Darren Coleman is the poster child for financial advisors who are looking to develop a niche business. Within five years of deciding to focus on clients with cross-border financial issues, his assets under management (AUM) quintupled in size.
Mr. Coleman, senior vice-president, private client group, and portfolio manager at Coleman Wealth, a division of Raymond James Ltd. in Toronto, was already a 20-year veteran of the investment industry before he decided to streamline his practice to help U.S. and Canadian clients manage their money while dealing with cross-border issues surrounding career changes, inheritances, retirement and multiple business locations.
Part of the reason Mr. Coleman’s business grew so quickly was because he was able to hone new skills faster than when he was a general practitioner.
“There’s a speed of execution and a skill set that you develop as you spend time in your niche as a specialist,” Mr. Coleman says. “You just get better faster and wind up having a lead that other people just can’t match.”
If done well, a niche can help advisors answer the question of how to deal with commoditization and differentiation within the investment industry, says Dan Richards, chief executive officer at Toronto-based Client Insights. Simply put, most competitors look and sound the same, so it can be difficult for prospective clients to pick one advisor over another.
Mr. Richards notes that most advisors are discussing holistic wealth management and how to create portfolios that meet their clients’ needs. “There’s a sameness to that, whereas a niche lets you stand out,” he says.
Advisors can start the process of choosing a niche by looking at their current clients and seeing if there are two or three of them they like working with that have replicable qualities, Mr. Richards says.
However, it’s important to look beyond external identifiers, such as whether your clients share the same profession.
“Advisors need to identify a niche based on problems clients have and how [advisors] can [help clients] fix those problems in their unique and special way,” Mr. Coleman says.
For example, client groups that may need help problem solving are divorcees over the age of 55; people unexpectedly receiving large sums of money, such as lottery winners; and entrepreneurs looking to sell their businesses.
Ryan Gerstel, vice-president, investment advisor and portfolio manager with the Gerstel Wealth Management Group at CIBC Wood Gundy in Toronto, was able to narrow down his business to a couple of niches by looking at the issues concerning his client base.
Mr. Gerstel, who originally began advising entrepreneurial clients, noticed they experienced similar problems around the topic of intergenerational wealth transfer either as they approached retirement or as they considered the prospect of selling their businesses. Now, in addition to serving entrepreneurs, he helps families navigate a large handover of wealth.
Before narrowing down a niche, it’s important for advisors to spend several years in the business learning general best practices and gain a sense of what kinds of clients they can best serve. “You have to be a generalist before you can be a specialist,” Mr. Coleman says.
Once advisors have the necessary experience and insight to narrow down a specialization, the next step is to connect with their target market. Mr. Coleman says that the key to building his practice has been to find other professionals already working with cross-border clients.
In Mr. Coleman’s case, he knew that cross-border clients often have complicated tax filings, so he connected with tax professionals who specialize in the area and tapped into their networks. Once he established credibility, the referrals started flowing in. Now, when other advisors find themselves mulling over cross-border money matters, they often turn to him for advice, he says.
Other ways to build visibility and gain deeper insight into your client base is to connect directly with your target market. “LinkedIn has groups of doctors, lawyers or entrepreneurs where professionals discuss their challenges and the strategies that they’re looking for,” Mr. Gerstel says, adding that advisors can begin participating in these discussions if they have helpful advice to offer.
Advisors can also be of service to prospective clients by finding ways to provide education – whether that’s writing for a publication or newsletter for people in those groups or developing workshops or events for them, Mr. Richards adds. For example, he points to an advisor who hosts a monthly breakfast with her target market of female business owners.
Although advisors have heard the benefits of building a niche many times before from their head office, industry publications and at conferences, the biggest obstacle often is that advisors don’t make developing a niche a priority and commitment, Mr. Richards says.
Thus, he suggests advisors could begin making headway on developing their niche by blocking out time on their calendars every week to conduct research, get to know their target market and start building their profile as an expert.
“This is not something that you start today and see the results tomorrow,” Mr. Richards says. “This is a 12-, 18- or 24-month commitment before there are any results.”