The financial services industry continues to be increasingly competitive. From robo-investing to the push to join a billion dollar firm, independent advisors are feeling the pressure. A way to stave off the pressure is by discovering a niche market to serve. This is not a decision to take lightly. Here are five of the major mistakes to avoid when making the niche decision.
MISTAKE # 1: Retirement Planning and Financial Planning are not a Niches! Most advisory clients need planning and most advisors supply it. Many advisors are credentialed and have general expertise but clients are looking for specific answers to their specific needs and that can only be provided by a specialist with the expertise to advise clients correctly. A niche requires a focus on a smaller segment of the advisory client market and the expertise to really service that market. The four main areas of differentiation can be found in my last article: A niche in Time.
The reasons for creating a niche are compelling. By establishing yourself as an expert it will be easier to find your target clients. When people know you offer what they need then hiring you becomes obvious which means the time and money spent on bringing in new clients is lessened. You will also receive more and better referrals because clients know your area of specialty will help others in the same circumstance and are more willing to send clients to you. There is also less competition. Lastly, creating a niche will enable you and your firm to focus your marketing and branding differentiating you from the crowd.
MISTAKE #2: Jumping on the nearest or latest band wagon. This is not a niche but a sales ploy. Think long and hard about what you want for your specialized differentiator. Passion is created when there is alignment with who you are and what you do. Have you ever had the experience of laughing at a joke that you didn’t think was funny because you wanted to blend in? Serving a market that does not fit with who you are creates entire days of these very uncomfortable moments.
Choosing a niche for the wrong reasons will end in disaster. So how does one know what to select? The process requires soul searching. What you do and wish to do extremely well ultimately needs to align with who you are. One place to start is by completing a personal SWOT analysis. What are your strengths, weaknesses, opportunities and threats? Employers are now assessing X.Q.s, the testing of personality traits. Test yourself.
Next, review your life experiences. What experiences or situations were enjoyable? It may help to look back to your childhood before your mind was cluttered with the “ought to do” and remember what was really fun. Have you held jobs in other industries that may add a level of expertise or knowledge about people in a specific industry? Do you have passion around a certain charity or leisure activity?
Lastly, assess the opportunities surrounding you: your location, demographic, client pools, industry. For example, if you live in Los Alamos, NM you might want to consider working with scientists, becoming an expert in federal government pensions, or serving skiers. Whatever you decide it needs to be a natural fit and feel right to you.
MISTAKE # 3: Paying lip service to a niche but not putting in the time to gain expertise. It may sound like a good idea but a niche requires specialized knowledge and focused effort. You need to know your market and clientele really well. Developing a niche is not easy or fast and requires dedication, focus and education. The lack of commitment and focus will have a negative effect on your practice. I have worked with firms who try to become expert in a number of areas. Not only was the advice wrong, the firm’s attrition was very high.
The focus on a niche needs to be reflected on the firm’s website. If your website has pillars, a lighthouse and/or an elderly couple riding bikes that’s a sure sign you do not have a differentiator. Make sure you are communicating your expertise to potential clients by creating a website that answers the questions, needs and concerns of your target client.
MISTAKE #4: Using a niche as a marketing scheme not linked with actual services for solving the problems associated with and encountered in that niche market. Once you have decided upon a niche it requires continuous improvement and the only way that happens is by truly listening to your clients. What are their needs and concerns? Your niche should define your services. For example, if your niche involves federal government workers you could develop workshops for pre-retirees which may also necessitate special retirement planning software.
Your pricing should align with your services. A percentage of AUM is not always the answer. Management fees for AUM are falling so if you fold your specialized services into the management fee it could cause future issues. What you spend your time doing should dictate how you get paid. Clients respect services they pay for more than ones for free.
Create a service menu that solves the specific problems facing your niche clientele. For example, if your niche involves providing financial advice to divorcees, a pre-divorce financial assessment program would be the type of service you would want to implement. Consider charging a specific fixed or hourly fee for that service.
MISTAKE # 5: Not getting buy-in from your staff. Staff needs to embrace the niche and align with the vision and that commitment should permeate every aspect of operations and client service. Your team is an integral part of the delivery package. Creating a niche may require a reassessment of staff roles and job descriptions. If your staff is not a good fit for providing services to your targeted clientele, consider training, reassignment or dismissal.
Service needs to be provided in a way that is best for promoting the niche. For example, scientists are very exacting so your team’s service needs to be precise. If a scientist asks for his or her RMD never use estimates. Certain clientele only want information via US mail but many want the speed and convenience of email.
The office environment should be welcoming to your niche clientele. Create the ambiance makes your clients comfortable. Rooms should reflect the interests of your clients and facilitate the services offered. This doesn’t just apply to your physical office but to your virtual one as well. Does your website reflect your niche and differentiate your firm from others? Or do you have the same old tired pillars and lighthouse? Does the site provide enough information for clients to judge your level of expertise?
The way service is delivered needs to align with the expectations of your clients. Entrepreneurs are very busy so phone meetings with a strict agenda will work best whereas divorcees may want in-person hand holding and a comforting approach. Excellent service is gold when it comes to practice management, niche or no niche so don’t let this slack.
For help in choosing a niche or in integrating it throughout the operations of your firm contact us at: 800-485-6141 or firstname.lastname@example.org.