Generalists are starting to feel the pressure to specialize.
"Collectively, growth rates of the industry have slowed," Kitces said. "Consumers are justifiably afraid to try to find an advisor when we use inconsistent labels and have low standards."
Furthermore, the Cerulli report found that "pressured to generate revenue, [generalists] typically accept clients based on one factor: Do these clients have enough money to qualify?"
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"An advisor's lack of focus makes investors apprehensive and raises questions about whether the relationship will create value," the report continued.
According to Tibergien at Pershing Advisor Solutions, advisory firms are prone to stretching themselves too thin, making specialization in the interest of greater efficiency and better branding compelling.
"Also, the reason to specialize becomes apparent when advisors analyze the characteristics of their clients and ask themselves, 'Where and how am I getting groups of clients?'" he added.
Notably, Tibergien has observed a growing number of niche-minded women- and minority-owned firms.