Financial advisors rightly preach the virtues of diversification to their clients. But what works well for investing isn’t necessarily a good strategy for building a financial planning business. In fact, focusing on a narrow client niche can be a lot more effective—and profitable—than casting your net as wide as possible.
“Most advisors feel there is too much risk in basing an entire practice on a niche, yet they run the risk of getting lost in a ‘sea of sameness’ in the market,” said John Anderson, managing director of the practice management solutions team for independent advisor solutions at SEI in Oaks, Pa. “According to our research, only 31 percent of advisors serviced a niche, leaving nearly 70 percent who are trying to define their value proposition as a generalist. In an age where the consumer is looking for personalization and customization, being a generalist isn’t going to cut it.”
Many advisors focus all or most of their attention on people who work for a specific company. Ed Snyder of Oaktree Financial Advisors in Carmel, Ind., for example, works with employees of Eli Lilly, the big pharmaceutical company and one of the largest employers in Indianapolis.
Read more: Once Advisors Find Their Niche, They Never Let Them Go