“If Sabrina Carter made a heavy metal album, nobody would buy it.” That was how the business tutor on my son’s music course recently explained the importance of knowing your target market and defining your proposition to his class of 18-year-olds.
Things like this often prompt a wider discussion in my house because we’ve all got our own take on the business world.
My son disagreed with his tutor as he doesn’t think successful musicians should be imprisoned by genres. I thought it was interesting that the tutor had referred to a female singer-songwriter who wasn’t Taylor Swift. I suspect he knew that Swift’s fanbase would have blown apart his argument for the commercial benefits of ‘sticking to your knitting’.
What fascinates me is how commercial brands, whether they be musicians or financial advice firms, navigate the challenges of growing and evolving
We all know ‘Swifties’ would buy any musical genre the American singer-songwriter wanted to pursue; such is their devotion to her personal brand. But that is a privileged position reached only after achieving a certain level of success.
What fascinates me is how commercial brands, whether they be musicians or financial advice firms, navigate the challenges of growing and evolving while staying true to their original values and identity. How do they retain profitable existing customers while attracting new business that secures their future?
Emma Thomson: Top tips for client retention strategies
There are a few online retailers that email me discount codes I can’t use because I’m an existing customer rather than a new one. It’s a strategy I don’t like – if they’re doing it, I don’t need them winding me up about it by email. But I understand why they do it.
Yes, it’s annoying that I know I’ll end up paying 10 or 15% more than someone else who buys the same thing at the same time. But if those retailers’ prices are consistently reasonable and their service is good, discounts that I can’t get don’t tend to put me off.
For me, the bigger issue is when a business needs to attract new customers of a different demographic to the old faithful, because that’s where its future revenue lies.
I’m seeing it now with an online clothing brand I used to love. They canvassed customer opinions about a year ago through a questionnaire, incentivised by automatic entry in a prize draw.
Some new product lines followed which were a little bit different to their norm and those designs have gradually taken over.
Most of the stuff they’re selling now just isn’t me – and they’ve noticed. They keep sending me automated emails about missing me, offering discounts to tempt me back and reminding me that I’ve still got loyalty points to spend with them. But sadly, they haven’t got much that appeals to me any more.
In financial advice, it’s often the other way round – attracting young talent and younger clients within an ageing profession that primarily deals with older clients
A parting of ways like this can be a natural progression. Anyone familiar with the English musician Yungblud – real name Dominic Harrison – will know that his recent move towards classic rock and a more masculine image has alienated some long-term fans. They connected with the punk/hip-hop fusion and gender fluidity of Harrison’s earlier career, but a new set of older fans love this recent more mature style.
In financial advice, it’s often the other way round – attracting young talent and younger clients within an ageing profession that primarily deals with older clients. As I’m covering topics like this for our weekly Starting Out slot, I’m always looking out for relevant research and comment.
What caught my eye this week was a report produced by NextWealth for Aegon called Organic Growth For Financial Advice Firms. Positioned as a practical guide for advice firms to achieve sustainable organic growth, the report contains several real-life case studies of how firms have proactively built their client base and service models.
I loved reading this report right from the off because it recognises, without judgment, that not all advisers do want to grow their business. Anyone who knows me well will know I’m a big fan of everyone doing what’s right for them, regardless of what others think or do.
The report got me thinking about whether an advice firm always needs a pipeline of new clients, even if at capacity
Researchers found that 18% of advisers surveyed are not looking to grow their personal assets under management, often because they want to maintain service quality and their work/life balance. ‘These firms are often lean, mature, and running profitably at capacity,’ states the report.
I don’t think there’s anything wrong with wanting to run a so-called ‘lifestyle business’. But the report got me thinking about whether an advice firm always needs a pipeline of new clients, even if at capacity. And do they need to diversify their customer base?
There are risks in not pursuing organic growth, as the report makes clear. ‘Even for firms not actively growing, attrition is real. Without a growth strategy, value can decline over time,’ it warns. Not good news for advisers who want to maximise value to fund their retirement when they eventually exit the business
Advisers know better than anyone how life is unpredictable. Earlier this week my friend, a retiree, was in shock because she’d heard an ex-boyfriend had died suddenly at the age of 72. An hour later she was told her cousin and his wife were in hospital after a serious car accident. Luckily, they’re going to be okay, but the outcome could have been very different.
If the worst happens to a client and the adviser has not built up a relationship with the children, they can’t assume they’ll retain that business
Many advisers sell protection policies because they know clients can become ill or die – and how this can have financial implications for loved ones. While it’s great that financial advisers protect their clients’ loved ones from the financial impact of these kinds of events, I wonder if they pay enough attention to the potential impact on their own business?
If the worst happens to a client and the adviser has not built up a relationship with the children, they can’t assume they’ll retain that business. With the cost of running a business increasing over time, new clients surely need to come in at some point.
Clients who are approaching or in retirement are attractive because they are most likely to have the kind of wealth that creates more complex needs that warrant advice. But younger clients are still important.
As the NextWealth/Aegon report says, younger clients often have simpler needs, so can serve as a training ground for newer advisers and paraplanners, expanding a firm’s reach and future revenue potential. ‘Firms investing in younger clients today are laying the groundwork for lifetime value and future trust-based relationships’ says the report.
With potential opportunities around targeted support on the horizon, what better time for advisers to think seriously about whether they really have enough clients now, and in the pipeline.
