How does your organization segment its clients? Most often they are segmented by amount of investable assets, net worth levels, and perhaps age, income, and/or risk tolerance levels. What’s missing? A guide to their competencies for building wealth.
As long as I can remember, my father has given big, gold-wrapped boxes of chocolates for thank you/end of year presents to his business associates. When I was growing up, as a treat, he would often buy a box for my brother and me to take home. The best part? It had a guide to what was inside each piece: no surprises of caramel or coconut.
Making strategic product and services decisions based on simple groups is similar to picking a candy based solely on what is easy to see on the outside, without a guide. It’s certainly easier but ultimately may not provide information about your clients that leads to demonstrable return on product and service initiatives.
How can you improve segmentation? Use a guide to understanding the life experiences and behaviors within client groups: a guide to their wealth-building competencies. Understanding competencies that are predictive of net worth and other key outcomes provides value beyond the traditional, easily identifiable categories being used today.
Based on Data Points’ database and analyses (including data that led to The Millionaire Next Door and The Millionaire Mind), we know that the competency of Focus & Planning is one key to building wealth. This competency includes measures of the ability to focus on long-term financial planning, to meet goals, and to not become distracted. In a recent study, Data Points examined a sample of mass affluent individuals (with net worth levels between $250,000 and $1 million). In this study, only 37% scored high on Focus & Planning, indicating that over 60% often found it challenging to finish projects or change habits, were easily distracted by technology, and, most importantly, were not devoting what they believed was enough time to financial planning. This finding supported recommendations regarding the amount, content, and format of research provided to high, medium and low Focus & Planning groups within the mass affluent sample. Additionally, we provided recommendations to individuals specifically based on their Focus & Planning scores to help them maintain and develop behaviors that will lead to building wealth over time.
By using predictive assessments, financial management and investment firms can build products and services that address differences within traditional client segments, ultimately improving the way in which organizations and individuals build wealth.