Many financial advisers are finding that picking a niche for their client base can help them stand out. Rather than compete for young professionals or others who could potentially get rich later, they narrow their focus to a particular segment of the workforce. One adviser might specialize in helping federal workers, while another focuses on law enforcement. There are advisers for dentists, pro athletes, firefighters, teachers, therapists and other industry-specific clientele.
So if you’re shopping for an adviser, you’ll likely discover that someone out there who helps people just like you.
Specialized advisers make a case that their deep familiarity with a particular profession gives them an edge in serving that profession. Because they’re aware of the special challenges and financial issues of a particular field, they can differentiate themselves.
Yet, does it matter whether you hire an adviser who specializes in your profession? Does that make other advisers less qualified to help?
“For the vast majority of individuals who seek financial help, what they need is pretty general,” said Cliff Robb, associate professor of consumer science at University of Wisconsin-Madison.
Yet some professions pose complex challenges for financial planners. Examples include livelihoods that involve deferred- or equity-based pay, volatile earnings, special tax rules or unusual circumstances.
“The average adviser may not have the time to investigate” complicated solutions for professionals in certain industries, says Michael Finke, a professor at the American College of Financial Services in King of Prussia, Pa. He cites the example of professional athletes who perform in different states and may face complexities tied to state income taxation.
“There may also be strategies for dealing with clients whose primary lifetime earnings happen in a short amount of time,” Finke added.
You might be more comfortable knowing that an adviser understands the inner workings of your professional world.
“Some advisers specialize in medical professionals who have higher earnings,” Robb said. “There are different nuances, like malpractice insurance and other requirements of running a private practice, so these professionals may want an adviser who knows their business.”
Doctors are an attractive market for advisers, Robb adds, because “they are above-average earners with not a lot of time to deal with their personal finances.” So it’s understandable why enterprising advisers would choose this exclusive niche.
By contrast, financial planners who seek clientele in less-lucrative fields tend to scale up the number of households they advise. Before you hire such an adviser, determine whether their firm is staffed sufficiently to manage their scope of business.
“With teachers and other mid-tier earners, advisers may need to bump up their volume,” Robb said. As a result, they can be less available to offer personalized attention, for example, if you get anxious during stock-market turmoil.
Another potential drawback in hiring a specialist in your field is that their narrow focus can limit their access to wide-ranging financial products or strategies.
“It can make sense if an adviser understands your profession really well, like if they know teachers’ retirement plans and 403(b) rules,” said Sandy Swanson, a financial adviser in San Jose, Calif. “But if I’m a teacher who puts all my money in my 403(b), my adviser might not be able to take advantage if they lack a wide scope of investment choices. You may miss out on some opportunities, like non-traded REITs or a new cannabis ETF.”
Finke cautions consumers to weigh another possible downside before signing on with an adviser who specializes in their profession.
“The biggest disadvantage, particularly for advisers who used to be in that profession, is the risk of undeserved trust,” Finke said. “A former professional who became an adviser may present themselves as an advocate for other professionals, but if they don’t have the depth of knowledge needed to provide high-quality advice, then they may not be the best choice.”
What to ask in an interview
During your introductory meeting with an adviser, test their insight into your profession. Even if the adviser works closely with a labor union that represents others in your line of work — or has affiliations with the most prominent trade groups or professional associations in your field — dig for more details.
These two questions are key to vet an adviser, says Dylan Bruce, financial services counsel at the Washington, D.C.-based Consumer Federation of America:
1. What specialized skills or expertise do you have that relate to my profession?
2. What unique circumstances do I face with my profession that relate to financial planning, and how can you address those situations?
“Don’t stop there,” Bruce said. “Look beyond that when you pick an adviser so that you understand the fee structure and fiduciary duties.”