As more and more financial advisors deliver comprehensive financial planning and wealth management services to clients, it’s becoming harder and harder for any particular advisor to differentiate themselves from all the other advisors offering substantively similar services. The good news is that as long as clients are well served, they tend to remain as clients (maintaining good retention for the advisory firm). The bad news, though, is that firms who are unable to differentiate will struggle to grow further, even if they’re serving their clients well and providing good value… because the prospective client’s perception is that every other advisor does, too.
Which means the key to growth as a financial advisor is not merely to be better, but to be different as well… crafting a unique value proposition that is relevant for the particular target market (or a subset thereof) that the advisor wants to serve. Which, in turn, requires the advisor to identify the specific niche solution they can provide to attract some or all of that target market. Except for most advisors, the struggle then becomes: how do you pick the “right” niche in the first place?
In this Guest Post, financial advisor marketing consultant Stephen Wershing shares his perspective on how advisors can better understand the range of niche choices in order to pick the one that best suits them. Because the reality is that not all types of niches are the same in the first place.
For instance, an “Affinity” niche is about developing relationships based on a common social circle (e.g., business development at the yacht club or the local chamber of commerce), while a Values niche builds relationships based on shared Values (e.g., shared religious beliefs, or a Values system like the Boy Scouts). An Educational niche focuses on prospective clients who are looking to get more educated about a particular problem or issue, while a Psychosocial niche focuses on prospects who need to address more emotional needs (e.g., recent divorcees or widows), and an Experiential niche tries to differentiate by crafting a unique experience that will resonate with a particular type of clientele. And some advisors will differentiate with a Technical niche, where they bring to the table a unique and specialized expertise that is relevant for a particular niche clientele.
Ultimately, advisors can differentiate themselves with any of the 6 different types of niches, and which will be most appealing depends on the advisor’s own interests, style, existing relationships, and natural market. The key point, though, is simply to recognize that differentiation isn’t just about being better, but about being different… and the best way to be different is to focus on a particular type of clientele who have unique needs, and develop a niche solution that is especially relevant (and differentiated) for that particular clientele!
How do you set yourself apart and answer the ultimate marketing question: "From all the advisors I have available or that I currently work with, why should I choose you to work with as my financial advisor?"
Differentiation is the challenge. Niche is the answer. What I aim to do in this article is to help you get some ideas about how to select and design a compelling niche.
A niche is different than a target market. Many writers and consultants conflate the two – I used to do it. But I learned that there is actually a difference, and that understanding can help you overcome one of the biggest obstacles to having a compelling niche. It’s not about the group of people you choose to work with. It’s about what you create for them.
Target Market Versus Niche
A target market is a group of people you want to attract as clients. There needs to be something that ties them together. Something they have in common. Something you can address when you create a service model.
You design a niche to attract some portion of that target market. If you have a highly specific, small target market, your niche offer will aim to attract a majority of them. If it is a large, broad target market (think “women in transition” or pre-retirees), your niche will be something unique with the goal of attracting a small slice of that pie. Target markets are real people. A niche is something you make up.
Here is the best way I have found to clarify the difference: If I were to ask you to name for me a retail organization that does well attracting mass affluent women looking for clothing who comes to mind? For many of my audiences, Nordstrom is one of the first names they suggest. The firm produces high quality products, and its customer service is legendary, which, in turn, has enabled them to create a loyal following. You know who else does well with that target market? Stitch Fix, the service that sends its customers a box of clothing each month that they can keep or return based on whether they like the items or not. The experience of Nordstrom is visit the store, browse what they have to offer, try on what you like, and make purchases when you want or need a piece of clothing. The experience of Stitch Fix is receiving a box once a month, try on what you like from among the selection a designer has chosen for you in the privacy of your own home at a time that’s convenient for you, and send back what you don’t want to keep.
Each experience is a niche the companies have created to attract similar clients with somewhat different preferences. Two distinct niches, same target market.
Differentiation Through A Niche Offering For A (Subset Of Your) Target Market
A good niche will set you apart. Unique would be ideal, but as long as what you do is different enough from all the other advisors in your town or market, it can be effective.
While a niche is a specific experience, the target market doesn’t have to be all that narrow. In some cases, advisors differentiate themselves by trying to tackle an entire target market with its niche specialty. For instance, with a highly specific target market like airline pilots (in the case of Retirement Advisors of America, which has practically cornered that target market), the advisory firm can design an experience in the hopes of attracting almost all of them.
However, it’s important to view target markets as separate from niches, because an advisor can have a unique niche carved out from a much broader target market as well (in the hopes of differentiating and thereby attracting just a tiny slice of the much larger market).
For example, consider pre-retirees (people within five years of retiring from a W-2 occupation). What might an advisor include in designing a niche for that target market? Perhaps promoting as part of your process (and having the expertise in) analyzing pension and Social Security options? Designing retirement-income-generating, as distinct from total return, portfolios? But advisors can get more creative, too.
What do the advisor’s pre-retiree target market clients want to do when they retire, and how can the advisor facilitate it? Lee Kalin and Associates in Syracuse, New York, makes it a point to tell prospective clients that many of the people they work with move to a different state when they retire (and they can provide guidance). Which means a key “Center of Influence” or referral relationship might be not with a traditional accountant or attorney, but with a relocation/moving company! Or be like Mowry Young II of Young Financial Services of Canfield, Ohio, and actually organize trips that you go on with groups of your clients. He gets the benefit of creating a community among his clients, while he is showing them a good time in retirement.
Attracting even a very small portion of a large target market in a specific geographic area by creating a unique niche is probably plenty for you to meet your business plan. In fact, when individual advisors can be wildly successful with as few as 50 great clients, it’s almost impossible to go “too narrow” with a particular niche (as long as the target market otherwise has the financial wherewithal to pay the advisor for his/her services in the first place, of course).
The 6 Types Of Niches
Notwithstanding the fact that almost any niche (from a reasonably affluent target market) “can work” in the first place, for many advisors, the biggest challenge in focusing on a niche is simply figuring out “which niche” is best (or at least, not problematic) to choose in the first place.
To help consider the options, it’s feasible to break potential niches into 6 different types of niches. The differences are important, because different types may speak to different ways to create unique services and experiences for that niche. And more generally, a framework for different types of niches can help simply spur ideas about potential niches to pursue, and ways that advisors may already have an affinity for or connection to a particular type of niche.
The 6 categories of niches are listed below, roughly in order of how compelling they can be to prospective clients, from weakest to strongest.
The affinity niche is as old as sales itself.
Affinity niches are about developing relationships based on a common social circle. This is business development on the golf course, at the yacht club, or at the kids’ school activities.
What goes on in the prospective client’s mind is, “I know you, you are a member of my tribe, and therefore I trust you.”
Notably, Affinity niches have little to do with your service model, except meeting the basic expectations of your target market. It is more prospecting than marketing. But when consumers aren’t sure who to pick or how to differentiate amongst a sea of financial advisor sameness, knowing “this financial advisor is part of a group of people like me” can matter... a lot.
The basis of a Values niche is a shared philosophy, or literally shared Values. The advisor believes in what the client believes in, and that forms a basis for trust.
For instance, besides being a financial advisor, Rick Kagawa has a couple of other passions, one of them being to mentor young men through the Boy Scouts of America. When he was asked to give a presentation on the fiduciary standard, he came in his Scout uniform. He started the program by holding up three fingers in the familiar salute and reciting the Scout oath: on my honor I will do my best to do my duty for God and country and to obey the Scout Law… As he did, an audience member, Dr. Dave Yeske, stood up, returned the salute, and recited the oath with him. Why? Because Dave is an Eagle Scout. I use the present tense because once you are an Eagle, you are always an Eagle. And you make a promise to uphold those principles for life.
There is no question in the minds of anyone who knows Rick through scouting work whether they can trust him. Being of service to others as well as trustworthy, loyal, helpful, and the other characteristics in the Law, is not something Rick does on the job; it is who he is. Through those shared values, people have an expectation of how they will be treated, which they find attractive.
Sometimes values can be expressed through the niche you create, as with socially responsible investing. Ziad Wehbe of Balfour Capital in Rochester, New York offers environmental, social, and governance investments, but also manages some portfolios according to religious doctrines like the Muslim prohibition on earning interest. The religious values are manifested in the service he provides, and those who share in the same Values connect to his niche.
Sometimes a target market needs to be brought up to speed on relevant issues before they can make an informed decision. This is the basis of an Educational niche.
When clients go through a life transition, in particular, they are often in need of financial advice… and often in need of substantial background information and education to understand their new situation, before they’re even ready to seek out and accept advice.
Jim Shagawat of Windfall Wealth in Paramus, New Jersey, dedicates a portion of his practice to this niche. When a client receives an inheritance or judgment or wins the lottery, they often find themselves in a whole new life situation. Aspects of the niche Shagawat has created include everything from teaching clients how to be realistic in their new spending habits, to how to tactfully fend off all the long-lost friends and relatives who see an opportunity to obtain some of the client’s newfound liquidity. Issues that most people won’t necessarily struggle with or care about, but are immediately highly relevant educational lessons for those who actually have recently experienced a windfall wealth event.
One way to differentiate from other advisors is to create a unique experience.
Some attempt to set themselves apart with a unique client experience by invoking Ritz-Carlton or “white glove” as adjectives. Unfortunately, that doesn’t actually say much. After all, no one says they give “bad service.” Which makes it hard to differentiate on good service. And ultimately, truly unique experiences go beyond “just” good service anyway. Regardless, claims of superior service (because they are general and undefined) are not as powerful as promoting a distinguishing service that is specific.
Or viewed another way, effective experience niches put less emphasis on better, and more on different. One possibility is to eschew desks and conference tables, to meet clients in a setting more like a living room or kitchen. Another may be a virtual practice, where “face-to-face” meetings are done over the internet with video conference software.
One creative example is Fiscal Fitness Clubs of America. Carol Craigie set out to define a new model that could deliver high-quality financial advice to clients who cannot afford the traditional model and may not need the kind of in-depth personal planning many advisors can provide. She set out to offer guidance a whole new way, with the explicit objective of being “the Weight Watchers of financial services.” Clients meet in groups facilitated by an advisor. There is a curriculum they follow through the calendar year. Clients hold each other accountable. It is an experience… and unlike what any other advisor provides.
Some clients need more than advice to get through a life transition – they need to work through a disorienting or painful experience. Simply dispensing the recommendations will not work, because there are other things on the client’s mind.
Advisors who earn the Certified Financial Transitionist (CeFT) designation will go on to create a process that includes special steps for assisting clients in coming to terms with changes in their lives. For example, after addressing immediate needs, there will be a period of time that Susan Bradley, founder of the Sudden Money Institute and creator of the CeFT, calls a “decision free zone.”
Evelyn Zohlen, CFP, FPA President and Founder of Inspired Financial in Huntington Beach, CA, works with women in transition… and specifically three types of transitions: divorce, losing a spouse, and late-life involuntary career change. She has developed a process she calls Guided Discovery, that incorporates steps and skills important to women going through those kinds of transitions. For example, she discovered that her target clients need to get their story out as part of processing the changes in their lives. So, her staff has had training in how to help clients tell their story, and how to tell stories of similar clients to help them understand there is cause for optimism. Her firm’s process is designed with the emotional as well as financial needs of women in mind. She says “it is not that the dollar is different or the tax code is different, but how women communicate, how they want to learn, how they want to collaborate and work with their partner is quite different than men.”
The final category of niche is offering advice or a service that other advisors do not have the knowledge, skills, resources, or connections to provide.
It might be as straightforward as advanced tax or estate planning, or as narrow and sophisticated as what Jonathan Lachowitz, CFP, does for his clients. His firm, White Lighthouse Investment Management, specializes in cross-border financial planning. His knowledge of tax and estate planning in different countries makes him uniquely qualified for, for example, executives working abroad. “…The complexity of the work is almost beyond comprehension. Imagine doing estate planning for an American married to an Italian living and working in France with property in the United States, Italy, and France. No unlimited marital deduction for starters.”
Chris Kowalik is a former Marine and founder of ProFeds, a firm that assists financial advisors who work with Federal employees. She understands the details of the benefits packages available to people who work for the United States government.
In addition, she offers access independent advisors do not have. Because in the years preceding the retirement of a Federal employee, government regulation requires that each be offered an education program about the decisions they will need to make. The government has offices in many cities small enough that the human resources directors have limited capability of providing this mandated training. Kowalik has been approved as a Federal contractor, who can provide these courses. When a financial advisor in one of those towns wants to work with government employees, ProFeds will offer to conduct those training sessions, offer to introduce participants with questions to the local advisor, and support the advisor in gaining the technical knowledge to provide competent advice in regard to federal benefits. Kowalik’s niche includes the technical expertise, and that technical niche, in turn, has created access through her Federal contract as an integral aspect of growing her service.
What Kind Of Niche Should You Create?
How can you claim your own unique niche? Start by looking at the work you do. What specialized knowledge do you have? Do your services include anything other advisors do not offer? Is there anything out of the ordinary financial planning that clients ask you to help them with on a regular basis?
Look for work that engages you. As Zohlen started the process of focusing her general practice advisory firm on a particular target market, she asked her staff, “who do we like to work with? What do we like to do?”
What have been the most significant positive outcomes you have helped a client produce or achieve, that you could replicate for other similar clients?
What were your most significant personal experiences? One technical niche is serving families with special needs children. Almost every advisor I have met who offers that service, like Gordon Homes of WestPoint Financial Group in Indianapolis, has a special needs child themselves (or has one in the immediate family). Mark Colgan, CFP of Montage Wealth Management in Pittsford, NY, has a special service (and has authored books) for widows and widowers that grew out of the experience of losing his wife in his early 30s. Having those experiences offers unique insight that can translate into a distinct niche.
Interview your clients. Take a sample of a dozen clients in your target market and find out from them what they find most significant about your service. Ask them questions like, “Of all the things I do for you, including how I do them, what do you find most valuable? What was it about what I do that was most important to your choosing me when you were looking for a new advisor?”
Do some outside research. With your target client profile in hand, look through financial planning trade magazines (or trade/specialized magazines that they would subscribe to) to uncover challenges they face, that you may not have thought to address. What are they up against? What do they seek? Based on your research, what kind of new service or approach can you think of that may address the unique needs or desires of your existing and prospective clients?
Pull together a client advisory board. Bring together a dozen clients who fit your target description, and get them into a conversation about where they find value in your relationship, and what you do that does not add value and should be dropped. Put ideas for new services in front of them and ask them for feedback. Ask them to pull it apart, to “red team” it.
For example, SignatureFD in Atlanta has a series of initiatives for client groups to offer different niche experiences to the various markets it serves. (Heather Fortner, their CCO and COO, described it on our podcast.) To get them started, they convened advisory boards for each of the client groups they would be serving. One of them was senior executives. The firm anticipated that as they approached retirement, the group might benefit from some coaching or consulting to transition into their new lifestyle. Nope, they said. One participant spoke for the group: “I know exactly what I want to do, and I can’t wait to have the time to do it.” The communities are a big hit… and (because now they know) retirement coaching is not part of them!
Start small. There is a movement in writing computer software called agile development. It stresses iterative, incremental, and evolutionary design and improvement. One of the objectives is to continuously deliver more functionality a little bit at a time, and respond to client feedback and changing environments.
Similarly, you can develop a new client experience tailored to your target market and roll it out all at once but that strategy has significant risk and requires a lot of effort and investment. Making smaller, incremental, agile improvements enable you to try more things more easily and get feedback to help guide your efforts. Brian Fricke, CFP, is founder and president of Financial Management Concepts in Orlando, Florida. He brings ideas for new services to many of his three-times-a-year advisory board meetings. Sometimes those ideas are met with apathy from the board, in which case he drops them and pursues them no further. Sometimes the board responds enthusiastically, and he and his staff further examine whether and how they might implement the change.
I was called to conduct a client focus group about a new service helping families prepare to send their child to college. To summarize the outcome, the group loved the concept, contributed ideas that extended the proposal, and indicated clearly toward the end of the meeting that they were unwilling to pay a fee for the service. The feedback saved the advisor tens of thousands of dollars and months of work fully building out a service that would probably have not generated revenue in the end.
Pursuing a niche strategy incrementally enables you to test as you go.
Promoting Your Financial Advisor Niche
Developing a marketing strategy around your niche experience is beyond the scope of this article. But let me offer a few tips to help you get the most out of the unique value proposition you have created.
Let your ideal client take the lead – when you draft marketing materials, be as specific as you can be about who you are trying to attract. Trying to describe the market too broadly for fear of missing opportunities dilutes your message to the people you actually do want to reach.
Similarly, attempting to have multiple target markets can be confusing. In the study of referral behavior I did with Julie Littlechild in 2017, we documented that one of the habits highly-referred firms share is that they talk about the description of their target client. A lot.
Have a process that includes something special related to your niche - Many top-performing advisory firms have a documented client process they used to explain what they do to prospective clients. Illustrating it in a simple flowchart can help clients understand and remember it.
When you draft your financial planning process, customized specifically to your niche, have one or two of the steps relate specifically to solving challenges or fulfilling the desires of your target market in particular. Something that group will especially care about… that communicates you truly (and uniquely) understand what’s really on their mind.
Focus your content on the challenges of your ideal client – If you promote your services through social media, a blog, articles in the local press, or other content strategies, relate your messages to the needs and desires of your target market.
For instance, if you work with pre-retirees, don’t post articles about 529 plans to your website. And steer clear of market or economic updates, unless you relate them to the ideal client. One participant in a client advisory board meeting put it best. We were getting feedback on an advisor’s website, and asking about what kinds of content they found most useful. One participant commented “don’t post anything I can find on CNBC – I can go there if I want that kind of information.”
Differentiation is key to successful marketing. Being a service industry, the experience you provide to your particular client niche can distinguish you from other advisors – if it is different.
Invest some time drafting a profile of the client you most like to work with. Consider who they are, and what they need. Describing a target market with terms like “they value good advice”, “they are delegators”, or “they appreciate the work we do for them” will not help you. That’s focusing on what you need from the relationship. Keep the spotlight on the client.
Assess your skills, resources, and interests. Work you enjoy with people you enjoy will be more engaging. You will also be more compelling.
Be creative in developing an experience that will set you apart from other advisors. Try to think beyond providing better service, or just developing better relationships with clients. Different beats better. Better is hard for clients to evaluate and distinguish (until after the fact and then it’s already too late, and even then the client still may not have another advisor relationship to compare to, anyway). Different is different. Different is niche. And there are six kinds of niches you can deliver to. Consider which type best suits your skills, capabilities, resources, and target market.
Delivering a service tailored to the needs of your target client, which in turn lets you do things other advisors don’t even think to do (and may not even be strictly financial in nature) sets you apart, and gets people talking. And it will help you strike it niche!