Consumers and Platforms – a new behavioural segmentation model

Our last Citylogue highlighted some key findings from NMG’s consumer research for the FCA’s Investment Platform Market Study – what factors are most important to consumers and how satisfied they are (pretty satisfied at present).

The scale of our study – over 3,000 consumers of the top 20 UK platforms – also allowed us to undertake a comprehensive new segmentation of platform consumers (both advised and non-advised).

While channel and the related consumer journey is an important marker, it is not a leading determinant of which segment a consumer is allocated to. Nor do the traditional drivers of financial segmentation models – wealth, age, lifestage – function as leading determinants of platform consumer segments.

Rather, we found five distinctive variables that drive our segmentation model and that highlight it is time to think differently about platform users:

1. Engagement – extent of activity on their platform
2. Attitude – knowledge, risk appetite and confidence
3. Ownership – number of platforms used, types of products held, patterns of investing
4. Switching – transfer and new platform adoption over the past three years (self-directed)
5. Motivations – objectives in using a platform

Using these variables, six robust segments – large, different, and stable enough for statistical scrutiny – emerged from our analysis (for the analysis geeks we used a specialised latent class clustering analysis based on the underlying probability distributions within input questions).

Direct Leaning Segments

Controllers (13% of platform users, average investable assets £485,000) are knowledgeable, experienced, highly self-directed and devoted users of D2C platforms. Controllers use more platforms than any other segment. They are very engaged in choosing and using platforms and like to undertake their own research into platforms and products. Platform choice is driven by the range of investment options and charges; either can lead Controllers to switch to, or begin investing with, a new platform. Controllers are likely to be the most demanding users and will switch to or start using new platforms if their expectations aren’t met or they see a superior proposition elsewhere. They have the highest investable assets of all six segments and are a prime target for platform owners.

Loyalists (19%, average investable assets £211,000) have many similar characteristics to Controllers but prefer to have all of their investments managed under one platform. They are loyal customers who, once they have found a platform that works for them, are unlikely to switch or start using an alternative. D2C platforms with large numbers of Loyalists are likely to have a sticky customer base with an attractive lifetime value.

Hesitants (14%, average investable assets £148,000) are out of their comfort zone. Less knowledgeable, less engaged and more risk averse, however most are self-directed. Less active than other segments, many do not contribute to their investments. They are the least affluent segments, both in investable assets and household income terms. Hesitants are unlikely to switch platforms away from what they know, despite the possibility to do better elsewhere. That said, if interest rates rise, Hesitants are the most likely segment to revert to cash products.

Advised Leaning Segments

Optimisers (11%, average investable assets £388,000) are also knowledgeable and engaged, but less so than Controllers or Loyalists, and being aware of this they tend to have an adviser, but on a needs-only basis. They are open to switching platforms or using multiple platforms, realising that different platforms may suitable for different needs. We expect this segment to grow as simpler and cheaper routes to advice expand (workplace, automated assistance etc), and consumers can more easily hop between advice and self-direction.

Delegators (18%, average investable assets £306,000) are older, less knowledgeable and less confident, and have less appetite for what they see as high risk investments. They are likely to have an ongoing relationship with a financial adviser whom they rely on. They are unlikely to switch or start using a new platform unless recommended to do so by their adviser.

Abdicators (25%, average investable assets £153,000) are the largest segment, representing a quarter of platform investors. They are the least knowledgeable about investments, least engaged and out of their comfort zone when managing investments. Most have an ongoing relationship with a financial adviser, some deal with advisers when have something they don’t feel confident about. Abdicators are the least engaged with their platform and make low personal use of their platforms (their advisers take on the platform operating responsibility). Abdicators become a potential fees-for-no-service problem if orphaned by their adviser, as they are unlikely to actively seek out the benefits provided by the platform environment.

Platforms need to develop a better understanding of the attitudes and behaviours of their end-consumers, whether they have a direct or intermediary channel strategy, in order to develop more customer-centric solutions. This segmentation model provides a framework to profile a customer base and better understand its value, based on behavioural propensity as well as more traditional inputs such as investable assets.

For more information, contact:
Andrew Baker, Partner (London;
Jane Craig, Partner (London;

Posted In: Citylogue