From the July 2009 issue of Investment Advisor • Subscribe!

The Fast Track: Highly Focused, Very Happy

How one of my clients showed me the ultimate solo model

Like most folks, I read with great interest the groundbreaking 2006 Moss Adams Financial Performance Study of Advisory Firms, which described and offered detailed analysis of the five types of advisory practices. One of the types was Solo firms, which the research showed that the majority of solos generates less than $500,000 in annual revenues, while only 4% reach $1 million or more. I was more than willing to accept Moss Adams's conclusion that for solos to break the $1 million barrier "requires the creation of operational capacity either through offloading operational needs to a broker/dealer, custodian, or other service provider or through additional staff, or both."

Then I met Brian Fenn of Carolina Capital Consulting in Charlotte, North Carolina. One of the best things about being a consultant to advisors is that often I learn as much from my clients as they do from me. Brian is a perfect example: He personifies the power of true niche advising. We all talk about "finding a niche," but I realized that Fenn has taken niche marketing to another level. With some help confirming and magnifying his ideas, we've positioned his solo practice to go far beyond $1 million in revenues, without any unusual help from his custodians or adding to his staff of two.

A Commonsense Approach

Brian is unique in many ways. At 39 years old, he's young for an owner/advisor. Yet, even though he's as tech savvy as most of his peers, he's not overawed by technology, the way many younger advisors are. His results-oriented, commonsense approach to managing his practice helped him to realize early on that additional programs and systems don't always increase operational efficiency. In fact, they can often increase the workload for no real benefit. Consequently, he's been very wary of adding new, complex technologies or upgrades unless he can clearly demonstrate a tangible benefit in workflow. Instead, he opts for basic programs such as Excel and, don't fall off your chair, even performs some functions by hand. "Technology isn't going to keep my clients," he tells me regularly.

Like most advisors today, he bought into the whole "niche marketing" thing, with a focus on doctors, but also like most advisors, he ended up making as many exceptions. Brian also has an aversion to hiring people: he doesn't want to manage them, or even run a business. He just wants to be an advisor, and work with his clients, with as little support as possible.

Brian quickly realized that having different kinds of clients was so inefficient that it could only lead to more staff, and probably to more advisors as well. To head off this upward spiral, he made the unusual decision to tighten his niche focus: not only would he take only doctors as wealth management clients, he'd start by only taking doctors from one practice. A true niche, if ever there was one.

With such a tight focus, Fenn found business efficiencies that he didn't even expect. Of course, working with similar doctors who are all employed at the same place makes the financial advice much easier: once you understand the intricacies of one situation, you understand them all. What's more, each new client isn't really new at all: they're exactly the same as all your other clients: the same source of income, salary range, benefits, retirement plans, work environment, vacations, challenges, and career and retirement tracks.

Be Happy Where You Are

Brian also found that because his clients shared so many similarities he could easily offer additional services that greatly strengthened his relationship with each one. For one thing, Brian is firmly against clients doing any paperwork, filling out data gathering forms, client questionnaires, and so on. They talk to him, and he gets it done. He writes a firm newsletter and has also structured and negotiated the doctors' compensation plans, set up retirement plans, and created an overall business plan. By working with his clients as a group as well as individually, Fenn could have a much greater impact on their lives, and much stronger relationships.

He also found that a medical group practice is an ongoing business, which made his advisory practice ongoing as well. As some of the doctors got older, they moved into retirement, so the group would hire and train younger doctors, which were a steady, constant source of new advisory clients. Moreover, the retiring doctors with their lump sum distributions from their 401(k)s provided large boosts to Fenn's AUM as well. All with very little marketing costs or effort.

Amazingly, Brian is quite happy being where he is, and just serving his existing clients. He doesn't want a huge business. As he says, "I do not want an ensemble empire, I just want all the benefits of the ensemble without having to build it. All I need to do is always be there to help my clients, who are in need of someone to listen to them and give them sound financial advice."

The Bottom Line

So, how's his practice doing? When I started working with Brian in 2005, he had $450k in annual revenues. Today, he's headed to $1 million with about 25 clients who are responsible for the majority of that revenue. He still has only the one client service advisor he had back then (we tried an administrative assistant and a junior advisor but once we realized that we didn't need all that other overhead and certainly didn't need to turn the firm into an "ensemble firm" it turned out that we didn't need them).

If he does nothing, Fenn's AUM will probably double in the next seven years from existing doctor clients who retire and roll over their 401(k)s. Beyond that, I believe he could double the number of clients he currently manages without adding to his staff. While technology has not been on the top of the priority list in the past, automating his process with portfolio management and reporting software at a cost of maybe $15,000 could add even more leverage.

In the interest of full disclosure, I didn't believe Brian needed another staff person in his firm (outside the current client services advisor he already has). Not technically, at least. While it was clear he didn't need any more help in his firm, it took us both some hard knocks and life changes to figure out what Brian did need: A personal assistant. Brian's not married (although this would undoubtedly be true for married people when both work), and he needed help on his personal stuff: grocery shopping, scheduling, dry cleaning, laundry, personal bookkeeping, scheduling, errands, getting work done around his house, shopping for presents and clothes, etc.

In short, Brian loves to work, and loves to help his clients. He needed help with all the stuff that took him away from that. He is, well, like a doctor, so well leveraged that all he needs to do is focus on his clients. He hired someone who not only helps with some clerical chores around the office, but also handles personal chores. That has made him even more productive.

The additional assistant gave Brian more time to work with his clients, which resulted in happier clients, which translates into client retention. During the recession of the past six months, Brian hasn't lost any clients at all. And perhaps more amazingly when compared to other advisors, he hasn't even seen much of an increase in his workload from scared or otherwise upset clients. If you've ever wondered how tangible benefits increase client service, this is it.

As I said, I thought that as he grew, Brian would need more professionals and more staff, but he didn't. And he won't. He can do a lot more with fewer people and--make a lot more money doing it--because he had a niche within the medical profession and he stuck to it. Brian didn't really need a consultant to tell him all this: he had figured it out way before I started working with him.

Aside from formalized practices and procedures for the services of each client, what Brian really needed to hear was that his instincts were right. His strategy was so contrary to what the gurus all tell advisors about increased staff leverage and adding technology that Brian just needed to hear that it was okay to not take all the clients he could, or even all the doctors he could, and not buy all the software that's out there.

Just like you often tell your clients, sometimes advisors need to hear that it's very okay and safe to ignore the current overhyped trends.


Angela Herbers is a virtual business manager and consultant for independent financial planning firms. She can be reached at angieherbers@cox.net.
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