M&G Wealth has launched a client segmentation guide in collaboration with NextWealth to help advisers evidence how they meet client needs under consumer duty.
This comes after research from M&G and NextWealth found that a quarter of advisers do not segment their client base which could help them deliver on their consumer duty obligations.
Out of the 200 advisers surveyed, 74 per cent said they were segmenting, however 26 per cent were not - a 10 per cent increase from last year.
According to M&G, the research also revealed the differences in interpretation of what client segmentation is, and what it isn’t, which it said might explain why an increasing number of advisers state they are not segmenting clients.
The research showed that advisers think the main benefits of client segmentation are delivering better outcomes (60 per cent), improving value for money (57 per cent) and offering lower cost services to some client groups (39 per cent).
However M&G has said segmentation does not mean having as many propositions as client types or trying to force clients into a template and ignoring the individuality of their needs.
Instead it is about helping advisers and firms support their business objectives as it provides the opportunity for firms to offer a clear and differentiated proposition and keep clients engaged as they meet their distinct needs and justify fees.
The guide contains an eight step process to help create and review existing segmentation strategies as well as a checklist for building a framework and examples of what an applied client segmentation framework might look like.
The guide is available to advisers through the M&G Wealth Platform website.
Catriona McInally, investment specialist at M&G Wealth said it was “encouraging” to see a fifth of advice firms looking at segmentation more holistically and exploring characteristics, such as communication preferences and behavioural criteria, that can influence outcomes.
“While segmentation by levels of investable assets is still the typical starting point for most firms, alongside life-stage and complexity of needs, this guide will be a valuable tool for advisers and firms to give client segmentation, or their existing framework, another look,” she added.
Philip Leigh, senior qualitative researcher at NextWealth, said: “Effective interpretation is key in how well advice firms meet their obligations. Firms have to be able to show they have reviewed how different clients will experience their service. This research has shown that client segmentation is the most obvious way – and that it can come with other benefits to the business.”
alina.khan@ft.com
