Client Pain Point

I can’t afford this. I feel like I’m paying for a lot of complexity I didn’t ask for. I don’t want to pay thousands for a huge document that I don’t understand.

Traditional Adviser Perspective

It’s getting hard to stay in business. The cost of providing comprehensive, personal, face-to-face advice is increasing all the time, and I must pass those costs on.

That’s why I only target high-net-wealth individuals and pre-retirees.

Understanding Your Business and Your Clients

The focus on advice practice financials has intensified in recent years as increasing compliance costs, the ceasing of grandfathered remuneration and continuing consumer concerns around advice fees have created a margin squeeze. This has left some practices on the brink.

But despite the challenges of the current environment, many innovative practices are thriving, largely because they’ve achieved a more sustainable match between their cost to serve and the way they price their offering.

To truly understand the cost of serving their clients, advisers need to meticulously break down the advice process into granular steps. This includes measuring the time taken to perform each step and the cost of the resource allocated to it. Armed with this information, advisers then have several levers they can pull, including:

  • Changing the resource allocation (for example, by automating a process, allocating it to a junior team member or outsourcing)
  • Changing the process (for example, by simplifying steps or removing them altogether)
    Adjusting the price of their offering
  • The individual circumstances of the business will determine which course of action is most appropriate. For instance, newer businesses are more likely to have greater flexibility around changing their external pricing than established businesses. Similarly, smaller practices may find process changes easier to implement

To price advice services appropriately, the adviser also needs to clearly understand the client segment they’re targeting. Advice clients vary widely across many attributes, including their circumstances, financial objectives, engagement preferences and level of sophistication, which means a one-size-fits-all approach to pricing is unlikely to be the best option.

In fact, research into Australian advice practices has shown that those with an effective client segmentation model are, on average, 148% more profitable than their non-segmenting peers.16

For a new advice business, tightly defining a target audience makes market research and testing more meaningful. It also enables offerings to be developed that are more focused, more tailored to the specific needs of those segments and more suitably priced.

For an existing practice, understanding client economics at a segmented level also informs how the business can strike the optimal balance between resources, fees and services. In turn, this can help to prioritise and target innovation efforts.

Tailoring engagement activities to match the preferences of different segments can also help take client relationships to the next level. Segmentation delivers further benefits in acquisition, retention, and communications too, including:

  • The scale benefits of conducting these activities at the segment level
  • The ability to focus on clients who are more financially viable, or to reallocate resources away from over-serviced scenarios
  • Improved ROI on marketing activities through more targeted communications tailored to the decision drivers and channel preferences of target segments

Case Study: The Diverse Needs and Expectations of High-Net-Wealth (HNW) Clients

The HNW segment is an increasingly attractive target for financial advisers, and one which can be both intellectually and financially rewarding. It’s also big, with Investment Trends estimating in 2021 that the HNW advice market comprises around 485,000 individuals who invest more than $2 trillion AUD.17

While the definition of HNW differs depending on who you talk to, one certainty is that this cohort is far from homogeneous. HNW clients vary greatly in terms of their behaviours, motivations and financial sophistication. In fact, the only universal truth for this segment may be that a ‘one size fits all’ approach is doomed to fail.

As Brendon Vade, of HNW specialists Lorica Partners, (Lorica Partners PTY Limited ABN 26 082 828 948) puts it, “Relying on stereotypes about this group can be dangerous. The notion that they are all financially sophisticated is just plain wrong. So too is the assumption that they all want to be educated about detailed financial issues.”

One reason for the attractiveness of this segment is that they have a larger capacity to pay fees, although Vade notes that the type of arrangement that best suits their circumstances will vary, from a flat fee retainer, through to a percentage of assets or a mix of both.

Rather than adopting a one-size-fits-all approach, Lorica Partners effectively subsegments HNW clients according to their money beliefs and behaviours. Using a model developed by American private wealth guru Russ Alan Prince, Vade classifies each of his clients into one of nine money personalities. The value of this approach is that it allows him to tailor his engagement and communication approach to suit their needs.

“The three types we see most of are the ‘family stewards,’ ‘phobics’ and the ‘independents’,” Vade says.

“The family stewards are primarily focused on making sure their wealth positively affects future generations. The ‘phobics’ are those who feel burdened by making financial decisions. With them the threshold for trust is high and so it takes a while, but after you reach that threshold, they trust you implicitly, and it generally becomes a very deep relationship. The ‘independents’ see money as an enabler, and they don’t want to feel boxed in by documented goals.”

According to Vade, HNW clients also vary greatly in their desire to be hands on or hands off. However, he notes that one characteristic most HNW clients seem to share is that once the adviser has gained the client’s trust, the client looks to them to be the financial facilitator, or project manager, at the centre of all finance-related matters. This involves working in partnership with the client’s lawyer, accountant, banker, mortgage broker and other specialists.

It’s for this reason that Vade believes advisers in this space need to be equipped to have very fluent conversations on matters such as estate planning and accounting, and even philanthropy.

“They don’t want you to just blindly outsource these areas, they expect you to play a role,” he says. “For example, we get quite involved with the estate planning discovery process and then we sit in on meetings between the client and lawyer.”

Legacy is another issue that’s more important for these clients than others. Many of them, especially the older clients, are investing not for themselves, but for their children and future generations, which gives them a much longer investment horizon, and is why many of them have portfolios that would be considered too aggressive for everyday retiree clients.”


‘Five key drivers of practice profitability’, Money Management, 19 June 2017.


‘The rise of high-net-worth advice validators’, IFA, 12 April 2021.

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