Advisors today face a major challenge. It is becoming increasingly more difficult for us to draw clear distinctions between ourselves and our competitors. This so-called “crisis of differentiation” is not likely to reverse course anytime soon. In fact, if anything, the trend is likely to accelerate.
The Labor Department’s fiduciary rule – or if not “The Rule,” a similar future rule – will make marketing oneself as a fiduciary virtually meaningless. Competing on price will also become more difficult as consumers continue to have more low-cost options for investments and advice. Even the internet, which for the most part has enhanced our businesses, has added to the “problem” by making it easier for consumers to compare greater numbers of advisors, independent of their location. Bottom line… it’s going to continue to get harder for advisors to stand out from the crowd.
So what’s an advisor to do? Ultimately, there are only two ways to put distance between yourself and “the field.” You can either be better than everyone else, or you can be different than everyone else. For most advisors, the latter of the two options is the better choice. Being “better” is simply a much harder sell.
“Better” is, by its very nature, subjective and open to interpretation. And let’s face it; we are an industry of braggarts, where everyone is telling everyone else that they are the best. There’s often little to nothing to separate those claims of braggadocio from one another. So that leaves us with “different.”
Interestingly enough, recent history provides us with one of the most compelling examples of this concept in practice. Love him or hate him, advisors can learn a thing or two from President Donald Trump about separating oneself from a crowd field. Long before Trump faced off against Hillary Clinton in the general election, he faced what, arguably, was an even bigger challenge: securing the Republican nomination. In the general election, Trump only needed to beat one person, but recall that to secure the Republican nomination, he had to beat 16.
No doubt, Trump spent a good amount of time talking about how he was “better” or “the best” at this and that — he is Trump after all — but that’s not how he won the nomination. Sixteen other Republican candidates for president also told voters why they were the “best” choice, but in the end, they all fell by the wayside. Trump won the nomination by having a very distinct message that, for better or worse, stuck out. The other 16 candidates were just too similar. It was like walking into an ice cream store where they offer 17 flavors; chocolate, and 16 flavors of vanilla. There’s regular vanilla, French vanilla, Tahitian vanilla… you get the idea. If you like vanilla, you’ll pick the one you like best, but what if you like chocolate? Well, there’s only one choice. 80% of the visitors to our fictional ice cream shop might like vanilla better than chocolate, but chocolate would likely still be the number one seller!
This is, in fact, exactly what played out in the Republican primary. In sum, Trump’s opponents had greater support — at least initially — than he did, but they were all competing for the same voters and ended up cannibalizing one another’s efforts. Trump, on the other hand, spoke to a smaller group, but in a unique voice. That approach worked well enough to give him the Republican nomination, and ultimately, the presidency.
So what can advisors — and truthfully, all business owners — take away from this? Quite simply, dare to be different. For many, the best route to “different” is to specialize, or to create a niche. This isn’t exactly new or rocket science (the concept was well developed in the seminal business book Blue Ocean Strategy, by W. Chan Kim and Renee Mauborgne, more than a decade ago), and yet, its one that continues to be ignored by many advisors who continue to stay the generic “I-am-a comprehensive-wealth-manager” course. But why?
In a word … fear. It’s the fear of missing out on the prospect that goes somewhere else because they didn’t fit the niche instead of thinking about the potential prospects that developing a niche or specialization can create. Niches attract, and today, that’s how businesses generate new customers — through the power of attraction. “I am a comprehensive wealth advisor” simply isn’t different enough to compel interest. It probably won’t push anyone who was already on their way to becoming a client away, but it’s not likely to attract anyone who wasn’t already on that path either.
Now imagine, for a moment, a financial advisor who “specializes in helping successful restaurant franchisees create tax efficient succession and retirement plans.” Many would shudder at the idea of boxing themselves into such a narrow niche, but stop for a moment to think of all the potential benefits. Who is talking directly and specifically to those people today?
If you were a successful restaurant franchisee getting ready to retire, who would you want to work with? The comprehensive wealth manager who has never dealt with your precise set of challenges, or the specialist who has seen dozens of “yous” before? It probably wouldn’t be a difficult choice.
And who do successful restaurant franchisees know? Probably a lot more successful restaurant franchisees. Do you write blogs that discuss strategies for successful restaurant franchisees? Well guess who’s most likely to find and read them? Marketing decisions are now easier, as you can focus spending in targeted trade journals or to attend trade shows. The possible benefits are virtually endless, particularly as technology makes it easier for potential clients to find you — through the power of attraction — and not the other way around.
It’s easy to want to avoid “niche-ifying” your practice to continue to appeal to the largest possible audience. The fear of a lost prospect to whom your message does not appeal is a powerful motivator to maintain the status quo of generalist. Truth be told, that’s not always a bad decision, just one that might limit your upside in the future compared to those that specialize — not unlike the medical profession today.
And even if you do move more towards a niche, just how niche-y you go is up to you. But we need look no further than the White House today to see that sometimes, the most effective strategy is to play to a very specific audience with whom you will resonate, and to let all the others fight over everyone else. It may sound strange to say, but sometimes, broad appeal is not the best appeal.