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To Succeed, Advisor CEOs, Compete to Be Unique, Not the Best

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As business people, we’ve had it drilled into us that we need to strive to be the best. Our firm must outshine all others. Even if we do the same things as other businesses in our space, we must differentiate ourselves by our sheer operational superiority.

Pervasive as this philosophy is, it’s totally flawed. As financial professionals my advice is this:  be unique in what your advisory business does, not the best.  In other words, serve chief executives, families, physicians or celebrities and carve out a unique niche instead of building your reputation on access to the best products or performance. 

To support my thesis, let me quote competitive strategist Michael Porter of the Harvard Business School:

 “For your business to thrive, you shouldn’t compete to be the best.
Rather, you should compete to be unique.” 

Porter cites the case of the furniture company, IKEA, which he says he dislikes intensely. However, Porter has a daughter who as a student in Washington, DC loved IKEA. Whenever Porter visited her, she asked him to rent an SUV so they could shop at IKEA and furnish her apartment.

Porter’s point: IKEA didn’t care that he hated shopping at its stores; he wasn’t their target audience. Rather, IKEAs philosophy was to create a unique selling proposition that was intensely attractive to his daughter and throngs of people like her. Quite simply, IKEA excelled at being unique. 

The Problems With Being a Generalist

According to the RIA Benchmarking Study from Charles Schwab, 61% of advisors do not segment their client base. Instead, they are generalists who live by a “one-to-many” philosophy.  

Here’s the problem with that generalist approach:

  • You’re missing the opportunity to develop specialized expertise and operational efficiencies that come from serving a particular niche.
  • You can’t charge a premium price for “typical” services, or build a reputation that’s as strong as you’d like it to be.
  • You can’t generate a high volume of referrals. 

What to do? Narrowly define who you work with, and achieve a competitive advantage within that group. 

Business Case: A New York-based Wealth Management Firm 

The Situation: A client was looking for an advisory firm that could create a different client/advisor experience for his children and his spouse, with the primary goal being to prepare the children for their inheritance. The client also wanted two-way communications between his family and the advisory firm, and envisioned the firm as a resource after he and his wife were gone. 

Solution: He found a wealth management firm that stepped up to the task, and in the process, transformed itself. The firm used new “generation-appropriate” media and rules of engagement to communicate with the client and his family—tool bars, texting, e-mail, and, of course, the  telephone. The firm’s lead advisor educated the children on the stock market starting at age 16, arranged for IRA contributions starting at age 18, and budgeted with them for key goals. This was done while at the same time establishing a service framework for the firm that was scalable, and not simply a concierge service offering. 

Result: The client served as the profile for the firm’s new target customer. In the ensuing years, the firm added more clients who sought an advisor who specialized in being an integral part of the family unit. Since the pilot with the initial client in 2002-2004, the firm has added 36 new clients (30 or whom were referrals) and $800 million in assets—with zero clients leaving.

The firm is serving a niche clientele, charging fees that are based on value of services as opposed to AUM, and uniquely differentiating itself from the bulk of the advisory firms out there. 

It’s a perfect case of Porter’s dictum in action. 

How to Drive Focus in Your Firm 

As the CEO, managing partner or principal, it’s your responsibility to drive organizational change. This will involve the following steps:

  • Create a vision and clearly communicate the firm’s strategy
  • Identify one  profile from your existing client base that you want to replicate
  • Understand that client profile’s needs and the value of meeting their needs
  • Pilot with a small number of clients that meet the profile 

In my own case, ByAllAccounts is the leading data aggregation firm, but we don’t try to be all things to all people. We don’t serve pure financial planners who don’t offer investment advice or wealth management. We don’t directly serve investors directly. Rather, we serve advisors/wealth managers, asset managers and trust companies with a proven service offering that is being used by more than 1,000 firms. That’s not simply a proud parent bragging. It’s smart business.



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