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Financial Planning > Tax Planning

How and Why to Choose a Niche for Your Financial Planning Practice

By Joe Elsasser

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Welcome to Hidden Value, the column where Joe Elsasser, CFP, addresses common financial planning issues with insights advisors and their clients may not have considered.

One of the easiest ways to make your financial planning practice stand out in this crowded industry is by niching your practice. In fact, the most successful advisors around the country have already decided to niche their practices — with good reason. In a recent survey by TD Ameritrade, niched advisor practices showed 35% higher client growth, 25% higher revenue growth and 17% higher profit margins than non-niched financial planning practices.

The advisors who will thrive in this increasingly competitive field are the ones who choose a niche and actively focus their practices across the entire client experience. The advisors who start with a core set of services they deliver, that are carefully chosen to be the specific services their clients need, all the way through marketing those services and delivering them predictably to every client who walks through the doors with the set of needs that you have equipped yourself to solve will see enormous success.

How to Get Started

The best way to define your niche is by thinking about the demographics of your current clients. Identify who your favorite clients are. What are their behavior patterns, motivations and goals? The more detailed you can be, the better. What kind of client do you want to be better at serving than anybody else in your market?

Steps for Niching Your Practice

  1. Choose your market.
  2. Tailor your services to be the best for that particular market.
  3. Choose the tools that best address the specific issues your clients face.
  4. Market to your target audience.
  5. Commit to finding referral partners and referring clients outside of your niche to those partners.

Why Niche Your Practice?

You can think of the evolution of niche practices as a game of musical chairs. The advisors who choose a niche and tailor their practices to serve their niche are claiming a chair. Ultimately, fewer and fewer chairs will be available, making it much more difficult for the generalist advisor to make an impact.

Niching your practice allows you to develop specific processes for dealing with the unique concerns of your specialty. You’ll become more adept at addressing the specific concerns of your clientele. For example, advisors niched in Generation X planning should specialize in finding solutions specific to just those clients, who share the common trait of being at the midpoint in their financial lives.

In order to better serve the clients in your specialty, you must be willing to forfeit the potential for business from individuals outside of your niche. It is impossible for an advisor to be an expert in every single aspect of the financial planning industry. Advisors who act in the client’s best interest should recognize that their “headspace” is limited and that those who chose a niche are more likely to have the ability to master the financial planning process for their specific clientele.

The Hidden Value

If you want more referrals, you need to be more referable. By choosing a niche, you’ll deliver better service to your clients. You’ll frequently answer the same four or five questions over and over. You’ll hear the same questions so often that you’ll become adept at answering them at a deeper level. Your deeper knowledge of the specific pain points for your chosen clientele will allow you address these challenges better than anyone else and set you apart from other advisors — leading to more referrals.

— Related on ThinkAdvisor:

Joe Elsasser, CFP, CovisumJoe Elsasser, CFP, RHU, REBC, developed his Social Security Timing software in 2010 because, as a practicing financial advisor, he couldn’t find a Social Security tool that would help his clients make the best decision about when to elect their benefits. Inspired by the success of Social Security Timing, Joe founded Covisum, a financial tech company focused on creating a shared vision throughout the financial planning process.

In 2016, Covisum introduced Tax Clarity, which helps financial advisors show their clients the hidden effective marginal income tax rates that can significantly impact cash flow in retirement. In early 2017, Covisum acquired SmartRisk, software that allows advisors to model “what-if” scenarios with account positions and align a client’s risk tolerance with their portfolio risk.

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