Schwab Advisor Services has launched a consulting program that helps advisors use a "segmentation strategy" to identify clients' potential profitability.

Called Managing Client Profitibility, the program is based on Schwab's 2010 RIA Benchmarking Study. The study found that a small minority of an RIA clients account for a significant share of revenue: 7 percent of clients account for 38 percent of a firm's revenue on average.

The program includes a "client profitability modeling tool" to determine client-level profitability and enable advisors to see their firm's revenue mix.

Advisors will be assigned a Schwab relationship manager, who will help advisors create a customized client segmentation strategy. The program also includes webcasts and workshops.

"We have found that advisors who take a strategic and proactive approach to client segmentation are often the best poised for future growth," said Nick Georgis, vice president at Schwab Advisor Services.

The goal of Schwab's consultation program is to get advisors to operate more efficiently and maximize profits, according to Schwab. 

"As firms form their business and acquire their clients over time they find that they've got a range and a mix of clients,'' said Scott Slater, managing director of business consulting for Schwab Advisor Services. "What we're trying to help them do is to stratify where their profitability is coming from and where their time is going as well. We're trying to help them do a better job at aligning those two."

"We will work with each firm and use some of the proprietary [monitoring] tools that we have developed," Slater said. "One is a spreadsheet that helps the firm more quickly get to both their [client] revenue mix and their cost to serve [clients], so they're making better judgments on 'where is our time going and why.'"     

Schwab's profitability program has been rolled out to a targeted group of RIAs in Chicago, St. Louis, Minneapolis, Dallas, Newport Beach, Calif., and Seattle, and will include several other regions across the U.S. throughout the course of the year.

"With the half-dozen markets that we've done, we've already had well over a hundred firms," Slater said. 

Slater said Schwab expects to have reached several hundred firms by 2012.

-Jim McConville