The "effective" segmentation of clients, including grouping them by value and differentiating the service they receive, can more than double a firm's profitability.
This is according to new figures collated by consultancy FP Advance, based on the details of more than 50 UK IFAs.
They show advisers who carry out proper segmentation can help a business to a £240,000 profit per principal compared with just £100,000 when they do not.
In addition, the figures suggest even minimal segmentation can significantly boost a firm's bottom line, while investing in technology can improve profitability ten-fold.
The results come as a white paper launched last week by software provider 1st-The Exchange, suggested client segmentation is the area a third of advisers plan to focus on in the run up to 2012, when proposals in the Retail Distribution Review (RDR) will be implemented.
"The numbers speak for themselves," FP Advance chief executive Brett Davidson says. "While education and qualifications dominate much of people's thinking around the RDR deadline, it is obvious many advisers are still struggling with how to transition to an effective and sustainable business model. In our view this is still the biggest threat to most advisers' businesses."
The figures were collated through FP Advance's Business Fitness Report tool, which launches this week (see page 3) and enables owners to assess how their firm compares with competitors and a range of industry benchmarks.
They were based on the details of more than 50 adviser firms already entered into the system. The report calculates ratios such as 'profit per principal', which can be compared across firms both large and small by assuming each business owner draws an annual salary of £60,000.
Advisers who did not segment their clients generated a profit per principal of £98,829, FP Advance says, whereas those who did topped it by almost £4,000 with a profit of £102,755.
However, advisers carrying out "effective" segmentation of their client base - grouping clients by value and differentiating the service each segment receives - generated profit per principal of £243,993, a staggering £145,000 leap.
Elsewhere, advisers using paper-based files generated a £6,667 profit while those using an Excel spreadsheet improved it slightly to £10,244. However, those using professional database software to manage their clients generated £116,878; a jump of £110,000.
The 1st-The Exchange white paper, based on research with more than 120 UK adviser firms and assessing the options for firms in the next three years, argued "thorough" analysis of client databases would enable them to ascertain the profitability of different client segments "based on past, present and possible future earnings potential".
"At this stage it is necessary to commit extensive time and research into the various options," it read, "but also to recognise a ruthless approach may be necessary - with some client segments possibly having to be 'farmed-out' or dropped altogether."
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