Can niche strategies work for financial advisers?

This is a question that occupies a lot of thinking time of many advisers today, as they contemplate their future client acquisition strategies. While we are seeing some advisers setting minimum hurdle sizes with new clients (either in assets under management or agreed fee levels), let’s be honest, many advisers are generalists, welcoming any prospective clients into their business. So it’s a valid question – is a niche strategy a viable business model for advisers?

I believe that if carried out in a very structured way, it can be a very viable strategy.

Let’s start with a definition of niche. One I came across described it as, ‘denoting or relating to products, services, or interests that appeal to a small, specialised section of the population.’ The scary part in reading this is the piece about the “small, specialised section”, as this leads people to think that their base will be too narrow to make it sustainable.

 

Niche strategies can make life easier!

I tell this from personal experience. When I decided to strike out on my own 6 years ago, this issue was the one that gave me the most headaches. Would I concentrate my proposition and ultimately my sales & marketing efforts only on financial advisers? Or would I offer my services to any client that I could get?

I went for the niche strategy, focusing my efforts solely on financial advice firms. My target audience was immediately narrowed to only hundreds of firms, rather than tens of thousands of potential customers. That was scary.

But what was far easier was connecting with this group. Rather than trying to appeal to everyone, and probably not connecting with anyone, I could focus all of my efforts on a specific group of people. This made it easier in developing my sales propositions, writing website content, producing newsletter and blog articles. I can communicate with a clear target in mind, and my messages as a result are a little more personal to my audience. On the other hand, when you are trying not to exclude anyone from your sales and marketing efforts, it’s very difficult to connect with people.

Yes, a narrow niche strategy is hard at times, and when business goes a little quiet the temptation is always there to broaden my marketing into other markets. But doing that will dilute my presence in the narrower (financial adviser) market. And just because you target a niche only, it doesn’t stop you working in other markets. I’m currently working with a fantastic construction company, who saw what I was doing with financial advisers and asked me to bring those skills to their industry. It’s a big challenge for me working in an industry that I’m not immersed in, but that challenge is making the work very interesting and enjoyable. But staying focused on my niche in my sales and marketing efforts will generate the lion’s share of my work, and is the right strategy for me.

 

What are viable niche strategies for financial advisers?

Financial advisers who have gone down the niche route successfully have tended to do so by focusing on one (or sometimes more) of the following,

  • Demographics: Focusing on specific age categories, gender, social grades (e.g. ABC1’s)
  • Employment sectors: Focusing on the public service specifically, sectors within the private sector, specific occupations.
  • Geography: Focusing on clients within a certain geographic area only
  • Product lines: Focusing on developing expertise and leadership positions within specific product areas or dealing only with clients who require full financial planning relationships.

 

What are the main steps in building a niche strategy?

If you decide to go down the niche route, first of all you need to do some research about your target niche. You need to understand the numbers of target clients (is the niche large enough to sustain you?), think through how you will access them and consider what opportunities are available to you to market to them effectively. You need to also think deeply about the problems that you will be able to help them to overcome, and how you will communicate and demonstrate your capabilities to that segment of the population in an engaging way. Because at the end of the day, you will live or die by whether your target customers recognise that they are dealing with a specialist in the particular niche or not.

 

Niche strategies are certainly not right for every financial advice business. However for some, they just might be the best way to fully leverage a unique strength or opportunity of your business.

Is your website punching its weight?

Financial brokers today recognise the importance of having a really effective website. After all, it’s the first touch point that many consumers have with your business. If you’ve a fairly basic website or one that hasn’t been revisited in a while, here are some tips that can double or more the effectiveness of your website!

 

Make it Easy to Navigate

Don’t make the user have to “work out” where to find the information they are seeking. Make the navigation so simple that a complete technophobe will find their way around it! The main navigation bar, which to my mind should always be at the top of the page and not down the side, is really critical. It is through this that most users will enter the site from the homepage, so think this through very carefully. Think very carefully of what to include on this, as it typically will only cover 6/7 site areas. And then consider very carefully what you are going to call each section. Use standard terminology that makes sense to people, such as About / Our Services / Contact Us / News or Blog.

 

Focus on Financial Planning

I look at a lot of financial brokers’ websites. Probably the biggest bugbear that I have is the lack of focus on financial planning. This is the extremely valuable skill that you bring to your clients, helping them identify their financial objectives and then finding and implementing the best solutions to help them achieve those objectives.

However many websites talk only about financial products. This makes you appear as a hard-edged salesman, selling the latest and greatest products, not doing justice to your skill at all. I strongly suggest that you develop a very prominent, specific section in your website about financial planning and explain the value that you will bring to clients.

 

Reduce the Amount of Content

Yes, this is not a typo! Obviously this may not apply to every website, but in the main, too many of them are packed out with superfluous content. While it might please you seeing lots and lots of pages with long explanations and technical details about every product available, frankly the user will just get bored. And boredom is fatal on the web as the user just leaves your site.

Use your Google Analytics to identify your poorly performing pages from where people are leaving the site. You will often see that these are long technical pages. Either shorten them or get rid of them!

 

Update your News Section / Blog regularly

This is one of the most valuable areas of the site for a number of reasons. I’m not talking about taking a newsfeed from some online source or sending links to other people’s content. This section is for regular and relevant blog entries that educate users and demonstrate your expertise and these play a number of valuable roles. First of all, they draw people to your site after you share a link to a useful article you’ve written. This of course in turn opens up the possibility of the user finding out more about you and the services you offer.

Google loves fresh, original content. In fact new, authentic content that engages users and in turn is endorsed by them through sharing it, liking it or commenting is one of the most important drivers of bumping you up the search results. This is of course on top of the value that clients and prospective clients will get from knowing that you are a Financial Broker with a finger on the pulse and demonstrating your expertise and ability to solve their problems.

 

Have Clear Calls to Action

Users will come to your site for a range of different reasons. Some may be simply browsing around, others may be looking for specific information, some may want to buy and may be looking for your phone number. Try and appeal to all of them by having a range of Calls to Action. The last group are easiest – make sure they can easily see your phone number without having to go looking for it! For the others, have Calls to Action that will enable them to stay in touch with your business, even after they leave the site. Do you make it easy for people to connect with you on LinkedIn from your site? Make it easy for them to subscribe to your newsletter. Maybe offer an online Chat facility to answer their questions there and then.

 

Mobile is Key

More than one third of searches happen now on mobile devices. Your site simply must be responsive, ensuring that it is easy to read on a phone or other device. People today have lost patience with having to “pinch” the screen to go looking for the information that they want – this results in a terrible viewing experience. Responsive sites alter the screen layout to suit the device on which it is being viewed – a “must have” today.

Also in relation to mobile, if someone is looking at your site while out and about, very often they are simply looking for contact details. So again make sure your phone number is very visible.

For some Financial Brokers, these changes will mean a few hours work. For others they might mean a new site. For everyone though they are worth it. Research of financial brokers is happening more and more online so you want to make sure you are demonstrating why you are the best choice for prospective customers!

Image courtesy of angus campbell king

Why I’m such a fan of Voyant

I’m a huge fan of Voyant’s software and usually go out of my way when meeting financial advisers to encourage them to start using it, if they are not already doing so.

First of all to be clear – this is not because of any commercial arrangement that I have with Voyant to be out there promoting their software to advisers, because no such arrangement is in place.

I’ve 2 reasons for being such a fan. The first is because I’ve seen the impact that the use of Voyant can have on an adviser’s business. The second is because of the impact Voyant has had on my own financial planning.

 

The impact of Voyant on advisers’ businesses

One of the busiest areas for me over the last few years has been helping advisers transform their businesses from a financial dependency on the products that they sell to a financial model where their income is based on the advice given to clients. This results in a more stable and lasting income stream that can be easily justified to clients, the regulator and any other interested party!

However when basing your business around advice, it’s of course not enough to simply advise clients on the best product to buy. Clients want financial guidance, they want to avoid making mistakes and want to put their limited financial resources to best use. They want to be able to plan for the future with confidence. Because at the end of the day, clients don’t think in terms of how much money they have or need. They think in terms of what they are going to be able to do in the future – this might be to retire early, to put their kids (or grandchildren) through college, maybe to buy a place in the sun in the years to come. Clients have these pictures in their head. The value that you can bring is to make the pictures the reality by guiding clients on how to achieve these goals financially.

And this is where Voyant comes in! Voyant enables you to build scenarios for your clients that show the impact of different financial inputs (your income, pension contributions, your investment portfolio, regular savings, protection products) and of outputs (lifestyle costs, expenditure, financial commitments, unexpected events). Now you can have real conversations with your clients about what their money can do for them, rather than how much they might have. This is real advice that clients will pay for year after year, creating that durability in your income stream and value in your business.

Of course financial products will often be needed to make these lifestyle goals the reality. But now the conversation is all about lifestyle rather than focusing on the products. For those of you that use Voyant regularly, you know there are also many other uses for it – looking at ARF bomb-out risk, calculating the correct amount of life cover etc.

Voyant to my mind is a critical element in transforming you from being a product picker to becoming a true financial planner or adviser.

 

The impact Voyant had on my own finances

I worked in life companies for 27 years, am a QFA and when I left in 2011, I was pretty confident that I knew my financial situation. I didn’t have a financial adviser.

Roll forwards about 18 months when I started working with my current financial adviser because I had a straightforward product need – I needed to put income protection in place. So he did that, but then he got me (and my wife) talking… About how we saw the future shaping up, our hopes and dreams, our objectives around our son’s education, holidays, targeted income in my business, big purchases, retirement, wealth transfer and the rest.

He plugged this information into Voyant. Now I already knew my financial situation at that stage and also had a good sense of how I was fixed financially when I reach retirement age. But I knew nothing about the intervening years. The value of Voyant for us was that it clearly demonstrated that based on our current financial picture, I was going to run out of cash at age 53 and effectively be underwater for 4 years then. This was a real shock to the system!

So the conversation changed completely. How were we going to close the gap? What did this mean in terms of reducing our outgoings? What “big spends” had to go on hold? What did it mean in terms of our investment and pension portfolio management?

And that has become the conversation now each year. Not how my products are doing (which of course is also important), but if our objectives will be achieved. Thankfully with the guidance of my adviser I’m now not going to be struggling at age 53, the gap has been closed. That to me is really valuable financial advice that is worth paying for.

 

It’s for these two reasons that I’m a big fan of Voyant.

5 ways to increase your income in 2017

Yes we’re at that time of the year now, when we all start to turn our attention to next year and are (hopefully!) working on how to make 2017 our best year yet! For many businesses, income levels will define this, so here are 5 ways in which you can look to drive up your income during 2017.

 

1. Get more customers

The most obvious way and also probably the most difficult! This one will be influenced by many moving parts; your own activity levels, the quality of your advice proposition and the number of referrals you get from satisfied customers, the consistency and quality of your ongoing client engagement processes, your networking and other client acquisition methods and all of your marketing activities.

Getting more customers is usually the sum of many activities. If I was pushed and had to pick one? That would be to get out of your office and meet more people. The more face-to-face time you spend with prospects, the more new customers you are likely to acquire.

 

2. Improve your proposition

Getting more customers is great. However this also creates new challenges in terms of minding these customers into the future. What if you could earn more income without increasing your customer numbers?

This is where your proposition comes in. There is huge benefit in regularly and critically evaluating your advice proposition. Is it good enough? Are there more services that you could offer, which would allow you charge more? Or (as is very often the case!) are you delivering the right services to your customers, but they are simply not aware of them as a result of poor communication by you? If you can improve their knowledge and engagement with your proposition, can you charge more?

I suggest you take some time out to review your proposition and how you are communicating it. You will probably be pleasantly surprised when you actually visualise the depth of services that offer, and maybe also will realise that you can charge more for the value you are delivering.

 

3. Attract more assets

Financial advisers constantly tell me of situations in which they are only managing a portion of a client’s assets. I just don’t really get this one to be honest… Yes I can understand that a client may think they are better off having a few advisers and not having all of their eggs in one basket. However, isn’t that the adviser’s job to manage that challenge on behalf of the client?

To my mind, this situation often arises as a result of an adviser being happy to simply get a new client on board, even when they are only getting a portion of the client’s overall assets. But how can you advise the client properly when you are only partially informed? Surely this situation will result in a completely misaligned portfolio? And if you carry out future cashflow planning, this is rendered pretty meaningless if you don’t have full visibility.

Work on your script with clients where you suspect you are only advising on a portion of their assets. Is it possible that you are settling for partial assets too easily and are just not convincing clients and being firm about the importance of total visibility of assets? After all, more assets will often result in higher revenue for you.

 

4. Don’t ignore cross-selling opportunities

Sometimes it’s easier for an adviser to position himself or herself as an investment specialist or a retirement practitioner. And sometimes as a result the adviser can be reluctant to step outside of his or her specialist knowledge zone  and advise in other important areas such as protection etc.

Yes of course you need to be confident in your capability to provide excellent advice in these other areas, but this is not really a stretch for many advisers. And no, I don’t believe that it undermines your positioning as an expert in your main area of specialisation. Clients will be grateful if you are watching their back in these other critically important areas too.

 

5. Increase your rates

This one might sound a little obvious, and also a bit unrealistic! But when did you last actually review your advice rates? I see enormous disparity between rates charged by different advisers, and sometimes when there is little or no difference in their propositions.

Sometimes it’s a case of one adviser having set their rates in 2009 when the country was on it’s knees and not having revised these rates since then, while the other adviser set their rates in 2014 / 2015 when the economy was back on a pretty stable growth path. So is it time for you to look again at those rates you are charging – are you selling yourself short for the value that you’re delivering?

 

These are just a few ways in which you can look to increase your income in 2017. The next step is to do some more detailed planning around each of them, with the aim of hitting the ground running on 1st January next. The very best of luck!

Want to get more for your business when you sell it?

Over the last few years, most financial advice firms have seen a marked pick-up in business. Also, there has been a good bit of activity in the buying and selling of financial advice businesses. So for those of you who are coming to that point where you want to sell your business, maybe because you’re retiring or just want to do something different, you’re now thinking about how you can maximise your price.

Obviously your recurring income is a crucial starting point. However a good business is about a lot more than a simple multiple of your recurring income. There are many ways that you can demonstrate additional value in your business, which will allow you drive up the price for your business.

 

Work through all the valuation methods…

And find the one that works best for you! Financial advice businesses can be valued using a number of different methods. The oldest (and simplest) model is probably the multiple of revenue model, with this being replaced today in some cases by buyers using a multiple of the profitability of the business (usually excluding the business owner’s earnings) as this takes account of both revenues and costs within the business. However in some transactions, predictive models are now being used to examine future cash flows, with greater weight being given to cash flows that are seen as more “stick-able” than others.

 

The persistency of business is an important driver too

Of course the size of your business is a main factor. But so equally is the persistency of your revenue. Lapse rates have become a major issue for life companies and advice firms alike, so obviously persistency will significantly impact the price someone is willing to pay for your business. There is little value in a firm that can’t demonstrate an ability to build up a durable revenue stream.

 

Have a clear business proposition

A buyer will want to believe that he or she is getting more than their money’s worth when running the rule over your business. A very compelling business proposition will help to provide this comfort. For example, this may be strengthening the buyer’s position in their chosen market or indeed giving them access to a new market. It may be a unique expertise that your business offers or strength in attracting a particular target group of clients. A strong position within a niche market can be a very attractive proposition! If you own a brand that is really well known in an attractive target market, this is a very valuable asset. However on the other hand, if you’re not clear about what’s unique about your business and be able to demonstrate this, you cannot expect a potential buyer to see this potential.

 

The quality of your client relationships is key

We all know that your clients are at the core of your business. They also are a key determinant of the value of your business. Can you demonstrate that you have been able to successfully infiltrate your chosen markets and that you have really engaged both these existing clients and indeed potential clients in the particular target group? A buyer will want to be purchasing clients who are engaged by and committed to your organisation, and are likely to stay with the firm going forwards.

To achieve this, you’ll need to ensure that your processes for ongoing client engagement really stand up to scrutiny.

 

Your service and compliance systems must be excellent

Potential purchasers also want to minimise the headaches involved in a purchase. They want to buy a well-run business that looks after its clients in a professional and engaging way and is compliant in everything that they do. In fact better still, they want to buy a business with potentially better processes and systems than their own, that they can then leverage for their now expanded business. This will be definitely be worth paying for by them. Who doesn’t want to buy best practices? So there’s a real opportunity to make your business more attractive to a buyer through utilising excellent business processes.

 

The quality of your staff is very important

While your clients are at the core of your business, your own people are the heart and soul of it. They have the strong relationships with your clients, the expert skills that potentially are sought by a buyer and the capability to deliver brilliant service to attract and retain your clients and valuable income stream. A highly skilled, cohesive team is an enormous asset!

 

These are just some of the factors you might think about as you prepare your business for a potential sale. If you have any comments in relation to the above or indeed can identify any other factors, please leave your thoughts below.

Buying Another Practice? 4 Questions to Ask Yourself

So you’ve survived the economic downturn and your business has re-emerged strongly now on the other side. In fact you’re in a position where you’re looking to accelerate your growth opportunities. And one approach that more and more advisers are leaning towards is finding another advice business to buy.

In fact I’ve seen a real sea change in the Irish market in recent years. 3 or so years ago, a number of advice firms approached us to help us get their business fit and ready for sale. In 2015, all we’ve seen has been firms coming to us seeking out help in finding and acquiring other advice firms.

So what are some of the questions you should ask yourself before stepping into the market place and looking to buy another business?

Why?

First of all, be crystal clear on why you are actually in the market to buy another practice. What is the strategic rationale for the acquisition? Are you seriously in growth mode, or have you simply run out of ideas in terms of developing your existing business? Maybe instead of buying another business, it’s time to really unpick your own client value proposition, get crystal clear on the type of business you are and then look at all of the potential means to grow your business. These may or may not include buying another business.

What?

What are you actually looking to buy? Have you run out of opportunities in your existing business and need an injection of potential clients? Are you looking to buy a book of clients hoping you will unlock a few nuggets in the belief that your advice approach is superior to that of a selling broker? Or are you looking to buy a very well developed business that is going to turbo charge your own business through bringing better processes and opportunities than those that exist within your own business? The challenge in the latter situation here is to ensure you actually extract these opportunities, rather than letting the business you are buying fall back to the levels of your existing business.

Who?

So you’ve decided that the strategic rationale justifies buying another business. The question now is which business to actually buy. This is where you need to carry out careful due diligence to really understand what you buying: the quality of the clients, the processes, the client propositions and of course the advice that has been provided to their clients. After all, poor advice given in the past could result in a whole host of headaches for you into the future.

Are the clients that you are buying simply going to increase your recurring income stream, or are they going to really help you to gain a foothold in your target market? Are they going to be worth more or less than the “sum of the parts”?

The people that will come with the business (if any) will of course also be a tremendous asset or liability going forwards. You need to make clear and educated decisions as to whether they are a good fit for your business or not. Bringing in a strong group of people could really help you to drive your business to the next level.

How?

So you’ve found your purchase target. If you’re simply buying a book of business, the chances are this is going to be a fairly straightforward transaction based on a multiple of the income stream. However if you are actually buying the business, there are many other factors to consider.

Are the existing owners remaining involved and if so, in what capacity? Are they going to be part owners of your newly enlarged business, keeping them with “skin in the game”? If they are remaining as shareholders, they are much more likely to stay committed to growing the business. On the other hand, if they are remaining in the business simply to help the transition, you should be looking to build in clear earn-out targets. This will ensure that you reap the rewards of their ongoing involvement, as they will be financially incentivised to help you transition the clients into your business.

You should also examine closely the profitability of the business you are buying. If they were struggling to make meaningful money, how are you now going to do it? Can you see cumbersome administration practices that you can immediately replace with your own well-developed processes, extracting immediate savings? Can you see savings to be made in terms of people – maybe you don’t need all of their staff? And possibly you can see opportunities to broaden the proposition that was offered to their clients, increasing the revenue potential. Any of these factors will help you realise more profit potential.

These are just some of the questions that you should ask yourself before you step into the market to buy another firm. Buying a business is a big step – take your time, ask yourself the hard questions and do careful due diligence in order to seriously enhance your prospects for success.

Photo courtesy of Flickr user Images Money