7 Reasons Why Financial Advisors Need A Target Market
NOTE: If you’re a new financial advisor, make sure you check out Your First Year As A Financial Advisor, where I reveal several things every new financial advisor ought to know.
“Cast a wide net – the more people you prospect, the more business you’ll get.”
This oft-repeated advice has circulated among financial advisors for years. Advisors fear that if they pick a particular target market they won’t get as many clients. Their fears keep them from committing to a specific target market and getting more business.
According to CEG Worldwide research, 70% of top financial advisors (those earning $1M or more annually) focus on a particular niche.
Why does focusing on a target market improve an advisor’s chances of success? Here are some reasons:
1. You’ll actually get more clients.
At first glance, casting a wider net to get more business seems like a good idea. You think that if you just double the number of people you speak to, you will double your income. While that may be true, you will also be working twice as much. Is that really the goal?
Choosing a particular niche allows you to convert a higher percentage of the people you prospect, because you will have a stronger connection with them. If your prospect is a doctor and has to choose between a generalist (who works with everybody) and you (who only works with doctors), it’s an easy choice.
Having a clear focus on a certain target market will ensure that once you get in front of people in your niche, the fit will be so obviously perfect that the likelihood of converting is much higher. The whole point of having a niche is to be so clearly differentiated in the marketplace that working with you is the only right decision.
2. You’ll work smarter, not harder.
When you focus your business on a particular niche, you soon discover that people within your chosen group are very similar. Since people in a particular niche share the same hopes, fears, and financial concerns, you will soon know every objection, problem, and concern that your target prospects have. Eventually you can design systems, including prepackaged solutions, to help deliver your services more efficiently, further increasing your income.
One of my consulting clients was having great difficulty in finding the time to prospect for new business. When I told him he should spend at least two (preferably four) hours per day prospecting, I thought he was going to have a panic attack. Trying to calm him down, I asked what he did all day. Do you know what he told me?
He said he did research all day. He dug himself into a hole and was desperate to get out. All of his clients had different circumstances and problems, so he was constantly spinning on a hamster wheel, trying to keep on top of their changing needs.
Wouldn’t it be so much easier if the bulk of your clients were in the same industry, with the same goals, the same concerns, the same investment products, and the same service needs? When you do this, you save precious time that you can use to scale your business. If you're a financial advisor with the dream of working less and earning more, you need a well-defined target market.
3. Prospecting becomes easier.
80% of a typical salesperson’s time is wasted talking to poorly qualified or unqualified prospects. When you target a particular group, you can spend most of your time talking with highly qualified prospects who have clear potential to become clients. After all, you will be positioned as the go-to person for that particular industry.
If you only work with educators and your put that on your business card, your website, and all of your marketing materials, you will attract educators. This is the “client attraction” type systems that advisors dream about.
When you become clear on your goals, the path to achieve them usually becomes clearer as well. Rather than trying to get leads from anywhere and everywhere, if you only focus on a particular group, you will instantly make your list that much more qualified. Is this person a doctor or not? Is this person a corporate executive or not? And because your conversion rate will probably be higher (tip #1), your prospecting time will become much more productive.
4. You get more referrals.
When you specialize, word of mouth spreads a little faster. People within your target market will feel special that they’re working with you because of your reputation in the industry, and they will start to share it. And guess who they’re going to share with? Other people just like them!
If you work with physicians, guess who physicians spend time with? Other physicians – they go to trade shows, hang out at the same country clubs, and even work in the same building. Plus, asking for referrals becomes way easier. Your client won’t have to do any mental gymnastics to refer you because he/she will quickly qualify friends/family based on your target market.
5. You’ll have less competition.
Once you have a niche, you become known as the go-to expert in that area. I told you that word of mouth spreads a little faster to get you more referrals, but this also builds your reputation as the trusted resource. Your competitors simply won’t be able to compete once you’ve positioned yourself so well.
Simply by narrowing your focus, you will reduce your competition because there will be fewer people offering the same thing. There are tons of generalist financial advisors. They work with anybody with a pulse. On the other hand, there might only be a dozen advisors in your state who work with your niche. I’d rather compete in the smaller space because it allows me to have fewer overall competitors and keep a close eye on the competitors that I do have.
6. You can use case studies.
Case studies create the most powerful marketing stories, especially during a presentation. In 37 Sales Tips for Financial Advisors, I talk about how to make your prospects feel like they’ve already shopped around. Service industries don’t usually have a “try before you buy”, which causes a lot of uncertainty and resistance. Case studies are the best way to give potential clients the sense of having taken a test drive.
The best way for people to understand how you can help them is to hear a story about someone just like them. Once you have a niche, crafting this story becomes much easier. You can tell your prospects a story about how you helped someone in their niche. If they like what you did for the person in your story, they’ll ask if you can do the same for them. A case study makes it easier for prospects to do business with you.
7. You’ll have more fun.
Your business should serve you, not the other way around. Ideally, your niche should arise from your interests and passions. When this happens, you will be doing more of what you love. Your goal should be to build your business by design. Picking a niche is a big step in that direction.
Whether your business serves only your niche or a niche among others in your book of business, the idea is the same. You want to find a small pond in which you can become a big fish. If you pick an area to focus on, you can concentrate your efforts and stand out in your market.
Curious to know the best target markets for financial advisors? Check out this post: 5 Best Niches for Financial Advisors
P.S. If you're a financial advisor who wants to get more clients from LinkedIn, make sure you check out How to Get Clients With LinkedIn: How Financial Advisors Can Set Appointments and Convert Prospects With LinkedIn