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Marketing Strategies for Financial Advisors Niche Marketing

Financial Advisory

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Financial Advisory article in Advisorkhoj - Marketing Strategies for Financial Advisors Niche Marketing

The problems faced by small independent financial advisors in trying to grow their business are quite a few. These problems are not unlike the problems, which many small businesses face when they try to scale up. Some of the problems are:-

  • Small IFAs receive little support from the industry till they reach a certain scale

  • IFAs typically start the sales prospecting in their immediate community, friends circle and neighbourhood. However, scaling up is a challenge, due to lack of resources

  • Sales cycles are long and effort intensive. With limited resources, usually many IFAs are one man army, balancing customer servicing and new sales effort is very difficult

  • Client needs are complex and go beyond a particular service or set of services. Advisors need to develop to comprehensive capabilities, become a one stop shop, to address these needs

  • Customers do not entrust big ticket transaction to small IFAs

  • For small IFAs, every rupee of additional business is a lot of hard work. However, the difficulty gets complicated as one looks at client profitability. Clients are demanding, but 80:20 rule applies (80% of AUM comes from 20% of clients), and not all clients are profitable over the long term

This article does not aim to address all these concerns. We will discuss some of the concerns in a set of articles over the coming months. Also, we will hear stories from advisors, on how they were able to overcome these challenges. In this article, we will discuss niche marketing as a technique to successfully grow your financial advisory business on a sustainable basis

What is niche market and why does it make sense?

Niche market is a small but profitable segment of a market suitable for focused attention. While for large financial advisors, niches may often be too small to serve profitably, small advisors may explore specific niches to optimize their sales effort and grow their business profitably. In developed markets like the US, there are examples of financial planners and advisors focusing on particular niches like college professors, professional sportsmen, doctors, retired communities, specific immigrant groups with common economic backgrounds. The logic of niches, from a financial planning perspective, is obvious. People in particular niches have similar income levels and patterns, financial aspirations, tax concerns, and more importantly similar cultural values. Referrals are more relevant in this context and advisors can customize their advice to meet the requirements of such niches

Does it make sense in the Indian context?

Independent financial advisors in India also focus on niches or communities. What needs to be evaluated is the strategy, if there is one in the first place. The traditional form of communities in India is undergoing a transformational change. Some of these are:-

  • People are migrating from their hometowns and extended families to other cities to pursue their career interests

  • People are spending much more time in the work-place. They are developing stronger personal ties in their work-place in comparison to their neighbourhoods

  • People working in similar professions and industry sectors are increasingly sharing more cultural attributes, despite their regional diversity. While companies are becoming more cosmopolitan in nature, employees are identifying themselves more with their respective corporate cultures

  • Traditional forms of communications within communities are being replaced with social media interactions. However, the need of networking is increasing than ever before

  • Spectrum of career opportunities is broadening for young people, as also the concept of risk taking

These changes, present a great opportunity for financial advisors to be relevant in the current paradigm of niches in the market. While breaking into a niche takes a lot of effort, once advisors are established as the go-to expert for that particular niche, referrals within the niche are way more effective compared to more traditional sales activities. Once an advisor is established as expert for a particular niche, it is also easier to charge fees for financial planning. There are examples of financial planners in US, who service employees in just one large organization, e.g. Coke. What makes this constituent attractive to financial advisors is that they have a strong corporate culture, similar values and common financial concerns, like stock options, variable compensation, retirement plans, so on and so forth. By specializing on a niche, advisors can create barriers to entry for their competitors, with respect to their specific niches. While corporations in the US are larger in size, large sized Indian companies, like TCS, Infosys, HUL, L&T, Reliance etc, represent a large enough target segment, from a financial planning business perspective. Going beyond organizations, financial planners and advisors can focus on specific industries or industry segments, like legal practice, dental or medical practice, media and entertainment, small businesses, so on and so forth

Key success factors in Niche Marketing

There are several key factors that determine the success in niche marketing:-

  • Finding a segment of the general market for a service package that meets the financial needs of that segment

  • Developing a comprehensive solution for the needs of that segment. The focus should be on being a one stop shop for all financial needs for the said target segment

  • Developing capabilities to service that segment. This takes time and effort, and there is no getting around it

  • Marketing to that segment to get the word. Word of mouth will continue to be the most important marketing tool, however, as people spend more time online, internet marketing will increasingly be more crucial in supplementing the traditional forms of marketing

  • Positioning oneself as the best choice for that market segment. Again, while referrals will go a long way, electronic presence and social media are very effective mechanism to strengthen that position

While we continue to discuss marketing and sales strategies for IFAs, it will be valuable to have your comments and thoughts. Please share your thoughts with connect@advisorkhoj.com or comment below.

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Dwaipayan Bose

An alumnus of IIM Ahmedabad, Dwaipayan is a Finance and Consulting professional, with 13 years of management experience, mostly in MNCs like American Express and Ameriprise Financial, both in India and the US. In his last role, he was the Chief Financial Officer of American Express Global Business Services in India. His key interests are building best in class organizations, corporate governance and talent development

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