Generally speaking, focusing on a niche is a lucrative strategy for advisors. But sometimes even the most promising target market doesn’t quite meet your expectations.
Take Ward Mayer, an advisor with Raymond James/Morgan Keegan in Memphis. For his first 10 years or so as an advisor, he focused on business owners in general. But, after a while, he came to a realization: His business had flattened out—and he wasn’t sure where the growth was going to come from. “I started wondering, where exactly was my practice headed,” he says. “Was I going in the right direction?”
Then, in the late 1990s, a client introduced him to the owner of a successful trucking company. Mayer immediately took a liking to the prospect, who was smart and down to earth, despite his self-made millions. He started to do more research into the industry and discovered it was a lot more complex—and company owners were wealthier—than he’d thought. Plus, the more he met business founders, the more Mayer liked them. After about two years, he decided there was enough opportunity there to make that his new niche.
It was a good decision. Now, about 65 percent of his 125 clients are owners of trucking companies and he has about $200 million in assets.
Focusing on a niche market is often considered the road to huge success. By targeting a particular group and developing an in-depth understanding of its needs, you can create deeper relationships and a more efficient service model, goes the thinking. And that potentially can lead to frequent referrals and, perhaps, a deeper share of wallet.
But even the most promising niches aren’t always what you think. You may find that, while you’re not doing badly, you know with a different target market, results could be better. Worse, your chosen niche could end up being a dud. In either case, the solution is either to keep on following your old strategy—or make a switch.
Doing so, of course, requires many of the same steps you’d take to target a niche the first time around. At the same time, however, you’ll face some different tasks, like re-doing your marketing materials or finding new attorneys, CPAs and other centers of influence. What’s more, you may also face a distinct advantage: being able to leverage both your relationships with existing clients—and “the lessons you’ve learned from everything you’ve already done as an advisor,” says John Nersesian, managing partner of Nuveen Investments in Chicago.
Your first step should be making sure you aren’t jumping ship prematurely. According to Nersesian, that requires evaluating your current niche by asking yourself three questions: Are you good at it? Do you enjoy it? And is it profitable? If the answers are ‘yes,’ you might need to reconsider. Otherwise, you probably should start scouting for a new niche.
Refining Your Niche
In many cases, the choice of a new niche arises naturally from interactions with existing accounts. Like Mayer, you may find you’ve hit it off with certain clients and that’s the group you want to focus on. Take Chris Sands. In 2008, right out of college, Sands started working for a general agency affiliated with Guardian Life Insurance, figuring he’d target a market sure to pay off: attorneys in the Atlanta area. After all, Sands had grown up there and his mother, a realtor, could provide access to her many connections. Even his fraternity at the University of Georgia had a plethora of alumni turned lawyers. “I thought, these are people who make a good living,” he says. “It seemed like a great idea.”
Turned out, however, reaching those attorneys was a lot harder than he’d thought. Seemed that every other advisor was knocking on the doors of the same attorneys. Then, Sands started working with a new client who happened to be a dentist. They hit it off, the account began offering tips on how to attract more people like him, and Sands realized he’d found a possible alternative niche. First he pitched disability insurance to dental students. Then, after joining oXYGen Financial, a financial advisory firm in Alpharetta, Ga., he began partnering with other professionals targeting dentists looking to buy practices. The result: Although still a work in progress, with around 100 dental clients and $5 million in assets, along with commissions and planning fees, Sands feels he’s found a niche with legs.
Another approach is to look at your book of business and see what target groups emerge. The likely result: Without your realizing it, you’ve attracted a preponderance of a certain type of client. “You may find your niche finds you,” says Nersesian.
Case in point: John McDonough, an advisor who runs Studemont Group, a The Woodlands, Texas, firm with about $30 million in assets. For much of his first 10 years in business, McDonough focused on public school employees near or in retirement. Then in 2011, not long before he left AXA Advisors, where he’d been working, to start his own firm, he decided he needed to refine his niche. When he examined his client list he realized that not only were most of them women, but many were divorced or recently widowed. That led to an inspiration: reshape his practice to target that group in particular. “I discovered a niche within a niche,” he says. About 85 percent of new clients now fit the new market.
Do Your Homework
As with picking a niche the first time, you’ll need to do some research to make sure you’re on the right track. It will help to establish that the group attends regular conferences and there are common publications and web sites prospects regularly read. For one thing, it will be more efficient for you to reach your niche by attending meetings or writing articles, being quoted or running ads in those publications. What’s more, if people meet in common forums, “They’re going be a lot more likely to talk about you more often,” says Laurie Burkhard, senior business consultant with Securities America. And that, of course, should help establish your reputation—and get the word out that you’re a smart choice.
To learn about the market, pinpoint a few people who fit the niche to pick their brains about their concerns. They don’t have to be clients or to have an advisor. Just make it clear you’re not looking for their business, but for information. Burkhard suggests framing your request by describing the person as an expert, someone whose opinion would be invaluable. Once you meet with them, they’re likely to provide insights you couldn’t come up with on your own. Burkhard, for example, recalls an advisor who wanted to target engineers. During a lunch meeting, his colleague suggested he call himself a “financial engineer,” something that would appeal to his new niche. “He did that and it proved to be a phrase his prospects really liked,” she says. At the end of your meeting, you also want to make sure to ask for a reference to another person knowledgeable about the area you want to tap. Then, go through the same drill with that individual.
Existing clients belonging to your niche will be most useful, however. You’ll want to discuss everything from what they like about your services to improvements you should introduce to meet their particular needs more exactly. To help build his new process, for example, McDonough talked to about 12 clients to learn what they wished they’d done differently earlier in their lives and the information they particularly wanted to receive. The main lesson he came away with: They regretted not being involved in financial decisions during their marriage and wished they’d learned more about finance. From that, he developed a monthly educational program for clients and prospects about investments and other issues, many of which he pinpointed in those conversations. About 30 to 60 women generally attend; approximately 50 percent usually come in for an appointment, and about 80 percent of them become clients, according to McDonough.
Existing clients also are likely to provide guidance for how to get started. Sands’ first dentist client, for example, suggested he tap so-called lunch and learns held at dental schools and talk about disability insurance. So Sands started researching schools in the area and e-mailing dental residents asking if they’d be interested in hearing him speak. Then he found out who was in charge of organizing the events and e-mailed them, indicating there already was interest among students in having him appear. Now, he regularly speaks at about five schools and about 30 percent of each class usually become clients.
As with any niche strategy, you also can expect to fine-tune your approach. About six months after he started to pitch to dentists, Sands attended a major dental conference in the area, aiming to find out what other professionals tended to work with his market. In particular, he says, he wanted to figure out “who was the first point of contact after graduating,” figuring he’d do better targeting prospects closer to his own age. What he discovered was that, perhaps one or two years after getting their degree, dentists usually started looking for a practice they could buy, rather than start from scratch. And that meant dealing with brokers helping with the purchase and sale of such operations. With that intelligence, Sands started forming partnerships with dental practice brokers, who began introducing him to their clients. Since then, he’s developed a network of professionals, ranging from placement firms specializing in dentists to dental supply firms, that serves as a reliable referral source.
You also may need to refine the way you work with clients. Mayer, for example, discovered that many of his trucking company owners were inclined to be considerably more aggressive in their investment style than his other accounts, a philosophy unlike his own. “They had the same high tolerance for risk that they did in their businesses,” he says. Mayer eventually compromised: He decided to help them engage in frequent high-risk trading, but only in the transportation industry, an area he figured they knew very well and about which they could make informed decisions.
Of course, you’ll need to revamp your marketing materials and, probably, change the type of client appreciation events you put on—and even your office decor. McDonough, for example, first outfitted his office with comfortable couches and warm colors to create a welcoming, homey atmosphere. Then he changed from wine tasting events and the like to monthly gatherings in his office aimed at helping women to form connections with one another. He recalls one recent party at which a client, already divorced, offered advice to another account just going through the process. “If I can provide an opportunity for clients to connect and build relationships, that’s another benefit I’m able to provide,” he says.
You also may need to get back to attorneys, CPAs and other sources of influence who provide referrals and explain what your new ideal client is. That may require finding different professionals. Sands, for one, has courted CPAs who specialize in dentists. Or you may simply need to have a talk with your existing network.
About five years ago, Jonathan DeYoe, a Berkeley, Calif., advisor who heads DeYoe Wealth Management, which has about $75 million in assets, took interested clients to see a performance of George Bernard Shaw’s Mrs. Warren’s Profession. That’s when he realized that, “Almost all my clients are women.” From there, like McDonough, he decided to focus mostly on divorced, widowed or single women.
Not long after, however, a CPA referred a prospect to him. Although the individual was worth $8 million, the person not only had a more aggressive approach, but was a man. “I had to go back to the CPA and explain why he didn’t fit,” DeYoe says.
Perhaps the most important requirement for changing niches, however, is something intangible: patience. “You have to give it 18 months of the old college try before you decide it’s not working,” says Burkhard. Even if you start out with a few clients in your new niche, it’s likely to be several years before you’ve established strong enough ties with clients to motivate them to provide regular referrals. “It takes time,” McDonough says. “You can’t expect an overnight success.”