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Boost your business by knowing your ideal client profile

Posted on 26 Apr 2022

We have been living with the COVID-19 pandemic for some time, infections have reduced and FSPs either have or are starting to adapt to a world where Key Individuals are focussed on continuing with business regardless of external circumstances. Despite the improvement in the COVID-19 statistics, it is unlikely that businesses will ever fully get back to operating as they did pre-COVID. This is not something that one can “ride out” – in simple terms, therefore, FSPs cannot afford to not do something. We are seeing a growing trend where Key Individuals are looking toward the future with a sense of cautious optimism and focussing their attention on actions and strategies that support the business plans for 2022 and beyond, creating positive energy and good interaction with employees and clients.

This renewed positive energy is being translated into assessing the quality of the business’ existing client base. Even more so than before, there is and should be, an acute understanding that clients are the biggest asset the business has, and with that awareness, there is a renewed desire to understand and connect with this client base. The two key questions seem to be, (1) how have my clients’ current circumstances and needs changed? (2) how, if at all, do I need to adjust my value proposition and/or the way I interact with my clients so that I can not only ensure ongoing suitable advice and build ongoing quality client relationships but also how can I capitalise on generating revenue in the most efficient and effective way to ensure that I can reach the planned business goals for 2022 onwards.

In our previous article, we discuss why it is important to have a business plan and provided tips on some elements to include in a business plan. If you missed the article, read it here.

So, we ask you the following questions:

  1. Do you have an ideal client profile, and have you recently analysed your existing client base to identify or confirm whether the existing client base matches that of your ideal client profile?
  2. Have you analysed the revenue received from various client segments, specifically the top 20% from whom 80% of the practice’s revenue is received?
  3. Have you clearly differentiated the service offering provided to the 20% of your clients?
  4. Are you aware of the financial and client retention benefits of having an ideal client profile?

In this newsletter, we discuss what an ideal client profile is, the importance of having one in place, provide a few steps to follow to identify, or relook at the existing ideal client profile, and the benefits to the business when focusing on an ideal client profile.

Identifying the ideal client profile, whether for existing or new clients, creates a targeted approach to client retention, income generation, and ensures that suitable financial advice and client services are delivered. This, in turn, enables your business to position and maintain a reputation as the financial services provider of choice and as a result, grow your business by receiving quality referrals.

An easy way to identify these clients is to follow the Pareto Principle, which is known as the 80/20 Rule. When the Pareto Principle is applied to client segmentation, it would typically identify the 20% of clients who are responsible for generating 80% of the business’s profits. How would one do this? A practical way to approach this exercise would be to work through your existing client base and focus on the key information required to identify the various types of clients. Large businesses talk about “big data” – i.e., data/information about their customers. This is no less important in smaller businesses. Having access to updated information on your Client Relationship Management (CRM) system (e.g., atWork, Xplan, Elite Wealth), or any other similar type of CRM system, is a good place to start.

Once you’ve identified the 20% of your client base that provides 80% of your revenue, you will have a very good idea of the profile of these clients, their characteristics, and their financial needs. From here it is easy then also to identify and understand the client profiles of the remaining 80% of clients who generate 20% of your income. With this critical management Information, you can now decide where and how much time should be spent by both financial advisors and administrators on each segment or group.

What is an ideal client profile?

There is a difference between a client profile and an “ideal client profile” – the first is the type of client you have. The second is the type of client you want. By nature, financial advisors are caring people who want to help others, and therefore it is easy to fall into the trap of wanting to work with anyone who has a financial need. However, for most financial advisory businesses this is not practical.

The Future of Practice Management inaugural study by the FPA Research and Practice Institute, a program of the Financial Planning Association® in the USA identified that 75% of advisors do not know who or what their ideal client is.  Unfortunately, the impact of this is a lack of efficiency and effectiveness and possibly an inability to meet business retention and growth targets.

If your business falls into the 75% of advisors who have not defined their ideal client, please consider changing this and become part of the 25% who do have an ideal client profile in place.

An ideal client profile refers to the description of a client who would benefit from your FSP’s financial services offering, who you want to work with, whilst providing the business with significant value in return.  The value would ideally be measured in revenue, levels of satisfaction, as well as referrals, and in this instance, specifically focused on those clients who have been identified as fitting within the business identified deal client profile.

What is required to create an ideal client profile?

Typically, one would identify several ideal characteristics and qualities the business is looking for. These characteristics and qualities are used as the guideline when the existing client base is assessed to decide whether you need to shift your business. Assessing the existing client base will provide the business with specifics e.g., demographics such as age, profession, income, and psychographics which helps to understand the client better e.g., attitudes, lifestyle, values, and personalities. This information can be further tested to identify those clients (the top 20%) who are responsible for generating 80% of revenue and, ideally the ones that can and do provide referrals. The result is a deep understanding of your existing client base, a profile of your ideal client, and how, if required, the business needs to shift its focus to obtain more of the ideal types of clients who fall into the top 20% as ideal clients.

At times, it might be easy to fall into the trap of wanting to work with anyone who has a financial need, however, a good way of not falling into this trap is knowing who your ideal client is not, as this is just as important as knowing who your ideal client is.

The importance of having an ideal client profile

Stating the obvious, FSPs want to stay on track with business plans for 2022 and, at the same time, serve their clients. We are proposing that when the business has a picture of the ideal client in mind, it allows advisors to truly understand who these clients are, what they are interested in, what their financial needs are, and how to position the value proposition to ensure their needs are met.

Having an ideal client profile in place contributes to both driving revenue generation and, referrals of similar-minded individuals. This is commonly known as ‘referral marketing’ and its basis is relying on recommendations through the FSP’s network of its existing clients.

Further research conducted by Growth Agency in September 2021, identified that referrals reduce client acquisition costs and increase revenue, which contributes to increased operational efficiencies, effectiveness, and profit.

When referrals are made by trusted friends or colleagues, leads have a 30% higher conversion rate. Companies receiving referrals had 80% more revenue growth over a two-year period, referred customers’ lifetime value is 16% higher than those customers who do not provide referrals. The research furthermore identified that 92% of consumers trust referrals from people they know, are likely to spend 13% more than a normal customer, and referred customers are 18% more loyal. 

Masthead understands that many of our FSPs have joint responsibilities, those of a Key Individual and a financial advisor, and each of these roles comes with its own set of responsibilities which eats into your available time. Knowing this, would it not make sense to spend your ‘financial advisor’ time on the clients and activities that generate the most revenue whilst at the same time delivering suitable types of financial services to your ideal clients?

As an experienced Key Individual and Advisor, it would be easy to fall into the trap of identifying your ideal client based on years of experience, a gut feeling, and what you’ve seen work over the years. However, we recommend that this should be based on the assessment of the business’s existing clients as referred to earlier as this provides a structure and process for everyone to follow.

Steps to follow in order to identify your ideal client profile

Step 1: Identify the description of what your ideal client profile looks like.

Step 2: Identify the existing clients who match your ideal client profile and those who don’t to see how closely your existing clients match your ideal client profile.

Step 3: Identify the full scope of your advisory services, both rendering financial advice and providing intermediary services, including any other services offered.

Step 4: Cost the services to establish the cost of delivering initial financial advice and ongoing reviews, including intermediary services. Ideally, the business should offer differentiated services for various client segments, and these should be costed separately e.g., the service offering to your top 20% clients.

Step 5:  Identify profit margins per segment.

Step 6:  Adjust and review where required.

Masthead has worked with FSPs and Key Individuals since 2004 to ensure that they stay independent and continue to run sustainable businesses. This remains our mission – to serve and support you.

How does defining your ideal client profile benefit your business?

By embarking on this journey and/or refining the current strategy, not only does the business implement good business practice, but you also ensure that the following regulatory requirements are embedded in your business: Section 2 of the General Code of Conduct Board Notice 80 of 2003 as amended, Section 36 (1)(b) of Board Notice 194 of 2017, Determination of Fit and Proper Requirements for FSPs and TCF Outcome One.

General duty of provider Section 2: “A provider must at all times render financial services honestly, fairly, with due skill, care and diligence, and in the interests of clients and the integrity of the financial services industry”.

Section 36 (1) (b) of Board Notice 194 of 2017: “adopt, document and implement an effective governance framework that provides for the fair treatment of clients and prudent management and oversight of the business of the FSP”

TCF Principle of Outcome One: Principle of Culture and Governance

TCF Outcome One: Customers must feel confident that they are dealing with an institution where TCF is at the core of their culture

What is the benefit of identifying your ideal client profile?

  1. Improved conversion rate: Defining your ideal customer allows you to focus your resources on existing, loyal clients who contribute 80% of revenue to your business. It furthermore allows you to focus on potential new clients who are most likely to convert and bring higher value to the business
  2. Extended client lifetime: By reducing time on non-ideal clients, you give yourself more time to build relationships with ideal ones, which helps you tailor your offering to their needs.
  3. Increase referrals: Loyal clients who experience value from financial advice and efficient client services will be happy to refer like-minded individuals.
  4. Reduced expenses: Sometimes working with a non-ideal client can lead to increased expenses because they need more assistance which takes up more time. These clients might not be as loyal and might leave the practice, which means time and money spent are wasted. Being clear about who your ideal client is, helps to avoid these types of unnecessary expenses.
  5. We have found that some FSPs don’t always record referrals and would like to recommend that such a process is put in place. It provides an enormous amount of management information that can be positively applied e.g., bringing clients who referred others together for a small function. Those who referred friends and family are thanked for loyalty and newly referred clients are welcomed to the practice and could be introduced to employees. It fosters a sense of family and in turn, contributes to client retention and further referrals.

Research conducted by Growth Agency in September 2021, identified that referral leads have a 30% higher conversion rate, companies using referrals had 80% more revenue growth over two years, and referred customers’ lifetime value is 16% higher than those customers who do not provide referrals. 

In essence, as financial advisors dedicated to rendering quality and suitable advice, we want existing and potential clients who interact with the business to trust you and your employees. The practices discussed in this newsletter support your existing efforts to create a trusting and professional environment.

Masthead Implementation Services: Design and cost your value proposition

With our in-depth knowledge of financial advisory businesses and best business practices, we can assist you in designing and costing your value proposition. Please contact your Masthead regional office or compliance officer for more information.

Big ROI Starts With Defining Your Ideal Customer.
Who is NOT your ideal client as a financial advisor?
Boost your revenue with referral marketing in 2022.,from%20you%20again%20and%20again.


A national supplier of risk management services to independent financial advisors and other licensed financial service providers (FSPs). Established in 2004, we help our clients overcome their risk management challenges so they can grow and thrive in an increasingly regulated industry. Providing professional guidance and practical support, our team of specialists is passionately committed to delivering tangible solutions.

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