Insight for advisers by advisers: Why niches work

5 min read 20 Sep 22

“I used to say: ‘introduce me to anyone and I’ll find something to improve their financial position’ and I got… zero referrals.”

David Macdonald, founder of green finance firm Path Financial, explains why he launched his niche financial advice business, and why (and how) you can too…

How I got started

In my case, the curious thing is that it all came about from some work I had been doing on myself, an exploration of my personal values. I often quote my wife who, shortly after we met I explained to her what I did for a living, said: ‘Oh, so you help make rich people richer’. I said: ‘Hang on a minute, it’s more than that’, but I soon came to believe she had hit the nail on the head. It dawned on me that what was important to me were human rights and the environment.

Honestly, I didn’t really know if there was a marketplace or not. Greta [Thunberg] had popped up at that point and David Attenborough began talking about how crazy it was that we align our pensions with outcomes that may be harmful to us.


The advantages of having a niche

In a previous life when I was looking for clients I used to say: ‘Introduce me to anyone and I’ll find something to improve their financial position.’ For years I trotted out that mantra and… I got no referrals, zero, and the reason is that I was not visible. If you try to be everything to everybody, you end up being nothing to nobody. But if you pick a specialism in something – a niche – you become more visible and more appealing to those interested in it.

The tighter of a vertical you operate in, the more visible you are, the more findable you are. Setting your stall out in a particular niche means you have already completed some of the hard yards of marketing.

For me it was about living a life in greater congruence with my personal values. It was more fulfilling to feel that there is a higher purpose and that I’m providing a facility to clients who are looking for something bigger than simply maximising their investment returns. Now, that may be particular to us, but I dare say it also applies to any other niche, be it the clergy, pharmacists, whatever it is. It feels wonderful to provide a service to an audience that feels you appreciate and understand them.

If clients can find true alignment with what they’re looking for, then price becomes less of an issue. Price is never irrelevant but, if you look the same as two or three other businesses, price often becomes the deciding factor. But if you’re unique – or if you’re operating in a true niche – price is less of an influence.


Why clients are receptive to niches

Let’s say you need a specialist heart operation. Would you go to a generalist surgeon who can turn their hand to anything, or would you go to the person who specialises in the aortic valve you need replacing? You’d go to the latter, and if necessary, you’d do a lot of research to find them.

If you can identify a niche, you may find it hard to come across an existing, authentic, and well thought-through service that attends to it. When clients find you, they’re like: ‘A-ha, I found you’, and there’s often an instant rapport. You won’t have to do too much work to convince them that they have come to the right place.

Are there enough niches to go around? Absolutely there are. I’ve heard it said that, in our industry, you will only ever really need 1,000 clients to provide the turnover to both look after those clients extremely well, and to turn a profit. Now, 1,000 clients are far too many for an individual adviser, but it seems to me that, from a working population of tens of millions, 1,000 is nothing to be afraid of.


How advisers can get started

I literally started from scratch – selling one business before, sometime later, starting another – and in some respects I think that’s easier than trying to transition. It’s difficult to manage clients, staff, and to run your proposition if one day you say: ‘It’s time for something completely different.’ You risk alienating clients and employees. You risk them querying what you had done before and why it was now sub-optimal.

There’s a consideration as to whether it should be more of a binary process, as in my case, or whether it should be more gradual. There may be some collateral damage on the way through. But I certainly found it quite impactful to quit one thing, stop my income, and then to invest in and grow something new.

When I started Path Financial, I certainly would not have said I knew everything there was to know about green finance, but you can borrow expertise in a business. The first thing I did was to research and find the experts I needed, and then to build out a best practice approach and devise a way to deliver it. I’m proud of the difference we’re making for the planet now.

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