Back in 1985, I thought I found the perfect niche.
Cattle breeders embracing technology.
I had their perfect ‘solution’ – basically, it was me providing a XT twin-floppy computer complete with green screen, 256Kb of memory, meagre software, on-site training and promises of 24/7 support.
At the time the overwhelming trust and cattle progeny data were paper-based and heavily protected by cattle societies.
I gave lots of presentations at country shows, local schools, agricultural colleges, conferences and on farms.
I survived, but didn’t sell many ‘solutions’ to my ‘perfect’ niche.
Thankfully I did find a better niche with ‘cashflow solutions’.
Niches are crucial.
Especially for advisers.
Why implement advice niches?
Niches improve advisory team productivity by increasing returns for effort.
Growing expertise and experience advising a growing number of clients with common, while diverse, complexities generates a snowball effect. Advisory team knowledge, confidence, capability, networks and reputations grow exponentially.
Niches are for growing advisory firms what the irrigation systems are for my former farming clients.
They fuel productive growth.
Niches have been created for retirees from specific companies, for post-retirees downsizing into specific regional holiday locations, for clients with aged parents, for executives in specific long and short term incentive packages, for tradies, restaurant owners, medical specialists, architectural and IT firms.
Some of the more innovative niches include defence personnel on overseas assignments, former sports stars, farmers providing easements for neighbouring mining leases, and medical entrepreneurs building regional medical centres.
Regardless if advisers are building multi-adviser firms or intending to remain a solo adviser firm, their first ‘successful’ niche is themselves.
In reality, it is cash flow, not niches that fund start-up advisory firms.
Founders being founders will do whatever is necessary to protect and care for their startup.
Pre-launch plans to focus on a specific ‘niche’ need to be flexible as startup cashflows are too thin to subsidise non-working plans. In so doing, startups take on a diversity of clients to ensure survival where the most common ‘niche’ for all the propositions delivered during the startup phase is the adviser delivering it.
However, during those first twelve months when cash flow is both king and queen of the growth strategy, vital ‘niche clues’ have usually been planted. These are found among approximately 20% of clients that share specific common complexities.
Properly selected, managed, and researched, these infantile niches will bloom in year two and beyond.
If the first niche of every advisory business is the adviser themselves, the second is more subtle.
It’s a fee niche.
Assuming advisers are building a comprehensive advice model, the next niche to focus upon is a fee niche.
A fee niche is a collection of clients where the commonality is not specific expertise, but a fee, specifically a common minimum fee.
Assuming a niche is profitable and not a ‘loss-leader’ for other areas of a firm, growing the range of niches before understanding how much clients value the firm’s advice will create an ‘activity niche’
An ‘activity niche’ creates more activity than returns or profits which defeats the purpose of establishing niches – to increase productivity.
This is true for both multi-adviser teams and solo adviser teams.
GENERAL PRACTITIONER NICHE
Some advisers, particularly solo-adviser firms, have no desire to ‘specialise’.
They enjoy the variety of their clients and rightly believe that being a ‘general practitioner’ is, in itself, a type of niche. These firms may have no need to pursue a specific ‘expertise’ niche (e.g. clients with aging parents, self-employed wealth accumulators), but they still need to master their unique fee niche.
Regardless of a firm’s destiny as a solo-adviser or multi-adviser firm, failing to understand, accept and implement a growing niche of new clients based upon growing minimum fees to match the firm’s growing expertise, experience and confidence will result in greater activity and reducing productivity, profitability, valuation, enjoyment and any work/life balance.
Niches are prolific.
The complexities needing advice can be a combination of behavioural (e.g. clients who are always too busy), situational (e.g. clients approaching retirement), circumstantial (e.g. clients who have lost their significant life partner), occupational (e.g. SMEs), locational (e.g. ex-pats), and technical (e.g. family businesses handling succession).
Niches are grown via a deliberate and methodical approach to research.
Existing clients, alliances, or networks and their recommended third parties are the research focus. Understanding the significant complexities that affect their financial lives, the causes of their complexities, how they manage their complexities, the consequences if complexities are left untreated are all starting questions for methodical research.
Like most productivity initiatives, the most significant factor determining the successful growth of niches is accountability.
Firms who focus too much on their first niche – where the advisers themselves are the niche – focus their accountability on the priorities of the clients rather than accountability to their own plan.
These firms struggle with niches, try many with most attempts failing simply due to the day-to-day pressure to deliver on daily accountabilities to clients.
Niches only work for firms willing to make their own plan the biggest priority.
Then they work really well.
What do you reckon?
Photo credit: Kat Smith: https://www.pexels.com/photo/close-up-photography-of-cows-735974/
ABOUT JIM STACKPOOL
For over 30 years, Jim has influenced, coached, and consulted advisory firms across Australia. His firm, Certainty Advice Group coaches, trains and is building a growing group of advisory firms delivering comprehensive, unconflicted advice, priced purely on value. The community of advisory firms aligns with Australia’s highest and only ACCC/IP Australia Certification Mark standard of comprehensive, unconflicted advice – Certainty Advice. He has authored four books regarding financial advice with his latest – What Price Value – launched in March 2022.