$250K Revenue Increase with Tiered Service Model: PFG Case Study

$250K Revenue Increase with Tiered Service Model: PFG Case Study

Executive Summary

Precision Financial Group (PFG), a growing RIA firm, faced challenges in effectively serving a diverse client base with varying asset levels and financial needs. Their uniform service model led to client dissatisfaction, increased churn, and missed opportunities for revenue growth. By implementing a tiered service model (Bronze, Silver, Gold), PFG was able to personalize service offerings, better align resources with client needs, and ultimately increase revenue by $250,000 and reduce client churn by 15% in the first year.

The Challenge

Precision Financial Group (PFG), based in Chicago, Illinois, experienced rapid growth over the past five years, expanding their client base from 200 to over 600 households. While this growth was positive, it also exposed a critical flaw in their service delivery model: a one-size-fits-all approach.

Previously, PFG offered the same level of service to all clients, regardless of their assets under management (AUM) or financial complexity. This meant that clients with $100,000 in AUM received the same attention and resources as clients with $2 million in AUM. This imbalance created several problems:

• Client Dissatisfaction: Lower AUM clients felt neglected as advisors prioritized larger accounts, leading to frustration and eventual attrition. In the previous year, PFG experienced a 20% churn rate among clients with less than $250,000 in AUM, representing a loss of approximately $30,000 in annual recurring revenue.
• Inefficient Resource Allocation: Advisors spent significant time on smaller accounts that generated minimal revenue, diverting resources from higher-value clients who could benefit from more sophisticated financial planning and investment management strategies. It was estimated that 30% of advisor time was spent on the bottom 20% of clients by AUM.
• Missed Upselling Opportunities: The uniform service model failed to identify and cater to the specific needs of different client segments, hindering opportunities to offer value-added services such as estate planning, tax optimization, or retirement income planning. PFG estimated that they were missing out on an additional $100,000 in revenue from these services due to the lack of a targeted approach.
• Inability to Scale: As the client base continued to grow, the existing service model became increasingly unsustainable. Advisors were overwhelmed and struggling to provide personalized attention to all clients, leading to a decline in overall service quality and increased operational costs. The firm was spending an estimated $5,000 per month on additional administrative support to handle client inquiries and paperwork due to inefficiencies.
• Lack of Differentiation: Without a clear value proposition tailored to specific client needs, PFG struggled to differentiate itself from competitors in a crowded market, making it difficult to attract and retain high-net-worth clients. Their close rate on prospective clients was only 30%, significantly lower than the industry average of 45% for firms with a tiered service model.

Lisa Tanaka, a partner at PFG, recognized that a fundamental shift in their service delivery model was necessary to address these challenges and unlock the firm's full potential.

The Approach

Lisa Tanaka spearheaded the implementation of a tiered service model designed to align service offerings with client needs and AUM. The model comprised three tiers: Bronze, Silver, and Gold, each offering a distinct level of service, advice, and access.

1. Client Segmentation: The first step was to segment PFG's client base based on AUM and other relevant factors such as age, financial goals, and risk tolerance. The following criteria were established:

• Bronze: Clients with AUM up to $250,000.
• Silver: Clients with AUM between $250,001 and $1,000,000.
• Gold: Clients with AUM over $1,000,000.

2. Service Definition: For each tier, specific services and benefits were defined, clearly outlining the value proposition for each client segment:

• Bronze:
  • Annual financial check-up and goal setting session.
  • Access to online financial planning tools and resources.
  • Quarterly market updates via email newsletter.
  • Basic portfolio monitoring.
• Silver:
  • Semi-annual financial planning reviews.
  • Personalized investment strategy and portfolio management.
  • Access to a dedicated financial advisor.
  • Tax-efficient investment strategies.
  • Invitations to exclusive webinars and events.
• Gold:
  • Comprehensive financial planning, including estate planning and tax optimization.
  • Proactive portfolio management and rebalancing.
  • Direct access to senior advisors.
  • Customized investment solutions tailored to specific needs.
  • Private consultations and concierge services.

3. Pricing Strategy: A clear and transparent pricing structure was established for each tier, reflecting the value and level of service provided. Fees were primarily based on AUM, with additional charges for specialized services such as estate planning or tax preparation. The AUM fee structure looked like this:

• Bronze: 1.0%
• Silver: 0.85%
• Gold: 0.70%

4. Communication Strategy: A comprehensive communication plan was developed to inform clients about the new tiered service model and explain the benefits of each tier. This included personalized letters, phone calls, and webinars to address client questions and concerns. It emphasized how each tier offered greater value, aligning benefits with the clients' specific needs and goals.

5. Training and Development: Advisors and support staff received extensive training on the new service model, including how to effectively communicate the value proposition to clients, provide personalized service, and leverage technology to enhance the client experience. This ensured they could comfortably handle all client tiers.

6. Technology Integration: Lisa understood that technology was key to the success of the tiered model. She wanted to automate and streamline the process as much as possible.

Technical Implementation

The implementation of the tiered service model involved several key technical changes and integrations:

• Wealthbox CRM Customization: PFG utilized Wealthbox as their primary CRM system. The CRM was modified to include a custom field to track each client's tier level (Bronze, Silver, Gold). This allowed advisors to quickly identify client service level and tailor their interactions accordingly. Custom workflows were also created to automate tasks such as scheduling reviews, sending personalized emails, and generating reports based on client tier.
• Automated Email Marketing: Marketing automation software was integrated with Wealthbox to deliver targeted email campaigns to each client tier. Bronze clients received quarterly market updates and educational content. Silver clients received invitations to webinars and personalized investment recommendations. Gold clients received exclusive insights and access to senior advisors. These emails were designed to enhance client engagement and demonstrate the value of each tier. PFG used Mailchimp, integrating it with Wealthbox using the API.
• Portfolio Management System Integration: The firm's portfolio management system (Orion Advisor Services) was integrated with Wealthbox to provide advisors with a consolidated view of client portfolios, performance data, and billing information. This allowed for more efficient portfolio monitoring and reporting, ensuring that clients received timely and accurate information about their investments. The integration allowed for automated performance report generation by tier.
• Financial Planning Software Utilization: eMoney Advisor was used to create and update financial plans for clients. The level of detail and complexity of the financial plan varied depending on the client's tier. Gold clients received comprehensive financial plans that included estate planning, tax optimization, and retirement income planning. Bronze clients received basic financial plans focused on goal setting and budgeting. eMoney was linked to Wealthbox to automatically update client information.
• Data Analysis and Reporting: A dashboard was created in Power BI to track key metrics related to the tiered service model, such as client churn rate, revenue per client, and advisor efficiency. This allowed Lisa and her team to monitor the performance of the model and make data-driven decisions to optimize its effectiveness. The dashboard was updated monthly and provided insights into client satisfaction and service utilization. The key metrics tracked were:
  • Client Retention Rate per Tier
  • Revenue per Client Tier
  • Advisor Time Allocation per Tier
  • Client Engagement (Email open rate, webinar attendance) per Tier
• Client Portal Implementation: A secure client portal was implemented, providing clients with 24/7 access to their financial information, including portfolio statements, financial plans, and communication logs. The portal was customized to reflect each client's tier, with Bronze clients having access to basic information and Gold clients having access to more detailed reports and analysis. The portal was integrated with Wealthbox using single sign-on (SSO).

Results & ROI

The implementation of the tiered service model yielded significant positive results for PFG:

• Revenue Increase: Total revenue increased by $250,000 in the first year, driven by improved client retention, increased upselling opportunities, and the ability to attract higher-net-worth clients.
• Client Churn Reduction: Client churn decreased by 15%, indicating increased client satisfaction and loyalty. The churn rate among Bronze clients dropped from 20% to 10%. The churn rate among Silver and Gold clients remained below 5%.
• Increased AUM: Average AUM per client increased by 20%, reflecting the firm's ability to attract and retain larger accounts.
• Improved Advisor Efficiency: Advisor efficiency increased by 25%, as they were able to focus their time and resources on the most valuable clients. Time spent on lower-tier clients was reduced by leveraging technology and standardized processes.
• Enhanced Client Engagement: Client engagement, measured by email open rates, webinar attendance, and client portal usage, increased significantly across all tiers, demonstrating the effectiveness of the personalized communication strategy. Email open rates increased by 30% and webinar attendance doubled.
• Increased Client Satisfaction: Client satisfaction scores, measured through surveys and feedback forms, improved by 15%, indicating that clients were highly satisfied with the personalized service and value they received.
• Higher Close Rate: PFG increased their close rate on prospective clients by 20%, reaching a close rate of 50%, exceeding the industry average.

By implementing the tiered service model, PFG transformed its business, improved client satisfaction, increased revenue, and positioned itself for continued growth and success.

Key Takeaways

1. Segmentation is Key: Understanding and segmenting your client base is crucial for delivering personalized service and maximizing client value. Don't assume all clients want the same thing.
2. Align Services with Fees: Clearly define the value proposition for each service tier and ensure that fees accurately reflect the level of service provided. Transparency builds trust.
3. Leverage Technology: Utilize technology to automate tasks, streamline processes, and enhance the client experience. CRM customization and marketing automation are vital.
4. Communicate Effectively: Communicate the value of each service tier to clients and ensure they understand the benefits they receive. Regular communication is paramount for retention.
5. Monitor and Optimize: Track key metrics to monitor the performance of your service model and make data-driven decisions to optimize its effectiveness. Continuously improve.

About Golden Door Asset

Golden Door Asset builds AI-powered intelligence tools for RIAs. Our platform helps advisors personalize client interactions, identify growth opportunities, and streamline operations. Visit our tools to see how we can help your practice.