I have been in the financial services industry for 25 years, and have spent 20 of those years supporting all types of financial advisors. The most successful advisors have at most a few niches they serve and serve well. However, very little is written about the benefit of this fact for the investor. In my opinion investors are better off when they engage an Advisor who focuses on a niche that is relevant to them.
For an investor, having your Advisor understand YOU as a person in your stage of life, or as a professional provides significant benefit. Why? First, our world of investments and “wealth management”, ( the “new” term du-jour used by our industry ) is incredibly complex, and gets more so every year. There are so many terms, types of investments, strategies to reduce taxes, insurance policies, etc. to understand. So to on top of that, to have to explain to your advisor what it means to be in your situation ( pick your situation-a widow, a doctor with 10 employees, a small business owner with union workers, etc ), makes the investor-advisor relationship all the more complicated. If your Advisor has clients like you, spends lots of time with other clients like you, then the entire experience is so much more productive, and you have less to explain.
Second, here is a little “inside baseball” for you investors: a growing number of Advisors are actively looking to change their client demographic. The last thing you want is an Advisor to only be moderately interested in you as a client. Because it is so hard for Advisors to get new clients, some Advisors take any type of client they can get. You do not want this dynamic. You want an Advisor who really wants you as a client. An Advisor who is very interested in your demographic will simply do a better job for you.
Third, as an investor, you will “hear better” the good advice your Advisor is giving you if you have the common ground of a mutual interest. Far too many investors smile and nod as they hear various pieces of advice from their Advisor. As an insider, I hear so many stories from Advisors about clients that do not take their sound advice. It is basic human nature to retain more when there is a common bond between two parties. Of course, an investor should never blindly listen and obey their Advisor, that has gotten investors into trouble when they were one of the few unlucky who got the wrong Advisor. But, if your Advisor caters to people like you, the communication will likely be more effective. For example, Advisor Alexandra Armstrong in Virginia has written two books about Widows, and that is one of her niches.
I have a very personal interest in niche client-Advisor relationships. Had my mother knew of an Advisor like Alexandra Armstrong after my father passed away at the age of 45, she likely would have been much better prepared financially for what was to come. It is this personal experience that helped me co-found www.adviceiq.com, and to help investors better understand Advisors. Niche marketing is very effective for Advisors, but more importantly, it is extremely beneficial to the investor. We will be writing often about the intersection of the investor and Advisor.