My Way

More startling, however, is a document that sounds like something right out of Mission Impossible: the “self-terminating” contract. While most planners knock themselves out to keep clients for life, every five years or so Bolton actively shows clients the door, inviting them to take a look around and check out his competitors. He sends out requests for proposals to other firms and encourages clients to ask their CPAs, lawyers, and banks to suggest candidates. He even helps clients compile a list of questions to ask. “Out of the list of 10 or so, they do a short list, typically me and two others,” he says. “Then I come in and bid for their business as though I don’t know them, and the others do the same. It’s kind of like being interviewed for a job. And may the best firm win.”

Voluntarily holding your own feet to the fires of competition might sound masochistic, but Bolton says it’s invaluable for rejuvenating client relationships, cementing clients’ confidence in his abilities–and keeping his firm on its toes. “Unless clients go out and make that search for someone new, they really don’t know whether or not you’re providing them with the best and latest services,” he says. “[During the search] they can determine if our fees are competitive, and that forces us to be more efficient. The whole process forces us to constantly be innovative.” Bolton says he’s lost only one client to the re-interview process–and, he adds cheerfully, after two years, the client came back. “It’s a great way to keep people from taking you for granted, and keep yourself from getting stale,” he says.

Bolton doesn’t want his staff getting stale, either. With the exception of the antique chairs, grandfather clock, and antique piano Bolton has collected, all the furniture in the one-story, red brick office he recently moved to in Pasadena is on rollers. And every few months, Bolton makes it a practice to reorganize everything. “We don’t want anyone to feel too safe,” he says. “We want people to be very open to change.” (He admits that the re-arranging drives one staff member batty, but the other two get a kick out of it.) For the moment, at least, the office is set up as a series of workstations, each with a particular function. “If you want to do scanning, there’s a station for that; if you want to do PowerPoint, there’s a station for that,” he says. “Everything is networked, but each station has ancillary equipment attached to it that is dedicated to that function.” Since Bolton charges clients in the manner of a law firm (an hourly fee, plus costs, including staff time), each station has a time sheet where staff can record their time.

Beyond the Pale

But perhaps what makes Percy E. Bolton Associates most different from other firms is its clientele. More than 60% of Bolton’s clients are African-American, an enormous percentage compared to the average planning firm. Why? Most firms, he maintains, have simply not tried to attract black clients. “The larger community never assumed that we had any money,” he says. “When I used to go to [industry] conferences, everybody there thought my clients were Michael Jackson and Bill Cosby, because those were the only black people they thought had any money.”

Having grown up with African-Americans of varying incomes, Bolton never thought any such thing. Now he’s ahead of the game, and the larger, mainstream firms are playing catch-up. “Minorities are younger, they are becoming more and more affluent, and the growth rate of the minority community is going to be a lot higher than those who are in the majority,” he says. “If these firms are planning on some kind of survival strategy, they have to begin to cater to the minority marketplace.”

True, he admits, there are unique challenges in serving most African-American clients. Many are the first generation in their families to have discretionary wealth, and they’re wary of ceding its care to a stranger. “It’s the first generation that’s starting to hire professionals for their needs and wants, whereas in the white community, you have families who have been delegating and hiring for generations,” he says. “So there’s an issue of suspicion, an issue of trust.” What’s more, some of his clients don’t even know anyone else involved in investing, let alone anyone who hires a professional to handle it for them. “Often no one else around them is doing this,” says Bolton. “They’re exceptional. In their entire group of friends and relationships, they may be the only one investing.”

Bolton says his clients’ inexperience was even greater back when he launched his firm. “My first client ever, a graduate student at UCLA, had $30 to put into a monthly investment program, and it took me nine hours to get that $30 from him! The commission was 8%, so I made $2.40!” he says with a laugh. “But it was like that a lot in the beginning of my career–I’d spend all day explaining a mutual fund.” Today, the advent of 401(k)s has expanded many African-Americans’ familiarity with the markets, but Investing 101 is still par for the course for new clients and potential clients. “I think the educational part that we do goes beyond what most financial planners do, to a large degree,” he says. “With each one of our clients, we have to educate them a great deal about the investment business.”

Part of that education includes a discussion of risk tolerance, and the definition of what makes a “safe” investment. “One interesting thing about our community is that we have a tendency to buy things that are safe, or are considered safe. And securities are not in that category,” he says. Many clients, particularly older ones, believe that real estate is the most prudent investment. Younger ones, on the other hand, have begun to show more receptivity to stocks and mutual funds. “This is the first generation I’ve seen that has an interest in the stock market,” he says. “It’s increasing, but it’s brand-new.”

With a firm where nearly two-thirds of the clients–and four of the five high-net-worth retainer clients–are African-American, Bolton believes he’s well-positioned to serve the growing African-American population and its attendant wealth. He believes the field of prospective clients has scarcely begun to be tapped. And given that his first client, the grad student with $30 per month to invest, is now worth more than $4 million, he knows the difference he can make is worth the effort.