Niche Marketing: When Is the Right Time For RIA Owners to Explore?

As the owner of Registered Investment Adviser (RIA) practice, recognizing when and how to explore shifting to a niche market share can be a game changer for your firm. But how do you know it’s time to make this strategic shift? It’s not as simple as looking at numbers and data; it’s a feeling, a gut instinct. In this entry, I’m going to delve into the importance of this feeling, how to recognize it, and how strategically growing your client base through niche marketing can lead to the eight-figure exit.

Follow Along With The Financially Simple Podcast!

This week on The Financially Simple Podcast:

• (00:46) My very first client

• (01:49) How do you know when to begin working with a niche?

• (06:31) The biggest stressor for financial advisors

• (08:20) The business is bogging you down

• (11:30) Sell to the masses; eat with the classes

• (13:32) Choosing a niche

• (17:06) Get the right people on the bus

• (19:33) Two ways nicheing can impact your business

• (23:00) Making the transition

• (25:38) The Four-Second Rule

• (28:31) My own experience with being part of a company’s niche market

Niche Marketing: Feeling When Change Is Necessary

Change is a constant in the RIA industry. In some regards, this is a good thing. It can lead to improvements in client care, revenue growth, or even the potential for greater automation in our systems and processes. However, change is often difficult and disruptive. When exploring niche marketing, making changes could mean losing long-time relationships and letting go of hard-earned shares of the market.

Yet recognizing the feeling that change is needed is crucial for continued growth and development. So, how can you know for sure that it’s time to abandon the notion of working with anyone who can fog a mirror and focus on a specific niche? It’s more of a gut feeling. Two key signs serve as indicators:

Feeling Drained by Clients

It’s a feeling that most professionals can relate to, regardless of their industry. In the financial advisory realm, this feeling can manifest as high levels of burnout. For instance, a report by E-Lab and Deakin University revealed that nearly 75% of financial advisors reported experiencing burnout. Similarly, stress levels among advisors in the United States are 25% higher than the national average. This stress affects both men and women, with male advisors reporting stress levels 26.2% higher than the national average. Similarly, female advisors  report stress levels that are 18% higher than the women’s national average.

The increased level of stress makes sense when you consider that advisors are shouldering the burden of helping clients achieve their financial goals. In fact, a recent survey found that many advisors consider the responsibility of guiding clients toward their financial future to be a major stressor. Friends, this stress is exacerbated when you’re serving clients who are no longer your ideal fit.

Your RIA is Bogged Down

Folks, if the business of advice (i.e., regulatory compliance and the back office tasks necessary to serve your clientele) is bogging you down, it may be time to consider focusing on a specific niche. You see, when your RIA is bogged down, efficiency suffers. The varied nature of your client book creates a challenge to scale your business. The more individualized and customized services you offer to cater to different client needs, the harder it becomes to systematize your business. I recently read a blog by Michael Lecours, CFP®. I believe he put it best, saying:

“As financial advisory firms grow and accumulate more and more clients over time, the increased client load creates a growing pressure to find ways to be more efficient to scale the business. Yet the challenge is that with an ever-growing client base, where each different client has different needs – and where advisory firms often differentiate themselves by providing individualized and customized services to the differing needs of every client – it becomes increasingly difficult to systematize the business, precisely because the level of variability from one client to the next makes it difficult or impossible to scale efficiently.”

Therefore, the key lies in finding the right clients—those you’re passionate about, and those that offer pathways to greater efficiency. So, eventually, you’ll have to make a choice…

“Sell to the Classes; Eat With the Masses. Sell to the Masses; Eat With the Classes.”

My mother is an avid reader, like I am. She once read and shared a quote from Henry Ford that really stuck with me. “Sell to the classes; eat with the masses. Sell to the masses; eat with the classes,” Mr. Ford is credited with saying. But what does that really mean? The basic idea is simple. If you sell to a smaller market share, your upward mobility will be limited. However, when talking about niche marketing in the RIA industry, the opposite is true.

You see, by working with a large and varied book (masses) you can have a thriving business, but eventually, the laws of constraints will take effect, limiting your growth. On the other hand, choosing a well-defined niche (classes) could, in fact, lead to greater efficiency which maximizes your throughput. Therefore, you could see greater value from being selective about who you serve.

Friends, you can’t be all things to all people all the time. Attempting to do so will leave you exhausted, your clients unfulfilled, and your business in a state of atrophy. So, you will have to decide between scaling your practice to accommodate the masses or hyper-focusing your marketing to reach the classes. We’ll explore the difference between these strategies in a moment. But first, how do you determine who your niche will be?

Get On The Bus

Although Jim Collins was referring to your team when he introduced the concept of “Get the right people on the bus, ” in his book Good to Great, the same idea can be applied to your clients. As your practice grows, the clients that were beneficial in its early stages may not align with your current business goals.

Getting the right clients on the bus and placing them in the right seats is crucial. This process involves repositioning clients who no longer fit your business’s direction in the context of finding a niche market. However, the decision to focus on a niche market should revolve around who they are and what drives them, rather than how many investable assets they have.

Scaling vs. Hyper-focusing

So, what is the difference between scaling your business for a large number of clients and hyper-focusing on a specific niche? Scaling your business for a large number of clients involves significant investment in people, offices, and advertising. On the other hand, hyper-focusing on a specific niche can help clients feel understood and improve practice efficiency. It’s about finding the right systems and processes for each approach.

Former nuclear engineer turned RIA owner, Ryan Townsley, saw remarkable growth after focusing on a niche market. He said, “Niches are not for everyone, and it is okay if that is not your vision. However, consider the efficiency you gain with a more niche focus, and how it helps both you and your clients.”

You see, Townsely attempted to serve anyone and everyone in the early days of his practice. It wasn’t until he began focusing on helping nuclear power plant professionals, that his firm truly began to take off, growing to nearly $50MM AUM in just 4 years. I mean, who is better suited to serve nuclear power professionals than a former nuclear engineer? As Townsely’s story illustrates, the efficiency gained through niche focus is a benefit to both you and your clients.

Making the Transition

Of course, making such a drastic change in your business will create friction. You’ll need to work through a well-thought-out change management plan as you transition. In addition to working through this plan, you’ll need to define a couple of critical details before you’re ready to move forward.

Determine Who You’re Going to Serve

First, you must identify a niche that you’re passionate about serving. Whether it’s military families, athletes, or another group, your niche should align with your interests and expertise. For example, Ryan Townsley rebranded his practice and tailored his service offerings to reach nuclear power plant professionals.

In my own businesses, I found that I worked very well with dentists. So, I built my practice around helping dental professionals achieve their business and financial goals. The bottom line is that you have unique gifts and talents. Use them to serve those whom you feel the most passionate about.

Marketing Strategies

Once you’ve identified your niche, it’s time to start speaking to them. Your marketing should be hyper-focused in a way that it’s immediately obvious who you’re trying to reach. At the same time, it should be readily evident who you’re not speaking to. This is the central idea behind the Four-Second Rule. The idea is that visitors to your website should recognize your niche within seconds.

Develop a detailed marketing persona for your niche, considering factors like age, marital status, hobbies, media preferences, and more. The more detailed your persona, the better you can reach and convert leads into clients. Friends, this isn’t going to be an easy feat. Consider enlisting the help of experts who specialize in marketing to your niche effectively.

Wrapping Up…

Look, growing your RIA in preparation for the eight-figure exit is hard. It’s emotional. It will be frustrating at times. Yet, recognizing the need for change and exploring new niche markets is essential for sustained growth. The feeling that it’s time for change is a signal that shouldn’t be ignored.

I know life is hard, but friends, life is good. Change can be frustrating. But it doesn’t have to be. By strategically transitioning to a niche-focused strategy, you can make growing your RIA for the eight-figure exit at least, financially simple. Let’s go out and make it a great day!

Are you struggling to maximize throughput, and create a hyper-efficient practice that can be leveraged for an eight-figure exit? Reach out to our team to learn more about how we could help you reach your goals.