Much like the medical and legal professions have done in the past, wealth management continues to get more specialized. That creates many opportunities that are truly exciting. Finding the right niche allows you to streamline your services and scale your firm’s growth more easily. However, there is work to be done before you can claim to be a financial specialist within a niche.
On this episode of Elementality, Reese and Matt talk about the allure of niche markets. Many advisors see the benefits of a niche but believe it merely requires targeted marketing. From his experience with his own RIA, Reese explains why, to find success, you actually need to become an expert at the financial jobs within that niche.
Podcast Transcript
Reese Harper:
The point here is, we have a job map that is easier to build in a concrete job, it’s easier to build if you know who you’re building it for. And too many niches aren’t actually getting down to that homogenous clientele. They’re just marketing, that’s it. And a niche is not… You don’t do a niche just to market. It’s actually less about marketing and more about really delivering a service that’s of value.
Jordan Haynes:
Welcome to Elementality. I’m Jordan Haynes, Financial Planning Specialist at Elements. Each episode, Reese and Matt will discuss major challenges faced by financial advisors and the things they can do to navigate the complexities of delivering quality financial advice to clients. We hope you enjoy this episode.
Reese Harper:
Welcome to another episode of Elementality, everybody. I’m your host, Reese Harper, here with Matt Glazer, ready to rock and roll on another episode. How’re you doing, Matt?
Matt Glazer:
Good, Reese, how are you?
Reese Harper:
Just loving breaking up my day in between a million other things to record a podcast episode for our audience. It’s always fun.
Matt Glazer:
Reese, what is skiing like on the West Coast? Help me sitting outside of Philadelphia, seeing Vermont getting dumped on and Utah getting dumped on. Just bring me there.
Reese Harper:
[chuckle] Oh man. Dude, this could be a fun weekend. I think the cabin is ready to have visitors. I’m already planning my food. I think we had… I don’t know if we got a foot today, but it was close. It’s just we’re sitting on probably 112% seasonal average right now, slightly above the norm.
Matt Glazer:
Has a raptor been challenged to get to the cabin yet?
Reese Harper:
It has been. [chuckle] It’s been nice. I like giving it a chance to slide around a little. This morning is a little icy. Yesterday it snowed. This morning, it snowed a little bit, but it’s awesome right now. Actually just like it’s so super sunny and blue skies, but good base, and it’s gonna be a groomer weekend, like gorgeous groomer weekend, for sure. But little bit of powder in the trees, probably still a foot. So if you wanna fly out, man, I told you you could have my sky miles, but just you gotta convince your wife and kids to let you go. That’s a bigger challenge.
Matt Glazer:
Yeah, let’s put that one in the parking lot for now.
Reese Harper:
[chuckle] Okay, so today’s conversation is more around practice management. You guys know we love diving into nerdy financial planning topics. Today, we wanted to talk a little bit about practice management, marketing and positioning. For those of you who don’t know and are tuning for the first time, Matt and I both have experiences in RIAs. Matt’s been a manager at an RIA and worked with his own clients, and also was a Product Manager at eMoney prior to this. And I was the founder of an RIA called Dentist Advisors, that is kind of a niche RIA that has dentists in, I think, every State in the US now. And we are headquartered here in Salt Lake and expanded out from there. And one of the things that has been interesting for me is to kinda see what different types of niches people pick. And really exploring that deeply to determine if I was gonna launch another advisory firm, what niche would I pick next, if I was gonna do something besides dentists? And I learned a lot in picking a niche the first time and learned a few things, Matt, that I think would be helpful to share with people today, so one of the things I wanna start with here is the different types of niches that you’ve seen people create. What’s one type of niche you can think of, Matt, just like an example of a niche market that you’ve seen?
Matt Glazer:
Yeah, a good one, and maybe this is more recent than not, but high-tech employees, software engineers at large technology firms.
Reese Harper:
Yeah. So that’s a good example to pick on. In that specific example, I think you could actually… There’s two different options for how to carve out your niche right there. Are you going to carve out your niche in an occupational format, like tech employees at high-growth software startups or software company employees? That’s occupational. Or are you gonna kind of go product-oriented, like ISOs, stock option packages, executive tech comp? Those are different types of ways to break apart even that one practice.
Matt Glazer:
There was one other one in there that I was thinking of too, and this was from a personal experience of mine, and that could be role-based, meaning your role in an organization. So I was trying to… I had a friend of mine that I was trying to get to come over to us as a client, and ultimately he went with a firm who specialized only in founders of early stage, Series A stage, Series B stage startups. And all of the things they’re face… All the challenges they’re facing as business owners, like setting up equity comp plans in their company for their employees, issues particularly germane to their role. So I think role-based is another way to think of it.
Reese Harper:
I think those are really interesting. Another example that I can think of is… I’m just gonna list all the examples, I’m not gonna talk about whether they’re strong or weak yet, okay? We’re just gonna get all the different options out there. Another one I can think of, Matt, is geography. I know a firm that’s… That’s Chicago’s premier wealth management firm, they’re like, that’s their brand, that’s their positioning, is that they work with people in Chicago. What’s another example of a type that you can think of that’s maybe if there’s anything else out there floating?
Matt Glazer:
Well, I wanna hang there for a second, because I feel like geography was probably the original niche, to some degree.
Reese Harper:
Yeah, it’s the OG, yeah. [chuckle]
Matt Glazer:
I’m the most fun in my community, and I think it’s definitely… Obviously, a use niche today and a viable niche in many cases, but I’m interested into maybe your thoughts and really the history of DA in this regard, like you could have easily been for dentists in Utah, and that would have way more niche down than for dentists nationally.
Reese Harper:
Yeah.
Matt Glazer:
For example, help understand though the… At least for you, ’cause I’m sure it’s there for everyone, but as you see it, the benefits and detriments of niching down by geography.
Reese Harper:
Well, I had a friend, when I first started picking dentists, I actually wasn’t thinking outside of Utah, I was a State registered RIA at the time, probably had 20 million of AUM, and most of it wasn’t dental. This is probably ’09, 2010, maybe ’08 even when I was contemplating this. And if I’m honest about it, like it did evolve because I didn’t have any external marketing and I was just doing referral-based marketing, like it did evolve locally more quickly because I didn’t have a podcast, I didn’t have content, I wasn’t like putting a brand out there, I hadn’t committed to investing in that niche, I just thought, well, when I’m asking for referrals I’ll ask for referrals into dentists, and that happened to be in my local region.
Reese Harper:
But before picking dentists, I did have a chance to look at, am I going to be in Salt Lake City, am I gonna just try to be the premier independent fee-only RIA. And I tried that. I didn’t have a brand that said “Salt Lake City’s premier RIA.” My original brand was called “Acquire Wealth,” and it was really just a generic brand, and I was just kind of positioning as a local high net worth, a great option, and very quickly… [chuckle] I mean like it was probably ’cause ’08 happened and ’09 happened. I saw the writing on the wall for me really quickly, like you’re gonna die if you don’t start picking who to go after, ’cause you’re a 20, young 20-something advisor with no reputation and you’re not gonna make it. Now, looking back, I guess I just wanted to kind of disclose that journey because I think it’s instructive for someone who’s struggled that I didn’t go out of the gate, like knowing what to do and what to pick. Dentist Advisors is a very successful firm today and growing faster than it’s ever grown, like we’ll add more clients this year than I added in my first, probably seven years of operations.
Reese Harper:
But it started with some mistakes around thinking that there was a way to niche down in a general category like business owners. And a general or a general region like Salt Lake, I wouldn’t say it’s always a mistake, but if you’re really being honest about it, if you already have a firm today, I think it’s very different than if you don’t have a firm today; and you’re building from scratch because it’s more competitive, more specialized, just like the medical industry went from general practitioners to dozens and dozens of specializations, you’re gonna see that with wealth management. And, I just don’t think that there’s as many… There’s not as much traction in every type of niche today, and for a very specific reason.
Matt Glazer:
When, we’re jumping ahead here to the space where you’ve already picked a niche and niche down, I think we wanna fill in the gaps here in terms of finding the right niche and I know you’re biased towards occupational niches versus a geography, I wanna get to that conversation, but let’s fast forward for a minute, you’ve niched down, you’re now not in ’08-’09, you’re now in ‘013-‘014. And now you have a pretty heterogeneous book of clients. You have your core set that would fit the niche, and then you have everyone else we’ll just call legacy. How do you reconcile that disparity? Do you just live with that disparity for a while and the inefficiency of that? Or do you proactively address it and try to fit people back into a box? Do you funnel those people? Help me understand how you might have… I mean you probably have the same issue. Help me understand how you address that at that point of time…
Reese Harper:
Well, it’s probably just naturally… This is a great, this is a great segue to the conversation, ’cause the thesis here that I have is: The best niches are the ones that allow you to understand the jobs that the client is wanting to get done. The best niches are the ones that clearly allow you to gain understanding of the unique jobs, the end client’s trying to get done. And, if your niche doesn’t actually get you to a similar type of person, a similar or homogenous type, then you won’t learn the jobs ’cause I’ll tell you today, I’m still learning what the jobs to be done are for dentists. And they’re evolving, like they’re evolving, now there’s this job of…
Reese Harper:
Let’s say assess or examine the proposal from DSOs who are trying to acquire me, that job to be done is a new job inside of the dental niche that was not a job that I was handling in ’07, ’08, ’09 ’cause there was no consolidation of the dental industry. I could give you 10 jobs that have appeared in the last two years and I am… My firm’s at the forefront of knowing how to identify those jobs. We’re getting those jobs exposed to us, then we’re building job maps to handle those jobs, and then we’re understanding the customer’s desired outcome from those jobs to be able to communicate those in our marketing, and so we’re just like freaking… We’re writing articles on it, we’re publishing podcasts on it, on the job.
Matt Glazer:
Well, and not to mention, executing against those jobs at scale more efficiently.
Reese Harper:
Yes. And we have efficiencies, we have better revenue metrics, so we’re increasing our revenue, we’re decreasing our cost internally, and we’re creating more efficiency inside of our practice, ’cause we can identify those jobs, we are moving. Now, there are common jobs among lots of firms, I don’t wanna say that… There are very… Most jobs are common, I would say 90% of jobs are common to firms, but there’s this 10% that really is highly differentiating from a marketing perspective, and the ratios, the analysis, the conclusions you’re gonna reach from the job are gonna be different based on… Even though me and… A firm like mine and a firm like let’s say that focuses on attorneys, we both share a common job map around personal spending, but the ratios and the KPIs and the advice we deliver on the end of that job map, it’s gonna be different based on that customer, they’re just very different. Attorneys have generally different income levels, they have different… Depending on whether you’re targeting owners of firms or if you’re… Even in attorneys, if you’re targeting PI attorneys or contingency-based fee attorneys or State paying attorneys, they’re all gonna have different job maps, slightly different job maps even though the jobs are common, and they’re gonna have slightly different outcomes and advice, and so the point of bringing all that up was like…
Reese Harper:
I found that during the time where I’ve had to kind of get this legacy book of customers that aren’t dentists, and I’ve got dentists that are my core bread and butter, I just started seeing that the jobs for these two groups of people, one set had very common jobs and I was able to scale that, and the other set was all about Reese Harper being just a really custom consultant, and that’s awesome, that’s what multi-family office is. That’s why I’ve got 100… Some families that are very wealthy, nine figure net worth kind of families, and they depend on my brain to maximize the customization of their life, but I can’t scale… I didn’t spend time trying to scale a family office style offering, I spent time doubling down on the job maps that I could identify that were scalable and as large of a customer base as I could, and I would say that the better business today is not the one where I’m servicing high net worth households, the better business today is the ones where the job maps and the jobs are being repeated so frequently that the customer is just being served well with whoever the advisor is that’s interacting with them.
Matt Glazer:
But I’m also hearing you say there’s still… The path forward isn’t like a scorched Earth thing where you’re like okay, well, now I work with this and we’ll just say dentist, now I only work with dentists, so I’ve somehow gotta wean off the rest of these clients from my service, what I hear you saying is well, no, not necessarily, you stood up a separate brand in a separate business to handle a totally different client and now you have the opportunity, whether you do this or not is one thing, but you have the opportunity to make the one brand, the one product, the one service for the one type of customer who is uniquely different from the other one really efficient, and then scale the other service to match the other kind of consumer, so you have two different arms that are being two different people, what, two totally different places. So if you can do that in your business, volume of clients is one thing, but if you can split up the brand or product or service and make them, niche the services down or the product lines down or the brands down to a place where they’re efficient in and of themselves, that’s as much of a viable path forward as any.
Reese Harper:
Yeah, totally, and I’m not gonna give up my private… I’m currently augmenting the family office side of my business with dedicated staff that’s different from the Dentist Advisors staffing. I’m trying to understand the job maps and how to customize those for… And make it a little more scalable for that kind of… ‘Cause it’s not like I don’t have a homogenous clientele, the other clientele is just like massively wealthy, illiquid, meaning they’ve got millions and millions of dollars, but most of their net worth is in private business assets or land or real estate, and so that’s a consumer that’s different from a dentist whose balance sheet is probably 70% to 80% liquidity in public securities and kind of more of a $5-$10 million net worth customer versus a $100 million net worth customer that’s super liquid, they just have different…
Reese Harper:
You have to have different staff, you gotta have different positioning. My high net worth clients didn’t wanna be meshed into a brand with the dentist, and it was very complicated to make that all happen, and I had to have some dentists that I was serving as an advisor for under another brand and then high net worth for another brand, and it was definitely not an easy thing to work through, but I think that the point here is we have a job map that is easier to build than a concrete job, it’s easier to build if you know who you’re building it for, and too many niches aren’t actually getting down to that homogenous clientele, they’re just marketing, that’s it, and the niche is not… You don’t do a niche just to market, it’s actually less about marketing and more about really delivering a service that’s of value, because you can’t deliver a service of value until you get down to understanding the jobs in detail for a particular person.
Reese Harper:
And so, whether it’s an occupational niche or whether it’s a product-oriented niche like you said, stock options, for example, that’s not a holistic planning relationship, but that’s a different example. I’ve seen people have many, many clients around a transaction type, like business continuity or business exit or stock option, transactional kind of volume planning. They tend… You don’t have to have a holistic planning relationship to have a viable niche market, but if you’re doing holistic planning and you are looking for comprehensive as kind of your focal point, I think occupational-based niches or role-based niches, meaning COOs of a particular type of company, that’s a different… That’s a way to narrow it down. I think my point in bringing all of that full circle is I think find a niche where you can clearly start to limit the number of jobs that need to be done and get yourself focused around those jobs. And then of course marketing is an important component to that, but it’s less about looking like you’ve got a niche and it’s more about understanding the jobs.
Matt Glazer:
Cool, thanks Reese.
Reese Harper:
It’s a good one. Thanks so much, man, look forward to tackle on this one again next week.
Matt Glazer:
Take care.
Jordan Haynes:
Next time on Elementality.
Paco de Leon:
Yeah, I’m a musician, so I hang out with musicians, and once you start hanging out with musicians, then you find yourself hanging out with painters and just all sorts of filmmakers and all sorts of creative people. And so at work, I would go to work and I would learn all this secret financial planning wizardry, and then I would go home and hang out with all these artists, and they would eventually start to ask me questions like, “Hey, my grandma gave me a 100 grand, what should I do?” Or, “Hey, what’s a bond even?” Or, “Hey, how can I not be screwed in 10 years?”
Abby Morton:
You can learn more about the Elements Financial Planning System at getelements.com/meet and schedule a time to speak with one of our friendly financial planing experts. Elementality’s executive creators are Reese Harper and Matt Glazer. Elementality is produced by Abby Morton and directed by Jordan Haynes. Have a good one.