10 Reasons RIAs Should Specialize Now

2. Specialists typically make more money.

Whether you’re talking about “a doctor, a dentist or any profession, a specialist typically ends up making a lot more money and providing more value than a generalist,” according to Parham.

Noting that he lives in Los Angeles, he said: “It seems like every person in L.A. either acts part-time, has a small business, [or] is a musician on the weekends. So we're developing some specialized expertise there.”

For his firm, it all “started with working with a whole lot of people, figuring out where we could deliver massive value, and then really investing the time and the effort to dig deeper,” he added.

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3. No advisor can know everything.

“It's very rare to have someone who has both the client-facing skills and also a deep knowledge of all the different aspects of financial planning for all the range of different client types,” according to Heather Welsh, a comprehensive financial planner and vice president of wealth planning at Sequoia Financial Group.

“Estate planning expertise,” for example, is “a whole sub-field that requires lots of in-depth knowledge.”

Therefore, having “different team members that can dig into the different areas a bit deeper really can best serve those business owners,” she said.

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4. Specialized firms have an easier time staying current.

Going to professional organizations’ conferences and “listening to a range of different speakers [is] a way of staying fresh and thinking in new ways” about advanced planning topics, according to Welsh.

“Knowledge is always advancing in every aspect of financial planning and it’s nearly impossible for an advisor to maintain their knowledge on a range of advanced planning topics,” according to Michael Finke, professor of wealth management and WMCP program director at The American College, who moderated the webinar “By specializing, an advisor can more easily remain on the cutting edge … and can suggest strategies that are more creative,” he told ThinkAdvisor on Monday..

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5. Specialization goes hand in hand with consolidation.

“It's likely that the consolidation in our industry will continue,” Welsh predicted. “But that, in my mind, affords opportunity for further specialization. You can really build out those teams. You can build out additional specialties.”

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6. It helps deepen your firm’s bench of talent.

“As you grow, it gives you the opportunity to build out depth in those specializations” that you offer, Welsh said.

One advantage: “You don't have to worry about ‘our department of one is on vacation and how are we going to get this done for somebody?’ Because you can really have that deep bench” where several advisors can help any client, she noted.

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7. It could help your firm expand to new markets.

If you start specializing in serving the needs of clients who belong to specific professions, it could make it easier for an RIA firm to expand into new markets.

After all, some professions may have an especially strong presence in certain markets.

For example, when Parham moved from Texas to Washington, D.C., he noted: “I was in a completely different market [where] I wasn't working with active duty military anymore. I was now working with people close to retirement.”

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8. It supports recruiting.

“Specializing in a certain category of client ... allows you to gain advanced knowledge specific to this profession (such as strategies for working with 1099 employees with intermittent income streams),” Finke told ThinkAdvisor on Monday.

That, he said, “helps with recruiting because other financial advisors don’t understand the unique challenges of others in this profession.”

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9. It makes your firm more competitive overall.

“In recent history, implementing a niche or specialization has given many financial advisors a competitive business and marketing edge over the growing number of advisors in the industry,” Michael Kitces, head of planning strategy at Buckingham Strategic Wealth, points out at Kitces.com.

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10. Advisory firms that specialize are more efficient and scalable.

Kitces Research has shown that advisors who “focus on niches or specializations operate substantially more efficient and scalable advisory firms, spending 13% less time doing middle- and back-office support work for clients, 28% more time with clients and prospects, serving an average of 14% more clients, who in turn have an average of 25% more in investable assets and net worth,” according to Kitces.