisor to manage the bottom half of their book, as they were feeling at capacity with their time. Together, we used the ABSLN method to segment their clients, which revealed that a new hire would cost more than the revenue being managed and that many existing clients fell into the "non-ideal" category. The advisor decided to scale back the services being provided to that group, which freed up some of their time.

Step 3: Combine the Power of Segmentation with Service

Once you've finished the client segmentation exercise, you can build your client service model, where you'll identify which services you'll deliver to each segment—and how often.

Use these questions to help define and guide your service offerings:

Your results may start to look like the following grids, which pair services—everything from investment management to client events—with client tiers. Be sure to consider the total number of hours you'll spend to deliver service across each client category. If it doesn't align with the average revenue earned from that category, you may need to adjust.

Step 4: Put Your Strategy into Action

You've segmented your clients and created a service model. Now, it's time to implement your strategy by systematically evaluating every aspect of your business and adjusting accordingly.

Here are some questions and example scenarios to consider:

Client Segmentation: A Launchpad to Enterprise-Level Growth

Implementing a thoughtfully planned client segmentation and service model isn't just nice to have—it's a must-have for advisors aiming to reach enterprise-level success. By following the four critical steps we've outlined—analyzing your book of business, implementing a client segmentation framework, combining segmentation with service, and putting your strategy into action—you're laying the groundwork for sustainable, scalable growth.

*As of 11/1/2024