More industry research emphasizes the benefits of client segmentation, which can however be challenging to implement.

As the industry continues debating over where the target client “sweet spot” is, and as research increasingly points to where new or developing pools of wealth can be found, a new report says client segmentation is key for advisor productivity and profitability.

“The process of client segmentation allows advisors to make critical trade-offs between resource allocation and opportunity potential,” said Kenton Shirk, associate director at Cerulli Associates, which has released its June 2015 issue of The Cerulli Edge – US Edition.

The idea that client segmentation strategies can help determine which types of client promise the most potential to grow a business over time is certainly not new. But the issue has gained ground as firms intensify their focus on finding innovative ways of optimizing internal resource allocation, as well as facilitating a more efficient commercial distribution of wealth management products and services, and, ultimately, boosting client satisfaction (source: SEI and Scorpio Partnership).

“It [segmentation] helps an advisor focus time and resources on the highest priority clients and prospects, ensuring a high-touch, positive experience for top clients, while providing a reasonable yet proportionate level of service to non-ideal clients when necessary,” Shirk said. “The segmentation strategy for an advisor practice lays the foundation for its service model and pricing structure, and these intertwined decisions have significant ramifications for a practice's productivity and profit output.”

However, effective segmentation can be difficult for advisors to establish and implement,” Shirk noted. “Advisors struggle to prune clients who are now outside their ideal profile, but became clients when they begin their career, because of a sense of obligation and worry that turning down these non-ideal clients will strain an existing relationship.”