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Kitces: Why it pays to specialize

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Finding ways to differentiate yourself amid a sea of people who call themselves advisors has never been easy. For newer advisors trying to get noticed within their firms — and get opportunities for client face time — the problem feels particularly acute.

That’s why, more than ever, niches and mini-specializations are becoming effective differentiation tools. By going through a focusing process, new advisors can learn more about the things that matter most to their target clientele, making the work of acquiring new clients easier over time.

And because most advisors are generalists, you can pick nearly any topic, really focus in on it and become more knowledgeable than your peers, to say nothing of virtually every consumer. Once you begin to differentiate with your expertise, you’re well on your way to securing your own clients — and potentially a significant amount of recognition in your field.

In my second year as an advisor, I worked in a paraplanner role at an independent broker-dealer. This was back in the very early 2000s, the heyday of variable annuities with living benefit riders. Annuity companies would roll out new riders with new features every couple of months, making it really difficult to keep track of them all.

So I decided to get copies of specimen contracts for all the popular major annuities, and read and catalogued every single one. Did the rider have a ratcheting high watermark benefit base or a guaranteed growth rate on the benefit base? Was that growth rate 5% or 6%? Were there investment restrictions? What was the cost of the contract, rider and all the underlying funds? All that information was captured and catalogued. I did my homework, and in doing so created a mini-specialization in variable annuities with living benefit riders.

Being a younger advisor trying to get more experience and facetime with clients, it was amazing to suddenly be the expert on a topic. More senior advisors would call on me because I knew the details better than they did, which gave me a ton of valuable client experience early in my career. It would eventually lead to a book that’s now in its fifth edition, The Advisor’s Guide to Annuities.

This is precisely why I’m such a huge advocate of advisors finding niches and specializations. The distinction between the two is important. A specialization typically connotes some kind of subject matter expertise. Mine was variable annuities with living benefit riders. By contrast, a niche is about serving a particular group of clients exhibiting a particular need, and applying a service or solution to solve that need.

Your niche might be in serving airline pilots who need to navigate their airline pension system or executives at a corporation that need to know how to handle their firm’s unique executive compensation package. Or maybe you’re working with recent widows and widowers, or new retirees.

This matters because whether it’s a niche or a specialization, you become more referable when you have one. If I meet someone I wouldn’t have to say, “Hi, I’m Michael. I’m a financial advisor,” which usually would prompt the person to take a couple of steps back. Instead, after exchanging the requisite pleasantries, I could say, “I advise recent widows and widowers on how to put their lives back together after a tragic loss,” or, “I work with people who are charitably inclined and want to leave a bequest to charity after they pass but don’t want to undermine their current retirement plan while they’re still alive.”

These are niches and specializations that define really specific needs or problems. And if you have that problem or you know someone with that problem, guess who’s instantly going to come to mind?

The caveat for newer advisors is that building a niche often takes up to three years. That’s partly why I also advocate for mini-specializations. Practice management guru Philip Palaveev wrote about this strategy in his recent book G2: Building the Next Generation. Among its insights is that if you really want more credibility, especially as a young advisor, don’t try to figure out how to play golf or socialize with your clients. Rather, start by simply being an absolute expert in something that matters to them.

When you shrink the domain of what you need to learn on a specific topic, you really can become an expert in a relatively short amount of time. Be awesome at it — both to establish yourself in your own advisory firm and get credibility with clients as a younger advisor.
Just because you’ve formed some kind of mini-specialization doesn’t mean you’re suddenly the go-to authority. That takes applying an effective marketing strategy to your specialized skill set. Luckily, if you know exactly who it is you’re trying to serve, you can make really targeted marketing plans to reach them.

As I wrote recently, when you have a niche in a particular profession — architecture, for example — you can immediately focus your marketing. Write articles for the architect trade publications. Get interviewed on an architect’s podcast. Join the architect association and volunteer. Find opportunities to speak at architect conferences.

Now, one of the challenges with specializations is that there may actually be a number of advisors who could potentially serve your target clientele. That’s why it’s doubly important to get your name out there. Publish a website or a blog — a little virtual office on the internet that makes it possible for others to find their way to you and this specialized expertise that you have.

Say you’re a budding expert in charitable remainder unitrusts, or CRUTs. Define for your reader what CRUTs are, how they work, the history of CRUTs and why they should use CRUTs and not CRATs. Explore how new tax law changes impact CRUTs, and how CRUTs compare to alternatives like donor-advised funds. Simply put, your goal is to ensure that when someone googles a question around CRUTs, your website shows up. And if your website projects an air of quality and professionalism — the kind where a prospect might say, “Wow, this advisor really knows what he or she is talking about, this is really professional, I need more help, I think this is who I’m going to call” — then you’re well on your way.

Bear in mind that for most advisors starting out, your website isn’t going to become the definitive source overnight. Developing credibility and optimizing for search engine ranking takes time. But you have to build a foundation first — and populating your blog or website with meaningful content is that first step.

From there, you need to get the word out. I’d encourage you to check out Michael Hyatt’s book Platform, which is all about how to begin what he calls “narrowcasting” your specialization to get noticed in a crowded, noisy world. Few of us will ever be on television reaching millions of people, but any of us can create our own platform that narrowcasts our expertise to our target market.

This usually means building an email list using software like MailChimp; creating social media accounts on places like Twitter, LinkedIn and Facebook where you share out your content and expertise; writing relevant articles in trade journals; and becoming a go-to source. You may even start connecting media to your blog posts about angles they may have missed in any reporting related to your specialization.

These are important foundational steps for several reasons. Even if someone hears about your specialization or sees your presentation and is duly impressed, they’re probably not going to hand over their life savings or make a massive irrevocable gift to a charitable trust based on one interaction or one recommendation. They’re going to check you out. They’re going to vet your expertise. They’re going to see if you’re credible. And in that critical moment, your website has to be ready for them.

From there, you can get more targeted going outbound. Take all that information you’ve written on your website about CRUTs, for example, and turn it into a presentation that you can offer to local CPA societies and estate planning councils. You might then even publish an e-book or a physical book on CRUTs — in far less time than you may think and at a fairly modest cost. Now you’re a recognized author and a proven authority in your area of specialization.

Bottom line, the deeper you go with the mini-specialization or niche, the easier it will become to market your expertise to people who might do business with you.

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