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“Isn’t that too narrow a focus? Seems risky.”
My firm provides wealth management services to current and former Intel employees. Invariably, when I meet someone in the industry for the first time, it isn’t long before they respond with some variation of that statement, or the simple, “Wow, that’s a narrow niche.”
The assumption is that by focusing on one niche we are leaving business on the table, or that the opportunity isn’t big enough. This simply isn’t true.
Industry guru Michael Kitces, director of wealth management and partner at Pinnacle Advisory Group, has written extensively on building a specialized advisory practice:
“Casting the net wider may lead to more potential clients, but fewer actual clients, as the advisor who can/does work with anyone runs the risk of losing one client after another to specialists who are more clearly suited to that particular client . . . until there aren’t any prospective clients left at all!”
Overcoming the concerns about occupying a niche leads to several benefits for both an advisory firm and its clients.
First and foremost, a specialized focus will make you, as an adviser or analyst, more knowledgeable about your clientele. I would bet my firm knows more about the Intel benefits plan, investment options, pension plan, and the Intel employee mindset than any other adviser in the country. When making any major financial decision, clients should want to work with someone who is an expert in their situation.
Kitces gave an example of how client expectations about an adviser’s expertise are increasing during the 2016 CFA Institute Wealth Management Conference: Suppose you have a dentist looking for financial advice about selling his practice. In the past, he may have simply elected to work with his golf buddy who happens to be a financial adviser. But now he is going to find an adviser with experience helping other dentists sell a practice and navigate all the financial considerations that accompany it. He is going to find the best possible adviser for his particular situation.
With a specialized practice, you speak directly and specifically to your target clients, which makes it easier for them find to you in the first place. If you’re an adviser who focuses on dentists selling their practices, you can develop white papers, case studies, webinars, etc., that demonstrate this.
At my firm, our focus has helped create a whole suite of resources for the Intel employee and retiree. Some examples include an e-book on the investment options in the Intel retirement plan, an Intel pension analysis tool, and regular webinars and seminars about key topics.
Having such expertise and content helps make us more referable.
According to Hinge Marketing, 81.5% of professional firms receive referrals from people with whom they have not directly worked. These referrals didn’t come from clients, but from others who found out about the firm through its reputation and capabilities. The main sources of these “expertise-based referrals” are speaking engagements, written pieces (such as a blog or a book), and social media.
Sources of Expertise-Based Referrals*
* Source: Hinge Marketing
Another major benefit of having a specialized firm is that you are a category unto yourself in the minds of your potential clients. Consider the following story from Harry Beckwith in Selling the Invisible — it’s an excellent example of the power of differentiating yourself from the competition:
“Almost fifteen years ago, I saw Michael Graves’s brilliant presentation to the City of Portland, Oregon, of his proposal for a new city hall. Graves immediately redefined the competition with his design and his manner. . . . His position veered so far from the others’ that he made the others appear almost identical to one another, thus reducing the five-firm competition to two firms: Graves’s and the best of the other four.
“Graves did more than position himself. He also effectively repositioned his competitors.”
When competing for a prospective client’s business, occupying a niche narrows the field to you — the specialist — and the best of the rest. Just as Graves demonstrated with his Portland proposal, being different and focused almost always makes you one of the two final choices.
Deciding to build a specialized practice and construct a brand around that niche can be scary at first. But having that focus will help you acquire knowledge, dedicate your time to communicating your expertise, and ultimately separate yourself from the competition in the minds of potential referral sources.
Repositioning your competitors as mere generalists and yourself as uniquely qualified to provide the specific advice your clients need makes a specialized firm the best investment for both you and your clients.
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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.
Image Credit: ©Getty Images/Silvia Li Volsi /EyeEm
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