While niching has become an increasingly popular business model for advice firms in recent years, an industry analysis revealed that efficiency has a far greater impact on business profitability than specialised service offerings.
It has been a common practice for some advice firms to target specialist, niche groups of clients such as top professionals, retirees, sport players or younger clients as they seek to differentiate themselves in a crowded market.
But Adviser Ratings has found, while it may help them stand out, there is little financial bonus achieved over their peers from opting for this strategy.
“Niche strategies show virtually no correlation with superior financial performance”, it said. In fact, the firm said that practices with defined niches were achieving almost identical outcomes, with an average revenue of $2.4 million for both.
This trend carries into other areas as well, with niche firms reporting average profit margins of 26.7 per cent, compared to 26.5 per cent for generalists, and client book growth rates of 89 per cent and 90 per cent, respectively.
Meanwhile, Adviser Ratings’ 2025 Advice Landscape Report found that 83 per cent of practices saw an increase in revenue, regardless of their positioning strategy.
Notably, the firm noted that as advice practices increase their revenue, the span of its service areas widens, with small practices that are generating $500,000 to $1.5 million offering an average of 5.8 service areas, while large practices with $5–10 million offering 8.3 service areas.
“The correlation between revenue and service area count confirms this directional relationship: growth and generalisation move together, suggesting that niching may function more as a developmental phase than a permanent strategy,” Adviser Ratings said.
Although niche practices will have a specific specialisation as a key point of differentiation, Adviser Ratings found that both niche and generalist practices tend to have “virtually identical” core service offerings with financial planning and retirement advice offered by more than 90 per cent of practices.
The real financial benefits, according to the firm, occur through “strategic intentionality”, meaning practices need to identify their ideal client type and target this demographic, without implementing “artificial boundaries” of a narrow scope, especially early on in their career.
Namely, Adviser Ratings said that practices achieving 40 per cent profit margins are doing so due to systematic and efficient operations while making strategic decisions about the scope of their service base, investing in technology and staff, and taking a disciplined approach to growth and profitability.
“Practices that think strategically about who they serve, how they serve them, and why they’re uniquely positioned to deliver value achieve better outcomes – regardless of whether that strategy involves traditional ‘niching’,” Adviser Ratings said.
“Stop chasing the perfect niche. The data provides no evidence that specialised positioning delivers financial advantages over thoughtful generalist strategies. Focus on client types that you understand deeply and can serve exceptionally, but avoid forcing artificial boundaries that limit natural business evolution.”
