Financial advisors often miss opportunities to scale up because they focus on too large an audience. The ideal goal for many advisors is to build a practice that will continue to expand as their retirement approaches, but by failing to market to niche groups, they are actually limiting their firm’s growth potential.
Since most advisors are striving for evergreen firms that will be in existence for a very long time, if not forever, and are not concerned with making a quick sale, they have the luxury of building in processes that will bring them more profitability, demonstrate more expertise and attract greater customer loyalty. But they often cast their net too wide in attempting to draw in a client base, and as a result neglect to differentiate themselves from their competitors.
This makes client acquisition a longer and more expensive process, both in marketing and opportunity costs. Here are some things advisors should consider as they build their ideal client base:
- Niche marketing homes in on your ideal client.
- Niche marketing creates market leadership.
- Niche marketing raises profit potential.
- Niche marketing generates a deep level of customer loyalty.
- Examples of niche marketing.
Niche Marketing Homes In on Your Ideal Client
Bigger is not always better. This is especially true for women and minorities, who often find greater success in solo or boutique practices. Going smaller can create the flexibility that larger organizations lose.
Niche marketing is the ideal marketing method to create a durable, high-margin practice because it creates a repeatable process focusing tightly on a specific group of clients. Although today’s technological capabilities make a national niche a possibility, ideally, your niche should be relevant to your local community. The goal is to be able to go deeper within a focus area so that client acquisition costs are minimal, referrals come more easily and overhead costs don’t escalate.
By choosing a niche market, the advisor has the opportunity to gain three major benefits: creating, market leadership, raising profit potential and generating customer loyalty.
Niche Marketing Creates Market Leadership
Niche marketing allows financial advisors to create points of differentiation that distinguish them from the crowd. Advisors should choose a niche that closely aligns with both their expertise and their passion.
Expertise does not mean that you have to be an expert in a field right off the bat. Rather, it indicates that you are going to study and educate yourself on the needs of the people who fit this particular group. You will also gain a deep understanding of that group’s perspective on money, time, behavior and communication styles. This specialized knowledge will help you tailor your offerings to the clients in your niche.
Passion is an important component because you will be laser-focused on this topic every day. Being an expert is not critical to niche marketing, but having experience in the niche is meaningful from the very beginning. Additionally, your passion for the specialty area lends authenticity to your marketing efforts.
For example, you may choose to make aircraft pilots your niche audience. To demonstrate expertise, you’ll want to understand who the major employers are in the field, the details of their retirement benefits and the choices pilots make with regard to those benefits. Passion is demonstrated by obtaining a pilot’s license and talking about the aircraft that you fly or aspire to fly.
Once you have established expertise and are demonstrating your passion, clients in your chosen niche will soon seek you out. Their companies may ask you to speak with their employees, or you may be able to write (or have ghostwritten) articles for their corporate publications. Client acquisition becomes easier at that point because people will talk to others in the target group about your skills and results, often triggering an excellent flow of referrals.
Niche Marketing Raises Profit Potential
Niche marketing allows your firm to get a better return on each dollar spent. Because your firm is offering only services and products that most closely match the niche profile, you can streamline the practice dramatically.
Staff needs are lower because employees have mastered the communication priorities and paperwork needs for a smaller set of topics and providers. It takes less time to work with external vendor representatives or wholesalers because the product list has narrowed.
The niche firm is more nimble, has quicker decision capability and can pivot faster to evolve with niche trends. Lower competition allows the firm to raise fees to match the increased level of specialized expertise.
Lower overhead and greater revenue translate to more significant profitability.
Niche Marketing Generates a Deep Level of Customer Loyalty
The most important activities for a financial advisory firm revolve around the human interaction between the client and the advisor. Yet a 2020 Kitces Research study revealed that advisors actually spend only about 20% of their professional time with their clients.
Most advisors seek to overcome this constraint on their practice’s growth by investing in newer technology and offloading more tasks to staff. However, both paths lead to higher overhead costs for the firm, which lowers profitability.
Niche advisors have more fun staying in contact with clients, as they are constantly talking with people who share their same passion and interests. Their client-building activities feel more like a social gathering and less like a task. They are literally getting paid to keep up with the latest news and trends in an area that gives them energy. This passion feeds a renewed energy into the practice that is palpable to clients.
When a practice is grounded in a well-built niche, the firm is able to escalate its services and capabilities. Momentum builds from word of mouth. The firm understands that both positive and negative reviews are impactful, so it remains committed to a higher level of service. This professionalism adds to the firm’s esteem in the marketplace.
Examples of Niche Marketing
Financial firms have an established history of seeking broad niches, such as medical professionals, small-business owners, divorced women, widows/widowers and business owners. Others have delved a bit deeper with niches such as energy company executives or medical school graduates.
All of these are successful and established niches that have worked well. However, part of the appeal of niche marketing is reduced competition, so going to the next level of depth is the next step. For example, business owners might become architects or commercial property developers. Real estate agents might be those who specialize in equine properties, luxury homes over $1 million or historic properties.
Another approach is to seek a broad group, then narrow by lifestyle choice. For example, a financial advisor may choose to work with women who own dogs. Marketing literature would include canine images, client appreciation events may be held at a dog park, and a desirable client appreciation gift might be a pet portrait photography session with a personalized frame. The firm logo may include a paw print. Of course, the most important office staff member is the advisor’s own pet.
Whatever one chooses, the niche has to be broad enough to have enough people available as prospective clients but deep enough to create differentiation. Most important, it has to be meaningful to the advisor.
Over time, the astute advisor will use technology to understand clients better and create additional, complementary niches that allow the firm to replicate its earlier successes.
In the end, the ideal firm size for you is one that lets you enjoy the lifestyle you desire. Niche marketing gives advisors more options to optimize their client acquisition methods, affirm their growth goals and achieve their dreams of success.