Successful entrepreneurs know niche markets can provide more value to clients along with stronger potential for growth and long-term success. In fact, most of the 42% of startup failures occur because they ignore capitalizing on a niche. Financial advising is no different.
Rather than catering to all clients or sweeping large with a big net in a saturated ocean, advisors who specialize in a smaller niche can find more success by standing out from their competitors, increasing their profits, and delivering valuable insight to clients.
Standing Apart From the Crowd
The U.S. has over 200,000 financial advisors vying for the same clients. The amount of competition makes it difficult to stand out in a growing industry.
Financial advisors are wary of competition. Most fear if they are not broad enough, they run the risk of losing potential clients. However, having a niche will distinguish an advisor from the rest of the industry, and may dramatically decrease their competition. Lessening the competition will make it easier for clients to find advisors best accustomed to their needs.
Finding a niche creates separation from the mass of competition. Niching is the best way to differentiate from other advisors and will provide more worth to clients looking to have their specific needs accommodated.
Increased Efficiency and Effectiveness
Unfortunately, generalists can become good at a lot of things, yet unable to master any of them. Unlike advisors who attempt to cast a wide net in the hopes of potential clients, niche players build a deep understanding of their clients and their driving needs.
For example, a financial advisor for physicians, like myself, becomes highly adept at understanding specific financial pressures and goals of the industry. In turn, the advisor becomes more efficient at creating value for the client, saving the advisor time and resources.
Additionally, a niche advisor becomes much more effective in serving their client. In the example of a physician’s advisor, knowing about the large amounts of student loans combined with a shorter-than-average earning period can create a more meaningful dialogue with a client.
Ultimately, the increase in efficiency and effectiveness increases profitability: CEG Worldwide Research reflects 70% of top financial advisors earning at least $1 million annually are focused on a niche.
Tailored Marketing for Larger Returns
In addition to higher efficiency and effectiveness with clients, marketing becomes more efficient with higher branding potential, beginning with referral marketing. Referrals convert 30% better than leads generated from other forms of marketing, and referral marketing becomes much stronger when an advisor is specialized.
Clients want products and services that are designed specifically for them. Financial advice is no different. Clients are most comfortable working with advisors that work with others just like them.
Similarly, inbound marketing becomes stronger when long-tail keywords are combined with clear descriptions of what is offered. Typing “financial advisor” into Google will provide the nation’s entirety of investment advisors.
A search for “California financial advisor” will return 9,210 CFPs, plus the other thousands of individuals who do not hold their certificate. However, specifying a niche such as “financial advisor for physicians in San Francisco” clearly states exactly who is served and the specialty.
Having a clear and specified value prospect increases return on advertising spend (ROAS) for outbound marketing as well. Niches produce smaller contact lists, and the message can be designed specifically for that group.
Instead of a general message about financial advising, clear and direct messages using in industry terminology will produce higher responses and better conversions. Flyers and emails with tailored messages can create the sense of an advisor who understands how to serve their needs best.
Niches Create Long-Term Success
The best part of specializing in a niche is the ability to scale up depending on staff and resources. In fact, serving a niche allows businesses to focus on meeting the needs of a smaller group of clients without compromising a chance to increase their appeal to a broader market.
While some advisors choose to specialize and turn away clients who do not fit their niche, IARs who wish to grow the business can open their doors to more clients once a niche is established. Beginning with a niche can allow advisors to target and excel in a specific market, but over time, they may find they are able to provide this same value to a larger crowd.
The biggest success in niching comes from understanding the client better than anyone else and becoming the go-to advisor for that group of people. Advisors should not only build a niche to maximize their success, but also to maximize the success of their clients. The value proposition and thought leadership brought about by that depth of knowledge will create a brand that has no competition.
Benjamin Yin, MBA, is the co-founder and principal of Generational Financial Partners, LLC where he helps physicians plan for today, plan for tomorrow, and plan for generations.