Is my potential market size too small?

First off I think having a goal of only 5k is going to make sustaining the effort difficult over the long haul. But that's not the question you asked.

I have a close friend in a market of only mid 5,000s and they're approaching mid 7 figures in revenue (after many years).

Key to success is that, in their case, the software runs the businesses so they only churn really if they go out of business.

Hope that's helpful.

Aim higher.

I'm going to go against the grain here and say starting with a small market is good for you. Here's why: you cannot and will not be able to build something that caters to everyone, it's impossible; however building a dedicated community of paying customers that love your product is key.

Throughout your journey to 3,500 advisors you will learn and maybe pivot, but most importantly you will likely find new markets and opportunities for your product along the way that could be complimentary.

I read an article/post a few days about this which I'm trying to find, if i do i will edit this post and add it. I think it was from PG.

Hey, my space is exactly like this. Would be cool to get a group chat of some sort going to bounce challenges and ideas of other doing the same. I feel like it’s a common but very unique problem

No, those numbers don't add up.

First off, you need to make your goal bigger than 5k. Remember 5k revenue does not equal 5k profit. Once you take out taxes it's already not enough for your and your cofounder to live on, not including the business' expenses.

If you have a small addressable market it could work but only at much higher price points (like deal size in the thousands). It's normal to aim to convert 1% of your web visitors to traffic. So if every advisor visited your site that would only be 35 customers. Of course if you are doing one-on-one sales you may get a higher percentage IF they actually really need your product. But then you need to increase your ARPU for all the time you're spending getting each customer.

I'd just say be careful with setting yourself a ceiling on what you want to earn as it can become as self-fulfilling prophecy.
As another poster mentioned, £5k mrr is not enough to sustain a business with a few employees and overheads. For the amount of effort you are going to need to put in to get any business going, I'd aim much higher.
It's fantastic to have such a clear and identified niche as this will help you get to market faster and not waste money on advertising. Just don't sell yourself short and very best of luck with it.