For financial advisors in a crowded market, standing out is always good.
Being a go-to specialist is even better.
That’s why, as Michael Kitces puts it, “more than ever,
So how are advisory firms actually building their niche practices?
Here’s an inside look at four RIAs who have built up expertise in areas as diverse as professional baseball, Microsoft deferred compensation plans, the oil and gas industry and transitioning to a new stage of life.
Firm: AWM Capital
HQ: Scottsdale, Arizona, Pasadena, California
Niche: Professional baseball players
Percentage of clients: Approx. 85%
When they opened their new firm last year, Brandon Averill and his brother Erik didn’t have to spend a lot of time figuring out what their niche market was going to be.
As collegiate and minor league baseball players, they had been immersed in it for years.
Brandon played for UCLA, was drafted by the Houston Astros and played third base for the minor league Tri-City Valley Cats in Troy, New York and the Gateway Grizzlies in Sauget, Illinois. Erik played for Arizona State, was drafted by the Detroit Tigers, later signed with the Seattle Mariners and pitched in the minor leagues for three years.
“We looked at our teammates and noticed that the advice being given athletes was not what it needed to be,” Brandon Averill says. “We realized the model was broken.”
Tax and estate planning for ball players — along with any basic understanding of personal finance — was in short supply, the brothers recognized.
“Whoever was advising the players didn’t want to spend the time educating them,” according to Averill. “Planning wasn’t being done for the long term.”
To remedy the situation, Erik joined Morgan Stanley in 2009 and Brandon joined him a year later. They quickly moved on to start a wealth division for athletes at a Southern California independent broker-dealer and spun it out to form AWM Capital in Pasadena, California, last year. The acronym stands for Athlete Wealth Management.
“Our model was a multifamily office,” Averill says. “We wanted to focus on advice and holistic planning. We look for players who will earn more than $25 million over the course of their career and want to make good decisions. We will walk away from a player who will make $100 million and will blow $100 million.”
"We will walk away from a player who will make $100 million and will blow $100 million,” says AWM Capital's Brandon Averill.
The Averill brothers get referrals from agents, but prefer to acquire new clients by word of mouth from other players, according to Averill. And since their clients travel constantly during the baseball season, so do Erik and Brandon.
“We bring the office to them,” Brandon says.
Players from Latin America remain an underserved market, Averill says. Besides the language barrier, many Latin players lack knowledge about investing in the U.S. and distrust their home governments, he adds.
Instead of getting financial advice from experts, professional baseball players of all nationalities tend to look for advice “from guys who make more than they do,” Brandon says.
“These athletes are busy performing at the highest level of their sport,” he adds. “They need to be educated about finances, and we decided to take the leap to play the long game.”
Firm: Avier Advisors
HQ: Bellevue, Washington
Niche: Microsoft employees
Percentage of clients: Approx. 10%
Dave Welty knew he had to make a change in 2013 when prospective clients came to his office and asked if they were in the right place. Especially since those prospects happened to be well-heeled Microsoft employees.
Welty’s firm then bore the un-captivating name Retirement Asset Management, which worked just fine for its many telecom executive clients, who either had retired or were planning to do so.
But if Welty looked out from the windows of his Bellevue, Washington, office, he could see six office buildings filled with Microsoft executives and staffers — most of whom were not about to retire — and who just might represent his firm's future.
“We realized we had to redefine who we are,” he recalls.
To do so, he made three changes: He hired a public relations firm, started hiring younger advisors and became an expert at untangling the ins and outs of Microsoft’s complicated deferred compensation program.
The PR experts helped change the firm’s name to the snazzier Avier Advisors three years ago. When it came to the age of his colleagues, Welty, who is in his 50s, brought on people in their 20s and 30s who he felt the nearby tech executives could relate to.
Avier Advisors sent about 6,000 Microsoft employees a free educational video explaining the firm's 401(k) plan.
He also made sure the staff could analyze how Microsoft’s stock grant election and vesting rules worked, among other fine points of the software giant’s compensation plan.
“There’s a lot of moving parts,” Welty explains. “If a client is deferring long-term compensation, we’ll run a cash flow needs analysis, to see where money can come from for short-term needs.”
Next, Avier began an aggressive marketing campaign via LinkedIn.
In January, the firm sent about 6,000 Microsoft employees — selected according to their pay grade — a free educational video on Microsoft’s 401(k) plan. The video focused on the issues the employees should expect to encounter upon their next promotion.
Thus far, around 800 Microsoft employees have accepted the LinkedIn connection and about 15 have become clients, Welty says. The firm anticipates adding over 20 new Microsoft clients by the end of this year, and double that next year.
“We focused narrowly on a subset within the company and wanted to become the expert resource for those folks,” Welty says. “We think we’re just scratching the surface.”
Firm: Castleview Wealth Advisors
HQ: Oklahoma City, Oklahoma
Niche: Oil and gas executives
Percentage of clients: Approx. 30%
Targeting oil and gas executives as a niche market in Oklahoma City wasn’t the hard part for Kendall King, CEO for Castleview Wealth Advisors.
After all, oil and gas is one of the leading industries in the state and Oklahoma City is headquarters for a number of companies connected in some way to drilling and exploration of the fossil fuels.
What Castleview had to adjust to was the industry’s volatility, King says.
“There’s a lot of uncertainty,” he explains. “It’s an industry with a lot of ups and downs. An executive can be in demand one day and then can’t get a job the next.”
As a result, he says, executives in the industry are continually worried about the next downturn. To make its niche practice work, Castleview had to be able to adjust its advice accordingly.
Oil and gas executives tend to be “over optimistic about their own companies,” says Castleview Wealth's Kendall King.
“These folks know how to make money,” King says. “They’re not so much return-focused as they are interested in how to preserve what they’ve made for the down periods and retirement.”
Although Castleview stresses diversification, it can be challenging to get oil and gas executives to buy in because they tend to be “over optimistic about their own companies,” King says. “We want them to understand that there are alternatives for their portfolio.”
In addition to word of mouth from clients and references from local CPAs and attorneys, King is regularly interviewed in the Daily Oklahoman newspaper about oil and gas issues, which has bolstered his credentials as a local industry expert. And a recent hire, Drew Garner, has a graduate degree in petroleum engineering.
“It’s helped create a level of authority,” he says.
Castleview has also expanded its service offering to older oil and gas executives who have been forced out of their corporate jobs.
“We saw that they needed to become consultants and form an LLC,” King says. “They don’t even know where to start. So we’re helping them incorporate and learn how to run their own business.”
Firm: The Planned Approach
HQ: Kansas City, Missouri
Niche: Wealthy — but cautious — clients in transition.
Percentage of clients: Approx. 97%
In 2007, with a full plate of nearly 700 clients, The Planned Approach, was anything but a niche practice.
After launching the firm five years before, co-owners Stephanie Guerin and Kelly Hokanson, who with their respective spouses both had young children at home, realized that they were doing “too much for too many people,” Guerin says.
The two principals hired a consultant, who advised them to identify their 30 best clients and why the women liked working with them.
From this practical starting point, a niche was born.
“We realized our best clients had a similar personality type: they were true stewards,” Guerin says. “They had more money than they needed to spend. They had a mission. They were concerned about family or charitable organizations — and they wanted to learn.”
Put another way: “If you were a spendthrift, you probably wouldn’t be a good fit for us,” Guerin says.
Accordingly, people undergoing life transitions who had a conscientious approach to their wealth (and at least $2 million in investable assets) became The Planned Approach’s target market.
That group includes widows, divorcées, retirees and business owners liquidating their holdings.
“If you were a spendthrift, you probably wouldn’t be a good fit for us,” says Stephanie Guerin, partner at The Planned Approach.
Widows and divorcées who haven’t had to handle money on their own are often pressed to make decisions they are unprepared to undertake, Guerin notes.
“We want them to make as few decisions as possible,” she says. “They can take their time. The point is to make better decisions, not quick decisions. We want to educate them and give them time to learn. Planning is the priority. We spend very little time with portfolio design.”
Retirees and those planning for retirement are also urged to take their time, as much to figure out what to do with their newly free time, as to construct the best model portfolio.
“We’ve seen too many people become bored, depressed or lose purpose when they retire,” Guerin says. “We want to help them get through that.”
Investing and tax planning, however, is a priority for clients putting their business up for sale.
“Business owners spent so much time focused on their business, they need help in how to invest in the market and how to plan for the future,” according to Guerin.
Attorneys and accountants in the Kansas City area have helped spread the word about The Planned Approach’s emphasis on patience, sharing knowledge and strategic planning for clients in transition, Guerin says.
The advisory firm now has around 100 clients and aims to add four or five new clients a year.
“We’re not a rapidly growing firm,” Guerin says — happily.
