The risks and rewards of specializing in niche clients

To be a jack-of-all-trades and master of none carries risks, especially when it comes to helping clients manage their finances. That’s why some financial professionals focus on serving a niche clientele. Not only can it enable them to refine their skills to address each client’s specific needs, it may also help to differentiate themselves and attract others who face similar challenges.

But what happens when a client’s situation changes or they evolve from one niche to another? Financial professionals need to consider how they can evolve, too.

Examples of niche clientele

It’s relatively common for financial professionals to have broad areas of focus. These might include estate planning, wealth management or retirement planning.

Some in the financial services industry further refine those target areas to pinpoint clients within a niche category. Some may specialize in serving small business owners, divorcees, widows or collectors of fine art or antique cars. Others may target clients with particular careers like doctors, dentists, IT professionals or musicians. The types of niches are almost limitless.

The benefits of specialization

Honing in on niche clients may help position you and your firm as the go-to financial services firm for those who align with your target audience. Entire marketing campaigns can be developed to brand your firm for a niche audience. Serving a niche clientele may also help you refine your skills and improve efficiencies. 

For example, a book of business that mostly consists of medical professionals may allow you to develop your expertise and take a deeper dive into the shared challenges your clients face, allowing you to further customize offerings that better serve their needs. Each portfolio still needs to be customized to address individual goals, but you won’t necessarily have to reinvent the wheel each time a new niche client comes on board.

Potential pitfalls of focusing on niche clients

For all its potential benefits, there are risks to targeting a niche audience. Notably, what happens if a client’s circumstances change and they no longer align themselves with “that thing” that brought them to you in the first place?

If your focus is on helping divorced clients, there’s a chance they may remarry. A collector of fine art may auction off their collection. Someone may choose to switch careers. The question for financial professionals who serve niche clients is whether they can continue to offer their services at the same level and seamlessly shift their strategies to help clients reach their financial goals.

Finding a balance

Should you and your firm move toward specialized services that meet the needs of a niche audience, or should you shift to a broader demographic? That is for you to determine after examining your current book of business, growth goals, your region’s demographics, industries and other criteria.

For many, however, the key to success lies somewhere in between. While it’s important to establish criteria for your ideal client, it’s also important to not be so exclusionary that you limit your reach or potential for future growth and sustainability. 

No matter where you land, it’s important to remember that your clients will evolve over time, and so will you. Financial professionals who’ve been in the industry for decades know this well. They might have started out helping young, middle-income clients build their wealth, and now those same clients may have entered retirement with a nice nest egg thanks in part to the financial advice they received. They may now be ready to focus on estate planning, establish a trust or have a family planning session where they invite their children into the conversation, helping to engage the next generation of clients.

The transition often happens gradually. So the answer to whether you should shift your focus may be more a matter of riding the tide to see where the current takes you rather than jumping ship. 

Experienced financial professionals know that while individual investor circumstances will vary considerably, their underlying needs are typically quite similar. No matter their social or economic status, conversations with clients often return to a few overarching topics.

Some worry about running out of money in retirement. Others are concerned about providing for their heirs. One client may desire leisure while another may look forward to volunteering or pursuing a second career. And let’s not forget the emotional toll of life’s circumstances: an unexpected career change, the loss of a spouse or children going off to college.

In the end, a client’s emotions, attitudes and impulses may have a greater impact on their finances than the niche category they identify with. As a financial professional, you can help them navigate the ups and downs of life so that they’re better equipped to make intentional decisions that support their values and goals.

Our Behavioral Finance Advice program is designed to help you connect with clients on a deeper level and allow you to differentiate your practice in ways that can apply to every niche or specialization. Learn more about our award-winning Behavioral Finance Advice program. 

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