How to build a $55 million practice.
It began as a standard exercise to help Lou Tranquilli, CFP, gauge where he and his financial planning practice stood in the wake of the economic crisis of 2008 and 2009. But by the time the strategic assessment was done, it had taken on an entirely new and more profound meaning, for it led Tranquilli to conclude that it was time to chart an altogether new course for his Clinton, New Jersey-based firm.
After almost two decades as what amounted to a general practitioner, Tranquilli, motivated by an epiphany of sorts, took the bold step of pivoting his firm into more specialized territory. And he hasn't looked back since. The decision to focus his practice on delivering holistic financial planning services to female clients, and specifically divorced women, has proven to be both financially rewarding and personally fulfilling, he says.
As of late summer 2015, his firm, Tranquilli Financial Advisor, was managing more than $55 million in assets, marking an AUM increase of about $18 million in 18 months. Then there are the intangible benefits. "I'm a much better financial advisor now that I have identified a market to focus on," he says. "I'm more confident that the message I'm delivering is the right one, and I don't have all that excessive noise of moving from market to market as a generalist."
The epiphany that led to the pivot came after Tranquilli, at the suggestion of his business coach, examined his book of business to identify the types of clients with whom he most enjoyed working. "That exercise really clarified who I liked doing business with -- and it was predominately female clients," he explains. "Then it became a matter of figuring out how do we replicate that time and again."
It may seem counterintuitive, but for many advisory practices today, growth comes not by expanding focus but by narrowing it. "It's about getting more specific, not less specific," says Ray Sclafani, founder and CEO of ClientWise, a Mt. Kisco, New York, executive coaching firm for financial professionals. "The more they can focus on their ideal client types, the likelier they are to succeed."
"Most advisors, I think, feel uneasy about focusing in on a specific niche, because they worry about pigeonholing themselves," adds Maribeth Kuzmeski, principal at Red Zone Marketing, a financial advisor-focused marketing and management consulting firm in Grayslake, Illinois. "But I look at focusing a practice as a strategic growth opportunity and a really smart play. If you want to grow, you better find a niche or two."
As daunting as it may seem to pivot and refocus an already-established practice, the payoff from doing so can be huge. Here's how to go about identifying a niche and carving out a strong, sustainable presence within it.
Determine what stokes your passion. As a precursor to a pivot, figure out "what you're passionate about -- who you enjoy working with and the types of people you want to build the firm around," suggests Sclafani, author of the new book, You've Been Framed: How to Reframe Your Wealth Management Business and Renew Client Relationships. When you genuinely enjoy working with people in the segment you've targeted, prosperity, fulfillment and professional longevity tend to follow, he says. "You need to think about your life's work, the business you want to build and the legacy you want to leave."
See where your passion and your current client base overlap. To further define your niche, comb through your existing client base to identify any common themes and where those themes intersect with your passion. For Tranquilli, divorced women represented that intersection. For another advisor, it could be young professionals or small business owners or members of Generation X, for example. "You have to find your tribe," says Russ Weiss, CFP, who specializes in the "modern lifestyle" niche (so-called non-traditional families and clients) for Marshall Financial Group in Doylestown, Pennsylvania. The segment in some instances can be narrow, even esoteric, Sclafani notes, pointing to an advisor he knows who has built a successful practice catering to boating enthusiasts.
Identify a void, then move to fill it. It was during the process of planning for his own "modern lifestyle" situation -- he's in a committed unmarried relationship with a long-time girlfriend -- that Weiss says he realized, "Wow, this is an area not a lot of advisors are focusing on. Then I did some research and saw what a huge market it is. Half the [adult] population is unmarried." On one hand, you want to be sure a segment is substantial enough to provide a market for your services before you commit to pivoting into it, says Sclafani. But on the other, you need to be wary of moving into a niche where the competition is already stiff, such as the ultra-high-net-worth segment.
LOC it down. LOC stands for the list, the offer and the creative, three elements Sclafani says advisors need when targeting a new market segment. The list represents the specific individuals, groups and organizations in a given segment at whom you plan to aim your message and your value proposition. The offer is the strength of that value proposition. "The value comes in knowing how to fill some unknown need," he explains, "where you make people in that segment aware of the need, then demonstrate you're the right person to help address it." The creative represents the marketing content you use to highlight that need and demonstrate how you're best qualified to address it.
Get to work networking. Accountants, bankers, estate and divorce attorneys, insurance agents and other professionals, as well as business, civic, philanthropic, cultural and religious organizations -- these are the kinds of centers of influence that can open doors for you in a given segment. So start cultivating relationships with them early in the pivot process. "Focus on professionals who work in a similar niche," recommends Evan Bedel, who leads the GenerationNeXt-branded practice within Bedel Financial Consulting, which was founded by his mother, Elaine Bedel, in 1989. "You want to develop relationships where they refer business to you and you refer business to them." Tranquilli says the referral breakfasts he hosts on a quarterly basis with estate planners, business owners and other local centers of influence in the women's market have been "phenomenally successful" at creating avenues for two-way referrals.
Refine and test your message. What exactly is your value proposition in the segment to which you're pivoting, and how will you explain it to prospects? Once you get clear about the message, go out and test it on members of your target market (at a cocktail party, a networking event, a business function, etc.) before you commit to pivoting into that segment. "It's explaining CyI do this and this and this for physicians' or CyHere's how I help attorneys' not CyI want to sell you insurance,'" Kuzmeski says. If the message resonates, run with it. If not, refine it further or reassess whether the niche is worth targeting.
Rebrand yourself. Here's where "the creative" comes into play. All your public-facing content and imagery, including website, social media profiles and pages, blogs, brochures and more, must be updated and angled to resonate with your new target market. "It all needs to reflect your personality and how you can help the people in that segment," explains Tranquilli, who estimates that women now represent the primary point of contact for about 80 percent of his business.
Make yourself an SME. First learn as much as you can about problem-solving for that segment. If there's a professional designation you deem worthwhile to earn in order to serve that market, pursue it, as Weiss did in earning his ADPA (accredited domestic partner advisor) designation. Then take that specialized knowledge to the public to position yourself as an authority in your chosen niche. Find ways to get on the agenda to speak at conferences, meetings and other events relevant to that segment. Post blogs and publish articles in outlets your target prospects tend to read. Offer yourself to media outlets as an expert source.
Prime clients for referrals. While referrals are the lifeblood of most practices regardless of the segment in which they operate, they tend to resonate particularly loudly in a close-knit community or segment, contends Weiss, who says his client base has grown by 50 percent since he made the modern lifestyle segment a focus of his practice. "As you help people within your niche, they go out of their way to cheerlead for you." During the process of pivoting into the women's market, Tranquilli discovered he needed to be more thoughtful about his approach to referrals. "I went to my [female] clients and I explained to them who I liked to work with and why," he explains. "Basically I trained my clients how to refer me."
Get a coach. "The first advice I would give to anyone considering shifting into a new market," says Tranquilli, "is to hire a business coach. It was the best investment I made."
Practice patience and persistence. Cultivating clients in a new segment may take time. Be sure to invest enough time, energy and resources in the effort and to measure the progress you're making.
For advisors looking to build a practice for the long haul, such an investment is necessary to create sustainable growth in their selected niche. "We think of it as CyLook, we've been here for 25 years. How can we be here for 25 more years, and 25 after that?'" explains Bedel.
So far, so good for Bedel and his GenerationNeXt practice, which primarily serves young professional clients in the 20-to-40 age range. In five years, according to Bedel, the portion of Bedel Financial's clientele in that demographic has grown from less than one percent to 11 percent. What's more, he says, "The referrals alone have kept me busy enough that we haven't really had to do much formal marketing. It's at the point where we need to look at hiring more people for this department."