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In any profession– medicine, dentistry, law, accounting – the average income for specialists is more than double that of generalists with the same years of experience. My experience with successful financial advisors who’ve built a niche practice confirms this, but first they had to overcome three common myths about developing a niche positioning.
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I was reminded of this by a call from an advisor who’d heard me speak about focusing on a niche market. “I’m ready to make the change,” he said. “I’ve bought into the need to be a specialist rather than a generalist. My question now is where to start to make that happen.”
I’m far from alone in talking about benefits of being the go-to advisor for an attractive client group in your community. Focusing on a defined niche with common needs means you develop unique expertise, tailor your practice to the group’s needs and do a better job for them as a result. As you develop a critical mass of satisfied clients in a group, you become the “safe choice” which lets you price your services at a premium and to attracting clients via word-of-mouth.
The challenge for most advisors is that they’ve built practices as generalists and aren’t sure how to make the transition to become specialists. There are three basic steps to becoming a go-to resource for a defined client group in your community:
- Selecting the right niche
- Ensuring you have the right skills and capabilities
- Building a reputation within your target group
Today’s article will focus on the first two of those steps; I will tackle building reputation within your target community in a future article.
Three myths about a niche focus
Before getting into the specifics on selecting the right niche and developing skills, let’s quickly address three myths that get in advisors’ way when it comes to focusing on a niche community:
- You have to abandon existing clients or refuse referrals from anyone except clients within your group.
- You will have to work with an entirely different group of clients than you currently serve.
- Focusing on a niche group entails a complete departure from the way you currently conduct your business.
These are all false. Advisors who specialize in a narrow group still work with legacy clients and accept new clients from outside their niche. Most advisors who go the niche route select a group that already exists within their client base. And while the ultimate outcome may be to that your practice looks different, in the early stages the biggest shift is allocating marketing resources and time away from a broad-based focus to a much more concentrated and ultimately more efficient approach.
Targeting the right group
The foundation of an effective niche marketing campaign begins with selecting the right group. The most effective target groups have clearly defined needs in common – so people who own Ferraris or enjoy gardening may share interests but not necessarily needs. The same applies to people who went to the same university or belong to the same golf club. A simple way to determine if a group has common needs is to complete this sentence: “ I specialize in the unique needs of NAME OF GROUP. As a result I have developed particular expertise in …..”
Effective niches tend to fall into three categories:
- Life stage (retirees, people planning for retirement)
- Occupation (business owners; self-employed professionals; senior corporate executives)
- Unique circumstances (women emerging from long marriages; affluent families concerned about wealth transition to the next generation; families with children or grandchildren with special needs)
Within each of these categories you can choose to focus broadly (for example all retirees) or more narrowly, so your target could be retirees:
- In the early stage of retirement
- For whom travel is a priority
- Who winter in warmer climates in the southern United States or Mexico
- Who face health issues
- Who are asset rich but struggle in terms of cash flow
- Who need more income but are concerned about the risk of owning stocks
You can break every broad group into similar sub-groups. Advisors working in smaller communities will of necessity focus more broadly. In larger centers, if you narrow your focus, you improve your chances of resonating with prospects as someone who has truly unique capability to address their issues.
Often the best groups are already represented in your client base. Start by looking at your top 20 clients and brainstorm potential groups with a team member, colleague, supervisor or, failing all of those, your spouse. Come up with a broad range of potential groups – the more possible candidates the better.
Selecting potential target groups
Once you’ve got a long list of groups, narrow down the list of possibilities. A simple way to do this is to rank each group from 1 to 5 on eight criteria:
- How large is the group?
- Do members typically have the financial means to be clients around which you can build a profitable niche?
- Does the group have clearly defined common problems?
- To what extent do you currently have or can you readily develop the skills and capabilities to solve those problems?
- Are there vehicles such as associations, publications or regular meetings that make it easy to reach this group – or is a list of group members readily available?
- To what extent is there unmet opportunity in this group, or are there several other advisors who have already acquired a go-to expert positioning within that community?
- Do you currently work with one or more clients in this group?
- Do you enjoy dealing with members of this group?
Of course, not all of these factors are equally important, but the key is not to sweat the details. At this stage, make a broad first cut at identifying possible niches around which you can focus your business.
Fact-finding
Once you identify two to four possible groups for your short list, the next step is to gather more information. In the next 30 days, plan to meet with three or more people within each of the groups that you are considering, with the goal of getting answers to the questions above
These meetings can be with clients or acquaintances who are members of the group, but they can also be with suppliers of services to that niche or professionals who focus on this group. A good starting point is to approach a client or someone you know in that group, explaining that you’re interested in learning more about the challenges faced by them and their friends. Another source of information is the executive director of an association to which members of the group you’re considering belong.
One advisor I know went about this differently. About this time last year, he hired an MBA student looking for work between first and second year at a local business school. Using his network, the advisor set up initial meetings for this student with members of several potential groups. At the end of each meeting, the MBA student asked who else he might be able to talk to who could provide insight on the group that the person he was talking to belonged. As a result, the student conducted numerous interviews over a six-week period and came back with detailed answers to each of the questions above.
Go narrow to build the right capabilities
To become the go-to advisor for a defined target group, this has to be more than just a marketing ploy; you truly do need to have unique skills and expertise that meets that group’s needs. That’s why narrowing down the focus of your group is important – the more focused your group, the easier it is to develop capabilities that precisely solve its problems and let you credibly position yourself as an expert resource.
Over the past year, several advisors who initially targeted broader groups told me they refined their focus over time, achieving go-to positioning as a result.
One female advisor initially targeted affluent women, but over time began focusing on widows and divorcees coming out of long marriages. A second advisor located in the Midwest at first broadly targeted retirees, but has shifted his practice to serve snowbirds who winter in the southern U.S. A third advisor started out concentrating on business owners but found numerous other advisors going after the same niche; it was only when he noticed the special problems of a client who owned a car dealership that he began reaching out to other owners of automobile dealerships and has built a dominant position in that group in his community as a result.
In each case, the advisors started out with marketing to a broader group but only saw real success as they narrowed their focus. Clearly, shifting the orientation of your business to concentrate on a defined target group is not something you should do lightly. If this is something you’ve been considering, use the next 90 days to research and explore the process of shifting the direction that you take your business. And if you decide to go ahead, think about September as the starting point for this initiative.
In the meantime, here are two recent articles, one from an advisor who carved out a niche and attracted 100 clients in 18 months and the other from a leading authority on strategy, explaining why only businesses that are truly different can outperform.
Harvard’s top strategy guru: The key decision to make your business excel
How to find your perfect niche
conducts programs to help advisors gain and retain clients and is an award winning faculty member in the MBA program at the University of Toronto. To see more of his written and video commentaries, go to www.clientinsights.ca. Use A555A for the rep and dealer code to register for website access.
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