Finding a Niche Market for Your Financial Practice

Read the Transcript Below:

This is The Perfect RIA, in case you didn’t know. Bringing you all the strategies to help your business grow. Are you happy? Are you satisfied? Are you hanging on the edge of your seat? Sit back and listen in while you feel the beat. Another myth bites the dust…

Matthew Jarvis: Hello, everyone. Welcome to another episode of The Perfect RIA podcast. I’m your co-host Matthew Jarvis, and instead of Micah Shilanski, I have—I’m going to call it an upgrade—I’m here with Michael Kitces at the XYPN Live event in Denver. And, Michael, really excited to do a podcast with you.

Michael Kitces: I appreciate the opportunity, Matthew. I’m a little nervous now. Like Micah is going to be coming for me for having, like, knocked him out of his seat for an episode here.

Matthew Jarvis: Well, it’s just setting Micah and I are very competitive, and so he’s going to have to try to find a guest. That’s even the next level above. So I’m not.

Michael Kitces: Oh, there you go. Sorry, it’s like Gauntlet has been thrown right out of the gates.

Matthew Jarvis: On halfway. I didn’t want to go halfway. Well, Michael, when I told a couple of friends that I was going to have you on the podcast, of course, their number one question, which is the question everyone asks about you, is do you ever sleep as against one out of the way right away?

Michael Kitces: I do sleep. I actually, like, literally have. I’m a big measure of how Fitbit fans like I do sleep. It is measured. I sleep like, don’t have a lot of social life these days. It’s pretty much work family sleep. And that’s kind of the rotation these days. So it does stay a little busy. But yeah, I do sleep. I just cram in a whole lot of other productivity around all of the available waking hours that I’ve got.

Matthew Jarvis: I love it. Back to playing bridge or is that still shut down for?

Michael Kitces: No. Unfortunately. So I played at the same local bridge club with my father now for oh gosh, what is it? About 30 years? Like same local weekly club game, but unfortunately got shut down in Copan. Environment has not reopened yet, so hoping they will reopen sometime soon and we can get back to the weekly game.

Matthew Jarvis: Yeah, fingers crossed. Well, really excited to talk to you today about delivering massive value, which is a term we use a lot on the perfect array, not just a term that you do talk about other things like like giving away most of your content, you’ve been delivering massive value. If I can use that phrase for a lot of years, like ever since you launched kids. It was about like delivering incredible amounts of value to the industry and then kind of these like ancillary things after. But I’d love to hear it for a little bit your thoughts on delivering massive value as it relates to the Kids+ platform. And then we’ll kind of pivot that into the industry.

Michael Kitces: So, I mean, from our platforms perspective, I can tell you in kind of setting out, I essentially view our model as my goal is to give away 99 percent of what we do for free and get paid enough on the last one percent to make the whole model work. And so huge amounts for free. Very limited value of very high dollar, high value things that we actually get around to charging for and just and making that math work. And it has it has for building and scaling the platform for the better part of 13 years now since it originally launched. We’ve shifted that model a little bit over the past few years now, and we’re probably more like give away about ninety five percent of what we do for free and charge in the last five percent. As we’re as, we’re scaling up a little bit more, but you just add at its core. To me, one of the drivers has always been like, you don’t have to get paid the top dollar for absolutely everything you do. You just need to get paid enough for some of the things that you do to make the business work well in the aggregate. And when you when you take that approach, frankly, it’s very freeing for saying like, what exactly are the things that we do that we’re going to get paid for? And what is it that we’re going to do simply because we want to deliver value to the community that we serve? Because ultimately, that’s what builds your brand, builds your credibility, gets to the point where people start saying, Well, this is what the free stuff is worth.

Michael Kitces: I wonder what the paid stuff is like and just we’ve built the business around that philosophy throughout, just starting with literally what questions are people asking us? We’re going to do the best we can to answer those questions. And over time that became, we’re going to answer those questions, then we’re going to teach about the answers to those questions are going to speak about the answer to those questions. They’re going to try to see if they answer those questions, then we’re going to actually give you some service companies to help you implement the answer to those questions. But all just drives around really the same thing that we we do and live in the advice business as well. So obviously, where I started and spent the bulk of my career is what are your clients, whether the people that you serve asking you for and and try to do it for them? I think the biggest trap that we tend to fall into in the in the industry is we, you know, we we try to deliver the value that everyone else is delivering instead of spending more time talking to the people we serve and just saying like, No, no, really like, what’s what’s bothering you? What’s your challenge? What are you dealing with? And the more focus that you get on who you serve, the more you start seeing common themes that crop up amongst people that have a common set of problems and the more opportunity to have to create a solution because I’m not creating different solutions for everyone like I don’t have a zillion different people, all different needs.

Michael Kitces: Sure. You know, at least for the kids platform, we’re very focused on advisors. And yes, there’s a range of advisors with a range of stuff. But like, I’m not also serving doctors and dentists. And like any other number of professional services, folks out there, like we’re very focused in the advisor community and not even all advisors, but the particular segment of advisors that charge for their advice and build businesses around their advice. And we call them the financial advisors. Sure. And it’s all the more that we’ve gotten focused there, the more you find there’s just all these questions and challenges that we deal with everything from obviously what you guys focus on, right? How am I delivering value to my clients? How do I run this business? How do I scale this business? How do I price this business? What technology do I use for this business? And just that’s where we get to focus our value, offering out the advisor community of we’re going to try to answer as many of those questions for you as we can. If you need a little bit of help of implementing some of that, we happen to have a couple of things to help you with that to do that.

Matthew Jarvis: I think what comes to mind is, I sort of say in that adage of of being an inch deep and a mile wide versus an inch wide and a mile deep, like you said, you’ve really with the this platform narrowed in on just financial advisers. You could speak as opposed to all professional services, right? There’s overlap there, but you said there’s an

Michael Kitces: Immense amount of overlap, I’m afraid, like we could spend time with attorneys and accountants and consultants and we just almost anybody that that that sells their time and or expertise for dollars has a lot of common issues to what financial advisors do. But they use different technology and they have different business metrics. They have slightly different marketing strategies. And all of a sudden, like if we went that broad, we would water down a lot of the stuff that we do to not be as relevant to the particular segment that we’re serving. And just there’s I mean, it’s the challenge anyone has when you start talking about things like niches and picking target markets is the average advisor when they start thinking about getting targeted, spends most of their time thinking about all the people that they won’t serve. Exactly. And I spend all my time thinking about the people I will serve. Sure. And just there’s a lot of people out there that need help. Like, there’s so many people that need help. You can pick ridiculously narrow things and have wonderful success rate like zip line network. We started seven years ago, like, let’s work only with advisors, and they’re in Gen X and Gen Y in their 30s, 40s and 50s only who were doing family models only who are charging fee for service business like only, who are willing to also work with clients virtually only who are willing to subscription like we.

Michael Kitces: You know, if you take like the Venn diagram of the advisors that we are working, we put like so many overlapping circles in that Venn diagram that the business should be able to exist. Yet that’s what got us so incredibly focused on who we could serve that we build an offering. We got traction and we created a market around it by being so successful and serving advisors that want to build fee for service advice only businesses that we’ve been able to power the growth specifically by being so focused on who we serve and fully acknowledging, like when we launched, we launched something that probably wasn’t viable for ninety nine percent of advisors, but at least there’s three hundred thousand advisors out there. It’s like, Guess what, if you serve one percent of advisors, there’s still three thousand of them. Half of them have already joined the network because we’re over 500 advisors now.

Matthew Jarvis: Now, one of the fascinating things that stands out to me being here at XP-Pen Live is is not only have you focused all of your efforts on that, like you said, a very, very narrow niche in the scheme of the industry. But by doing that, it’s almost like you’ve created this like self-reinforcing machine, like everybody like this is my community and I get that I’m. Not I’m almost proud that I’m not part of the ninety nine point nine percent like I’m in this point when that criteria like these are my people, I look around like, this is my group and you’ve got a community. I think that doesn’t exist really anywhere else because everywhere else, we’re kinda trying to serve everybody.

Michael Kitces: To me, that’s one of the natures of just communities look like I’ve created a lot of different communities over the years. I was I was originally one of the co-founders for next gen. In fact, when it was independent before it folded NFPA, we create a community around XP-Pen. There’s there’s a financial advisor community around Kitsis as well. And like one of the defining characteristics to me of community is that communities have clear boundaries about who can be part of the community and who can. So if you get all the way down to like the origins for most of us in community, like our communities, our neighborhood and like, because it’s got the defined geographic space like you’re part of the community because you live in our community, I hang out with the members of my community because like we’re in common circumstances, we can gripe about the same local community, things that we’re all dealing with because we all live here, you know, schools, whatever it is like, there’s a good geographic constraint, but communities are defined by the boundaries that define them that ultimately say, like, you’re part of this community because you’re in this group and you’re not outside of this group. There’s a clear defining line to help you know when you’re in the group and not outside of the group. People who have common characteristics often shared experiences. Shared experiences, ultimately is what binds us together.

Michael Kitces: When we go through challenging situations together and survive them together, then we form very tight bonds as we go through that same reason why study groups work. And so all of the things that we’ve created, all the communities that we create successfully all had very clearly defined boundaries around the Next-Gen had a hard line. You had to be thirty six was highly controversial. We did it. We were like, Well, lots of advisors have these little challenges of growing firms and staffing firms. We had a whole segment of career changers that were like, I’m 42 years old and new to the industry. I want to be in next gen with all the new advisors as well. We were like, That’s great, but you should have your own community because 23 year old is getting started in the industry is very different challenges in the 42 year old starring in the industry because, you know, they’re coming with usually like no family, no more. It’s a lot less a lot more flexibility, no money in the bank like you maybe coming as a career change or existing relationships, existing network, family, mortgage, kids like very different dynamics and constraints like you all need a community for you. Eventually, that got created for a while was called mid-career professional transitions and impact for short. So next gen had this title find age based characteristic and just what that meant.

Michael Kitces: And because that age threshold stayed in place for a long time, it’s one of the only communities that has survived 10 plus years because the fact that it had a defining characteristic meant as advisors age, they literally aged out. I still remember when I got the like, you know, really weird is the one that found me with the age limit to get kicked out for my own age and my own age limits. But it was important because if we hadn’t made the age limit, it would have moved with the founder group and it would have become something different by putting an age constraint in it forced people out when the community was no longer relevant to them, and it kept the community focused on what was actually relevant for them, which is the life cycle. In the first five to 10 years of getting started as a 20 something advisor with all the challenges that go along with that X y plotting network had its own community lines that we’ve defined around everything from fee only fee for service, CFP certification, even clean compliance records. Like a lot of a lot of defining lines, we put around it. Because when you end out with is, everybody who is part of that group feels like, wow, all the other people I’m with, like, these people are like me, this is my tribe. Yeah, you know, we’ve done the same thing with the Kitsis advice or platform, like we published our advice or manifesto.

Michael Kitces: Just like if you’re a financial advisor, these are the things that advisors should believe in that are important and valuable. All of it is around creating those lines and characteristics of what defines your people, your tribe, your community that either you want to build with. If you think about this in a building context, what do you want to community with this? If you think about the community building context and it applies equally well in the in the business context as well. Next gen was a community for the sake of being a community. Xp-pen was a community that we also built a business around kids as financial advisors, as a community that emerged around a business even a little bit different. Xp-pen was more we built with community minded business around ish kids us. We built an offering and then found a community around that because of what we what we built towards and what we stood for. But all of that applies in the context of what we do with advisory firms as well. The more clear you get about who you’re serving and the more that you can start creating those lines again, we start worrying about everybody who can’t get into the community. But what happens is the people who can get in, become so connected to you, to each other, to the people that are there.

Michael Kitces: That’s how you start creating really powerful businesses that are really deeply connected to the people that they serve, and that the formula is exactly the same as advisory businesses anywhere else. But it all starts with you have to get clear about the lines of who you really want to serve and show up for and be the best that I can say with confidence like. We are better than anybody else in the industry for advisors that want to go and build fee for service businesses from scratch and start them and run them and grow them and sort out everything from the compliance of the technology to the what am I going to do for my clients? So what I’m going to charge for them, like, we solved all that stuff. Now, if you come to me and want to know, you know, tips to grow a sizable annuity business, I got nothing for you. You’re not knocking it. Just not what we teach here. You want to know how to scale in a U.N. business can tell you some of the kids. This platform sure can’t tell you anything about that next. It’s not what we do here. And so we’re great who are great at. We’re frankly terrible for everyone else. I don’t care because like, you know, we’re awful for like somewhere between ninety seven and ninety nine percent of advisors.

Michael Kitces: And by doing that, we’ve built the equivalent of a top 10 broker dealer platform in less than seven years from scratch, with no outside capital, no recruiting budget and just by being awesome for the people that we want to serve. But you can’t even define us that way because we’re not a broker dealer because we do feel for service and there’s no brokerage product. So like the broker dealer broker dealer, yeah, yeah. So it’s all about getting clear on who do you want to serve? And, you know, spending less time worrying about all the people you won’t serve and the fact that look, you, you pick anything on this planet that serves zero point zero zero zero one percent of the population, that would be more clients than you can handle in a lifetime, like by many multiples. I mean, just whatever. There are seven plus seven billion plus people on the planet, sure north of 300 million people in the country. Most of us can have wildly successful practices with one hundred clients, 50 great clients like. There’s basically no limit as to how ludicrously focused you can actually get and quickly create something that’s very different that you can create as you frame it like massive value around it because you just literally start doing things for your community that no one else does, because no one else focuses on them.

Matthew Jarvis: So, so, Michael, tell me when you, when you and Alan were thinking about these boundaries around y right, you’re you’re saying, Hey, we’re going to go to this super narrow, almost like undefined niche in our industry, like nobody really talking about that area before you guys started talking about. Tell us about your thoughts. Like, do we need to go wider? Was it ever discussions like this is too narrow?

Michael Kitces: No, there wasn’t much discussion for us about it being too narrow because we we we got a little say like, we got a little. I’ll call it pre-work. Sure, which was, you know, I had lived the dynamics of the financial planning world almost 15 years already. At that point, I had gone through the growth cycle of next gen because we started that in two thousand four and didn’t come until twenty fourteen. So I spent almost 10 years kind of living that community, seeing the growth, seeing the gap, seeing the pain points, learning from what we did well as well. Some of the things that we we didn’t do well or we or we had missed. You know, we saw some of this space growing around fee for service business models and new models like monthly subscriptions and how to work with younger clients profitably, which is sort of all the started coming together. Allen was living a version of that himself. So if you go all the way back to like twenty twelve twenty thirteen before ZPM launch, Allen was running an advisory firm doing fee for service financial planning to try charging monthly subscription fees for clients. And and so he actually wrote an article about it on the nerd side view blog back in Twenty Thirteen A Like How I did it article that was like, Here’s what I do, here’s what I charge. Here’s all the technology that I use. And back then, technology was even sparse even today. So there was just a lot of like, Oh my god, you can use that to do that. Like, That’s sure, it’s great. So, you know, he wrote this article. Advisors started coming out of the woodwork to say, like, I want to learn more about how you’re doing this.

Michael Kitces: I’d love to do something like, you’re like, You’re doing it. I mean, relative basis. Like, sure, I know, like a hundred advisors, maybe maybe had called Allen. And so, you know, in the grand scheme of three hundred thousand financial advisors in the industry, that’s like not even a visible rounding error on the number of advisors, but it was like, wow. One hundred advisors called and said, I want to learn more about about doing this. I think we could help them and actually be so valuable that we could charge for it. I know there’s enough of a market there to get something started. And and like that was really the extent of it. You know, we didn’t go out saying like, we’re going to create this, but at least to me now, it’s like ridiculously large business. You know, we’re we’re crossing hundred team members at XP-Pen and gearing up for the next stage of growth, but I’ll never live it down internally. There’s still a chart that floats around sometimes like the original, the original business model projection that I had put forth. And I think like if we were on that original track by now, we were supposed to be at something like two hundred and forty advisors. And we just like you strut on this here. Yes, yes, we had a three hundred and ninety one this year. So, you know, we’ve like seven eight x to that original projection and completely blew it out of the water. So I will own like I didn’t know it was going to grow this big. But I knew there was enough there from the, you know, from the indications of interest that we were already getting.

Michael Kitces: It was like, there’s something here, I could do something for them that’s value that’s economically valuable, for which I can charge and start building a business. And then from there, we found quite how big our market was. And as we grew and were successful, more people were attracted to it and wanted to do the same thing. And then the the compounding of the flywheel of the business starts to get going. So I will say, like for anybody who’s looking at building more in that direction, I mean, there are some takeaways that no no one is. Most of us, even when we think about trying to build more focused businesses, frankly, like, we overthink this too much. Yes. I mean, the number one I see is like, Oh my God, like, I have to pick the thing that I’m going to do for the next 37 years without changing. I have to make the decision now. If I make it wrong that I will be forever doomed to my business. Will uploaded a fireball of chaos, right? So like the head traps, like for Christ’s sake, no. Like pick a thing that at least two of your current clients like and see if you can get two more of them like just start there, and if you get four of them, try to get four more. And if you do that for a few years, you might find that your business looks completely different than it did a couple of years ago, because suddenly you’re now going down this pathway of building deeper and deeper with these people that you’re serving.

Matthew Jarvis: So they are real quick. It doesn’t need to be like, I think sometimes advisors think, Well, I need a niche that I know 20 people or 100 people under 500 people. And you’re saying, if you know two people in that niche or four people, that’s enough to get focused after that.

Michael Kitces: Correct. Now, I mean, you have to just at some level, like be aware that there are other human beings on the planet that also do that thing. Like, I can come up with a world where someone constructs things so ridiculously narrow that that you managed to get too narrow. But frankly, again, 300 plus million people in the country, seven billion people on the planet like it is actually quite difficult and almost impossible to get too narrow, right? You look at advisor like Adam Schmale or like, let’s start with anybody in in like medical services who wears a white coat. No, no. Let’s just go after ophthalmologist. No, let’s go ophthalmologist who have independent practices. Let’s just go after ophthalmologists who run independent practice to within five years of selling to a private equity firm, which is the current version of his niche, and he has a waiting list. Yes. And like, great like he like, sliced it four or five different times. It took several years of iteration, right, as as he refined down further and got narrower. Because what happens is the further you go, the more you start discovering problems that no one else has seen and notice and realizes, which is how you get to deeper value propositions, better value propositions, right? Delivering massive value we see very clearly, even internally different types. Benchmarking studies, basically the niche here, the advisor, the higher the fees.

Michael Kitces: Yeah, just because you start doing things that are so unique and different, unlike what any other advisor does, because you know them better, you’ve gone deeper with them. You create things that no one else would create for them, because who’s going to do that when they’ve only got two clients like that? But you start doing it because you’ve got four and eight and 16, the fly was going. It’s like, I should really put some more stuff here because this is really working well for them and I’m trying to systematize my business. And that’s how you start creating more differentiated value. So you don’t have to pick the end thing. You just have to pick up a thing and start walking down. That path creates any defining line that starts to say who is a fit and who is not a fit. But but I will say, just like it has to literally be about the human. So right, so you look at the most, the most typical things that we define on today, which is, you know, the definition of my niche target market is people who can afford my fees, right? Otherwise known as like an asset minimum or whatever reason like that is that is that is not a definition of some segment that has unique problems. I kind of like

Matthew Jarvis: Steve lurching crazy, high like billion dollar, you know, some year. But setting that

Michael Kitces: Aside, you know, I like sort of Steve warging who likes to frame this around just niches our needs. We just people who have some kind of unique need or challenge or problem that that you think you can serve and solve in the marketplace. So you don’t have to pick the end thing, pick a thing, do some stuff for the people with that thing and what you find and see just for virtually anybody who is built really successful niches is it iterated several times in the first several years as they just went deeper and deeper and deeper? Not because they picked a super deep thing, but because every time they took a step, it was like, Wow, I actually found a sub segment of this that has even more complex problems for which I can deliver even more value and then commands a higher price in order to do that. And that does very good things for the metrics of my business. And they just keep going further down that road.

Matthew Jarvis: Now be curious, you mentioned Adam Chmela, who’s a great friend as well advisors you’ve run into with with more obscure niches than atoms. I recently met through an advisor. His niche is garbage truck drivers in his city, garbage truck drivers in the city. But it turns out they have an interesting pension. There’s one supplier of all of that. That’s his Ashley Murphy. Australian expats live in the United States again.

Michael Kitces: Narrow things. Yeah, I my my favourite for a long time was Jared Reynolds, which is advisor from the West. So is his niche. Is bass fisherman. Oh yes, right? Not all fishermen. Because obviously that would be too broad. Right? Just the bass fisherman. You know, he he grew up his father was a bass fishing pro, he grew up on a bass fishing lakes like he’s lived in that community all of his life. And I didn’t know much about it until I learned his story. But like bass fishing, million dollar prize purses, a ton of money that moves around the bass fishing community. And that’s not even the big money. The big money is the bass fishing equipment endorsement deals that start coming in after you win the bass fishing tournaments. And just like Adam was, the guy out became the go to guy. And so, you know, it seems like this sort of crazy, narrow niche. But by his late 30s, he had more than $100 million under management and 90 percent of his clients were bass fishermen. And even from there, like I know, Jared iterated at one step further which CEO he got to the point where he basically penetrated the whole bass fishing community or like the whole, the whole bass fishing pro circuit.

Michael Kitces: Sure. So he started expanding the bass fishing amateurs because what he found was there’s a sub segment of when you’ve got to think about, like who can buy high end bass fishing equipment and do high in amateur bass fishing for extended trips. The answer is business owners who’ve grown their businesses to a certain point that they can afford to go and spend like a week on the bass fishing expedition and buy some fancy stuff, and their business has grown the point that they’re able to do that. So then Jared started doing a marketing process where he would organize bass fishing and hunting expeditions, invite out a small subset of clients, and prospects ended out inviting out people who were like very successful business owners and started eventually capturing 401K plans for mid-sized businesses and bringing in seven figure 401k plans for prospects that he met and connected with on bass fishing expeditions. But then like, I mean, I remember having a conversation with him talking about like how he does his marketing events and his marquee events. He has the story of like the time he had to fight off an alligator from his client’s shoe with a knife. Yeah, boy, that’s a bonding experience that like

Matthew Jarvis: Remember that time for sure.

Michael Kitces: And so he even lives now these hyper focused marketing events, right, which is sort of functionally what they are doing, the thing he loves with the people that he loves finding a segment of them who also have some very nice business opportunities, which only grew as an evolution of his niche from the original one, which is the bass fishing pros who were winning the tournament. So even in his context, niches can and often do evolve a bit over time only because, you know, the more you become a leading expert in a thing, the more you find other opportunities that no one else even knew and realized where they are because they’re not as into the thing as you are.

Matthew Jarvis: Well, it seems like using that example and several others, that’s where that Venn diagram overlaps. Like if you can take what you’re passionate about, right? He wasn’t saying, like, Hey, I should learn how to bass, which he is passionate about bass fishing. And then overlay that with a client to whom you can offer marketable value, like that’s the golden goose right there. I love doing this thing and the people who I can deliver massively to also love this thing.

Michael Kitces: Yeah, it’s it’s interesting to me, just kind of having looked out there and the advisor wrote of the different ways that that niches end out evolving in practice. I mean, I’ve seen three or four pathways that people end out with. So one is a version like Jared’s, which essentially was, I’ve got this particular passion, and I found a segment of people in my passion who have the financial wherewithal to pay me for advice because I have seen people like it. Got it, got it. Itch, got a hobby. Start trying to do a thing with people in the hobby and like, you know, just because you do need people who are into your passion, who have a financial, who have some complexities or financial wherewithal to pay your fees. Now there’s a lot of ways you can do it. I think Jared’s has a good example because like, let’s do the pros in my passion who win prizes and have complexity there. And then he found another version, which is like, let’s find the high end amateurs who actually have other complexity in their lives, but share this passion around bass fishing and so we can get them that way. So like different ways, you can get there, but you do need to make sure there’s a financial wherewithal and some complexity to have problem solving, but one starts around a passion, OK? The second group that I would see starts around. I’ll call it a natural affinity. I have some connection to the community, so I serve engineers because I used to be one. I serve teachers because my grandparents were teachers, my parents were teachers. All my siblings were teachers. I was like the one freak who went into financial planning instead.

Michael Kitces: But I really just did it because I have a passion for financial education. I was just the numbers person. And so now I’m going to go back and make an issue with teachers because basically, that’s all I ever hang out with, because that’s my whole family and upbringing anyway. So like they, I wasn’t from the thing, and I don’t necessarily have a passion for it, per say the way I might have the passion for bass fishing. But I’ve got a natural affinity. I’ve got some connection to it. The third way that I see niches evolve are just, I’ll call it happenstance. It’s like I got I got a client or two who had this thing. I helped them with it. They introduced me to a few others who have the problem. I started working with a group of them, and by the time I get like four or five six of them, I start seeing some common themes and like, it’s actually pretty good clients and I’m pretty good at solving their thing and like, I’m getting good at their stuff and they give me some introductions to others. And suddenly just next thing, you know, like, I’ve got this whole niche of clients, they’re focused there. So I look at firms like All Worth, which originally is Hanson McClain. Like Hanson, McClain started out with, you know, they had a local market of PG&E energy employees back in the late 80s, early 90s when there was a ton of energy company mergers. And so all these, they had some clients who had all these questions about what to do with their pension plans. As the energy companies were merging, they had to make all these decisions about what you’re going to keep or roll in and roll out what you would do.

Michael Kitces: So they got good at that because a couple of their clients had that problem. Then their clients refer them to some other people who had that problem. Suddenly, they had a growing segment of clients who were PG&E employees going through mergers. And so then they went all in on it and they learned PG&E. And I think they got the HR department and distributed flyers in the PG&E parking lots about how we can help you with all of your pension decisions like just went full in on it. And then that led to a couple of other sister energy companies who are also going through similar mergers because they built their reputation there and it went down the path like they didn’t. They didn’t found their company with the founding vision of like, I’ve got it, energy mergers are the great opportunity of the 90s. Like, that’s not where they started. They just started doing some financial planning stuff and service some clients and doing what a lot of us do. You know if you could fog a mirror or you’re a prospect and get who they could get? But then they saw some patterns emerging from some clients they were working with led them to a few others and then led them down a rabbit hole of something that for a long time was their big niche. And I’ve seen a lot of those crop up over the years as well. Just had a few clients, got a few more there and then went all in on it as my thing.

Matthew Jarvis: Ok, so we’ve got these success stories on niches you shared in your presentation this morning that advisor with niches are typically making more money. We have these kind of fun stories. Where have you have you seen advisors that went niche and it didn’t work like? Is it always the golden path to success like the road to Emerald City or does it backfire?

Michael Kitces: I think the only situation I would say I see where it really backfires is primarily the advisors that come for that, that pursue passion niches and they pursue a passion niche where there’s just there’s just no opportunity, there’s no dollars there. So like I remember like an advisor who had like a passion for like Aave’s and living life on the road and wanted to try to make a niche around it, but ended out like they sort of lived in a community of like, downsize, simplify your life, super frugal living and live your life from an RV. And like, they have a lot of passion around it. They were living it personally. They were in the community there, but it was a community of people who are trying to maximize their lives with the minimum amount of dollars. So like more power to them not judging it at all, but like not the best market. If you want to charge a lot of dollars at the end of the day for financial planning fees like you’re going to go there. I would probably like, OK, can we do a different version of this? Like maybe a segment of the community of the people have had a successful life and built a lot of wealth and want to simplify their wealth by living a five year excursion on the road is RV retirees.

Michael Kitces: Sure, like, let’s show you how to get a plus RV. Yeah, yeah. So like, yeah, so we’re like, we’re going to write a blog about how to live a life of luxury in an RV, and we’ll live and we’ll do all the reviews of the highest end RVs. And we’ll talk about all the like, high end, really nice places to go for RV ing. That, like affluent people with some money, would want to go and check out right? They had off to necessarily put a banner for like, we only want people who drive RVs and have at least a million bucks. But if you start saying like, Well, we’re going to, we’re going to really focus on super high end luxury RVs and luxury trips you can do on your RV. Like guess who’s googling for that? Like people with money who are into the lifestyle read so like he was sort of in the right vicinity like, OK, he got an RV passion. Let’s go there. But let’s make sure we’re serving a segment where there are some dollars associated with it. But again, like, you may have to spend a little time thinking about what that looks like, but again, you can get there, right? There is a version of the RV niche that doesn’t work, but there’s a version of the RV that niche that does, you know, there’s certainly a version of like, you know, folks who just like to fish instead of building a career and more power to them, but like not a lot of dollars for them.

Michael Kitces: But there’s also high end business owners who like taking expensive, high end bass fishing expeditions because their businesses are so successful that they can afford to walk away from their business, not be there for a week and spend a lot of money otherwise known as good prospects. That’s right. So like, the biggest gap I probably see are advisors that pick a niche driven off of passion or even sometimes off affinity. But don’t do that cross section of there do need to be some dollars there, or you got to find some angle to it where there are dollars and not necessarily. This is about like fishing for atom or portfolios, but just at some point they need some kind of financial complexity and some financial wherewithal to pay you for your services, or this probably isn’t going to work out well.

Matthew Jarvis: That makes sense. Well, let’s pivot to a little bit. This podcast is all about taking action. What are a couple of items you would give to the listeners, be it specific to niches or delivering value in general? What are some action that they could implement in the near term on any of these subjects,

Michael Kitces: Like albeit I don’t think it’s entirely original, but just at the end of the day, like success to me over the next 10 years is going to be increasingly about how you get more focused into something that you can be awesome at as you frame it, deliver massive value and really deliver a unique, massive value. Because just doing value at scale, like the Fidelity’s and Vanguard’s and Merrill edges of the world are going to do it at scale and they’re going to do it cheaper than any of us. Do it? Yep. And so just doing a thing repeatedly at scale systematized alone won’t be enough, even if it’s going to be valuable, because if it’s not valuable, they’ll copy has done it. The the unique opportunity that virtually all of us have is independent advisers is firms at that size like the Vanguard and Schwab and Fidelity’s of the world like they think in terms of OK, how many tens of billions of dollars is on the table in this segment? And if there’s not that much money on the table, they do. It’s like Vanguard’s never going after the best fisherman. There are aren’t enough of them on the planet to literally on the planet to move the needle for them. So they only think in terms of giant broad slices. We get to win by taking narrow slices, which works fine because you can be wonderfully successful at 50 100 great clients and maybe like ten thousand at a time to get their needle. So getting comfortable and committed and being focused is first and foremost like it’s a mindset shift as you frame, like it’s a head trash thing of letting go of like, you know, I mean, like just let’s get really clear if you make something that ninety nine point nine ninety nine point ninety nine percent of the world hates, you will make more than a million dollars.

Michael Kitces: I love it. I mean, just like do the math on the world population. In fact, I could have added a few more nines to it, and it still would have worked like we just there’s so many people on the planet and we just need 50 to 100 great clients to make a wonderfully successful business. So, you know, don’t think about who you don’t serve, think about who you do serve and you’re awesome at because there’s plenty of them with pretty much any niche that’s got any level of financial wherewithal, but that’s a mindset shift that we have to start with. The second piece then that that goes with that is OK, then just pick who you want to start going after. So if you’re really not sure where to go? Well, let me start with you the other way, the most straightforward place to go for any adviser who’s already established is just look at some of your clients that you already served well that have some kind of unique space to problem you challenge and just say, like, what would it look like to get a few more of them? If you’re not sure how to get a few more of them, like talk to them.

Michael Kitces: If you’ve got a great ship and you work well with them, like, Hey, just you know, I love working with you, I’d actually love to work with more people in your industry, field, profession, background, hobby, whatever it is, right? And just start asking the questions, whether that’s, you know. Tell me more about some of your challenge. Like, what are some the areas I don’t help you in that you wish I could help you in that maybe I can’t do right now. But if there were more of you, I would totally do that because I would actually be really good investment for me to start doing that one or more of you. So going deeper with them, what else could I be doing to serve people with your passion, niche background, whatever it is, trying to dig deeper, like what else can I do that would be unique to you? That doesn’t doesn’t crop up because it’s not the generic financial planning stuff that everybody else does. More specific to them. And you know, how else would you suggest that I get connected with other people in the community group place, whatever it is and right in good clients tend to want to promote us and help us with those introductions. So I know Robin Crane, I think, likes to frame this around. Just, you know, think about your top two or three clients that you want to clone. And I probably don’t even top because this doesn’t have to be pure dollars. Right? Yeah, just which you just which, you know, clients that you would like to have more of because they go some direction that maybe starts getting a little niche here and talk to them about what else can I do for you that I could do for other people like you? And then I’m going to try doing that and see if I can get a few more like that for those who are a little more open ended, like, I don’t know where to go.

Michael Kitces: I don’t have that many clients. I don’t actually really love any of the client segments I’ve got to to to build with that depth again, like you can more or less pick anything that you want. The way I’ve always been a fan of going about this is, you know, find a half a dozen people that do fit some profile that you might want to serve you doctors, doctors in a particular hospital, doctors or a particular hospital do a particular thing in particularly whatever it is. That’s fishermen who keep winning type tournaments and have questions and reach out to half-a-dozen and say, like, Hey, I’m I’m, I’m building a new business for serving people like you, and I would love to just interview you about the kinds of challenges that you face because I see you as one of the leaders in your community, and I just love to pick your brain, right? Like, I’m not. I’m not going to tell you anything. In fact, I literally don’t have anything to show you because I’ve made the thing yet. I see you as a leader in your community, and I’d love to pick your brain.

Michael Kitces: Yeah, most people like that because they like feeling flatter and they feel like feeling like they’re they’re they’re strong leaders in their community. So not everyone will say yes, but a lot of people say yes. And just ask them all the questions that you can think of of like, what are your challenges? What keeps you up at night? Where do you where do you find kind of complexity and get good at listening to that and finding what you hear? And I find where the biggest challenge for loss of advisors and insights are the awkward recognition as well. Like nobody says, Well, you know, I’m always up at two o’clock in the morning, so I’m having a comprehensive financial plan. No, nobody. Frankly, nobody says I wish my portfolio would be better managed, right? They start talking about other things they start talking about. Usually things that pertain to their financial reality in their niche and their space, right? You know, the bass fishing guys are like, I won the tournament. I don’t know what I’m supposed to do with the prize. And there’s all these tax things on stage. All the tax stuff works. And then like, I got a call from HGTV and I don’t even like know how to negotiate the deals. But there’s all this money flowing around like, I don’t know what to do. Like, like, right? They like they start talking about that stuff because that’s what they’re dealing with you. You get to know what the niche of young dentist.

Michael Kitces: It’s like, well, I want to buy into this senior dentist practice, but like, I don’t know if I can afford it, and I don’t know if I can afford the buyout deal. Like, I don’t even know how these deals really work, and I don’t know how to get the financing for it. And then all of a sudden, like you end up with a niche of helping doctors finance or helping dentists finance succession plans from senior dentists and how to do it well. And you write articles about it. And lo and behold, now you’ve got a niche of young, upwardly mobile dentists who are doing buyouts and managing a practice for acquisition while they’re paying off their student loan debt. So just start asking them about what their areas of financial complexity are, what their challenges are, what keeps them up at night, and both the good news and bad news. Be prepared to hear them say almost nothing that has to do with what we traditionally 10 offers financial advisors. The bad news is that’s challenging. Sure, a lot of people get then caught in the head trash are like, Well, I don’t know that much about that stuff, like what entitles me to give them advice, sure. But that’s also what creates the opportunity. Like, you don’t know about it. No one knows about it because no one gives them advice about it. That’s why they got a solution. There’s a solution wouldn’t be doing it. It’s like, Go learn about all that stuff and then you can be the leading expert in it because all you have to do is know more than them is saying goes like in the land of the blind, the one eyed man is king.

Michael Kitces: Like, again, the head crash for us, like, you know, I have to know everything that has ever been known. To mankind about this subject, in order to be an expert like that’s not true, an expert is simply someone that knows more than what anybody else currently knows in the space or even what you’re at. The end of the day, an expert is nothing more than if you know, more than your client. You’re an expert. Yes. And the more that you spend time in that space. The more you learn about what the what they really need, and just again, that’s why niches go deeper. That’s why niches tend to evolve, because the deeper we get it, the more that we start learning. But the starting point is, if you’re not sure where to go is to start doing informational interviews with people, Hey, I’m thinking about building a business to serve, to serve people like you. I see you as a pillar in the community that knows all this awesome stuff. Like, I would just love to buy you coffee or buy you lunch or buy you dinner and like, just learn more about you and pick your brain a little bit. Yeah, and you’ll find a lot of people say yes, and you’ll start learning things when you talk to them.

Matthew Jarvis: Yeah, I think this is one thing I want to draw from that. That you mentioned is notice that everything that Michael mentioned is things that you could take action on. So I didn’t hear anything about sit down in an office with a lot of spreadsheets and do a lot of analysis. You’re like, Hey, listen, either find people that, you know, like the three different areas or people that you like or a profitable venue or just can’t start interviewing people. But I think the key is you’ve got to take action, right? You’ve got your practice is never going. Xp-pen was not created by just sitting in a room like this really sounds like fun. Like you had some ideas.

Michael Kitces: Oh, we jumped out there. No, we jumped out there and made a thing.

Matthew Jarvis: Same as you’re the Kitsis platform, right? It wasn’t like this would be really fun if I did this website. It’s like, All right. Article after article after article.

Michael Kitces: It was, and it was the same thing that I got. If you go back and look at like just the site in the content of what was there 10 years ago, right? Like, yeah, relative to what we do now and the depth of where we go, like, it’s a little cringy to me to look back, but that’s OK because when I started, the only people who read it were my friends and my mom. And so like, you know, the stakes were a lot lower. By the time I figured out what was going on and who I was really serving got deeper in it. I gotten better at what I did, and we were showing up in a more unique way that then by the time we got traction, we were ready to get traction. So again, like we we we put a lot in ourselves like the mindset shifts are getting more focus is not all about all the people that say no to you. It’s about how many people say yes in your perfect and your perfect target. Yeah, and if you’re not sure what the target looks like, just start interviewing people and asking them.

Matthew Jarvis: I love it. Well, Michael, thank you so much for that insight. Thanks for all that you do on our industry, all the value that you deliver through your platform and your different things. It’s really been a pleasure chatting with you. And again, I’m a regular reader of your site. That’s one of my guilty pleasures is almost every day one of my first sites to visit Kitsis dot com. What’s going on today? So thank you for all of that. \

Michael Kitces: My pleasure. Thank you, Matthew.

Matthew Jarvis: Perfect. Well, everyone, until next time. Happy planning.

Hold on before we go. Something that you need to know. This isn’t tax, legal, or investment advice. That isn’t our intent. Information designed to change lives. Financial planning can make you thrive. Start today. Don’t think twice. Be a better husband, father, mother, and wife. The Perfect RIA. The Perfect RIA.