Advisors Must Be Specialists, Not Generalists

If you are a boutique advisor, avoid the temptation to be a jack-of-all-trades.

Compared with the brokerage days of yore, the modern financial services business can be summed up in one word: specialization.

Some of this shift has to do with an evolving industry and changing client needs.

Today's financial planners devote their time to helping investors budget before and during retirement, plan for the accumulation and distribution phases of their lives, calculate probabilities, and help with money-planning decisions over a lifetime. The bottom line is that the brokerage and financial advice business is now more focused on planning.

More people need good financial planners than ever before .As a result, the industry has splintered into many types of firms.

This splitting has been great for the consumer in terms of choice and access to professional advice, both in person and online. However, it has created a big issue for those who are actually in the financial services industry. Moreover, many in the field do not even realize what has changed.

Specialization Has Become the Way of Wall Street

Financial planners have plenty on their plate just dealing with existing clients, finding new ones in a field full of similar-sounding offerings, and meeting the dramatic increase in demands from compliance, operations, cybersecurity and social media. Insurance is more complex than ever, and in some cases, its features overlap significantly with other financial advice topics.

This has led to a conclusion: If you are in the financial services field, you had better pick a lane and go with it. In other words, specialization is the way of Wall Street now.

The days of being a jack-of-all-trades are not over, but generalization severely limits the ability of a boutique advisor to grow a practice. Behemoth firms can do just about anything, and they do so with teams, budgets and branding abilities that dwarf those of nearly any small to mid size firm.

Today, you can't afford to think only about which area you want to target. You have to choose, go deep and let your network know about it. The generalist can still prosper, but the odds are much longer than in the past.

The cost of indecision: a better chance that your clients will move on to a bigger firm. The world has become more complicated, and your clients and prospects know that. Although that fact helps your bigger competitors, you can fight back.

Why Advisors Should Select a Specialization

Financial services professionals have to determine what their best and most unique skill set is compared with hundreds of thousands of seemingly similar professionals. To this day, there are plenty of well-heeled investors who still think of all advisors as brokers.

Most professionals with at least a few years in the field know what they like to do and what they are good at. Those two guidelines are the simplest and best cues for finding your specialization and niche. Doing so with confidence and a clear message to the world is most of the battle. And, whether you ultimately meet your own expectations or don't, at least you will have done the Frank Sinatra thing: You can say you "did it my way."

Consider What You Feel Passionate About

If financial planning is your passion, go that route. But don't also try to be an investment manager. And don't try to make everyone your client; that is so1990s.

This is a great time for boutique-style financial folks to identify good collaboration partners in fields where they have knowledge but not true expertise. Meanwhile, investment-focused planners who also try to slap together financial plans are at risk of losing out to competitors that are bigger and more diverse in their offerings. Iconic financial firms win business from boutiques simply because of their size and perceived strength.

This is a business about people, emotions and beliefs. If bigger is better to potential clients, the only shot you have is to present yourself as an expert in a specific role, as part of their multiadvisor team. Sure, you can try to get the "head coach" position, but unless that is truly your specialty, being the boss is getting harder to do.

How to Explain Specialization to Clients

Advisors of all types tend to lean toward making themselves indispensable to their clients and looking as if they are capable of wearing many more hats than they should. They hesitate to admit to clients that they cannot do it all.

Turn that around and explain to your clients that, in an increasingly complex world, you have figured out something that will add great value to their financial and emotional well-being. You have determined that the best way you can help them is to identify experts in the more specialized parts of the field and make sure their bases are covered. The last thing you want is for anything of importance to fall through the cracks.

And, lest you think this is something you are just making up to mask what you are doing, keep this in mind: You're just being honest with them.

Frankly, specialization by boutique advisors ought to be considered part of the fiduciary standard. What is in the client's best interest is that their advisor has depth in the care of their wealth. That is how you can be their hero. And, as a fringe benefit, you will get to keep your sanity in an era when financial advice is simultaneously more ubiquitous and less informed than ever.

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