If You’re a Generalist, Advisor, Your Days Are Numbered

In today's marketplace, where the number of financial planners is drastically higher, differentiation is being pushed to the next stage. For consumers, it's no longer just about getting a financial planner, but a financial planner who's specialized enough to solve my personal needs and problems. The age of the generalist is coming to an end; the age of the specialist has begun.

It's worth noting that yes, you can still "specialize" in being a generalist. The model exists in other professions, like doctors who are general practitioners. But remember in the medical world, the generalists typically earn less than the specialists, and have been under pressure for years. If they succeed, they do so in part because they specialize in being a generalist: someone who can provide an initial review of the situation, and refer the patient out to the necessary specialists, which in turn means the business model for generalists would likely resemble a simple, low-cost fee-for-service model that virtually always ends in a referral to another (higher priced and more specialized) advisor, which may not be an appealing business model future for today's generalists!

And bear in mind as well, even that generalist position for doctors only works in part because the medical system is increasingly subsidizing the cost of seeing a general practitioner for a regular checkup (i.e., low co-pays or no payment required at all for an annual check-up), because the insurers have found preventive care is less expensive for them in the long run.

In other words, one might say that the primary reason general practitioners in medicine remain successful is because insurers are trying to get patients to use them for a lower price rather than see a specialist at a higher price. Which doesn't exactly paint the most bullish picture for the career of the general (financial advisor) practitioner, especially when there is no insurance coverage to steer consumers in their direction as a first step.

Getting From Generalist to Specialist

For the advisor who's starting a practice from scratch, the natural implication of this evolution is to recognize that, from the outset, starting to craft a niche is probably a very good idea. No, that doesn't mean the new practitioner has to turn down every prospective client who doesn't fit the niche as they try to build their business; when starting out, any new client and business revenue is often crucial. But the point is that, done well, there frankly shouldn't be very many non-niche prospects and referrals in the first place. The new practitioner should recognize that spending time with prospective clients outside the niche is likely to have a much lower success rate. While it's good to get any clients possible when starting out, be careful not to waste too much time meeting with prospective clients whose business you're not realistically going to win in the first place…especially when that time could be better spent building relationships in your niche instead!

For established advisors who already have some client base, but would like to grow it further and are struggling to do so, the options are more plentiful. Advisors in this position have a choice: to point the practice in a new direction towards a new target niche, or to look at the existing client base where there may already be a partial niche, and steer the business further down that path.

If you already have a number of entrepreneur clients, and you enjoy working with them, you can expand in that direction. If you have a lot of doctors, or teachers, or executives or workers from a large local company where you know their retirement plan and employee benefits cold, you can expand one of those. The business doesn't have to be reinvented from scratch (unless you wish to do so); it can simply be tweaked and adjusted in a direction where there's already been some success, to build more.

As with the new advisor, this doesn't mean the established advisor will automatically turn away any other referrals and business opportunities that come along. But again, if the practice is doing a good job focusing on the niche, most or all of the prospective clients who get referred should be in the niche anyway, and with a much higher close ratio than the non-niche referrals.

The bottom line, though, is simply this: as financial planning continues to grow, just being a financial planner is no longer the differentiator it once was.

Instead, advisors who want to grow and succeed from here must differentiate themselves further, by demonstrating to a certain target clientele why that advisor is truly more focused, more specialized and more capable than the competition. The only way to do that is to craft a niche accordingly.

Going in the opposite direction, and casting the net wider to deal with struggling growth, will only lead to the paradoxical result of an increase in prospects and activity, but not an increase in new clients. Focusing in on a niche provides an opportunity to work smarter, instead of just working harder.