Choosing a niche helps identify the ideal prospect
February 13, 2012 — 5:58 PM UTC by Guest Columnist, Maria Marsala
It’s a costly and hard-learned lesson in the advisory business: declining to work with an interested prospect who neither fits your ideal client profile or qualifies as a “B” or “C” client. This may be counterintuitive, but indiscriminately accepting clients generates frustration, costs you money, and wastes a lot of your time. See: Schwab encourages RIAs to adopt client segmentation but some don’t approve.
Alternatively, choosing a specific niche of clients and becoming an expert in that realm is more pleasant—and profitable. Think about it in terms of quantity versus quality. The extra revenue generated by less-than-ideal clients is usually not enough to cover the extra costs associated with servicing those accounts. Your time is better spent serving your special client niche. See: Cerulli report: Specialized RIAs likely to win middle-market 401(k) plan battle.
A point of definition here: niche versus ideal client. A niche is a general category describing income, life stage, business or profession, interest or passion—high-net-worth individuals, small-business owners, divorced executives, health enthusiasts, empty-nesters, or Generation X and Y investors. Your ideal client fits very specific criteria that you set based on who you can serve best. While an ideal client profile may contain demographics such as gender and income, it also includes values, passions and personality characteristics. See: Top 10 ways financial advisers can 'market smarter’ — and enjoy it more in 2012.
Characteristics of 'ideal’
How do you know if you have ideal clients? Here are six behaviors exhibited by ideal clients, no matter what your niche is:
• They have done their homework and are ready to hire someone.
• They don’t quibble about service fees because they value your skills.
• They’re your biggest fans and spontaneously provide testimonials.
• They love working with you and automatically refer you to others.
• They return to you when they have additional needs for your services.
• They share something in common with you, making it easier to build long-standing relationships.
Choose your niche and stick with it. As in any industry, advisors have a hard time being jacks-of-all-trades. If you don’t choose a niche, you’ll constantly have to learn the ins and outs of serving many types of clients—perhaps a broader array than is practical. For example, you may find yourself cramming to familiarize yourself with different industries, marketing segments, consumer profiles, business owner levels, and so on.
Drive you nuts
While a change of pace is nice and keeps you sharp, constantly operating this way will drive you nuts (read: wasted time and energy). More important, you won’t become recognized as an expert in one key area and won’t be the go-to gal or guy in that area, either. It makes sense to specialize in one type of client.
You can target people who work in a specific job or profession, belong to a certain age group, or have entered a particular life stage. You can also create your niche by identifying your top five passions. Determine which of your passions most easily affords you the opportunity to meet and speak to many others who share that passion. Then, specialize in working with them. See: What Meg Green was thinking when she purposefully shed $40 million of assets.
Here are 10 reasons to limit yourself to one niche and one type of ideal client:
1. You’ll learn and master the communications that perk up their ears. After working with a category of client for a little while, you’ll recognize patterns. They’ll have the same “pain points,” those aggravations of life that prompt people to take action. They’ll often use the same words or phrases to describe their situation. Use those pain points in your marketing and prospects will know you get them and will be more likely to contact you when they decide to act.
2. You’ll attract new clients as you construct a better marketing funnel with relevant free articles, newsletters, blogs, etc. When you focus all your marketing materials on your niche, you create an entire sales system that answers common questions and addresses possible objections. Your customized sales system will predictably guide them through the buying process. Plus, paying to have compliance- or FINRA-approved marketing materials becomes easier when you choose companies specializing in your niche.
3. You’ll be more confident speaking in front of your prospects. When you understand your prospects’ challenges and goals, you can present solutions to them with little hesitation. You won’t be as afraid of being stumped or looking stupid. Of course, if you don’t know the answer, follow up with them; however, your familiarity with your ideal clients’ issues will make it easier for you to address all their concerns—and position yourself as their best option. See: One size doesn’t fit all, or how advisors ought to adapt their strategies for their clients’ behaviors.
4. It’s easier to develop other products/services for your clients (and new revenue streams for your business). Your close connection with your niche will reveal ways to serve clients better. The relationships you’ve grown with your ideal clients also provide a forum to launch new product and service initiatives. Run ideas past your clients to gauge their interest.
5. You’ll use your networking time more strategically. One of the time- and money-saving advantages of developing an ideal client profile is the ability to quickly pinpoint networking groups and associations worth joining. Your criterion is simple: Either the group consists of ideal clients (and referral partners who can connect you to ideal clients), or it doesn’t. Your return on investment for networking will improve dramatically after running that single litmus test.
6. You save money and convert more clients when you laser-focus your message. There’s a saying that goes, “Only half of your marketing works. You just don’t know which half.” Unless you have an unlimited budget, you must choose only a few of the marketing and networking vehicles available. Having an ideal client profile facilitates wise and somewhat scientifically based choices, based on your clients’ demographics, geographics, technographics, and other preferences. Knowing these things will help you choose the best media. Knowing your clients’ needs and pain points, as we’ve already seen, helps you formulate your message.
7. Your ideal clients associate with others who are like them (which generates ideal referrals). People who socialize with each other often hold the same values. So it’s likely that your ideal clients associate with others who would equally enjoy your services, and exhibit the traits of an ideal client. This group of clients will always refer business to you and become a critical and almost automatic source of word-of-mouth advertising.See: Advisor Spotlight: Diane Pearson is building Legend Financial with sensitivity to women.
8. You’ll be happier working with people who value what you’re offering. Review the traits of the clients listed above. Imagine working with clients like that every day. Choosing a niche isn’t just about attracting more clients. It’s about attracting quality clients. But it’s not a one-way street. You’ll actually serve them better. Not only will your business prosper, but your clients will appreciate the difference you’ve made in their lives.
9. You’ll become known as an expert more quickly. The concept of choosing a niche is nothing new; however, many businesses are afraid to say no and struggle to be everything to everyone. Concentrating on your niche, by itself, will make you conspicuous in the marketplace. Quite frankly, as humans we are self-centered — always plotting solutions to the problems that plague our minds. It’s in our nature to shift our attention to a custom solution.
10. Bottom line, your business will be more successful and you’ll be paid more.
Action step: Look at your client base more strategically. You know that list of clients your assistant knows to always put through, no matter what? Chances are, that list contains your ideal clients. So open up a new spreadsheet (or get some paper). At the top of each column, list 10 of your best clients. Underneath each name, list why you enjoy working with them and include the things that you have in common with them. Voila — you’re starting your ideal-client profile.
Maria Marsala is a former Wall Street trader who specializes in helping registered representatives and advisors increase their productivity and production. Maria’s Empire Builder Kit is available at Elevating Your Business.
More articles by Maria Marsala:
Top 10 ways financial advisers can 'market smarter’ — and enjoy it more in 2012
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