Historically, “success” as a financial advisor was all about building a book of business, to generate ongoing revenue, and perhaps even the possibility of selling that book of business at the end. Yet the caveat the value of a book of business – and what you provide them, and where the value really lies – depends on whether the people you work with in the end are really your “clients”, or simply your “customers”.
In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss what the difference is between a customer and a client, and why the terminology advisors use really does matter in the value of a book of business, and the value that’s provided to the people we work with.
For many, the idea of differentiation between customers and clients will probably seem like minor semantics, but the reality is that the words we use truly do matter. Just consider for a moment what comes to mind when you think of a “customer”, and then a “client”. For most, the images are not going to be the same.
A customer buys a product from an order-taker or salesperson. A client buys advice from a professional. The key distinction is that when engaging with customers, the value isn’t actually the advisor (or the salesperson in general); the value is in the product. Good customer service may create repeat customers, but if you eliminated the product from the equation, the business would vanish. By contrast, when a client buys advice from a professional, it’s not reliant on the product implemented at the end. The value is the advice itself, and the advisor is a core part of the value proposition.
And the difference is reflected not only in the value proposition provided to clients, but the value of the book of business itself. After all, the origin of a “book of business” in the first place was a book of customer names – people who could be contacted, who had been sold a prior product, and could perhaps be sold a(nother) product in the future. Which is still a tenuous relationship at best… and is why a book of customers rarely sells for more than one times trailing revenue (if that). By contrast, clients have an ongoing relationship with the business – and typically pay ongoing revenue – and it’s that distinction, between a customer who buys a product, and a client who is engaged with the business and its professionals themselves, that helps a client-oriented advice business get twice the valuation of a customer-oriented book.
So when you’re working with people in your advisory business, consider carefully whether you call them “customers” or “clients”. Because the terms we use to refer to the people we work with truly matter. Whether we call them “clients” or “customers” is not just a matter of semantics, but an important indication of the services we provide and where the value truly lies. If you work with customers, the value is in the product you sell. If you work with clients, it is in the advice you provide. So, as you build your business, consider what you really want to build. Is the name you use really reflective of the relationship you have… or want to have?
source https://www.kitces.com/blog/financial-advisor-client-vs-customer-book-of-business/?utm_source=rss&utm_medium=rss&utm_campaign=financial-advisor-client-vs-customer-book-of-business
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