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Ideal client profiles

Publish date: 08 February 2019
Issue Number: 57
Diary: CompliNEWS
Category: General

By Lee Rossini

In a previous article, I discussed the importance of identifying a target market with the best fit for your business. The next step in the process is to draw up an ideal client profile (ICP). One of the main advantages of an ICP is that it provides guidelines on whether to take a person on as a new client or not. If a prospective client does not meet the criteria on your ICP, they should not be taken on but rather referred to a more suitable financial planning business.  Developing an ICP is also useful when working through your existing client base. The clients who do not meet the criteria of your ICP should be referred to a business who are in a better position to take care of their financial needs.

What is an ideal client profile?

In short, an IDC is a list of characteristics that you would like both your existing and potential clients to have. When deciding on these characteristics, it is important to consider both the quantitative and qualitative aspects of your ideal client. Quantitative aspects are easily defined and measured numerically. Qualitative aspects are subjective that provide an indication of human behavior and the reasons for the behavior. They are concerned with the ‘how’ and ‘why’ of decision-making and include characteristics such as attitude, beliefs and opinions. 

Examples of quantitative characteristics

  • Assets over R5 million
  • Annual income of over R500 000
  • Middle to late career stage
  • No dependent children
  • Location 
  • Age
  • Active in charitable organisation

Examples of qualitative characteristics

  • Aspirations and goals
  • Values
  • Beliefs
  • Opinions
  • Attitude towards financial matters
  • Risk tolerance
  • Establishing knowledge levels

Why is it necessary to target specific clients?

Take an example of a bank that offers private banking services to high-net-worth (HNW) individuals. They will not take on a client that does not meet their criteria of HNW as it will not add any value to their business. Any prospective client must meet their minimum criteria before the bank will consider taking them on. These criteria have been built into their business model. If they take on clients who do not meet the criteria, their business model will not be successful or sustainable over the long-term. Financial planners should apply the same logic to their businesses. You need to be clear about what type of client is needed to make your business model work. 

Targeting clients who have the specific characteristics of what you have defined as your ideal client enables the business to narrow its focus and to channel all available resources and effort into meeting the needs and expectations of these clients. A well-constructed ICP provides the business with an opportunity to assess the suitability and potential profitability of prospective clients. It prevents the business from spreading itself too thin by trying to be everything to everyone by taking on any client that comes through their door.  When drawing up an ICP, it is important that it is not an idealized version of clients who wish you could have. It must be a representation of a real near-perfect client fit which is based on research and data. To be of value, the ICP must be closely aligned with your overall business model and strategy.

Ideal clients

  • Are profitable from a business point of view.
  • Have sought out your business as experts and therefore are willing to listen to and accept advice.
  • Speak highly of the expert advice and service they experience.
  • Value the work you do for them.
  • Have an enjoyable, friendly and mutually satisfying relationship with you and your business.
Working Smart

By Lee Rossini

As financial planners, we seldom stop to think about the services we offer and how the nature of these services impact on our relationship with our clients. The differences between goods (products) and services are important when developing a business model, marketing plan or client engagement process.  Goods are tangible objects that can be created and sold or used later. A service, although more difficult to define, consists of economic activities such as product time, place, form or psychological utilities. Services are intangible acts, deeds or performances.

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