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Industry Spotlight > Advisors

Kitces: Why Advisors Must Specialize Now

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What You Need to Know

  • Advisors who focus on one niche area tend to take home higher incomes than those who don't, Michael Kitces says.
  • While the average annual income of a generalist advisor is $142,500, the average annual income of a niche advisor is $160,000.
  • And the more specialized the advice that an advisor offers is, the more “dramatic” the difference in income is.

Advisors looking to grow their businesses and their own wealth should consider a specific niche and become a specialist if they haven’t already done so, according to Michael Kitces, chief financial planning nerd at and head of planning strategy at Buckingham Wealth Management.

Just like accountants, doctors and lawyers, advisors who specialize tend to see higher incomes than those who are generalists, he said in a “Scaling Advice” webinar on July 28. The event was hosted by fpPathfinder, a membership service offering financial planning checklists and flowcharts, of which Kitces is a co-founder.

Ed Slott, head of Ed Slott and Co., is a highly successful example of an advisor specializing in individual retirement accounts, Kitces said.

Other Specialties

Some advisors specialize in the needs of a specific type of client, such as airline pilots or doctors, he noted. These clients are paying for the added expertise that typically comes from being a specialist advisor.

Kitces pointed to data showing that while the average annual income of a traditional financial advisor is $142,500, the average annual income of a niche advisor is $160,000.

That 12% difference in income, though, pales in comparison with the 56%-69% increase that specialist accountants such as forensic accountants and IT auditors see, the 151%-183% increase that specialist doctors like thoracic surgeons and neurosurgeons see, and the 64%-101% increase that specialist lawyers such as corporate and patent attorneys see, he conceded.

Future Gains

The 12% higher income that niche advisors earn, however, is likely to increase, according to Kitces.

“We’re beginning to see the same evolution occur with financial advisors,” he said. And while niche advisors take home an average income of $160,000 per year, “top niche advisors” can make an average take-home income of $660,000 annually, he pointed out.

Also, the more specialized the advice that an advisor offers, the more “dramatic” the higher income is, he added. It’s worth keeping in mind that advisors who offer specialized service to only some clients don’t see nearly the lift in income that true specialists see, Kitces added.

Overall, advisors who specialize have clients with investable assets that are 25% higher than those of generalist advisors, he explained. Meanwhile, advisors who specialize can also set their assets under management fees 9% higher than generalist advisors can, he said.

Plus, advisors who specialize generate 20% higher stand-alone planning fees than generalist advisors, Kitces added.


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