Client Segmentation: The Secret to Long-term Advisory Growth

• Advisors face several headwinds in today’s uncertain landscape.
• Focusing on high-growth client segments may help you position your practice for long-term growth.
• A refined client segmentation strategy can help inform your service offerings.

As markets, the economy, and investor demographics shift, it’s vital for financial advisors to keep pace with evolving investor trends and preferences to ensure your practice stays competitive.

Becoming more familiar with the goals and preferences of distinct investor segments can help you align your offerings and services to better attract and retain those investor segments. This is key to driving the long-term growth and health of your practice in the current environment, which presents significant challenges for today’s financial advisors.

Challenges Financial Advisors Face Today

Today’s advisors face a number of significant industry headwinds. But keeping up with the preferences of high-growth client segments is critical to building a sustainable practice centered on an exceptional client experience. Here’s how:

Industry Consolidation

Competition among advisors is strong: “Today’s tenured advisor force signals continued industry consolidation as M&A opportunities will increase for growth-oriented firms,”¹ as smaller advisory practices face competition from larger firms.

How client segmentation can help: Diversifying your client-base can help you better position your practice for sustainable and stable revenue in the face of increasing competition.

Ascendant Demographics and Wealth Transfer

Advisors that lean into changing demographics stand to benefit from the growth of up-and-coming client segments. It’s estimated that the Silent Generation and boomers will pass $72.6 trillion in assets to their Gen X and millennial heirs through 2045.²

How client segmentation can help: Advisors who capture even a small percentage of these assets in motion can access new opportunities as heirs look to advisors for help managing their inherited wealth.

Shifting Client Service Expectations

Technology has dramatically shifted client expectations when it comes to investors’ advisory service model preferences. The frequency of communication and the mode of communication investors want have also changed. Both factors have put pressure on the human-only advisory service model.

How client segmentation can help: Our 2024 Influential Investor Segment Study found that millennial investors want more frequent communication with their advisors compared to Gen X and boomers. And because many hybrid investors want technology integrated into their advisory services,³ implementing new technologies in your own practice may help you attract and retain these tech-savvy investors.

Why Client Segmentation Matters

How you might navigate advising a 25-year-old software engineer making $200,000 annually is likely to be very different from how you’d approach advising a 60-year-old business owner with variable income. In other words, your client service model shouldn’t be one-size-fits-all.

As you begin to develop your client segmentation strategy, start by assessing your current and target clients.

• What do they value?
• What are their goals?
• How do they like to communicate?
• How can your practice help?

Thinking through how you’re positioned to serve different client segments helps you to more effectively allocate your practice’s resources, market your value, and deliver the kind of client experience designed to retain and grow your book.

Client Segments Shaping the Future of Advice

Ultimately, the longevity of your practice depends on your ability to flexibly meet the needs of different client segments, especially ones whose influence is growing and increasingly shaping the future of investing and of advice itself.

Our 2024 Influential Investor Segment Study identified four key segments that may offer powerful growth opportunities for today’s advisory practices:

1. Women are expected to control $30 trillion of financial assets that boomers possess by 2030.⁴
2. Hybrid investors are tech-savvy investors looking for an integrated experience that spans both traditional advisor-led offerings and self-service platforms.⁵
3. Millennials have now surpassed boomers as the largest generational group in the US with over 72 million people.⁶
4. Gen Xers are sandwiched between their children and their aging parents, juggling a myriad of priorities, and in need of valuable guidance to help them achieve their short- and long-term financial goals.⁷

These diverse client segments all have different goals, fears, service preferences, and approaches to investing, but they share something in common: they are shaping the future of financial advice. Knowing what they want and understanding what they need can help you position your practice for the long term by capitalizing on this growth.