Differentiating through client focus - Schwab Advisor Services

Differentiating through client focusUsing an ideal client persona and client value proposition to grow

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Contents

03 Introduction

04 The power of an ideal client persona

05 Delivering value through focus

06 Differentiating through a client value proposition

07 Case study

08 reputation

10 The power of a good story

11 Conclusion

2 | Differentiating through client focus

Visit advisorservices.schwab.com/guidingprinciples to learn more.

GUIDING PRINCIPLES FOR ADVISORY FIRM SUCCESS

Effective planning and execution is a leading indicator

of success

through your clients’ eyes

Your reputation is your brand

Operational excellence creates greater capacity

for clients

People are your most important

asset

Kathryn McKinsey is a 49-year-old corporate executive in the San Francisco Bay Area who yearns to do the things she loves without having to worry about her finances. Married and the mother of two children, Kate juggles her family and her career daily.

Kate is ready to be serious about preparing for retirement but also recognizes that her parents need increased financial support. She and her husband, Sean, are both high-income earners who own their home in the Bay Area, and at times they have differing opinions when it comes to their financial decisions.

On top of her salary, Kate receives a large portion of her income as equity compensation, which has grown to represent a majority of the family’s wealth. Sean expects to receive a pension from his employer when he retires. Their financial goals are to save for retirement and their children’s education, to buy a vacation home, and to be able to care for Kate’s parents.

Kate and Sean, like all investors, must contend with circumstances that impact their financial lives. But there is one thing that makes Kate unique: She is not a real person.

Differentiating through client focus | 3

Mosaic Financial Partners, a San Francisco-based independent advisory firm with over $620 million in assets under management (AUM), created Kate McKinsey to obtain a clear picture of the ideal client for their firm. Mosaic brought Kate to life with a picture, a name, and a story, and through the process, Kate became like a real person with real concerns and real challenges.

The story of Kate McKinsey talks about her life and who she is—a mother, a wife, an executive—as well as what energizes her and what she worries about. Developing Kate and her story was powerful for Mosaic because it created a vivid and memorable image of their ideal client and allowed everyone at the firm to truly understand whom they are best suited to serve and to learn to identify and attract others like Kate. As Mosaic continues to grow, they recognize the importance this focus has provided so they are able to effectively target new clients.

Year after year, most firms participating in Schwab’s RIA Benchmarking Study cite growth as a top

Introduction

priority. And while most indicate growth is a primary concern, many firms do not dedicate the time and resources required to create formal initiatives. Many of the fastest-growing firms outperform by effectively creating a culture in which everyone in the firm contributes to the growth of the firm. They approach their business with a disciplined focus and the attitude that growth is an imperative.

Like Mosaic, one way they do this is by developing and effectively executing a strategic plan and very purposefully designing their entire client experience around their ideal client—clients who understand and appreciate a firm’s value proposition and who are a best fit based on the experience that firm offers. These firms understand that value is defined through their clients’ eyes, and they benefit by evolving their offer around their ideal client’s desires.

Attentively focusing on their ideal client allows a firm to better understand the client’s needs in relation to a firm’s core capabilities—those things a firm does exceptionally well. It also allows the firm to see where they need to make changes that allow them to better serve their ideal client. Advisors can spend less time and money trying to serve clients who are not a good fit and will find it easier to identify ways to delight their ideal clients and deliver a more consistent and highly personalized experience that sets their firm apart. Advisors who distinguish their offering through more meaningful interactions become even more successful at building trust and developing long-term relationships. This creates a differentiated client value proposition that distinguishes them from the competition and helps earn new business and referrals.

+41%

More new client assets

+26%

More new clients

Firms with a documented ideal client persona and a client value proposition earn significantly more than those without those strategies.1


The power of an ideal client persona

Developing a strong ideal client persona typically begins with firms exploring their existing clients and identifying patterns of demographic and psychographic characteristics among the clients who they feel value the services they provide and are truly the best fit for their firm. While profitability should be a consideration, firms should also examine clients who are loyal and engaged. These clients are more likely to be satisfied and to be or become an advocate for the firm. Firms should equally consider those clients whom they derive personal and professional satisfaction from working with.

A desirable set of attributes will begin to emerge as firm leaders reflect on:

• The various demographic and psychographic characteristics of their clients, such as marital status, stage of life, education, mind-set, personality, financial goals, lifestyle goals, etc.

• The aspirational qualities they would like to see more of in their client base

• The strategic direction they want to take the firm, such as a specialization in a niche

The best of these attributes can then be brought together into a persona. The ideal client persona is not a specific person; it is an aspirational example

Creating real connectionsDeveloping an ideal client persona is the first step. Successful firms create an environment in which their ideal client is wholeheartedly adopted and employees begin to connect with them as if they were a real person. Consider the following examples adopted by some firms:

of the most desirable characteristics of a firm’s preferred best clients—like Kate McKinsey.

Having a vivid and specific picture of a firm’s ideal client persona enables firm leaders to uncover what clients really want and to obtain a deep understanding of how they provide value to those clients. While many firms have a concept, or even a list, of the characteristics they desire in their clients, bringing those qualities to life in a true persona creates a connection that is memorable and real. Partners and staff can simply apply the lens of “What would Kate want?” versus attempting to recall a list of characteristics as they make strategic decisions and evolve their client experience so that it is extraordinarily compelling to their ideal clients.

Mosaic knows that at times, people like Kate and Sean may have differing opinions on how to approach financial decisions. As a result, they recently had their financial planners go through a certified coaching program to help ensure their advisors were able to navigate those complexities and find solutions.

“Utilizing coaching tools, we are equipped to handle our clients’ emotional relationship with their money, including helping partners find a shared vision of their future together.”

Propel leadership decisions. Share leadership decisions with the firm that were made by applying the lens of what your ideal client would want. Consistently communicating how the preferences of your ideal client inform key decisions at the leadership level demonstrates commitment and helps ensure that your persona will become part of your firm’s culture.

Map it out. Examine your current workflows and map them out from your ideal client’s perspective. Consider what he or she is thinking, feeling, and doing at each step. This helps create a valuable experience and aligns everyone in the firm around how to create small delights that your ideal client will appreciate.

Think of them as family. Frame a stock photo of your ideal client, and place it on employees’ desks among other family pictures (to avoid making clients feel as though they are not individuals, consider a subtler placement if their desks are in a client-facing environment). This creates a memorable image of your ideal client and makes employees feel as if that client were part of the family.

Keep it fun and creative. Create a presentation and showcase what motivates your ideal client. Ask everyone in the firm to contribute by submitting photos that encapsulate your ideal client’s likes, hobbies, and interests.

Celebrate milestones. Bake cupcakes and place an image of your ideal client on top of each. Small acts that celebrate meaningful life events and milestones reiterate those things your ideal client finds important.


In the early stages of a firm’s life cycle, many advisors take on any and all types of clients to get their business off the ground. Growth is the utmost priority, and firms are often able to be all things to all clients since they tend to have a great deal of capacity. But as they grow, many advisors find that servicing a wide variety of clients can erode productivity and lead to staff feeling overextended, and the client experience can suffer as a result. This constraining environment leaves principals with a need to rearticulate the strategic path for the business as it matures and the complexity of the business increases—commonly along various points as a firm approaches $250M, $500M, and $1B in AUM.

By honing in on their ideal client, advisors can optimize resources around the type of client who best fits their firm. They determine which aspects of their offering those clients value most and develop a strategic plan that aligns the firm’s unique capabilities with the right investments and activities.

Some firms opt to shift from the “generalist” role to a more specific specialization or focus. Identifying an ideal client persona allows a firm to focus on a type of client—or even a client niche, such as anesthesiologists, or a unique technical specialty, such as equity compensation for C-suite executives—and become the best in that category by creating an experience that differentiates them in the market and attracts more clients of the same sort.

Delivering value through focus

You can fine-tune those aspects of your business that are most important to your target clients. This focus allows you to find and win the type of client that your firm is structured to serve best. You can spend less time and money prospecting with clients who are not a good fit. Clients who are the right fit will value a deep connection and seek out your expertise. And because these clients feel valued by your firm, they will refer similar types of clients: “Like refers like.”

Focus your business to delight your ideal clients

Find and win the right clients

Provide expertise and connect deeply

Clients are likely to refer like-minded peers

4

2

3

By narrowing your focus, it’s easier to find ways to delight your ideal clients.

1

Having an ideal client persona also allows firms to refresh their offering by adding value-added services to address client needs or create personal interactions as they manage aspects of their client’s financial life. That is, principals find it easier to enhance their service offering based on their ideal client in a way that continues to differentiate their firm in the marketplace.

Consistently and effectively communicating firm value to clients and prospects enables firms to drive growth and often empowers them to win new business more quickly in the sales cycle. Although concerns about pricing compression are prevalent and advisors report having more dialogue with clients and prospects about fees, data shows that pricing has remained stable and that what is actually manifesting is margin compression. As principals continue to provide an outstanding and noteworthy experience to their best clients, many are adding more services for existing clients at the same price. By having a clear business strategy and looking through the lens of a firm’s ideal client, leaders can evaluate decisions about the services or experiences they may offer, helping increase the chances that an investment in those added services will lead to higher degrees of client loyalty, referrals, and new business.

Further, as the needs of a firm’s ideal client change naturally over time, firms can easily revisit their offering and innovate and evolve in response to those changing needs.

Ideal client


The fastest-growing firms recognize that when they design their business with their ideal client in mind, they can create an experience their clients perceive as valuable—their client value proposition. And while their service model is not always notably different from that of an average firm, they have created an environment in which every aspect of their firm maintains an extreme focus on the ideal client.2 Their client value proposition is a succinct articulation of what sets them apart in the eyes of their clients and prospects—it highlights the reasons clients are so happy and why future clients would choose to work with that firm.

Historically, many advisors focused the articulation of their firm’s value on their expertise in asset allocation, investment selection, and portfolio construction, and they have been successful at delivering an exceptional client experience. As the industry grows and technology advances, however, investment management risks are becoming increasingly commoditized and represents just one piece of the overall value most firms provide to clients. Clients also need to see the value of what a

Differentiating through a client value proposition

Firms thrive when focusing on the client experience from their clients’ point of view. When every person, process, service offering, and system maintains an extreme focus on your ideal client, you are able to differentiate your firm in an increasingly competitive landscape.

Guiding Principle: Value is defined through your clients’ eyes

firm does in terms of not only their portfolio returns, but in how it relates to their life circumstances and aspirations. Many investors seek advisors who will help them navigate the full spectrum of their financial lives and give them confidence in their decisions. Highlighting aspects of the client experience the firm delivers in terms of value-added services and relationship management can make the value proposition particularly compelling.

A compelling client value proposition should speak to each of these dimensions as advisors look to engage in meaningful conversations that allow them to build relationships by connecting with clients and prospects on an emotional level. These conversations begin with advisors developing a powerful story around their firm’s purpose and effectively telling that story in a memorable way so they are able to convey the value they provide. Their narrative then becomes consistent, and repeatable messages used throughout various marketing tactics continuously reinforce the firm’s reputation within the community it serves.

Design a valuable client experience Every aspect of the firm is designed around the ideal client and what they value

Processes• Operational workflows• Client onboarding• Client meetings• Compliance• Cybersecurity

Systems• Client relationship

management• Reporting and billing• Planning• Trading

People• Recruiting and hiring• Talent development• Incentives and rewards• Employee ownership

Services• Investment management• Value-added services• Relationship management

Ideal client


Maximizing client focus to accelerate growth

The Colony Group launched Her Wealth®, an initiative serving female investors that is becoming an important source of client referrals and is strengthening the firm’s reputation. Through exploring their existing clients, they were able to quickly identify a core set of clients their firm was strategically positioned to serve.

This signaled an opportunity for the firm to leverage their growing base of female investors—in conjunction with a talented staff of advisors who were already leading the charge on women investors’ needs—and to propel this energy forward to empower women with financial knowledge.

“We could point to the rising divorce rate among women over 50 and projections that by 2030, about two-thirds of the nation’s wealth will be in women’s hands.”

—Nina Mitchell

Nina Mitchell, senior wealth advisor and partner at The Colony Group, states, “That added weight to our value proposition around empowering women to better understand their own financial picture.”

Once they identified their ideal client, The Colony Group solidified their client value proposition by conducting a deep dive into their brand extension. Through a series of interviews with many of the firm’s senior advisors who had expertise in serving female investors, The Colony Group could formulate a complete picture and pull it together into a singular impactful vision: empowering women with the financial confidence and resources they need to take control of their money and wealth.

Documenting their client value proposition gave The Colony Group a guidepost when making decisions. With added focus, they were able to create a detailed plan that set up the firm to capitalize on opportunities that resonate with their target

segment, including creating the right touches at the right time. They identified relevant moments to engage with women and help them make confident choices about their financial future. The firm built an extensive website that included articles, step-by-step guides, blog posts, and links to other recommended resources. Moreover, it secured a weekly live interview segment on a D.C. radio station during peak drive times because their ideal client spends an hour or more commuting each day.

The Colony Group continues to stay attuned to its target clientele and their evolving needs through the Her Wealth® advisory board. The board is composed of 14 women who have diverse backgrounds and professions, are champions of the firm, and are well connected in the community.

“These women have deep business expertise and connections in the same circles as many of our ideal client prospects.”

—Nina Mitchell

According to Nina, “They bring us extremely valuable perspectives from outside the firm about the types of issues that women investors encounter, so we can make sure we’re responding to those needs.”

Through this initiative, The Colony Group was able to design their business so they knew who they were servicing and innovate their client value proposition in a way that empowers a virtuous cycle of referrals.

CASE STUDY


In 2017, fastest-growing firms’3 growth in assets from new clients totaled 9.1%—2.2 times that of all other firms. For top growers, existing client referrals and marketing both contributed to new client asset growth. This often indicates a more robust growth strategy that effectively incorporates a broad set of tactics.

Amplifying the firm’s reputation

Fastest-growing firms’ key metrics

Fastest-growing firms3

All other firms

Multiple

Five-year net organic growth CAGR

15.4% 3.9% 3.9x

Net organic asset growth in 2017

$67 million $25 million 2.7x

Number of new clients in 2017

36 19 1.9x

Assets from new clients in 2017

$48 million $24 million 2.0x

Growth in assets from new clients in 2017

9.1% 4.2% 2.2x

Mosaic showcases a “Meet Kate” presentation to all its employees, highlighting who Kate and Sean are as well as what planning opportunities exist. Mosaic employees also watch an external video on the firm’s website to become familiar with their ideal client. In addition, the front office is trained to greet clients and offer an experience that Kate would want. A thoughtful gesture, such as placing plaques with names of drinks—coffee, tea, water—in the conference rooms, can set the tone for a comfortable and professional interaction and create a hospitable feel as clients who resemble Kate walk in the door. Through small delights, Mosaic trains its staff to consistently refer to the look and feel of the experience that Kate would appreciate.

Fastest-growing firms dedicate resources toward a deliberate referral strategy that systematically involves employees and clients. They create a culture in which everyone in the firm feels as if they have a stake, and every aspect of their firm communicates their client value proposition. These firms educate employees and clients so they are able to articulate whom the firm is built to serve and how they deliver a personalized experience to those clients—and they portray it in a way that resonates and inspires others to learn more about the firm. This strategy creates an advocacy platform, as clients and employees are able to share a firm’s story and talk about the challenges its advisors can solve for its clients in a way that leads to interest and action. They consistently and effectively amplify the firm’s reputation and create an organization-wide culture that drives referrals.

Fastest-growing firms added twice as many assets from new clients by effectively employing a broader set of marketing tactics.

2.2x more growth

9.1%

4.2%Other marketing

Professional referrals

Client referrals


Every aspect of your firm—employees, centers of influence, clients, and even your digital presence—should effectively amplify your firm’s reputation within the community you serve in a way that increases referrals and generates new business.

Guiding Principle: Your reputation is your brand

Creating a culture of growth sets the foundation for a virtuous cycle of engaged clients who organically promote the firm’s services to friends and peers, which helps firms connect with prospects from a place of greater trust and credibility and establish a repeatable result that can position the firm for steady, long-term growth.4

The divergence in performance of fastest-growing firms is also impacted by their ability not only to excel at referrals from existing clients and centers of influence but also to win new clients through other marketing strategies such as networking, community involvement, and other outreach. They view marketing as a growth strategy that takes place consistently, according to a well-developed plan—not just an isolated event that occurs when they desire new clients.

Through a systematic, disciplined approach to marketing, fastest-growing firms are able to effectively communicate their value proposition and engage clients and prospects across all channels of communication in a way that reinforces their reputation—or brand. They effectively amplify that brand within the market both digitally and in one-on-one interactions, compelling existing clients to talk about their firm with prospects who are similar to them.

Firms who demonstrate their value in a compelling and distinctive way not only stand out from the competition but also tend to experience higher referral rates that translate into new clients. Prospective clients are motivated to inquire about

and connect with a firm directly or through the firm’s digital presence—their website or other digital channels such as social media. When a firm’s digital expression of their value proposition is consistent with the reputation they have established in the marketplace and through word-of-mouth interactions, they are able to continue reinforcing that message to generate opportunity for new growth.

Kara Duckworth, Duckworth Wealth Advisors

‘‘Redesigning our website through the eyes of our ideal client helped to reinforce the value we provide and win new clients. For example, after being referred to us by their attorney, one prospect visited our site and stated, ‘I felt like you completely understood everything I wanted. It was as if your website was speaking directly to me.’”


The power of a good story

Stories shape how others see you. The stories people tell about you influence how they see you—such as whether they would hire you, refer to you, or like you.

Stories are tools of powerWhen you tell a story, your audience slows down to listen. Sharing a story more effectively conveys your insights to others.

Stories are memorableWhen you listen to a story, you are using more of your brain. Stories activate different parts of the brain, such as your visual and auditory cortices and your olfactory sensory areas, as you process information. And because you are engaging more of your brain, you enjoy the experience more, you understand the information more deeply, and you retain it longer.5

Stories persuadeStories can move people to action. You can persuade others to act by taking them on an engaging journey.

Stories also create valueIf you take a simple idea or service and build a story around it, the value increases exponentially. People process with their heads and their hearts, and they will pay based on how much that value means to them.

To compel clients to want to take action on your behalf, you need to connect with them on an analytical and emotional level. Data can convince people but do not inspire them to act. To do that, you need to wrap your vision in a story that inspires personal connection.

Every conversation with a client is a chance to tell your storyWhat are your firm’s origins? What does the firm do particularly well? What are its values and philosophies? What makes it different? Was there a time when you really “wowed” a client by going above and beyond expectations? These are a few of the starting points from which you can build compelling stories that your clients will remember when talking with friends.

The best stories are intentionalThey underscore a firm’s value proposition based on what clients actually care about. Effective stories compel action because they have a goal: The storyteller has a clear idea of what the listener should think, feel, and do after hearing the story.

Ensure every employee can answer very common questionsBeing able to answer “What do you do?” or “Where do you work?” sparks interest and illustrates your value proposition. Encouraging your staff to collect and share stories about the outstanding job your firm does for clients can make all members of your team, particularly those who do not work directly with clients, feel engaged in the client experience.


Define your value

Build your ideal client persona and client value proposition to grow your business.

Contact your Schwab Relationship Manager to learn more.

Conclusion

As a busy, high-achieving executive balancing career and family, Kate was delighted when a friend from her professional network told her about Mosaic. Mosaic’s offering, which includes integrated financial planning and investment management, gives Kate a process for making wise and informed decisions easily and confidently and frees up her time so she can focus on the things that are most important to her.

By creating an ideal client persona and client value proposition, Mosaic was able to identify the type of client they best serve, recognize the value they provide to those clients, and optimize resources around delivering a superior client experience. And by talking about that value consistently and often, Mosaic advisors can effectively establish trust with

their clients in a way that those clients choose to share their experiences with others. When a firm can get more people to talk about what they do well and the value it can deliver to the right individuals, referrals and new business often follow. As firms seek new and innovative ways to grow, focusing on an ideal client and what those clients value about working with their firm sets the foundation for growth and can help firms stand out in an increasingly competitive environment.

Visit advisorservices.schwab.com/guidingprinciples to learn more about the Guiding Principles for Advisory Firm Success.

1

in AUM.2 Maximizing Firm Growth: Five keys to building a successful referral strategy, Charles Schwab MKT.

3

4 The Power of the Independent Advice Business Model.5 Susan Weinschenk, “Your Brain on Stories,” Psychology Today, November 4, 2014.

Schwab. Their mention is not, and should not be construed as, a recommendation, endorsement, or sponsorship by Schwab. Experiences expressed by advisors may not be representative of the experience of other advisors and are not a guarantee of future success.

About the 2018 RIA Benchmarking Study from Charles Schwab

The 2018 study provides information on topics such as asset and revenue growth, sources of new clients, products

that custody their assets with Schwab and represent over a trillion dollars in AUM participated this year, making this the leading study in the RIA industry.

Schwab Advisor Services™ serves independent investment advisors and includes the custody, trading, and support

©2018 Charles Schwab & Co., Inc. (“Schwab”). All rights reserved. Member SIPC.JUT (0222-2KBU) MKT102222-02 (02/22)

Ideal client persona with. Consider the following three criteria:

• Your service model generates an acceptable level of revenue from therelationship.

• Loyal/engaged:

• Rewarding: You derive personal and professional satisfaction working with this client.

• :scihpargomeD Age, gender, location, marital status, stage of life, education,household net worth, investable assets, source of wealth.

• :scihpargohcysP to advice, risk tolerance.

• :pihsnoitaleR How this client found you, life or wealth event you helped this clientnavigate, ongoing challenges on which you consult with this client.

• :secivres/stcudorP Primary needs and products/services used, results and expertise

how this client feels for having worked with you.

that are most desirable.

• fO fer attributes:Remember to consider the entire breadth of your offer.

• :eulav tneilC Put yourself in your ideal clients’ shoes, and translate each attribute intothe value it provides. Describe what matters most to your target clients from their point

• :srevird eulaV Distill the value into a few words that describe how clients feel about theend result of each transaction.

list of factors that may resonate with your best clients. Identify the ones that deliver

• :esitrepxE experience that your ideal clients would highly value?

• Service offering: What makes your client service model exceptional to your ideal clients?

• Solutions:

• :ytinummoC a personal side to your business and help attract prospects with similar interests.

• :rehtO How else do you make a difference in the lives of your ideal clients? How does

woh ezirammuS

clients, and how do you help them solve their issues and challenges?

Step by step: Creating a client focusIdentify your own ideal client persona and client value proposition

Schwab Advisor Services™ serves independent investment advisors and includes the custody, trading, and support services of Schwab. Independent investment advisors are not owned by, af

©2018 Charles Schwab & Co., Inc. (“Schwab”). All rights reserved. Member SIPC. JUT (0222-2KBU) MKT103168-01 (02/22)

00221023

Developing a clear picture and understanding of your

your clients’ eyes. To develop a strong ideal client persona, think about existing clients who value the services you provide and are truly the

To resonate with your clients on an emotional and analytical level, it’s imperative to understand what your ideal client values most. You need to uncover what they really want and communicate how your

Client value proposition

Differentiating through client focus - Schwab Advisor Services

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