Defining a niche market could be a great way for some financial advisors to attract a certain type of prospective client. But to do so successfully, advisors need to be mindful of the various ways to build a niche – and to choose the type that best fits their practices.
“The fundamental issue in marketing financial services, as well as a lot of other areas, is differentiation,” says Stephen Wershing, president of the Client Driven Practice LLC in Rochester, N.Y., who coaches advisors in the United States and Canada and has identified six niches an advisor could pursue.
Advisors who choose and develop a niche stand to gain because they can focus exclusively on the issues they’re in a unique position to solve.
In the case of Charlotte Paul, an advisor with the Perspective Wealth Management at Toronto-based Raymond James Ltd., who works primarily with divorced and widowed women, developing a niche gave her the opportunity to streamline her business.
“[My niche] gave me a real focus when I was deciding who I wanted to target in terms of my marketing, where I spent my time prospecting and how I was connecting with centres of influence,” Ms. Paul says.
“From a time management point of view, it helped me to focus where I was going to spend my time rather than try to be everything to everybody. I could really cater my business to the market that I was going to serve,” she adds.
Here’s a closer look at the six niches Mr. Wershing has identified:
1. Affinity niche
Advisors who serve individuals who belong to the same types of groups that the advisors themselves do have built a business based on an affinity niche.
“[This audience] knows you and has some level of trust in you, therefore you can do business [with them],” Mr. Wershing says.
For example, this includes advisors who market themselves to individuals who are part of the same golf or tennis club.
This niche is less defined than the other five on the list – and probably the weakest in terms of making a strong connection with potential clients, he adds.
However, it can be a good start for advisors who may not have enough knowledge to design a specific type of experience for their clients yet.
2. Values niche
This niche is a step up from the affinity niche in that not only does an advisor and prospective clients belong to the same group, but they also share the same ethical code, Mr. Wershing says.
An advisor who serves members of her church is an example of someone who has built a values niche.
In these circumstances, prospective clients have increased faith in an advisor if they know their values aligned.
3. Educational niche
An educational niche is based on serving clients who have experienced a sudden change in their life circumstances and will need to go through an educational process before the advisor can start doling out advice.
A good example of this niche is serving clients who have just come into a large sum of money through the lottery, an inheritance or a lawsuit. In these cases, clients seldom have the skills to manage their money and other pressures as they would have if they had accumulated the money gradually.
Within this niche, advisors spend a lot of time informing clients about the issues they might face (in the case of lottery winners, that may be friends and family members asking for money), while also incorporating books, videos, courses and other items into the advisory process.
4. Experiential niche
This niche is one in which advisors create a unique experience for their clients.
“Working with an [experiential advisor] is fundamentally different than working with other advisors,” Mr. Wershing says.
Many advisors mistakenly describe their business as falling within this niche, advertising that they offer a “Ritz-Carlton experience” or “an unparalleled level of service,” Mr. Wershing says.
The meaning behind these claims is that advisors keep in constant contact with clients and go out of their way for them. In reality, though, there’s no way for prospective clients to understand how this service differs from other offerings, he adds.
Atlanta-based oXYGen Financial Inc. is a good example of an advisory firm that delivers a unique experience, Mr. Wershing says.
The firm, which targets Generations X and Y clients, wants its clients to “breathe easier” and has an oxygen bar and video games in its lobby. In addition, its advisors often post funny videos about themselves online.
5. Psychosocial niche
Adopting this niche involves serving clients who face serious issues that will require more than just financial advice and will need to be addressed as part of an advisor’s service offering.
Ms. Paul’s practice of serving divorced and widowed women falls within this category. When serving widows, her team accommodates her clients’ grieving processes by ensuring they never have to take on more than they can handle.
As part of the service, Ms. Paul and her team provide resources such as grief counsellors for children and adults or professionals who can help organize the home after a partner’s death.
“It’s often really hard for clients to get rid of some of their partner’s things after they pass away, so sometimes we will have a downsizing or organizational company go in and help with that process,” Ms. Paul says.
She has a roster of experts on hand who can help with any given situation a widow might encounter.
6. Technical niche
In this niche, an advisor has skills, capabilities, resources and connections that other advisors haven’t developed. So, advisors within this niche are usually providing very specialized needs that only they or few others can meet. As a result, this can be the most compelling niche for some clients, Mr. Wershing says.
An example of a technical niche is an advisor who works with expatriate U.S. executives and develops deep expertise in interjurisdictional tax and estate issues.