Post RDR, if you were to think about client segmentation within the financial advice industry it was likely as simple as those who had more than £100,000 to invest and those who did not – with providers arguing that the cost of servicing those clients below the threshold had become too high. 

Of course, there are many reasons why this model came to the fore. Changes to charging structures and the abolishment of the commission model brought about by RDR was of course a factor, but a shrinking of the market post RDR was also seen to have a huge impact.

However, marketing and customer relationship management segmentation has improved enormously with increased connectivity and data analysis. It has now been taken to a whole new level with the application of artificial intelligence.

AI allows advisers to decide what parts of this new customer base they want to target and offer highly personalised services accordingly. Companies and advice firms adopting AI powered processes to engage with their customers are already seeing marked improvements to their bottom lines, through being able to interact with more clients (through a robo proposition for example), heightened customer satisfaction and reduced churn

Firms can either choose to specialise at this level, or we are increasingly seeing traditional advice firm’s launching new robo-advice arms to expand their client base and target new parts of the market. These new business units can not only provide lucrative new opportunities, but also play a role in feeding clients into their more traditional advice arms. For example, clients in their twenties who may be looking for a low-cost robo service may find that as their spending habits change and they need to navigate important decisions such as buying a house, having children or succession planning, they would feel more comfortable speaking with someone face-to-face. Those adviser firms who can cater to all of these needs will likely be able to develop longer-term and deeper relationships with clients, moving them through propositions as needs change.

Additionally, developments such as open banking, which give us greater access to customers data sets, provide another opportunity to streamline costs and open up advisers’ businesses ta deeper understanding of the clients they are dealing with, supported by a rich dataset of transactions. For example, by automating certain processes such as the client fact find when taking on new business, you could free up costly face-to-face time and let the technology do the “heavy lifting” when reviewing a prospect client’s spending patterns. Advisers are then able to consider more value-add interactions, such as gaining a deeper understanding into a client’s goals and aspirations.

Open banking also allows us to learn more about our customers relationship with money and their individual spending habits. This too could allow for more segmentation within the advice industry. For example, many pieces of research show that men and women may have different relationships with money, therefore is there room for advice firms who specialise based on gender?

This choice about where to target your services is important. Being able to segment the market should only be seen as a good thing as it allows more room for bespoke services, rather than off the shelf or broad-brush approaches.

Despite the dialogue around finances becoming more open, money will always remain a highly emotive subject and a machine may not be able to understand this or probe in a way that a human being would be able to – although Natural Language Processing supported by Big Data is making impressive inroads here.

Of course, it depends on personal circumstances and is horses for courses but while robo-advice is a great solution to plugging a hole, in its current format it is not ready to replace face-to-face advice.

As the industry opens up we are likely to see smarter client segmentation, supported by technology (particularly AI) that could see advisers taking a very different approach to targeting different parts of the market. Done in the right way, this should only be seen as a positive thing – not only does it invite new players into the market who can drive competition and fee levels, it also encourages firms to create more tailored solutions for segments – even for individuals.  Should advisers have the appetite for it, the market is heading in a direction that opens the potential for them to engage a far broader spectrum of the population.

About the author

Freddie Findlater

Marketing Manager – EMEA

Based in our London office, Freddie has 10 years of experience working with, platform providers, asset managers and technology firms in a consulting, sales and marketing capacity. Freddie works within the Bravura Sales and Marketing team for EMEA.

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