How financial advisors can identify and capitalize on a niche clientele

As an up-and-coming financial advisor, Samuel Deane was told he could not afford to pass up any potential clients. Deane thought the exact opposite.

"Folks are usually apprehensive about letting me in the room and me being at the table, right. So being the only black person in the room, being the youngest person in the room many times, I knew that I couldn't afford to go out on my own and be a generalist," said Deane, president and CEO of Deane Wealth Management in Atlanta. "I knew that I had to specialize in something."

Five years later, that decision has worked out well for Deane and his firm, which caters to millennials at technology companies. But pursuing a niche clientele is not without its challenges. 

Deane sat down with Anand Sekhar, the vice president of practice management and consulting at Fidelity Investments, and Tobias Salinger, the chief correspondent at Arizent, the parent of Financial Planning magazine, at Financial Planning's INVEST 2023 conference to talk about how to build a niche advisory firm from the ground up.

According to CEG Worldwide research, 70% of advisors surveyed said the effect of specialization on their income has been "tremendously or very positive." Clients with complex financial situations are willing to pay a premium to advisors with expertise in their field, Deane said.

Building that expertise starts with identifying a niche. For Deane, whose firm focuses on millennials in tech startups, that process underwent multiple iterations. 

"For those folks who are interested in building a niche, don't put so much pressure on yourself to figure that out from day one," Deane said. "Just follow your hunch and it'll come over time if you're doing the work."

But established firms wanting to pivot to a niche clientele might have a harder time, Fidelity's Sekhar said.

"If you are an existing firm, and then you're trying to pivot to do this, I think there's a bunch of challenges that emerge," Sekhar said. A generalist firm with pre-existing clients would have to not only change their entire marketing approach, but also implement a change management plan, he said.

Despite the challenges, the benefits are obvious for advisors like Deane. Defining yourself as an expert in your field not only makes you more valuable to your current clients, but makes you stand out more to potential clients. 

And carving out a niche makes maintaining that expertise easier. "I only need to know a lot about a little," Deane said. "And for me, that's building a really efficient and effective firm."

Finding a well-defined clientele helps guide nearly every aspect of an advisory practice, the panelists said. For Deane, his firm's focus influences the tech stack they use. 

"You can't have shiny object syndrome and just want any and everything," Deane said. "You have to really evaluate the needs of your firm and the needs of your clients and then find the best tech that solves that problem, not the other way around."

A niche can also help advisors create a more helpful "center of influence," Sekhar said.

"Historically, our industry has worked quite closely with accountants, attorneys, all sorts of individuals who complement what you might do as an advisor," Sekhar said. "But I think those are overtapped. And I think there's actually another set of centers of influence that are gonna be more relevant for your specific niche that you're focused on."