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.