Many financial advisors have found that serving a client niche not only helps them run a more efficient firm (as they work with clients facing similar planning issues), but also attracts more new clients (as they are able to offer a unique value proposition for clients within the niche). Notably, though, while certain clients are likely to stay within the niche throughout their lives (e.g., retired clients tend to remain retired until their deaths), other clients might ‘evolve’ out of the niche (e.g., clients going through a divorce will eventually finalize the divorce, and perhaps remarry in the future). Which raises a question for these advisors of whether (and how) to continue serving clients who no longer fit their niche.
In our 124th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the options for advisors with clients who no longer fit their niche, why choosing either to stick with their niche or to change their niche to meet the needs of their clients can be workable options for advisors, and how electing to do both can lead to inefficiencies.
Advisors who have worked with a specific client niche for several years might find that some of their clients no longer fit the niche, leaving the advisor with several options. First, the advisor could change their niche to meet the shifting needs of their client base. For instance, an advisor working with tech employees whose company is going through an IPO might find that many of these individuals switch fields or retire early, creating a different set of planning issues to address. In this case, the advisor could change their niche service and marketing focus to target early retirees in order to more efficiently serve current clients in their particular situation (of no longer needing IPO support and beginning to consider available retirement options) and also to attract new ones.
Where advisors might run into trouble, however, is in trying to work both with clients in their previous niche as well as with those in the new niche. Because doing so can come at the cost of efficiency in terms of both serving clients (as the advisor will be facing a wider range of planning issues) and marketing (as the advisor might seek to attract clients in both niches). Which suggests that while an advisor might choose either to stick with their previous niche (and perhaps move on from clients who no longer fit it) or to shift their niche (to continue serving current clients and attract clients within this new niche), trying to do both might be less effective.
Ultimately, the key point is that for advisors who have leveraged a client niche to build their client base, being intentional about how to serve these clients as their planning needs shift can allow advisors to continue reaping the efficiency benefits of niching – even if that niche changes over time!
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