When I start working with an advisor on their marketing and growth, I generally ask them what type of clients they serve. More often than not, advisors half-jokingly tell me, “I can help anyone with money!” From what I have seen, this is the business model for many successful, and maybe even unsuccessful, advisory practices.
What most advisors mean when they tell me this is that they serve a variety of mass-affluent clients who come from all walks of life. There is variation in demographics, family structures, professions and life stages.
So what does it mean to have a niche? For a financial advisory practice, it means serving a specific market or specializing in a particular demographic. This could mean serving the needs of divorcees, medical professionals, teachers, families with special needs—the possibilities are endless.
Serving a niche market is generally a differentiator and potential source of growth—not an exclusionary like many advisors may fear, and focusing on a targeted demographic may lead to a better investment experience for those clients as well.
The more an advisor can learn about threats, opportunities and roadblocks that a niche population may encounter, the better resource they can be to their clients. For example, an advisor I partnered with focuses on families with disabilities. Currently, there are nearly 54 million Americans coping with special needs and the rising associated expenses. This advisor is well versed in state and federal disability benefits, but also serves as a “concierge” for these families. He provides referrals to in-home care, attorneys and other services the families may need.
I also recently worked with an advisory group that focuses on providing planning for law enforcement professionals. This team understands that many of these clients may not have very high incomes, but they typically receive generous pensions and benefits packages. By learning about the benefits available to the employees of various law enforcement districts and agencies, the advisors often had a better grasp of the resources available to these potential clients, and were better able to guide them. As a result, many of these clients are able to understand and benefit from the different sources of retirement income.
This advisory group has established themselves as a pillar within the law enforcement community, and as a result, has grown exponentially through referrals. Studies have shown that recommendations from friends, family members and community groups are more valuable than any type of advertisement.
Once you have begun working with a niche clientele, not only does it become more intuitive, but you may be better positioned to provide a more valuable investment experience. Serving a particular community allows you to delve deeper into some of the pending legislation or program changes that may impact your clients, while also helping to identify specific obstacles and opportunities. For example, is there pending legislation that may put a retired police sargent’s pension in jeopardy? Will new technology be available that may make a profession in the pharmaceutical industry obsolete?
If a particular issue creates concern for one of your clients, you may be able to conduct the proper research on the topic and incorporate your findings into the client’s financial plan. Additionally, you may be able to bring this issue to the attention of other clients in your niche who have not yet faced it, while also providing them with some suggestions on how they may wish to proceed. We believe there is significant value in being viewed as a compassionate resource who understands the landscape of a specific demographic.
While you may have served a general mass-affluent client base well over the course of your career, reflecting on your book and segmenting a niche specialty may be a way to offer advice with granular detail, while also helping to grow your business.