Acquisition: Module 2 Lesson 1: Developing Niches

There are two types of niches – natural/organic and target.

The first type of niche groups is natural or organic. You have niches that you develop within your practice. They are organic, they grow from within your practice – either due to your current clients or your personal interests or background. When I first started at Merrill Lynch, I was coming out of the Navy and still drilled on the weekends. Those that shared weekend duty with me became my natural niche. The officers that I drilled with became my friends and eventually we saw ourselves as a large family. Since I was one of them, they trusted me with their financial planning and I did business with many of them for years.

Natural niches are the former careers, industries, companies or commonalities that you came from. Mine was the Navy. This was a natural niche for me after having served 3.5 years in active duty and 7 as a reserve with a rank of Lt. Commander. I was automatically accepted. I spoke their language and they trusted me.

Inside each niche you need to develop at least one Center of Influence.  Just to remind you, COIs are people you probably already have as clients. By definition they like you, trust you and are willing to introduce you without asking. A niche can also be referred to as a nest. The nest, for example, might be a group of cardiologists in a partnership. If you were previously in the medical profession, this would be a great resource. For example, if you were hired from Baxter Labs, you’d go back Baxter for clients; you already speak their language and you know the company, their benefits and retirement structure. This is an example of a natural niche – already being on the inside of the circle is an extraordinarily convenient position – speaking the language, knowing the business. The bonus is most of your former colleagues would be highly qualified as prospects.

Target/External Niches

Target or external niches are those that you identify from the outside. You are looking into their circle and right now you are wanting to find an opening. Jumping in without first investing your time and efforts to learn their business, language and culture will likely land you on the outside, permanently. As the saying goes, “You only have one chance to make a good first impression.” Research. Learn, Prepare. Go for it.

The perfect niche must have a sufficient number of potential clients in it who see you as a trustworthy and knowledgeable authority in financial planning and have the assets to meet your minimum. The benefit of COI inside the circle is a regular stream of introductions. (See Supernova Multiplier for examples of niches)

STEPS NEEDED TO GET INTO A NICHE

1. Learn the company. You have to become an expert on the company or business including HR benefits, retirement options and stock options. Read their annual report. Be an expert on the things that are important to the people within that company. Knowing the details will enhance your value.
2. Learn the language of the company. Every company has acronyms, and you have to learn them. FAs, CAs, CSAs, admin, service – whatever they call their people, scientists, the VPs, etc. If you use the wrong term, you could look like an outsider at best and at worst offend them. When I was a young FA we would have wholesaler presentations and if they referred to us as registered reps instead of FAs they immediately lost the interest of everyone in the audience.
3. Understand the culture of the company. Here are some examples of cultures you need to understand before you can understand the company:
   1. Merck had a famous culture which is symbolized by a statue in the front of their headquarters of a young boy leading a middle aged blind man. The company accidentally discovered the cure for river blindness which only affects people in remote parts of Africa. Dr. Roy Bagelos, President of Merck decided to make the drug Mectizan, available without charge because those who needed it the most could not afford to purchase it. Annually the Mectizan Donation Program reaches more than 250 million people and more than 2 billion treatments have been donated since 1987. The statue is there as a reminder of their commitment to helping others in need. Their mission – “To discover, develop and provide innovative products and services that save and improve lives around the world.” When asked why he would commit to a drug that would never make a profit he said, “I had no choice. My whole life has been dedicated to helping people and this was it for me.” Jimmy Carter stated “Merck’s gift to the World Health Organization is more than a medical breakthrough – it is truly a triumph of the human spirit.”
   2. McKinsey & Company, which has a culture of excellence – who fires the bottom 10% of their staff every year with the expressed purpose of making everyone understand that mediocrity will not be accepted.
4. Your challenge is to develop a dependable COI inside the niche and meet with them monthly. They should be respected within the niche and proud to be doing business with you. Their association with you should carry some weight in both directions.
5. Be highly visible in that community in that niche to the point of even having an office inside that company where you can work and meet with people because you’re such a help. You want them to think of you as the backup HR department.
6. Have a strong relationship with the HR department. Learn their benefits package better than they know it. Most high-level employees don’t know the benefits that are available to them nor the retirement packages or process. You can be their resource person. You can be helpful for things like consulting on the retirement transitions, promotions and layoffs. When I served as a ML Managing Director my FAs were given office space at both Lilly and Chrysler because they trusted us to really help their people. We became an extension of the HR Department.

Internal Niches

Niches can be areas of Internal specialization, a circle within a circle. In the case of your own firm, you have the opportunity to be the internal specialist all high-level employees go to for any advice that HR can’t answer. I know managers/advisors that don’t have a clue as to what to do when they are ready to retire. They are basically on their own. And surviving spouses – where do they turn? You can be there to help them with advice and guidance

Here is my five-step process to developing a new niche:

1. Identify a client that could be a Center of Influence inside a potential niche. Let him/her (in this example a car dealer) know that you need his/her advice and would like a few minutes of their time. Tell him/her you are considering adding more car dealers to your practice.  Explain that he/she is an ideal client because:

• They are easy to deal with
• They understand risk
• They are used to making decisions
• They take your advice
• They meet your minimum

2. You then say, “Do you think it make sense at this time to add more car dealers to my practice?”  More than likely, he/she will say yes.

3. That is when you ask the key question: “If you were me, how would you go about adding more car dealers to my practice?”

4. Then you keep quiet and listen.  Let the client, in this case, tell you how to get in front of other car dealers.

5. If the car dealer has no ideas how to do that you can say, “When do you normally meet?” “Is there an association of car dealers?” “What charities do you guys support I could support?” “How do you suggest I go about connecting with them?”

If you really run into a roadblock merely ask them to think about it and follow up next time. “Don’t forget, I am never too busy to help people like you.”  The worst outcome is that you have planted the seed that you would like to have more car dealers in your practice.

One other thought on your niche.  Almost every market segment has a publication specific to it and many of the publications are free.  To make the point, there is a publication called Pit and Quarry for quarry owners and those in the aggregates industry.  There are multiple publications for physicians.  Go to www.modernmedicine.com to sign up for the free digital magazine.  How about looking at www.freetrademagazines.com to see a list of targeted publications?  If you have a niche, you will be more effective in the circle if you can speak the lingo. Reading publications specific to your niche will allow you to learn the “language”.