Marketing Wiz : Advisor Insights 25th Oct 2014
Vista's TACT Matrix : a great example of smart client segmentation
Ashish and Manish Goel, Vista Wealth, Delhi

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In the Marketing Insights series of this microsite, we had discussed the need to segment your clients and offer solutions aligned with each segment, to maximize client relationship value (Click Here). We talked about the need to go beyond the traditional HNI vs retail segmentation, and focus more on grouping clients on the basis of client expectations rather than merely portfolio size. Here is a great example of a successful advisory firm that has done just that - and is reaping the benefits of smart segmentation. Ashish and Manish Goel of Vista Wealth first slot clients into a novel set of 4 quadrants - they call this their 4C model. For each of these client segments, they have come up with a very well thought through approach of engaging with clients - which has helped their firm greatly boost revenues per client by enhancing wallet share from them. Ashish, who credits the brainstorming sessions at DFDA for the practice management insights that he develops and implements for his firm, shares with us in this article, the unique Vista TACT Matrix - a client engagement model that does not come out of a textbook, but one that has been developed through years of successful practice and incisive practical insights.

At DFDA, our core focus is practice management. We keep introspecting, observing and learning from one another on how we can enhance our practices, scale up our businesses and serve our investors better. We observed that among our members, some were able to scale up much faster than others. Some were able to gain wallet share from clients much better than others. When we discussed this issue in detail at DFDA and analyzed the ingredients of success of the faster growers, the aspect that came out strongest was an ability to better channelize efforts for different client types. Members who understood how to subtly change their approach based on client type, met with much more success than members who perhaps adopted a uniform approach to all clients. This insight led us to come up with the 4Cs approach to client segmentation, which is what this article is about. The 4Cs approach has worked very well for us at Vista Wealth - it has given Manish and me tremendous clarity on how to manage different types of clients, it has allowed us to give clear directions to our teams on what to do and what not to do with each client, and has allowed us to enhance our business from many of our clients significantly.

4 Cs are based on 2 perspectives : trust and knowledge

At the core of our 4Cs approach is an understanding that before we look at how to approach a client, we must take the effort to understand how clients view us. If we are able to align our approach on that basis, the equation with the client becomes much stronger. In our experience, there are two perspectives from which clients approach their relationship with their financial advisor :

  1. - Trust

  2. - Knowledge

Some clients are keen to gain sufficient comfort with their financial advisors such that they can trust them and their advice. They don't necessarily look to deepening their own knowledge on markets and products.

At the other end of the spectrum are clients who are knowledge oriented - who look for advisors who can demonstrate knowledge and proficiency over markets and products. They often pick up a lot of information on products from friends and peers and like to vet these inputs in conversations with a well informed advisor. They develop confidence in doing business with an advisor who can measure up to these expectations.

The two ends of the spectrum therefore are trust in an advisor vs knowledge of products. Not everybody fits into the extremes, which gives us four quadrants to slot customer types into :

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These 4 quadrants represent our perspective on where each client of ours is vis-à-vis their relationship with Vista Wealth. It does not denote where we would like to see each client. We would want every client as a core client - but not everyone is there and it is our objective to try and move every client to that quadrant over a period of time.

From the four quadrants, we created the Vista TACT Matrix - a framework that summarizes how we engage with clients in each quadrant with a view to maximizing client relationship value. Each component of this table is then explained in some detail in the following paras.

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Core Clients : A core client is one who trusts us and also has familiarity with the financial products we advice on. A healthy combination of trust and knowledge is what maximizes share of wallet from the client in our favour. Very often, these are clients who developed trust in us, went into mutual funds in a small way initially followed by moving most of their assets into funds over time as we kept giving them more information about products. Core clients represent the category we have worked a lot on - which is why they are in the "comfort zone" for us. These clients give us the bulk of our business - which is why they are "core" to our business. In most cases, the journey to become a core client happened successfully because we got the client onboard the right way - first introduced them to low risk liquid and debt funds and then gradually moved them up the curve on the basis of their comfort and risk appetite. Do it the right way and you have clients with the right mix of trust in you and knowledge of your products - which means you have set yourself up nicely to enjoy the fruits of your labour in the years ahead as the relationship is where you and your client want it to be.

Cash Clients : These are typically clients in their 50s, who look for relationships based on trust and comfort. They are not that keen on their own to learn more about capital market products and generally prefer to stick with familiar investment avenues. One important aspect we have observed about this category of clients is that although they trust you, they don't give large allocations of their money to you. A large portion remains typically in bank FDs. The point here for us to understand is that though they may trust us, their lack of proper knowledge and experience with mutual funds comes in the way of larger allocations.

If you want larger allocations from this category of clients, you can't win that on trust alone. "Sir, main hoon na" is not going to get you more money than they have already given you. You must make the effort of getting them comfortable with the product category you want them to invest in. We have found for example that concerted efforts to get these clients to understand accrual funds is what finally gets them to move that FD into an accrual fund. We have created simple one pagers that explain the concept. We have simple charts that showcase performance history. We take the effort of trying to get them to understand the product in a simple way, so that they become more familiar with the products. Trust alone is not enough to maximize allocations. You need to impart knowledge - then the client comes into the Trust + Knowledge zone - which is the best place for you to have your clients in. That's how they can become core clients. Shying away from imparting knowledge out of fear that your client will "know too much" will only prevent them from giving you higher allocations out of their total portfolio.

Challenging Clients : There are broadly two types of clients in this category. The first is typically retired professionals and bureaucrats - people with huge knowledge in their sphere of activity and people with good connections in all walks of life. They have the ability to equip themselves with information on anything they need to know, by making a few calls to friends. They pride themselves on being well informed and on their ability to get well informed on any aspect that matters to them.

Our approach to these clients, though based on knowledge, is one where we clearly show that we have huge respect for their own knowledge. We need to be well informed, but it would be foolish to try and "show off" our knowledge to somebody who is proud about himself being well-informed. Our approach is more akin to "I seek your blessings". We go to such clients, briefly inform them about say a new initiative, and then seek their blessings as we begin the new initiative. When we talk about a product or a market perspective, we give them a brief opinion, and make it a point to seek their view - rather than sounding as if we are giving them advice. We acknowledge their seniority as professionals. We share information only to the extent asked. When asked, we make sure we have all the information requested from us.

These clients have knowledge. For us to build trust, we need them to get comfortable with us. Acknowledging their seniority explicitly is a useful way to build a good equation with them. "I seek your blessings" approach brings them on our side and builds a strong bonding based on mutual trust and respect.

There is another category of knowledge based clients - typically successful professionals in their mid 30s. They like to be well informed before making any decisions. They will ask us to send mails with all the background information and will revert after reviewing it. They will typically check out with colleagues and friends and will take more than one opinion before coming to a conclusion. One thing we have noticed is that when they evaluate us as an advisor, the thing that gives them most comfort - more than product knowledge - is showcasing our business proposition and our processes. We make it a point, whenever we come across such clients, to take them through our business proposition, to take them through our research process, how we make investment recommendations, our service proposition, our reporting systems, our team, the recognitions we have earned etc. To earn trust of these clients, we understand that we first need to earn their respect. And respect comes from showcasing the entire business proposition - not necessarily from giving a great current market view. When such clients see that Vista Wealth is an organization that has established processes to serve clients, it builds respect for our proposition in their eyes, which is the stepping stone to earn their trust. If we don't do this well, they will remain in the Knowledge quadrant - which means limited allocations. We will get meaningful allocations only when we add the layer of trust to knowledge and move them to core clients. The way to earn their trust is sharply different - than say retired professionals. Understanding what works for each category of clients is critical to strengthen the relationships and aspire for higher wallet share from them.

Crust clients : These are prospects who neither trust you at this point of time, nor do they have product knowledge. Crust signifies the periphery - these are prospects who are at the fringes of your business, and you will need to work diligently on the knowledge aspect as well as the trust aspect to make them warmer prospects and eventually your clients.

Observe client interactions to pick up signals

This is a broad framework, which works for a typical retail business like ours. Probably an HNI oriented business will have different characteristics of clients and therefore different quadrants. What makes this approach work for us is that we first identify where we stand in these 4 quadrants vis-à-vis all our clients and then map out what we need to do to move them into a more favourable quadrant that helps deepen wallet share. This is a constant process and doing this helps us pinpoint what we need to do for each client relationship. We look at client behaviour very closely to get a sense of how they perceive us, which helps in accurately slotting them into the appropriate quadrant. Does the client ask us to send a mail about our recommendations and then revert to us with queries after going through it carefully? Does the client ask our sales team member to first fill up the form completely and signs only then or do they sign the form first and then ask the sales person to fill up the form later? Whether it is the behaviour related to advice or simple operational matters, there are signs to be picked up if you carefully observe. It is this observation that is key to determining what your client's perception is about our firm - which is the cue for us to determine what needs to be done to strengthen the relationship.

Give sales team specific inputs to get them out of their comfort zone

This 4Cs client segmentation approach has helped Manish and me to direct our sales teams' efforts and channelize them in the right direction. We found for example that our sales team naturally tended to meet core clients more frequently than others. These are strong client relationships and therefore less challenging sales calls to make. Getting our team to move out of their comfort zone would have been a challenge - but when we gave them specific inputs on how to deal with clients based on which quadrant they fit into, it gave the team a lot of focus and an impetus to go out and try to deepen other client relationships as well.

This is an ongoing process, we keep looking at where we stand with each client relationship and what we need to do to move it into a better quadrant. We are now getting software support to help maintain databases and track client relationships on the basis of the 4Cs segmentation approach. It has now become a way of life for us - one that has helped us significantly boost our business from existing clients and convert prospects into clients quicker.

All content in Marketing Wiz is created by Wealth Forum and should not be construed as views of Kotak MF.



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