Marketing experts urge new advisors to find an underserved niche and stick to it. The tighter focus leads to better results.
Advisors who pick a niche earn about 12% more on average than generalists, according to Michael Kitces of Kitces.com. Delivering targeted expertise can spur their business growth.
If specializing in one type of client (law enforcement officers, oil and gas executives, etc.) pays off, would pursuing two niches work even better? That depends.
"It's all about your resources," said Christopher Stappas, a certified financial planner at Summit Financial in Parsippany, N.J. "It's a lot easier to serve two different niches if you have a deep and experienced team behind you. It depends on having good support and expertise."
Stappas, 52, started his advisory career by focusing on business owners. As a tax attorney, he's able to help them with tax issues as well.
Around 2005, a physician friend became his client. When the friend formed a group of 30 doctors to build a large practice, they chose Stappas as their advisor.
"That group then grew from 30 to 60 physician partners," Stappas recalled. "It led to my having a second niche of physicians."
He now markets to both niches. In 2020, for example, he wrote a 10-page article for a medical journal on financial issues that physicians face. He took excerpts from that article and featured them on his LinkedIn page.
Stappas likes the variety that comes with having two niches. Doctors deal with specific challenges unique to their profession.
"I enjoy the design process (of their comprehensive financial plan) and the complexity," he said.
Know Your Target Market Inside Out
Today, Stappas estimates that about half his practice is physicians. The bulk of his remaining clients are business owners who run private, family-owned enterprises.
Once you establish a niche, you need to develop a keen understanding of those clients. That takes time, education and research.
The risk of taking on two niches is that advisors spread themselves too thin. They can only absorb so much information and apply it effectively to distinct audiences.
"If you're going to immerse yourself in another niche, you can't dabble in it," said Michael Silver, co-founder of Focus Partners, a coaching and consulting firm in Paramus, N.J. "You have to have the time to commit to it."
Solo advisors have limited options. They may have their hands full mastering one niche, becoming subject-matter experts on the challenges that, say, dentists or teachers confront.
"It boils down to capacity," Silver said. Advisors may need to hire administrative assistants or associate planners to serve the new clientele from a second niche.
To boost their marketing, advisors might recruit employees with existing networks within that niche. For instance, hiring retired athletes can work well if you're expanding to serve current and former major league players.
From Narrow Niche To Broad Market
When pursuing a niche, it's not enough to identify a target market and proclaim yourself an expert in that market. You need to understand the industry, its compensation structures and nuances relating to career trajectory, tax planning and unique financial risks and rewards.
"You have to have a deep grounding in it," Silver said. "That can involve sponsoring and attending industry events, writing articles in trade publications and joining boards or associations in that niche."
Adding a second niche can make sense if it complements your first niche. If you focus on entertainers in the arts, for instance, you can add sports figures.
"They're similar," Silver said. "In sports and entertainment, you're usually working with the client's agent, business manager, attorney and family," and not as much with the client directly.
Refocus Your Practice
A second niche offers a chance for advisors to refocus their efforts after they start off with their first niche and find that they've exhausted their opportunities.
Silver cites the example of an advisor who developed expertise working with clients in the construction industry, specifically crane operators. Eventually, she established another niche working with executives at public companies.
"The first niche worked well but it was ultimately too narrow," Silver said. "She started with an underserved niche. Then she moved to a broader niche with a bigger pond."
Advisors often define a niche as a group of clients in a particular line of work. But a target market can fall into many different categories.
"You can have a niche in an industry, a geography or a certain product or service," Silver said.
In terms of products, advisors can promote themselves as bond gurus or experts in certain alternative investments. And they can differentiate themselves by offering services such as career planning or managing a family office.
