Client Segmentation for Financial Advisors [Tips & Examples]

by Mark Stewart

Updated March 20, 2024, at 10:52 AM

Client segmentation opens the door to new opportunities for financial advisors. But segmenting clients is more than just categorizing people into boxes. It allows financial advisory firms to learn about clients on a deeper level to optimize the service they receive.

Capitalizing on proper client segmentation creates extraordinary client experiences and streamlines communication and support so you can continue to focus on your firm’s growth. And as they say, the proof is in the pudding.

According to a Fidelity Advisor Community Segmentation Study, the dichotomy is stark between firms that have a client segmentation strategy in place and those that don’t.

Client Segmentation Strategy
In Place
No Client Segmentation Strategy
Firm AUM
Firm AUM
AUM Growth
AUM Growth
Percentage of $1M+ Clients
Percentage of $1M+ Clients

The Value of Client Segmentation for Financial Advisors

Those stats paint a pretty picture of increased revenue and growth for financial advisors with a client segmentation strategy, but let’s talk about the other benefits of segmentation that culminate in this reported revenue growth.

Improves Scalability & Efficiency

When you segment clients, you allow your firm to deeply understand each segment’s expectations to help you scale your offerings and appropriately position your team members to maximize efficiency.

A great client segmentation strategy will allow you to offer the right services for each client and help you be more effective with the time you spend per client. This more personalized approach may seem time-consuming at first glance. But it offers more standardized and easily repeatable methods that benefit your internal processes and increase your firm’s ability to serve more clients without additional overhead costs.

Creates Higher Client Engagement

If you’re looking for a way to increase client engagement and foster more conversations, client segmentation could be the key. Through needs-based education and communication, you can engage clients with personalized content and meet them where they are in their journey.

Being in tune with your clientele and their wants will inevitably lead to more engaging conversations and help set your firm apart from your competitors.

Reduces Business Risks

Client segmentation strategies enhance your ability to give your separate audiences what they want, reducing the risk of losing clients and AUM. Your communication and messaging are delivered to everyone without segmentation, but it’s not tailored to specific needs or interests.

By targeting the right clients with the right message, you’ll create better one-on-one interactions and build trust, helping your clients feel fulfilled with the services they’re receiving from you.

Related: 5 Ways to Build a Customer Experience Strategy

Client Segmentation Methods to Consider

Tiered Rank Segmentation

A common system financial advisors use to segment clients is the tiered ranking system. It’s easy to group clients based on standard metrics like total net worth, AUM, or revenue generated for your firm. The tiered system is a simple way to assess the clients that drive most of your growth and define the service models each client should fall into.

One way we like to segment clients using tiers is the Platinum/Gold/Silver/Bronze scale. Breaking your clients into these segments assigns them a proper service level based on what they offer your business.

Here’s an example of what these different tiers may look like:

  • Platinum: The best of the best means you may only have a few. These clients are in the platinum segment not only because they have substantial assets and generate a lot of revenue, but also because they provide great referrals.
  • Gold: The gold tier is filled with above-average clients. They’re usually successful professionals, business owners, or affluent retirees that have been with you for a while. This tier generates a good amount of revenue for your business, offers occasional referrals, and deserves full attention.
  • Silver: Clients in the silver tier are perhaps younger professionals or people that have slowly brought in more business and seem to have a bright future with your firm. In this model, the goal is to spend more time getting to know your silver-tiered clients and uncover opportunities or other assets they may have. You’re hopeful that these clients will be in the gold or platinum tier in the future.
  • Bronze: Your bottom tier generates very little revenue while consuming much of your valuable time. Because of this, it’s important to remain diligent about the resources you’re committing and not “over-service” them if it’s not in the best interest of your company.

Scored Rank Segmentation

The scored-rank segmentation method takes the tiered system to another level. For example, instead of only considering generated revenue and referral opportunities, you can identify several attributes and create a weighted ranking system based on what’s important to your firm.

Using this segmentation strategy, consider these four steps:

1. Decide on the attributes that matter the most to you. Then, assign a weight to each one that reflects its significance to your firm.

Here’s an example of assigned weights:

  • Revenue: 40%
  • Referral potential: 30%
  • Wealth trajectory: 20%
  • Required time and resources to serve: 10%

2. Next, you choose a scoring range for each attribute and assign a score to all your clients. In this example, we’ll use a scoring range of 1-5 (1 being best, 5 being worst) for two hypothetical clients.

Revenue (40%)Referral Potential (30%)Wealth Trajectory (20%)Time & Resources (10%)
Claire Lang1325
Michael York2443

3. This is where you’ll calculate the client’s total score. To do so, multiply the client’s attribute scores by the weight you assigned, and add them up. Lastly, divide the final number by the sum of the weights (in this case, 100).

With scored-rank segmenting, you’ll want to think of the total client scores like golf: the lower the score, the stronger the client. Here are the calculations and total client scores for this scenario:

  • Claire Lang: (1×40)+(3×30)+(2×20)+(5×10) = 220
  • 220 / 100 = 2.2 total client score
  • Michael York: (2×40)+(4×30)+(4×20)+(3×10) = 310
  • 310 / 100 = 3.1 total client score

This segmentation strategy will take a bit more time to calculate for each client, but in the end, it’ll likely give a clearer picture of exactly where each person should land in your segmentation.

4. Lastly, use the total scores to identify the service tiers that each client will be segmented into, like shown below:

Tier 1 Client Scores0.0 – 2.5
Tier 2 Client Scores2.5 – 3.3
Tier 3 Clients Scores3.3 – 4.0
Tier 4 Clients Scores4.0+

Related: Maximizing Your Client’s Wealth: The Power of a Financial Advisor and Tax Planning CPA Partnership

Behavioral Segmentation

An even deeper way to segment your clients is by using behavioral and attitudinal layers. This client segmentation strategy allows you to customize client experiences based on their distinct wants, interests, and behaviors. It’s important to note that this segmentation can be used along with the tiered or scored rank methods we covered above.

Each firm will segment differently based on your service model and client goals, but here are some questions to consider if you choose to build or add behavioral segmentation:

  • What’s the client’s risk tolerance?
  • How do they like to communicate?
  • How involved do they want to be in their financial plans?
  • What do they value?
  • What are your firm’s capabilities?

You’ll create tiers based on clients’ unique interests, preferences, and life stages to implement a behavioral segmentation strategy. The short example below shows three tiers for three separate behavioral segments: delegation, validation, and negotiation.

Tier 1Tier 2Tier 3
Delegation Segment• Recurrent in-person meetings
• Constant financial goals and progress discussions
• Occasional in-person meetings
• Generally involved in plans and progress discussions
• Few to no in-person meetings
• Periodic emails focused on goals
Validation Segment• Recurrent virtual meetings
• Quarterly evaluation of financial plan and goals
• Occasional virtual meetings
• Quarterly assessment of plans and goals
• Few to no virtual meetings
• Annual review of financial plan
Negotiation Segment• In-person annual review of goals
• Limited but detailed discussions of financial goals
• Annual virtual meeting reviewing financial plan and goals
• Occasional email discussions about financial plan
• Emailed annual review highlighting their financial plan and goals
• Online or direct mail questionnaire gathering financial goal information

3 Client Segmentation Tips for Financial Advisors

1. Segmentation should start with your goals and ROI.

If you’re thinking about client segmentation, you have to approach the process in a way that creates a return on investment (ROI) and achieves your business goals. These goals should also be clear and measurable in some way. Setting goals for client segmentation is the most effective way to find gaps in your data and processes, so start with ROI and business goals first.

2. Segmentation should be central to the development of your services.

The main goal of client segmentation for financial advisors is to create a better client experience and enhance your ability to reach the right audience with the right message. However, segmentation can also lead to you uncovering new service offerings. As you fine-tune your approach for each segment, be mindful of new educational opportunities, client service changes, and internal process adjustments that can enhance your ability to deliver optimal service.

3. Have a plan to monitor and evaluate segmentation success.

Sure, a client segmentation strategy should start with goals and ROI in mind, but if you can’t evaluate them and make adjustments, those objectives likely won’t amount to much. Be sure to consider and monitor the various mechanisms in play so you can pinpoint what’s working and what’s not so that you can reach the highest-possible ROI.

Allowing yourself to monitor and evaluate your strategy will allow you to adjust other strategies and change your messaging or approach as you go further into your segmentation journey. Not only that but evaluation will also help you plan and prioritize new developments based on how you’re meeting clients’ current needs.

Expert Help in Client Segmentation & Other Growth Strategies

If you’re a growth-oriented financial professional looking for like-minded experts to help you grow your business through segmentation or other areas of marketing or business development, consider teaming up with our specialists by enrolling in the Elevate program.

Elevate is a proven coaching, marketing, business development, and practice management solution that provides access to world-class thought leaders and strategies that grow business by 20% on average in the first year.

See first-hand what Elevate can offer your business by attending the next ElevateU event on September 17-19, 2023, in St. Louis, MO. Contact your preferred FIG team member today or fill out this form to show interest in Elevate and attending the next ElevateU.

Keep Reading: How Are Social Security Benefits Calculated?

Financial Independence logo

Fidelity Investments. Segment for Success: Secrets from Firms Doing Client Segmentation. PDF file. 2017.
Fidelity Investments. Four Steps to Successful Client Segmentation. PDF file. 2021.

This material was created by Financial Independence Group. This material was created to provide accurate and reliable information on the subjects covered. It’s not intended to provide specific legal, tax, or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.


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