A Look at Advisors Serving Niche Clients

About 15% percent of financial advisors in the U.S. concentrate on a particular niche in terms of the clients they serve, according to research firm Cerulli Associates. These advisors, however, account for about 29% of all assets under management among those surveyed by Cerulli as of mid-2013. This really shouldn’t be all that surprising. Focusing in a particular area versus taking a shotgun approach to delivering a service allows you to become very good within your niche. Many of the basics of delivering investment and financial planning advice are the same or similar for all clients. But there are huge differences in the needs different clients. For example, a client approaching retirement will have far different advice needs than a millennial client. 

Life transitions requiring financial advice can include getting married or re-married, divorced, the death of spouse, the birth or adoption of a child, retirement and inheriting money among many other life situations. Financial advisors can easily focus on one or more of these niches. Advisors like Atlanta-based Russ Thornton and Oakland, Calif.-based Cathy Curtis both focus their practices on working with women in general including those in transitions such as widowhood and divorce. These niches require specialized knowledge and people skills. (For more, see: Financial Advice for People ‘In Transition'.)

Some investors want their investments to reflect their beliefs. Socially responsible investing (SRI) is a small but growing niche for financial advisors. SRI can take many forms. Clients may want to invest in companies that support the environment, they may want to stay away from companies that are defense contractors or perhaps companies that make products that promote abortion and birth control.

There are a growing number of financial advisors focusing on this niche including Kathy Stearns and Shane Yonston. Stearns works exclusively in this area and indicates that her clients didn’t know they could “…invest in a way that makes them feel good about being and investor.” Yonston works exclusively with SRI mutual funds and money managers for her clients. (For more, see: Big Money Is Moving to Socially Responsible Investing.)

SRI investing is also done by the foundations and endowments of organizations that want their investments to promote certain ideas or to stay away from areas that are contrary to the organization’s beliefs. These might be religious organizations for example.

A more focused life transition is the growing trend of people getting divorced at age 50 or older. The issues are substantial here. There are retirement assets, often other assets such as a home and perhaps a business, pension plans and many others to deal with. By this stage of life many couples have accumulated sizable wealth and wherever there is money involved the situation can become complicated. According to the National Center for Family and Marriage at Bowling Green State University about one in four divorces involves a couple over 50. This has doubled over the past 20 years. (For more, see: Divorcing? The Right Way to Split Retirement Plans.)

Solid financial advice for those divorcing after 50 can mean the difference between a comfortable retirement and the alternative. Financial advisors can help one divorcing spouse figure out the best financial settlement for them and also help them move on financially post divorce. Sometimes advisors will work with both spouses to help devise an amicable financial solution and avoid a costly legal battle. 

With the increasing acceptance of gay marriage as well as increasing access to benefits for gay spouses and same sex partners the need for specialized advice to LGBT clients is increasing. These clients have the same needs as straight clients such as investing, retirement planning, estate planning and the other areas traditionally covered under the financial planning umbrella.

The difference is that the rules are often different, complex and inconsistent especially from state to state. A recent Wells Fargo & Co. (WFC) survey indicated that 83% of LGBT investors didn’t fully understand how federal and state rules applied to their situation. The survey went on to say the 74% of LGBT clients would like to work with financial advisors who had other LGBT clients and 675 said they would seek out an advisor who was specially trained to deal with the issues facing same sex couples. (For more, see: The Risky Business of Courting LGBT Customers.)

In evaluating a potential niche financial advisors should ask a few questions. Am I passionate about helping these clients? Am I interested in this niche? Do I have the required knowledge to help these clients?  Will this niche be profitable for me? 

Then consider the niches that may be the best fit, such as specific professions (doctors, pilots, foreign nationals), income-based groups, life transitions (divorce, widows/widowers), a speciality (healthcare, municipal bond investing) or minorities and age groups.

For example, working with millennial clients is a growing focus for many financial advisors. Millennials are one of the largest demographic groups and at the point of entering stages of life and career growth that will increase their need for financial advice. In looking to work with these clients advisors need to understand the unique needs and characteristics of this group and the fact that it might be a few years before they have significant investment assets either via their own earnings or an inheritance from their Baby Boomer parents. (For more, see: Money Habits of the Millennials.)

For financial advisors focusing all or a portion of their practice on a particular client niche can be a rewarding and profitable endeavor. For clients seeking financial advice it is often comforting to know that their financial advisor understands their unique situation and has helped clients in similar situations. (For more, see: Financial Planners: Specialize in Seniors.)