Target Marketing: Finding and Pursuing a Niche

John Van Leeuwen isn't a dentist, but he knows how they think. For about two decades, he's focused his investment practice on the dental community.

"It's fun to work with a homogeneous group of people so you're not starting from scratch every time you bring on a new client. You know what their needs are and you know what their challenges are," says Van Leeuwen, senior vice president and marketing director for the Partners Group, a Portland, Ore., employee benefits and investment firm.

Advisors such as Van Leeuwen, who focus on a particular market, reap many benefits. For starters, they have access to a vast referral network, which greatly reduces marketing costs. They also develop an expertise, which sets them apart from other advisors.

"I get a lot of marketing mileage out of it. Once you become known as the expert in that niche, word travels and generates a lot of referrals," Van Leeuwen says.

Van Leeuwen got his start with dentists almost by accident. About five years after he started working as an advisor, a well-known local dental specialist became a client and suggested Van Leeuwen start giving financial planning lectures to dental study clubs, in which groups of dentists meet to learn in a friendly, relaxed environment. Van Leeuwen, who coincidentally had two other dentists as clients, soon recognized the opportunity to specialize. For three years, he attended business-related and clinical classes with dentists in order to learn about the profession and be able to help his growing client base with practice management issues. His practice continued to grow over time; today, 90 percent of his new clients are dentists.

For Pam Hoppe, a 22-year-veteran of the industry, the decision to focus on the special- needs market eight years ago also was a career-enhancing one. "The niche really revitalized my business. After a while you sometimes tend to get bored—it gets routine. There's nothing routine about this," says Hoppe, a special- needs financial planner with New England Financial, an affiliate of MetLife, Atlanta.

To learn more about the market she was hoping to target, Hoppe attended special training offered by her firm. She then began actively marketing herself to schools, family support groups and other entities that deal with people who have special needs. Right now, about 40 percent of Hoppe's practice includes special- needs clients, and she hopes that will continue to grow through referrals from existing clients, as well as her other marketing activities. "To me, it's the ultimate way to leverage your business because you become the expert in your field," she says.

Scott Hanson, a principal of Hanson McClain Advisors, Sacramento, Calif., agrees. "Your clients become your marketing arm. Because it's a tight-knit group of people, you cut down on your client acquisition costs. You still have to market yourself, but your costs go way down," says Hanson, whose business caters largely to retired telecom employees.

Hanson began working with local retirees of Pacific Bell (now part of AT&T) in the early 1990s, after the company made a mass retirement offer. He and his partner initially got seven clients out of a pool of a few hundred, but they saw a business opportunity nonetheless. After the retirement offer from the company ended, most of the other advisors went away. But Hanson and his partner did the opposite—they sought out local telecom employees who were three to five years away from retirement and courted their business. The goal was to develop relationships with these workers early and, hopefully, capture rollover dollars later on. The strategy worked; the firm now boasts more than 1,000 retired telecom clients from AT&T in the Sacramento region. The firm also has created the Hanson McClain Retirement Network—a group of independent advisors across the country with whom they share their knowledge of the telecom niche.

"If you are going to have heart surgery, you're going to want a heart surgeon, not a general surgeon. You can imagine how much more efficient the heart surgeon would be ," he says.

Scale also has been a benefit to Patrick Funke, a broker with Geneos Wealth Management, Phoenix. About 10 years ago, he determined that he could do more to help small- plan sponsors meet their requirements under ERISA. So he built his service model accordingly and, in the process, created a competitive advantage. Funke now has more than 60 retirement plans as clients and is able to do things more efficiently.

"It has provided stability to my business even during the past few years with the downturn –the retirement assets have held up much better. I have a definable expertise. I have a definable business model," he says.

The ability to network is critical for advisors who focus on a select group of clients in order to properly build referrals. Take Tony Mudd, an advisor with John Hancock Financial Network, Mishawaka, Ind., who has focused on retirement plans for hospitals and other healthcare-related businesses for 16 years, He started in this niche while at a previous job and continued to grow the business at his current firm. Because it's such a referral-based business, Mudd doesn't do a lot of direct marketing. Instead, he spends his time talking to top-level executives, while junior advisors on his team work with the rank-and-file employees.

Mudd works on plan design, implementation and servicing, and offers on-site planning and education for plan participants. As a result of his work, he has gained the personal business of many healthcare executives. What's more, the healthcare industry is often transient; so when clients move jobs, it gives Mudd an opportunity to solicit business from another institution. "The service model is the key," he says.

Jason Pace, a vice president and financial advisor at the R.M. Compass Group of Morgan Stanley Smith Barney, Atlanta, also gets most new clients through referrals. But Pace, whose business focuses on National Football League players, spends a significant amount of time attending games, dinners and other events where he networks with agents, coaches, current and former players, and parents of college seniors who are likely to be drafted to the NFL. Having a background similar to the clients he works with is a bonus for Pace, who played football in college. "It made it a lot easier for me to relate to these guys," says Pace, who has been working exclusively with football players since 2000.

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