Firms in niche segments seek wider client base

Add target marketing to the list of advisory firm best practices being rethought in light of the recession and market slump. Although relatively few advisory firms concentrate on clearly defined niches — a practice that most experts still heartily endorse — some narrowly focused firms are now trying to broaden their marketing efforts to maintain or expand their business. To retain their marketing edge, however, experts counsel that firms shouldn't venture too far from their specialty. Consider the experience of Hanson McClain Advisors Inc. of Sacramento, Calif. The firm, which manages $1 billion in assets as well as another $3 billion through the Hanson McClain Retirement Network LLC, has grown to its present size by specializing in the retirement and investment needs of telephone company employees, who constitute 80% of the firm's clientele. Hanson McClain became such an expert in the defined benefit plans of phone companies, particularly in the West, that the phone companies' own benefits administrators recommend the firm to their employees. In 2001, the company decided to expand its single-industry focus by serving airline pilots. Its initial forays made it realize how difficult the diversification would be. “Even though they are unionized, pilots are considerably different from the linemen and other rank-and-file workers we serve at phone companies,” said Scott Hanson, a principal at the firm. “We learned that airline schedules would make it difficult for our firm's representatives to meet with pilots, and we discovered that we would have to change some of our operations to meet their needs.”
In the wake of 9/11 and the falloff in airline travel, Mr. Hanson decided that focusing on pilots would be too much of a stretch for the firm. Last year, the firm decided to target workers in the electric-utilities industry. “There's tremendous potential on the electric side,” Mr. Hanson said. “The transition hasn't been much of a challenge. The employees are quite similar to phone workers, and we've got quite a few relationships with industry trade groups and union officials,” he said. About 20% of the firm's clients are now employees of electric utilities or their family members. Advisers who are looking to expand their niches should look to similar clients, said Mark Palmer, managing director of business consulting at The Charles Schwab Corp. of San Francisco. “The current environment is causing advisers to question their strategies and go back and think about what they should do differently, if anything,” Mr. Palmer said. But advisers often forget that they can develop niche markets cheaply simply by spreading the word about their business at the local coffee shop or grocery store, said David Patchen, regional director and head of practice management and coaching at St. Petersburg, Fla.-based Raymond James Financial Inc. “You want the word to get around that you're the go-to person in this physical location and that you provide best-of-breed financial advice,” Mr. Patchen said. Too many advisers don't even use simple strategies to target other clients, said Chris Holman, a Minneapolis-based senior-executive coach for ClientWise LLC of Tarrytown, N.Y., a coaching firm serving financial services companies. “Very few advisers have a consistent client acquisition process,” he said. “The first part of expanding a niche of clients is to select the types of clients with whom advisers enjoy working, and then approach them through their friends or existing clients,” Mr. Holman said. That is the tack used by Randy Landsman, an adviser with Warren, N.J.-based Beacon Financial Group, when he began switching his niche from New Jersey-based corporate executives to police officers. “I really like helping these people. It's been a mission,” said Mr. Landsman, whose firm manages about $300 million in assets. “We need to help them get the right kind of information,” he said. “It feels really good to help out people who are working really hard.” Police officers now constitute 20% of Mr. Landsman's business, and he hopes to go after officers across the country. With 60% of its clients and 70% of its $700 million assets coming from employees of Atlanta-based United Parcel Service of America Inc., The Botsford Group of Frisco, Texas, wants to widen its base.
“UPS still has a large base of clients that are a good fit for us, but it's really a situation of us wanting to grow beyond that. We need to take our own advice — we tell our clients not to have more than 10% to 15% in one stock,” said Kay Lynn Mayhue, a certified financial planner and Botsford's chief operating officer. Botsford is in the process of hiring a president of new-business development whose sole job will be to help the firm expand to new clients in other industries. The firm sees opportunities in the oil and gas exploration business. “We realized the expertise we had with executives in the UPS marketplace could be duplicated to have a bigger impact,” the firm's president, Erin Botsford, wrote in an e-mail. Some advisers aren't ready to expand beyond their niche. At Pittsburgh-based Lifetime Financial Growth LLC, where about 75% of clients are physicians and pharmacists, adviser James McGovern is content. “People want an adviser who understands their industry and concerns,” said Mr. McGovern, whose firm manages $1.5 billion in assets. “If we start seeing our clients leave the field of medicine, we'll follow them wherever they go.” E-mail Lisa Shidler at lshidler@investmentnews.com.