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Building the Business 101: Client Categories and Preferred Niches

By classifying clients, our strenghs and weaknesses come into focus.

Veena A. Kutler and Annette F. Simon, 03/22/2007

This monthly series of articles describes the many steps and occasional missteps we have taken in building our financial advisory business, Garnet Group LLC. Garnet has more than 90 clients, $300 million in client net worth under advisement, offices in Bethesda, Md., and Boston, and eight staff members. Veena Kutler, CFA, and Annette Simon, CFP, are the principals managing the Garnet office in Bethesda.

Earlier this year, while attending an industry conference, the two of us spent some time brainstorming about various long-term strategic issues we believe are critical to the future success of Garnet Group. As is often the case, we found that getting out of the office and away from day-to-day issues provided us with the energy and perspective we needed to tackle some important, big-picture concerns. On this particular occasion, we began a review of our client base and an examination of the differences and similarities between them. We followed up by discussing this topic with our Boston partners so that we could have a unified strategy across both offices.

At first glance, our clients appear all over the map in terms of their interests, values, stages in life, and significance to our practice. A closer review, however, revealed that our clients can actually be classified into broad categories with common needs and concerns. Why is this important? We believe that clients are attracted to our practice for a reason. By sorting our clients into broad classifications and then analyzing those groups, our strengths and weaknesses as defined by our clients come into focus. In addition, understanding the types of clients we now have allows us to manage our growth by focusing our marketing efforts on prospective clients in the categories that best fit our capabilities and preferences as a firm.

The Garnet Client Categories
Before starting, we wondered if some of our clients might be outliers whom we would struggle to artificially slot into categories that did not truly fit their situations. But after establishing our five broad client categories, we found that each current client fits well into one classification or another--with a few who straddle two or more categories but predominantly exhibit the characteristics of one segment over all others. Our five client categories are:

Busy Professionals
Our largest category, approximately 38% of Garnet's clients are corporate executives or professionals working in law, medicine, or government. These clients generally share a number of characteristics:

  • Highly educated.
  • Moderately high to high earned income.
  • Net asset accumulators.
  • Complex planning needs often related to benefits packages, employment contracts, stock options, and other executive benefits.

Clients in this category tend to have a common primary goal: retirement or financial independence, generally within a fixed number of years. Typically, they have been focused for so long on excelling in their professional lives that planning for a happy and productive retirement has been ignored. We incorporate life planning techniques to help our soon-to-be former professionals prepare for life beyond the structured work world they are accustomed to operating within. Planning for self-actualization in retirement goes hand-in-hand with the financial planning work we do for this group.

Thirty percent of our client base falls into this large and growing segment. As we help our busy professionals achieve their goals, they will naturally shift into this category. Common among our retired clients are:

  • Complex financial planning needs related to living on fixed incomes and with the current expectation of much longer life expectancies.
  • A desire for asset management strategies that both grow and preserve the portfolio over increasingly long periods of withdrawal.
  • Need for long term care and focused estate planning.

Because of extended life expectancies, returns in retirement need to be high in order to sustain continued growth, even though contributions to the portfolio have ceased and in most cases regular withdrawals suggest lower risk allocations. Insurance planning is often limited by the client's age and inability to acquire long-term care or life insurance at a reasonable cost. On the life planning side, retirees are ready to focus on their legacy. We urge them to look ahead past their active retirement to the next phases of their lives as well as the role of their wealth in the lives of their children and grandchildren.

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