Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here.
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Dear Bev,
I read so much about the importance of having niche markets. That strikes me as trying to identify 50-year-old divorced dentists in private practice with three kids to support. We are told to get so specific that when we do start to market we end up looking for a needle in a haystack. I work with 30-year-old entrepreneurs, 60-year-old dentists, divorced women and others. If I limit myself, I will leave opportunities on the table all the time. Am I wrong to be diverse in what I do?
Larry M., Washington
Dear Larry,
This is one of my favorite topics, because it is a simple concept that is often misunderstood. Yes, you are right – one can do niche marketing the way you have outlined here and target very narrowly. Many advisors do this because it allows them to be laser-focused on a given audience.
However, you don’t need to get this specific if that doesn’t work for you. Even with the differences in age and life situations among the clients you outlined, there could still be some themes that bind them. Was there somewhere you interacted with them all, for example? Are they all alumni of your alma mater? Do they all enjoy golfing and have summer homes in Florida? Were they experiencing similar life circumstances when they came to you?
If you want to find “niches” that you don’t even know you have, look for themes that might show you similarities that aren’t obvious. Advisors often focus on size of assets, age or stage of life to identify a niche, but there are other ways to link people.
To start, look through your client base and identify those top clients whom you would consider to be ideal – what makes them ideal? What links them? What similarities, if any, can you find between them? Niche marketing can often be about descriptors, experiences and ways of thinking, too.
Dear Bev,
We've just finished examining the profitability of our clients. We have been able to prove the 80/20 rule – 80% of our business comes from 20% of our clients. But we are now talking about the 80/80 rule – 80% of our headaches are coming from the other 80% of our clients. Short of firing them all and telling them to stop calling us and wasting our time, what do we do?
Doug, Southern U.S.
Dear Doug,
Let's coin that term, “the 80/80!” I know a number of financial advisors can relate to this.
Kudos to you for going through this process. Many firms never do. Here are a few next steps you could take now that you have this information that doesn’t involve firing all of these clients.
- See if you can identify the requirements for these headache clients. What are they asking for from you? How are they leveraging your resources? Is there any way to “tier” what you are offering into the classic silver/gold/platinum approach?
- Offer a menu of options. If you have a number of client service and client communication choices, you may want to list them out and then review with clients. Ask them what’s most important to them. This helps inform them about what you do and what they are getting and helps you understand what they really need.
- If some clients are just completely unprofitable and it isn’t working, find another advisor who works in the market they would fit in, and set up a referral system. Introduce the clients, and do a professional hand-off. Explain to clients that the other advisor and firm is better suited to meet their needs.
- Set up a separate servicing center within your firm. If the 80/80 group contributes enough revenue, you may want to just carve out resources and dedicate to this group separately.
- Be sure you are doing enough proactive communication that you can minimize call-ins somewhat.
I’m interested to hear from our readers, too. This is a common problem and I would like to hear how other firms have solved this.
Beverly Flaxington co-founded The Collaborative, a consulting firm devoted to business building for the financial services industry in 1995; in 2008 she co-founded Advisors Trusted Advisor to offer dedicated practice management resources to advisors, planners and wealth managers. She is currently an adjunct professor at Suffolk University teaching undergraduate students Leadership & Social Responsibility. Beverly is a Certified Professional Behavioral Analyst (CPBA) and Certified Professional Values Analyst (CPVA).
She has spent over 25 years in the investment industry and has been featured in Selling Power Magazine and quoted in hundreds of media outlets, including the Wall Street Journal, MSNBC.com, Investment News and Solutions Magazine for the FPA. She speaks frequently at investment industry conferences and is a speaker for the CFA Institute.
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