Repeatable revenue streams are those that generate consistent revenue over time; for a financial advice business, this could take the form of ongoing portfolio management or investment advice. This ongoing service can help to build long-term relationships with clients and therefore provide a stable foundation for business growth.
Ensuring you have clients for whom you can provide excellent service at the promised price whilst making a profit enables this profitable growth. You can’t service all your clients equally, so adapt your promise within these parameters. For example, for high net-worth individuals, you may build a portfolio, but for low-value clients, outsourcing to a low-cost multi-asset proposition may enable you to still provide a service that is profitable but draws on fewer of your resources.
High-frequency tasks can be automated to deliver both cost-efficient and consistent outcomes for clients. Efficiency increases profitability whilst consistency leads to higher quality and a better customer experience. You can read more about the benefits of automating processes, and which processes should be automated to maintain the best client experience, in our article, The benefits of combining robo advice and human advice. The key is to work out the best possible promise (or proposition) for your client that can be delivered for the lowest acceptable cost, without compromising on the quality of your service and delivery.
Generate the majority of their income through ‘sticky’ repeated transactions*, rather than through a single transaction with a ‘new’ client, with whom a relationship hasn’t been established.
Avoid the trap of spending valuable time and resources on generating growth for growth’s sake and instead focus their energies on making their existing client base more profitable.
Are aware that becoming profitable means creating repeatable revenue streams with low overheads.
Understand that locking in future profits requires you to persuade clients of the value of your service not once, but continuously. You can only do this by providing a service that clients understand, value and appreciate.
Can identify which of their clients and prospective clients will generate high long-term profitability. They are also not concerned about losing high-cost/low-profit clients who may be getting in the way of generating profitable long-term growth.
The terms ‘growth’ and ‘profit’ are not interchangeable: a growing company is not necessarily more profitable. Understanding which of your clients are more profitable and why and then focusing on this relationship is a good starting point to ensuring your business is on the most profitable trajectory. Ultimately, providing excellent service and advice that ensures your client receives the most value and therefore stays with you long term is the best method to maximising your business growth.
Identify which of your clients have the potential to be most profitable and work out one way in which you can provide them with more value from your advice and service. This could be issuing them with a personalised update regarding market trends or perhaps access to an exclusive investment opportunity. Ensure that these clients are prioritised with your advice and service.
From your existing clients, work out which of these may pay more for extended services. What potential additional offerings could you offer which may provide the most value to them?
Identify any clients who are in the high-cost/low-profit category. What would the best way be to service them, going forward? Could you automate any functions or offer a different investment solution — for example, a low-cost multi-asset fund or model portfolio solution?
Read “Understanding client value” to explore the nature of client value and profitability along with guidance about segmenting your client base.
Footnotes
* Vanguard Asset Management, Limited, How to build a successful advice practice (2020) pp. 3
If you have completed all content in the module, you are ready to take the quiz and collect your CPD
Ready to test your knowledge?
Take the quizCPD content crafted to empower you to service your client’s needs effectively, build relationships, create loyalty and achieve new business growth.
CPD content structured to give you access to useful tools, guides and multimedia resources covering diverse topics from risk profiling to retirement planning.
CPD content formulated for you to explore in-depth insights on investment principles, portfolio construction and comprehensive product education to expand your technical knowledge.
Investment risk information
The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.
Important information
This article is directed at professional investors and should not be distributed to, or relied upon by retail investors.
This article is designed for use by, and is directed only at persons resident in the UK.
The information contained in this article is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information in this document does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this article when making any investment decisions.
The information contained in this article is for educational purposes only and is not a recommendation or solicitation to buy or sell investments.
Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Conduct Authority.
© 2024 Vanguard Asset Management, Limited. All rights reserved.