Your goal within a niche market is to become the expert -- the go-to person with whom everyone wants to work, who has the breadth and depth of knowledge to offer value. If you do your homework and find a niche that meshes well with your personality, personal interests, and goals, this should come naturally. To achieve trusted-advisor status, advisors must stay focused on trends in that market and anticipate client needs. If the market is doctors, the advisor should be learning everything about health care, Medicare, HMOs and malpractice insurance, pensions, and partnership issues.
It’s much easier to develop a brand and marketing materials when advisors have a specialty. In the case of the client whom we identified as having 80 percent of his clients in the medical profession, we developed the brand WealthRx®. His marketing materials come in a folder with a notepad that looks like a prescription pad, and a design of molecules on the inside flap represents the components of the wealth management process. Another advisor client likes to travel in his RV. He meets people at high-end campgrounds, who meet other people in RVs, and these have became a nationwide source of clients for him. They plan trips together and do most of their meetings via Skype. Yet another advisor was interested in antique cars, allowing him to advertise in appropriate magazines and meet new clients at car auctions, while engaging in his own favorite pastime.
In this way, serving clients who have similar interests allows advisors to have some fun pursuing their hobbies or interests along with their clients. A natural shared interest or affinity builds trust. This is a lot more rewarding than advisors trying to remake themselves for each client who walks in the door.
Any fears of not having enough clients should quickly evaporate when advisors see that they’re penetrating their niche much deeper than they could a general market.
The Financial Side Of Target Clients
Common interests and compatibility aren’t the only factors that should define target clients. They should mesh with the firm’s financial goals and client segmentation:
• Client size (e.g., net worth or investable assets).
• Client needs (e.g., age or specialized needs).
• Client affiliations (e.g., lifestyle or profession).
If a certain account minimum is necessary to meet a firm’s financial goals, advisors need to make sure their target clients meet those minimums.
How many clients a firm can support profitably varies, depending on the offering, the available support, client expectations, and efficiency drivers such as technology and process. At Genworth, we find it helpful to think about capacity as a number of seats on a bus. If your business is a bus with 100 seats, one for each client, whom do you let on? In best-practice firms, advisors fill those seats with their target clients.
Capacity also raises the question of how many clients are “active” — households or institutions the firm actively serves. Inactive clients can limit growth and drain profitability. Overall, top-performing firms have a higher number of active clients and fewer non-target clients than their peers, contributing to better overall performance. Depending on the practice model, the number of active target clients managed by top-quartile firms ranges from 60 to 75, compared with 24 to 52 for typical advisory firms.
In a study, participants identified many ways to target new clients, including net worth, investable assets, profession, age, lifestyle, interests/hobbies, specialized needs and other. Yet client size dominated: About three-quarters of advisors used investable assets as the primary determinant of a target client. About half used net worth and just less than half used age.
Still, many advisors accept clients who do not meet their target profile. The primary reason they accept these clients is to maintain a good referral relationship or because they see a potential opportunity in the client.
It is, of course, important to protect referral relationships. When a client (or a professional) goes out of his or her way to make a referral, advisors don’t want to offend the client by not taking on the person referred. Yet advisors have to decide whether possibly offending a current client outweighs the opportunity cost of taking on a less profitable client and affecting overall financial performance.
As you define yourself and your interests, choose your target clients, and define and claim your niche, you’ll find that each step leads to the next on the road to building not only a better business but also a more satisfying one.
Reprinted with permission of John Wiley & Sons, Inc. from The Power of Practice Management, by Matt Matrisian, (c) 2013 by Genworth Financial Inc. Matt Matrisian is director of practice management for Genworth Financial. Another excerpt from chapter 11, "Target and Niche Marketing," was published yesterday.