Managing Client Variability As A Pathway To Scalable Efficiency

Managing Client Variability As A Pathway To Scalable Efficiency

As financial advisory firms grow and accumulate more and more clients over time, the increased client load creates a growing pressure to find ways to be more efficient to scale the business. Yet the challenge is that with an ever-growing client base, where each different client has different needs – and where advisory firms often differentiate themselves by providing individualized and customized services to the differing needs of every client – it becomes increasingly difficult to systematize the business, precisely because the level of variability from one client to the next makes it difficult or impossible to scale efficiently.

Rather than trying to figure out how to gain efficiency when serving an ever-widening range of clientele, though, an alternative approach is to actually try to tackle the issue of “client variability” itself, recognizing that having clients with a wide range of needs is itself a choice of the advisory firm… as is the firm’s decision of whether or how much to accommodate those varying needs (and/or whether or how to charge more for the service of greater individual customization).

In her Harvard research on “Breaking the Trade-Off Between Efficiency and Service”, Dr. Frances Frei highlights two alternative strategies to manage client variability between just “doing more and charging more” or “doing less and charging less”: low-cost accommodation (where the firm offers flexibility to clients but ‘only’ within a fixed range of choices, and uncompromised reduction where the firm doesn’t make compromises in the services it offers but instead reduces the breadth of who the firm serves in order to have a more focused clientele where their ‘customized’ services can still be delivered as repeatable expertise.

These techniques to manage client variability can then be applied across each of the domains where client variability occurs: manage ‘arrival variability’ (when clients meet) by offering them incentives to meet during quiet times of the year and/or using flowcharts, checklists, or other client educational materials to handle common client questions without a meeting; manage ‘request variability’ by rolling out a portal for clients to access their own reports/requests on demand, or by purchasing more specialized tools and then systematically rolling out analyses or solutions for all clients who might be interested in a similar service; manage ‘effort variability’ by implementing tools like Knudge or and e-signature to make it easier for clients to get through the process, or consider rolling out a service to turn a challenge into an opportunity (e.g., converting the data gathering meeting into a “Get Organized” meeting); and manage ‘subjective preference’ variability by either creating a standardized solution for more common client preferences (e.g., a set of ESG models for SRI-oriented clients), or by systematizing their higher-level service requests (e.g., creating a standard [email protected] that top clients get to have their needs handled quickly by anyone on the team who gets/sees the request first).

Ultimately, though, the key point is simply to recognize that the challenge of having an ever-widening range of clients with an ever-widening range of demands – and the challenges of efficiently scaling across such a wide range of needs – is itself a choice that an advisory firm has. Which means it’s not only a matter of either doing-more-and-charging-more or doing-less-and-charging-less, as there’s also an opportunity to either find more scalable low-cost accommodations to make that also enhance efficiency, or to choose a less-variable range of clientele in the first place in order to create room to provide a deeper service for those clients’ unique needs.

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