Four Habits of Highly Successful Advisors: Part Two

Scott Welch, CIMA ®

Chief Investment Officer, Model Portfolios

Ryan Krystopowicz, CFA

Director of Client Solutions

Follow Ryan Krystopowicz @ryankETFmodels

11/22/2022

My colleague Ryan Krystopowicz and I recently co-wrote and posted to the WisdomTree website a white paper “think piece” entitled “Four Habits of Highly Successful Advisors.”¹ We are now “serializing” that white paper into four distinct blog posts. In part 1, we discussed how to appropriately evaluate and build enterprise value by focusing on scale, efficiency and profitability. Here in part 2, we turn our attention to the importance of client segmentation and niche branding.

Habit Two: Segmentation and Finding Your Niche

Many advisors set minimum investment levels for accepting clients—$500,000, $1,000,000, $5,000,000 and so forth.

There is nothing wrong with that and, in fact, if you set a reasonable minimum based on your opportunity set of clients (and then stick to that minimum!), it will help drive scale in your practice.

But the most successful advisors take it one step further, identifying a specific market niche or segment, and then seeking to be the advisor for that niche. This is a viable way to establish a brand for your firm to set it apart in the crowded marketplace.

We like to use the simple example of deciding to be the advisor for people who collect watches. What do we know about this niche market?

One, if you collect watches, you probably have an elevated level of net worth and/or disposable income.

Two, if you’ve ever met anyone who collects watches, you know they love to talk about their watches (feel free to substitute jewelry, art, cars, wine or any other collectible).

Three, they love to get together with other watch collectors and talk about watches.

So, imagine if you became the world’s expert on collectable watches and the typical financial objectives of the people who collect them. You have a built-in market niche that is narrow enough for you to dominate and deep enough to build a thriving practice around.

Those are the keys—narrow enough to dominate and deep enough to build a practice around. It doesn’t matter what the niche market is—just identify one and build your practice around it.

We know many advisors who have done so successfully, whether it be around medical professionals, small business owners, lawyers, real estate developers, multi-generational wealthy families or something else.

A recent article in the IWI’s Investments & Wealth Monitor highlighted this segmentation strategy.² Three advisors were interviewed about their successful practices, and all highlighted the importance of successful client segmentation.

One advisor runs the wealth management arm of a successful sports agency, and all his clients are professional athletes. He outsources the investment management function to a third-party so he can focus on everything else his clients need—cash management, insurance, bill paying, tax preparation, estate planning and so forth. In a highly competitive marketplace, his new clients seek him out because of the word-of-mouth references he gets from existing clients, who are among the most well-known athletes in the world.

A second advisor focuses his practice on entrepreneurs, small business owners and corporate executives, all of whom place high value on estate and financial planning, business transition and succession planning, taxes and wealth transfer. His geographical footprint is fairly small, many of his clients know each other and act as active references for him with potential new clients, and his practice is thriving.

A third advisor focuses her practice almost exclusively on the ex-wives of wealthy New York executives and hedge fund/private equity managers. She counsels them through divorce and then helps them become self-sufficient in managing their own finances. Her practice is booming, and she has become a national spokesperson on empowering divorced women to take control of their own financial lives.

Three quite different market niches but all with the common characteristics of being deep enough to grow a practice and narrow enough to be one of “the brands” in those market segments. The point of the story is to find your niche, develop the appropriate expertise for that niche and then get busy.

For those interested in learning about the rest of the habits, please keep an eye out for the next two blog posts and make sure to read the entire white paper: “Four Habits of Highly Successful Advisors.”

¹ With respect to Dr. Stephen Covey for his The Seven Habits of Highly Successful People, Simon & Schuster, Anniversary Edition, May 2020.

² See “Client Segmentation and Its Impact on Growing Enterprise Value,” a facilitated discussion with three successful advisors, IWI Investments & Wealth Monitor, March/April 2021, pp.33-36.

Important Risks Related to this Article

Investors and their advisors should consider the investment objectives, risks, charges and expenses of the funds included in any Model Portfolio carefully before investing. This and other information can be obtained in the Fund’s prospectus by visiting WisdomTree.com for WisdomTree Funds. Visit the applicable third-party fund family website for third-party funds. Please read the prospectus carefully before you invest. WisdomTree Asset Management, Inc. does not endorse and is not responsible or liable for any content or other materials made available by other ETF sponsors.

There are risks associated with investing, including the possible loss of principal. Foreign investing involves currency, political and economic risk. Funds focusing on a single country, sector and/or funds that emphasize investments in smaller companies may experience greater price volatility. Investments in emerging markets, real estate, currency, fixed income and alternative investments include additional risks. Please see the prospectus for a discussion of risks.

For retail investors: WisdomTree’s Model Portfolios are not intended to constitute investment advice or investment recommendations from WisdomTree. Your investment advisor may or may not implement WisdomTree’s Model Portfolios in your account. The performance of your account may differ from the performance shown for a variety of reasons, including but not limited to: Your investment advisor, and not WisdomTree, is responsible for implementing trades in the accounts; differences in market conditions; client-imposed investment restrictions; the timing of client investments and withdrawals; fees payable; and/or other factors. WisdomTree is not responsible for determining the suitability or appropriateness of a strategy based on WisdomTree’s Model Portfolios. WisdomTree does not have investment discretion and does not place trade orders for your account. This material has been created by WisdomTree and the information included herein has not been verified by your investment advisor and may differ from information provided by your investment advisor. WisdomTree does not undertake to provide impartial investment advice or give advice in a fiduciary capacity. Further, WisdomTree receives revenue in the form of advisory fees for our exchange-traded funds and management fees for our collective investment trusts.

For financial advisors: WisdomTree Model Portfolio information is designed to be used by financial advisors solely as an educational resource, along with other potential resources advisors may consider, in providing services to their end clients. WisdomTree’s Model Portfolios and related content are for information only and are not intended to provide, and should not be relied on for, tax, legal, accounting, investment or financial planning advice by WisdomTree, nor should any WisdomTree Model Portfolio information be considered or relied upon as investment advice or as a recommendation from WisdomTree, including regarding the use or suitability of any WisdomTree Model Portfolio, any particular security or any particular strategy.

WisdomTree is providing Model Portfolio information to 55ip pursuant to a license and related agreement with 55ip. There is an overlay fee when using a WisdomTree Model Portfolio in connection with 55ip’s technology, and WisdomTree is paying a portion of that fee to 55ip, which advisors would otherwise be required to pay. There is no assurance that such payments by WisdomTree will continue. Additional fees, including underlying fees to implement trading in transitioning a portfolio, may apply. WisdomTree and 55ip are not affiliated. WisdomTree makes no representations, warranties, endorsements or recommendations regarding 55ip, any 55ip technology, tax strategies or related information. WisdomTree has not reviewed or otherwise provided any content on 55ip’s website or for other materials created by 55ip, other than information about WisdomTree, and makes no representations, warranties or endorsements regarding such content and disclaims any responsibility associated therewith. 55ip is the marketing name used by 55 Institutional Partners, LLC, an investment technology developer, and for investment advisory services provided by 55I, LLC, an SEC-registered investment advisor. Such registration does not imply a certain level of skill or training.

Neither WisdomTree Investments, Inc., nor its affiliates, nor Foreside Fund Services, LLC, nor its affiliates provide tax advice. All references to tax matters or information provided in this material are for illustrative purposes only and should not be considered tax advice and cannot be used for the purpose of avoiding tax penalties. Investors seeking tax advice should consult an independent tax advisor.

This material contains the opinions of the authors, which are subject to change, and should not be considered or interpreted as a recommendation to participate in any particular trading strategy, or deemed to be an offer or sale of any investment product, and it should not be relied on as such. There is no guarantee that any strategies discussed will work under all market conditions. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This material should not be relied upon as research or investment advice regarding any security in particular. The user of this information assumes the entire risk of any use made of the information provided herein. Unless expressly stated otherwise, the opinions, interpretations or findings expressed herein do not necessarily represent the views of WisdomTree or any of its affiliates.