Kitces: Tech trend will lead advisors into niche practices
ORLANDO, Fla. – Digital tools are changing the advisor industry, but not in the way many think.
Advisors have adopted technology long before robo advice entered the market, said Michael Kitces, partner and director of wealth management for Pinnacle Advisory Group, at the Pershing Insite 2016 conference. But these digital tools offer a new opportunity for advisors to focus, he added.
“As technology chipped away at the other models of how we execute we all converged in the same direction,” Kitces told the audience. “The way that this ultimately breaks out is we end up taking a fresh focus on niches.”
When it comes to technology many industry insiders believe that robos are here to help advisors and not take their jobs. Kitces believes these digital platforms will help advisors change the way they do those jobs.
“To me, one of the biggest transitions I think we’re going to see over the next 10 years is a passive rise in the adoption of niches,” said Kitces.
Kitces went on to say that advisors generally have the same type of information listed on their website to classify what they do exactly. He said that websites across the industry state that advisors are experienced, have various credentials and provide holistic advice.
“We all say the same thing.”
NICHE TRUMPS DISTANCE
Kitces believes that in the very near future advisors will not be limited by their location when it comes to acquiring new clients.
“You can go incredibly focused because you’re not constrained by geography anymore,” he said. “The technology is actually the enabler that makes it feasible to do niches the way you couldn’t before.”
While some clients do want the availability to have face-to-face client meetings with their advisor on a regular basis, Kitces believes that clients would want the opportunity to be a part of a firm with advisors who fit a specific niche.
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“When you’re in that niche and you’re the go-to person, client acquisition is drastically easier.”
Kitces said that he knows of examples in which it is already working. He said he is aware of an advisor in Alaska who carved out a niche of foreign service employees. While there aren’t many wealthy locals there, Kitces said this particular advisor was able to carve a niche out for himself that keeps him profitable.
“He spends 50% of his year fishing and he manages $120 million,” he said. “Not a bad practice for a solo.”
Kitces went on to say that another advisor he knows in the mid-west specializes in bass fisherman clients. While the audience laughed, he mentioned the prize money associated with bass fishing being in the million dollar range.
“Winners have endorsement deals rolling in which creates huge amounts of money move around that community,” he said. “It sounds kind of silly but he’s 37 years old and he manages over $110 million.”
“That’s a sweet practice.”