The practice management advice is almost ubiquitous – if you run a financial planning practice, you should eventually carve out a specialized niche for yourself. If you don’t already have one, look through your book of clients for similarities, and use that common thread to expand on a niche you might have unwittingly already started. The ultimate goal: to have carved out some unique space for yourself, whether that’s financial planning for fly-fisherman, working with public school teachers, or having a specialized skillset for doctors running a medical practice. Yet in reality, many (most?) planners seem to resist this advice; "if I specialize, don’t I leave a whole lot of other business on the table?" is the most common objection. But focusing on the clients you won’t get by specializing completely misses the point – which is significant increase in referrals you can generate by clearly defining a niche and conveying it to the clients and affiliated professionals who might refer you.
The inspiration for today’s blog post comes from a recent interaction I had with a to-be-unnamed financial services professional I recently had a conversation with. I think very highly of this individual’s work; he has a very wide and deep knowledge pool regarding insurance, and I actually wanted to proactively recommend him to some other financial planners I know. There was just one problem: notwithstanding the fact that he had some specialized knowledge of life insurance, he still didn’t actually serve a specialized niche.
As he explained it, "it’s difficult to describe what I do and how I work with people, because there are so many variations depending on exactly what my client needs, that my services ultimately are customized for each of my clients." Sound familiar? Although I was talking to him about his business serving the needs of other financial planners, I could have easily been talking to a financial planner about their business and how they serve their (consumer) clients.
It was a very problematic outcome. I wanted to refer him, but I couldn’t. I didn’t know what kinds of firms were the best fit for him. I wanted to seek out opportunities for him to be brought into a situation where his business model would be an appropriate fit, but I couldn’t describe what he did to anyone I wanted to refer him to. I wanted to identify situations where his expertise might be an especially good fit, but his description of his knowledge and services was so broad I still wasn’t certain exactly when it was right to refer him.
Of course, I could just try to refer him any time I hear someone mention "life insurance", but realistically I know his business isn’t that broad. He can’t actually serve everyone, all the time, in any situation. I’m sure that in the end, there’s some business he says "Yes" to, and some he says "No" to. But since he couldn’t describe it to me, and I don’t want to refer him as a solution only to have my referral sources get turned away, the net result is… I just couldn’t give him any referrals, even though I wanted to!
And this is the essence of why having a niche is important. It’s not necessarily about developing such specialized knowledge in a particular niche that no one else can match your expertise. In point of fact, my friend already had this part mastered. It’s about having an easily defined niche so that those who would refer you will be able to easily match you to situations where you are appropriate. In other words, it’s not about being focused in the niche, per se; it’s about making you more referrable by having a niche that your referral sources can use to describe and refer you! Or viewed another way, doing everything for everyone doesn’t make you interesting [or referrable] to anyone!
Again, although this situation happened to occur in the context of a professional who provides advisory services to other financial planning firms, I think it is entirely analogous to what financial planning firms go through in trying to acquire their own clients. When you ask your existing clients to refer you, or your affiliated professional relationships – can they easily and concisely describe who you are, what you do, how you serve clients, and match you to their family, friends, and acquaintances who would be the best fit for you? If you have a clearly defined niche where everyone understands your target client, what they do, what their needs are, and how you serve them, the answer is probably yes. However, if you are the typical financial planner, who "does everything for everyone, customized to the client’s individual needs," you are probably making the job far more difficult for your referrers than you realize.
So what do you think? Have you ever experienced this challenge when trying to refer another professional you know? Do you think your clients and other referral sources face this same challenge when trying to refer you?