"Our clients don't come to us to be their friends," says Nancy Gardner. "They come to us as professionals to manage their money. They want someone they trust who can take care of them."
That professional relationship, however, doesn't preclude a personal approach. "I care about our clients, probably more so than they realize sometimes, because you don't want to get too emotional. It distresses us when something negative happens in our clients' lives, but we have to be the voice of reason; we have to be the stabilizing factor."
Gardner is the executive VP of Houston-based Tanglewood Capital Management, a fee-only firm with some 370 clients and about $600 million in assets under management. A self-described "Helpful Hannah," Gardner knows that as much as she enjoys client interaction, not every client is looking for a "touchy-feely" relationship. If she senses that the client wants an all business, by-the-book approach she keeps it strictly on that level.
"They ultimately decide what kind of relationship they have with us," she says, noting that while she enjoys sharing opera tickets with clients who have the same interest, for example, she also realizes that they have busy lives, and most would rather spend their free time with their families than their advisor. Of course, friendships between advisors and clients who share similar interests are not uncommon. (See "The Feeling's Mutual" sidebar.)
"We have to be professionals first, but it doesn't mean that we can't form friendships with our clients," she says. "It also doesn't mean that we form a personal friendship with every client. I don't think it's mandatory, but when it happens it's very nice."
Career of the Future
Like many of the best advisors, Gardner came to financial planning as a second profession. In college she studied petroleum land management and began a career in the oil and gas industry, but the 1980s were a turbulent time in the energy business, particularly in Houston. "The company I worked for had, over nine years, 17 rounds of layoffs," she recalls. "That doesn't give you a whole lot of security."
In 1990, Gardner recalls she read a magazine article about the careers of the future, one of which happened to be financial planning. She decided that when it was her turn to be laid off, she would become a financial planner. Much to her surprise, the company she worked for stayed in business and kept her employed for another five years.
Ultimately, however, she was laid off, on a Friday afternoon, she recalls. Early the following Monday she was on the phone to a firm whose help-wanted ad for a financial planner she had cut out several years earlier. She got an interview that week and then a couple of follow-ups and was offered a position contingent on passing her Series 7, Series 63, and insurance license exams. "So I took my severance and sat home, not knowing a thing prior to that about finance or investments," Gardner recalls. "I taught myself, then took the tests and passed them."
Without any mentor or contacts in the financial services industry, Gardner feels she was fortunate to have landed that initial position, "but I didn't like their method of doing business with clients," she says. "I didn't like selling proprietary, loaded mutual funds. I didn't like selling expensive insurance. I didn't feel like I was getting the opportunity to put the client first and I had a problem with that. I guess I was too idealistic."
Feeling frustrated, she left that firm, knowing that what she really wanted to do was to work for an independent registered investment advisor. She tried cold calling a few firms but was never able to get past the receptionist, so she went back to her previous profession and was hired as a consultant to run the land department of an independent oil company headquartered in Houston. She enjoyed the work, she says, but missed the interaction that she had with her financial clients, not to mention the ability to help people.
One day she went into a local Schwab branch with the intention of purchasing some stock. When the rep she was dealing with heard that Gardner had experience and was licensed, she called her manager. And so she began her three-year stint as a Schwab employee. Although she speaks highly of her time there, she says that ultimately she was frustrated because she still felt she couldn't give the kind of advice she really wanted to offer. "But I did the second-best thing," she says. "I referred them to the Schwab advisor referral program."
Gardner became her branch's referral coordinator and then was asked to do training for the advisor coordinators in a three-state region. That in turn led to the creation of a position where Gardner traveled to Schwab branches in that region to train branch personnel on how and when to refer clients to a Schwab-affiliated RIA. The position was eventually eliminated in a Schwab reorganization and Gardner returned to a branch office.
But after working with so many advisors, Gardner now had an array of contacts unavailable to her three years earlier. She approached John Merrill, founder and CIO of Tanglewood, and asked what he thought about hiring a marketing professional. "Fortunately, he liked the idea and about six weeks later I started here," she recalls. "That was in June 2000."
The Thrill of the Chase; the Warmth of the Relationship
Gardner's role at Tanglewood entails both business development, which is where the marketing comes in, and client relationship management. Although she originally thought that she would eventually move into a strictly planning role, she's found business development to be something that she really enjoys. "I like the challenge of it," she says enthusiastically. "I love the chase of business development, but I love the feel-good of the client relationship management. John let me shape it so I have a combination of both. Most of the people that I'm the client relationship manager for are people that I brought into the company. I also help with their financial planning as they need it." Gardner estimates that she personally is the relationship manager for 80 families.
All of Tanglewood's revenue comes from asset management fees, which work out to about 87.5 basis points on the first million dollars and slide down from there. Investment portfolios comprise no-load mutual funds found on the Schwab platform, while any non-investment advice or planning is included in the asset management fee.
"As far as we know, Tanglewood was the first fee-only firm in Houston," Gardner notes, with a certain amount of pride. "I really like the idea of no conflicts of interest. I think all of my colleagues embrace that and our clients appreciate that. They really know that when we give them advice, it's the best possible advice."
The Three Niches
As with just about any successful advisory firm, referrals are a big deal at Tanglewood but they're not the entire strategy. "I'm also a strong advocate of niche marketing," says Gardner. "You have to determine what niches make sense for you as a firm and then go after them. I basically have three niches--one is well developed; one I'm working hard at; and the third one is in development. I would say that 80% of new business referrals are within these three niches. "
Considering the firm's location and Gardner's prior background, the first niche is an obvious one--people who work in the oil and gas industry. The second is a local corporation she'd rather not mention by name. The third, the one in development, involves non-profit institutions, which she thinks could turn into a substantial business for the firm.
One of the ways that Gardner works to develop her key niches is through seminars for her clients from the oil and gas industry, which she feels helps bring in new business and raises the firm's profile among that audience.
Although Gardner created an ad for Tanglewood to run in programs for Houston opera, ballet, and symphony groups, there hasn't been a great deal of outreach to a wider audience, at least not yet. "We don't do much advertising per se, but we are in the process of going through some re-branding and we're going to be rolling out our new brand and everything associated with it January 1," Gardner reveals. "I anticipate at that time we're going to be doing some more advertising and marketing to the general public."
Reaping the Harvest of Business Development
John Merrill's decision to bring someone in to handle marketing and business development has paid off handsomely for the firm over the last seven years. Assets under management have increased fivefold to $600 million. "Our goal is to get to a billion," says Gardner. "I'd like to try and be there by the end of 2009."
Obviously a significant portion of that AUM growth comes from the fact that Tanglewood's investments have done well. The fact that Merrill doesn't have to spend time on business development allows him to put more into his role as head of the firm's investment committee. "I think it's so hard for the owner of a firm to try and do everything," she says, but argues that "this works better. A firm needs to have a dedicated person who can spend 20 hours a week on business development."
In addition to the business development niches that Gardner mines for new clients, Tanglewood has designed four different client profiles: retirees; business owners; executives/professionals; and independent women.
Gardner says that some of the firm's women clients were originally one-half of a couple and have since divorced or been widowed. Many times the relationship will begin with the husband and wife together, and even if the wife generally doesn't handle the financial matters, the woman gets to know the firm and has an idea of the scope of the financial picture. In the event that the woman subsequently finds herself alone, Gardner says that in her experience most women are glad that the firm has built a relationship with them and that many feel more comfortable knowing there's a female advisor on staff.
Getting Together With Clients
In terms of their clients' milestone events, Gardner says she always teases Merrill that he gets to go to weddings while she spends her time at funerals. And although she can make light of the matter, it's obvious that Gardner's empathy for her clients' situations is genuine. "I think that if you're a caring person and it's your client, you want that client to be okay, and so you extend whatever courtesies you can to ease that person's transition."
When it comes to the clients for whom Gardner is the relationship manager, she likes to see them in person annually. "Some of them are happy with just a conference call," she says. "But I like to sit down with them once a year and go through all their needs."
She says she tries to call them all at least once every quarter. "We also have two technical meetings a year for our clients, in May and September, when we talk about what's going on in the market, what's going on in the economy, and what we're doing with their portfolios." The firm also sends out a quarterly newsletter and a monthly market commentary. In times of market flutter or political turmoil, an additional contact will be initiated, by telephone, e-mail, or traditional post to address the current issues and offer clients reassurance.
One issue that many advisory firms face is dealing with clients who do not meet current investment minimums. These "outside-the-sweet-spot" clients are usually either left over from when minimums were lower or taken on as a favor to a "good" client. The big question is always how to handle such clients profitably. "We have something that we offer to our clients as additional value," explains Gardner. "If they have a family member or friend and they want us to manage that person's money. They can be quite insistent sometimes, because they feel that they're in good hands and they want their family members to be taken care of just as well."
For those clients, Tanglewood offers investment management only on a minimum investment of $200,000 and charges only 65 basis points. "There's no financial planning, it's pure investment management," says Gardner. "Then what a lot of these people do is work to get up to the $1 million to be a financial management client with all the bells and whistles and the free financial planning.
What About the Future?
For many successful firms, succession becomes a big issue, but it's one that's already been addressed at Tanglewood. "We've just added a new senior investment officer with wonderful credentials," explains Gardner. "I think he provides the next generation. Our clients are saying they don't want to have to find another advisor when they're 80 years old. and I think he provides an internal succession plan."
With the firm's rebranding in January (although the name and philosophy will remain unchanged), Gardner feels that Tanglewood will be in an excellent position for growth and that the billion-dollar AUM goal can readily be achieved. What won't change is Gardner's professional, yet caring, relationship to her clients.
E-mail Managing Editor Robert F. Keane at firstname.lastname@example.org