The wealth management industry is full of competent, experienced and knowledgeable financial advisors who develop new business through a variety of channels, including personal networking, referrals, traditional advertising and online marketing.
That means there are lots of people very much like you doing exactly what you do to find new clients. What makes things even more challenging are regulations that limit what financial advisors can say in their marketing. In this challenging environment, how can you differentiate your wealth management firm? The key is specialization.
Specialization? Doesn’t conventional wisdom say otherwise? To grow your wealth management business you need to diversify to attract a broader base of prospects. After all, a larger pool of prospects will generate a larger number of new clients. Right?
Unfortunately, when it comes to attracting the right kinds of clients, conventional wisdom and common sense get it wrong. In fact, diversification can have the exact opposite effect, diluting your brand and making your firm less distinctive. It makes you just another face in the crowd. Any specific expertise you have gets lost in a haze of generalization — to the point that prospective clients can’t distinguish you from the crowd of undifferentiated competitors.
When firms specialize, however, they acquire some important advantages:
- Clients value specialists more highly than generalists, and when given the choice they are more likely to choose the specialist.
- Clients are also more likely to seek out a specialist when their problem is acute.
- Because they have a higher perceived value, specialists can often charge premium fees.
- Buyers notice and remember specialists more easily. They stand apart from the look-alike crowd.
- Specialists have a much easier time articulating their differences, which can accelerate day-to-day business development and referrals.
So what does it take to specialize? There are many niche audiences you might target to differentiate your business. Begin by looking at your current practice. Are there any client scenarios you address again and again? These might be good candidates for specialization. Or try to think of situations your clients face that are both common (so you have a large enough pool of potential clients) and complex (so your specialization will be perceived as valuable).
For example, widows often require financial advice to help them deal with Social Security, pension and investment issues. For widows of deceased business owners there can be concerns about business continuity, disposition of proceeds from business sales and partnership settlements.
CEOs and top management professionals are another lucrative niche market. For owners and managers of growing companies, this can involve wealth management advice for ESOPs, 401(k)s, stock option proceeds and general investment portfolios.
Here are some other ways you might specialize:
Specialize in an industry or specific financial service
Some industries have particular ways of providing benefits and compensation that generate financial assets that must be managed. If you’re familiar with an industry or business segment, consider specializing in it.
Specialize in serving clients of a certain size
If your firm provides financial services to individuals, consider focusing on a particular asset or income level, such as an investment portfolio with a minimum value of X. If you serve organizations or institutions, consider focusing on, say, entrepreneurial firms or fast-growing Inc 5000 companies.
Offer a truly unique process or service package
Firms that offer a unique technology, service or process have a special advantage, especially if the offering is difficult for competitors to copy. If you go this route, be sure that your specialty is truly different. It’s easy to convince yourself that your process or service is one of a kind, when in fact it’s little different from what others offer.
As you can see, specialization has a lot to offer. As you develop new clients and experience in your specialty, you’ll build a reputation as an expert in that narrow field. While this may limit your appeal to a broad audience, it will amplify your ability to attract the most relevant clients. It will also help you take advantage of opportunities to gain further visibility. Soon the wealth you’ll have to manage will be your own.
Lee W. Frederiksen, Ph.D., is Managing Partner at Hinge, a branding and marketing firm for professional services.