Define your service propositions
Firstly, map out your different service propositions.
Whether you offer a tiered model based on wealth levels, complexity, or frequency of service, each proposition will have a different cost to serve. For example, clients who receive quarterly reviews, cashflow planning and regular investment updates will naturally cost more to support than those receiving an annual review and basic portfolio management.
Calculate the cost to serve
Once these service levels are defined, calculate the actual cost to serve for each proposition.
This includes both direct and indirect costs such as adviser time, administration support, technology, compliance, and any outsourced functions. It’s important to be honest and detailed in this review. It’s not unusual to find that some clients, especially legacy ones, are receiving more service than they’re paying for, or are sitting in a higher tier than is commercially viable.
Assess client profitability
Next, compare the profitability of each client against their cost to serve. This will help you segment your client base more effectively and highlight where action may be needed.
Clients who are highly profitable and well-aligned with your proposition are your ideal clients. Others may fall into less favourable categories: they may be underpaying for the service they receive, require more attention, or fall outside your ideal client profile altogether.
Realign where necessary
Buyers will look closely at how well your client base is segmented, how scalable your propositions are, and whether the revenue streams are predictable and defensible. A clean, efficient service model adds significant value.
Where you find mismatches, consider how to adjust. Some clients may be happy to move to a more appropriate tier with reduced services. Others may be willing to pay more to retain the same level of support.
In some cases, it may be right to disengage with clients who no longer fit your model. This can be done respectfully, and it can help free up capacity to serve your core clients better.
Build a scalable model
In the context of an asset deal, it’s not only profitability that matters but also the clarity of your service model. A well-structured proposition makes your client base more transferable, helping buyers see exactly what they are acquiring and why it will continue to generate predictable income. In turn, this can help drive higher valuations and a smoother transition when the time comes to exit.