February 2015: Client Segmentation

Brokerage firms have long recognized that a one-size-fits-all approach is not the best way to serve their clients. To that end, firms segment their overall client base into various tiers, largely dependent on asset levels or trading frequency. This approach allows firms to identify the unique needs and requirements of their different client segments, while also incentivizing and rewarding those clients who choose to deepen their relationships with the firm. Active traders and affluent or high-net-worth clients often receive preferential treatment, special benefits or services as reward for doing increased business with the firm. This Broker Monitor Report provides an overview of how all full-service and discount brokerage firms in our coverage group segment their clients. Specifically, we review the following criteria:

  • Tiered programs
  • Reduced commissions
  • Active trading benefits
  • Rewards programs
  • Managed accounts
  • Client segment requirements

All Broker Monitor firms offer some type of client segmentation based on clients’ account balance or trading activity, and both discount and full-service brokerages offer a variety of fee waivers and other discounts for their affluent and high-net-worth clients. All eight full-service firms in our Broker Monitor coverage group offer fee waivers and discounts to clients with a high level of household assets invested with the firm – a useful benefit given the high account maintenance fee charged by some full service brokerages. Often these benefits kick in after clients have invested upwards of $100,000 with the firm, though $250,000 remains one of the most common asset break points. Discount brokerages remain much more transparent than their full-service competitors regarding the various benefits and perks awarded to higher net-worth client tiers. In addition to fee reductions and free trades, active traders receive considerable benefits.

Additional key findings include:

  • Though several firms offer limited-time free trade offers, two firms incorporate free or reduced trades directly into their standard pricing scheme.
  • Four firms offer promotions for existing clients choosing to deepen their relationship with the firm.