For years, independent advisors often marketed themselves as fiduciaries - emphasizing their commitment to work in the client's best interest. That message resonated with consumers.
[ibd-display-video id=3017249 width=50 float=left autostart=true] Today, however, large financial services companies such as Vanguard and Charles Schwab ( SCHW ) label themselves fiduciaries as well. So how do advisors who run small practices continue to differentiate themselves?
In a world where many big securities brokerage firms hype their status as fiduciaries, advisors are left rethinking their marketing strategy. Their options include specializing in underserved niches, lowering their fees and harnessing the latest tech tools to engage clients in new ways.
"It's still important to be a fiduciary," said Minna Burns, director of marketing at the Carson Group, an advisory firm in Omaha, Neb. "But I don't think it's as much of a differentiator. Advisors have a real opportunity to differentiate themselves by explaining the value they bring to the client and to personalize their message to appeal to their demographic target."
To attract younger investors who are just starting to accumulate wealth, some advisors are investing in technology that brings clients closer to their money. Examples include providing online portals for clients to open new accounts, track their assets, rebalance their portfolio and analyze their projected financial performance under a range of planning scenarios.
Burns, whose firm partners with advisors to offer marketing services, coaching and other services, says that millennials - those born in the 1980s and 1990s - expect customized features and resources that help them understand and monitor their personal finances. Advisors who produce a steady stream of rich social media content can also stand apart.
Define Your Niche
The big players - giant financial services companies - are unveiling tech platforms to meet the needs of different market segments. But advisors who operate on a smaller scale can differentiate themselves by pursuing more defined niches.
Todd Sensing, a certified financial planner in Miramar Beach, Fla., launched his firm in 2016 with a focus on serving families with special needs. The father of two sons on the autism spectrum, he applies his personal experience to help other parents facing similar challenges.
"My niche is one of my key differentiators beyond my fiduciary status," he said. "To stand out in a world full of options, you must be able to provide a compelling argument whether it be your knowledge, pricing or something else."
Marketing becomes easier if you can set yourself apart with your credentials, life experience and specialized focus. That way, you need not rely on your role as a fiduciary as the primary way to differentiate your business.
Sensing notes that there are not many certified financial planners who are also chartered financial analysts who specialize in special needs planning for families. He further differentiates himself by highlighting his own experience raising two children with special needs.
"My case is not the norm but does highlight the added advantage of developing a niche business," he said. "You could say I speak both the language of autism and finance and often act as the interpreter for families who need both."
Even for those advisors who uncover a relatively untapped niche, that may not be enough to win over cost-conscious clients. With a growing number of robo platforms competing to deliver planning services with fees dropping to nearly zero in some cases, human advisors are rethinking their traditional business model.
As robo advisors have proliferated in recent years, many human advisors have tried to maintain their customary charge of 1% of assets under management (perhaps discounting their rate for their largest accounts). But they are finding that's harder to do in the current competitive environment.
Some advisors with small practices are dropping their fees so that they're roughly in the same ballpark as automated rivals such as Betterment and Wealthfront, as well as Vanguard and other large companies entering the space. These independent planners have lowered their fees by 15% or more.
Advisors who operate on a small scale wield an advantage in that they're closer to their customers and understand their needs. Investors in certain regions or demographic groups may grapple with specific concerns.
If your target market consists of young professionals with heavy student debt loads, for instance, you can offer short, explanatory videos on your firm's website to educate them about paying off their loans. You can also dangle free, downloadable checklists, diagnostic tests and other resources to help them manage household debt.
"Advisors have a tendency to treat their website as a brochure of their firm," Burns said. "But the best websites give clients the information they want and are looking for. Website content should be client-driven, not advisor-driven."
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