If you’re looking to build your business, you might want to try focusing on a specific target market and carving out a niche for yourself.
“The better you know the investor, the better their investment outcomes are likely to be,” Don Phillips, managing director with Morningstar, said during a panel discussion at Morningstar’s 2020 Investment Conference on Wednesday.
As an advisor, you have to be “a generalist” when it comes to investment options for your clients, Phillips noted. “But on the client side, you can be focused on one niche and know that niche really well,” he said.
Cathy Curtis, the owner of Curtis Financial Planning in Oakland, Calif., described herself as a “true believer in niching” during the panel discussion.
When Curtis first launched her business as an independent investment advisor, she didn’t target a specific type of client, but she eventually shifted her focus to “single, independent breadwinner women.”
“When I decided to shift my focus to women and brand my marketing to appeal to women, my business took off,” Curtis said. “I would advise any advisor coming into this business to choose a target client and go after it.”
Different types of clients have their own unique needs and objectives for their investment portfolios, noted Alan Moore, co-founder of XY Planning Network, a support network for advisors serving Gen X and millennial clients.
Younger clients, for example, are often interested in responsible investment options and want to “see their own values reflected in their portfolio while also being able to accomplish their financial goals,” Moore said.
Women, Curtis noted, are typically “more interested” in environmental, social and governance (ESG) concerns than men are — and it’s now easier than ever to build portfolios that align with their values.
“It’s so much easier to build an ESG portfolio that is well-diversified now than it was years ago,” Curtis said. “It’s entirely possible to build your whole investment philosophy as an advisor around ESG.”
But serving your clients isn’t just about finding them the right products — it’s also about charging them the right fees. Younger investors, Moore said, are often better served by fee-only service models, rather than by being charged a percentage of their assets under management (AUM).
“We’ve historically said that young people don’t have enough money to pay for financial advice, but that wasn’t true — what they didn’t have was enough assets to base an AUM fee on, but they had income and cash flow,” Moore said. “What we found is they’re willing to pay for financial advice — you just need to have a business model that serves them.”
Moore also noted that charging clients a monthly fee rather than a percentage of AUM can help make financial advice accessible to traditionally underserved demographics such as Black and Hispanic communities, which have a disproportionately small share of household wealth in the U.S.
“Opening up a business model that allows clients to pay $100 or $200 a month out of cash flow vs out of assets they may not have [has] opened up an entire population for us to be able to work with,” Moore said.