December 11th, 2019 · 5 min read
Advisor Mark Pitre of California Financial Advisor put it straight. “In this industry, to be successful, you have to want to help people first and foremost,” he told CNBC.com. “Without that being your main objective, you will struggle as an advisor.”
While expanding your ering can help you reach more clients, it can put you at risk of being too broad in your offering. For many FAs, especially those in or near urban centers, the answer is to zero in on a particular client type. The focus could be a profession, or an employer, or a stage in life. Focusing on a niche can muffle direct competition and help you stand out in a crowded market — to become, as they say, a big fish in a small pond.
With the advent of artificial-intelligence-powered, smartphone-deliverable “robo” advisors, and with the increasing commoditization of investment products, advisors have to offer more value to compete these days.
You might be thinking, shouldn't I expand my offering to as many different people as possible if I want more clients?
There are plenty of garden-variety advisors out there, as a random survey of their websites demonstrate. There's a big difference between a generic value proposition like "We provide financial planning advice customized to the needs of our clients" and a specific statement such as "We help new business owners organize their books and make smart investment decisions based upon personalized advice, curated by our team of specialists who have a passion for helping entrepreneurs."
Establishing a niche may indeed mean chasing a smaller pool of clients, but — for the very reason it's because it's smaller — it's easier to defend and promote. Without a niche, you're competing for value with every other generalist out there.
By, for instance, focusing on employees of one company, you’ll learn details such as when they get paid, how their stock options work — perhaps even how much they may be making at that company five or 10 or 20 years hence. Focus on a particular industry, and you’ll recommend investment portfolios with less sector overlap. As further aids to your advice, you’ll start to understand when clients in areas like energy or retail may experience cash-flow shortfalls and surpluses.
In short, you’ll be an expert in your clients’ field as well as your own. This will equip you to have deeper conversations with clients and offer more holistic advice. As clients come to appreciate a personalized approach based on advice adapted to their circumstances, they will:
The bare concept of creating a niche is applicable even to advisors in small towns and rural areas. For advisors in this category, it’s imperative to figure out what employment sectors dominate your region (city-data.com can help), examine the issues executives in those occupations tend to face, and get up to speed on solutions. You may have to carve out several niches — say, education and healthcare — but the extra effort can pay off in relatively streamlined business-development efforts.
Building any niche calls for this sort of due diligence anyway, whether your practice is rural or urban. No matter where you are, you have to weigh the niche (or niches) you’re considering to make sure it provides a large enough market for you to stake a claim and carve out a thriving business. With that research done, and a niche selected, it’s time to tailor your service and product offerings to clients within your niche. This requires study and thought, and your “learnings” on these matters must begin to permeate your practice. Over time and with more experience, this work will inform everything from the questions you ask clients and prospects to the decor of your office — it may even help determine if you need an office.
Suppose your niche is divorced women. In your role as an advisor, you won’t address the trauma in question directly because you’re not a therapist. But you can understand, in broad strokes, what your clients have been through, and the various stages of recovery they typically experience. It’s no secret that advisors who can surface these issues in the context of providing financial advice forge stronger bonds with their clients.
In some cases, you can even shore up your standing as a niche advisor with certifications. There is, for instance, a Certified Divorce Financial Analyst designation.
Advisor Rick Kahler has built a national niche practice based on the tenets of financial therapy by catering to clients who feel they have money “issues.” In fact, Kahler believes that everybody wrestles with “money scripts” — hard-wired and often hidden feelings about money that shape financial decisions throughout life. These scripts “can come from the most innocent situations, mostly before you're ten,” the Rapid City, S.D.-based advisor told the Wall Street Journal.
To combat harmful attitudes that cloud decision-making around money, Kahler’s new clients have to answer questions and complete exercises meant to unmask these secrets. And to shore up the offering, he has a Certified Financial Therapist on staff.
Whatever niche you pick, in time you will develop the true expert’s ability to rationalize complexity as your practice matures in its specialization. This will help you select individualized flight paths to bring your clients greater peace of mind around their finances.
In other words, the positive impact of carving out a viable niche goes beyond focusing your marketing efforts. It gets into the very lifeblood of your practice, and, inevitably, to your bottom line.
In addition, a niche can make you a more dynamic and empathic person as you develop the ability to listen deeply and exhibit a profound understanding of your clients. With those elements in place, coupled with expertise in your niche, you’ll be on a path to achieving efficiencies and building trust in ways that most niche-less advisors can only dream of.