So you've decided to pursue a career as a financial advisor. Once you've found a firm to sponsor you, and are in the process of studying for your NASD securities and state insurance exams, you're off to a great start!

Take a moment, though, to think about what you'll do after you have successfully obtained your licenses and you're sitting in your new office. Whom will you talk to about the services and products you offer? Should you pursue every person you think might need help, or should you specialize in one market? Read on for some guidance on how to determine whether you should cast a wide net or find yourself a niche by becoming a specialist.

The Generalist
Most advisors start out as generalists and remain as such. They sell a full range of insurance and investment products and market to all consumers, regardless of age and net worth. No matter what someone wants, whether it's an international small cap fund, a Roth IRA or a long-term care insurance policy, a generalist is eager to provide it.

The Specialist
A handful of advisors specialize. Within this field you have three basic choices:

  1. Specializing in one demographic group such as seniors
  2. Specializing with one specific product, such as uranium stocks
  3. Specializing with any type of life event, such as pre-divorce planning

For most specialized options, you will need to obtain additional certification. For example, the Chartered Life Underwriter (CLU), Chartered Financial Consultant (ChFC), Chartered Mutual Fund Counselor (CMFC) and the Certified Employee Benefit Specialist (CEBS) certifications are just a few examples. (For more on the various financial designations available, see Financial Designations Aren't All Created Equal.)

When a Client Needs a Specialist
Take a moment to think about some of the events that have occurred in your life. You'll most likely been faced with of one or more of the following:

  • Birth of child
  • Buying or starting a business
  • Divorce
  • Early retirement
  • Long-term care
  • Death of a spouse

Each one of these indicates a point in a person's life when he or she is thrust into a situation for which the person may be financially unprepared. Furthermore, each presents a potential specialty for you.

Specialized Knowledge Spells Trust
To illustrate, let's look at it from a client's prospective. Suppose you work for Sparky Utility Company and are about to accept your employer's offer for an early retirement package. Consequently, you have no idea what to do with the $500,000 in your 401(k).

Would you go to the advisor who handles your life insurance and helped you put money into a 529 plan? Or would you feel better working with the advisor who conducts retirement seminars in your company's cafeteria each month - the one who holds herself as a retirement specialist and appears to know Sparky Utility's 401(k) plan, rollover options and the tax laws inside and out?

Many people would probably choose the latter.

Fast forward five years. At this point, you're happily retired and interested in a long-term care insurance policy. At this point, you might go to the generalist who sold you your life insurance policy and set up the college plan for your child.

You might also call the specialist who handled your 401(k) rollover. She says, "I'd love to help you out, but that's not my area of expertise. Let me give you the name of someone who only works with long-term care plans. He's the best in the biz."

Would you be inclined to work with the LTC specialist? For many people, the answer again would be "yes."

The Generalist Downside
As a generalist, it's becoming increasingly difficult to keep up with the new financial products that appear each week. For instance, new long-term care insurance options, retirement plan choices and exchange-traded funds are popping up like weeds after a spring rain. Throw in the ever-changing tax laws and it's clear that generalists may face an uphill battle when it comes to staying on top of their game.

As a result, whenever a client is seeking a product that the generalist hasn't reviewed for a while, the advisor will end up putting in hours, or even days, to get up to speed.

For example, suppose you're a generalist and you run across a business owner who is shopping around for a defined-benefit pension plan. Imagine that no one has ever asked you for one of these before. Sure, you have a basic idea of how they work, but you'll have to spend time reviewing vesting options, investment choices and plan administrators. As a result, you end up bumbling around and wasting a lot of time because you're not up-to-date on pension plans - it's just not your specialty.

Money Talks
In all types of careers, specialists make more (on average) than generalists. Consider a few examples: In medicine, a family doctor will make considerably less than a pediatric heart surgeon. In law, the lawyer next to the laundromat who advertises everything from lawsuits to wills will make less than the attorney who only takes divorce cases where the couples have at least $10 million to fight over. The list could go on and on. The point is, the more you specialize, the greater the potential for a higher salary. What's more, there's a good chance you'll do your job faster and more efficiently than a generalist.

Choosing Your Specialty
When choosing an area of expertise to specialize in, there is no right or wrong choice. Your decision will be based on your personal opinion on the pros and cons of each option.

If you're thinking about working with seniors, this is a great market! Because most are retired, you'll be able to meet with them during normal business hours, which means no night or weekend appointments. Plus, they generally have more money to invest than other groups. However, this group may require more patience than others as they will be extremely adverse to any kind of risk and some may be distrusting. In addition, you might have to meet in their homes, because they could be reluctant to drive to your office.
On the other hand, suppose you decide to specialize in working with couples in the 25-45 age bracket. No doubt, they'll need your help, but you'll have to work nights and weekends because they're busy during the day. Furthermore, they might not have much money to invest, which means you'll have to have a lot more clients.

Variety: The Spice of Life?
Despite the advantages of specialization, many advisors enjoy the challenges of solving the unique financial needs of every person they run across and are turned off by the thought of working with the same type of clients or the same type of products day in and day out. If this is the case, there's definitely a huge market out there for you, and you can earn a good living.

However, if you are interested in the possibility of setting yourself apart from the other advisors in your community while working more efficiently, becoming a specialist could be your cup of tea.

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