You hear it often: one of the best ways for independent advisors to maintain their competitive edge is to serve a niche clientele. William and Paula Harris can attest that this axiom is dead on. Here’s their story of how serving a niche of affluent women is really paying off.
William started WH Cornerstone Investments in the coastal town of Duxbury, Massachusetts–40 miles south of Boston–in 1996, and built up his clientele while Paula worked in the corporate world as a human resources manager. Three years ago, Paula joined her husband and became the planning firm’s marketing guru and self-proclaimed “people person.” William, a CFP, says he is the firm’s “spreadsheet guy and number cruncher.”
One of their first clients was an affluent businesswoman, and soon after signing on, she started referring her women friends to Cornerstone. The referrals snowballed, and today 80% of the Harrises’ clients are affluent women. Two years ago, the Harrises decided that serving women was just too broad a niche, so they rummaged through their client database and discovered a definite pattern–the majority of their clients are women executives who work in nearby Boston for financial services firms, like hedge fund and mutual fund firms, and big banks like Deutsche Bank and JP Morgan Chase. “It was an overwhelming theme that we saw,” William says. “We said, ‘Wow, there’s a niche, let’s go after it!’”
The Harrises serve a “highly educated and well-informed clientele” of affluent women, says William, who generally are over age 35, earn from $100,000 to $400,000 per year, and have from $250,000 to $1 million in investable assets–which includes their IRAs and home values, which start at $500,000. Dis-covering that their clients worked in financial services was a real “Aha!” moment, Paula says, because both “Bill and I have worked in financial services, so it’s a comfortable spot for us.”
It’s not always so easy for independent advisors that are looking to serve a niche to actually find one. Says William: “I think a niche evolves.” Some advisors may zero in on a certain niche that they know nothing about, for instance, serving telephone workers, he says. But once the advisor starts serving them, he realizes he “really doesn’t want to work with these people.” The Harrises really had to dig deeper into their already established client base of women that they’d been serving for 10 years to narrow their niche. They’re still parsing out that niche today, William says, by refraining from serving certain businesswomen. “You have to say no sometimes to some clients. We’re networking a lot, and we get a lot of single women who start up their own business,” he says. “We’re really going after corporate types, and we’ll also go after [owners of] a well-established business.”
Follow Your Passions
Paula suggests that advisors who are searching for a niche start with something they’re passionate about, like wine, fishing, and so on. Then the advisor can start prospecting for clients at various events that cater to these hobbies. “If you have a passion, it makes it much easier to connect with people,” Paula says. She’s found it easy to create a rapport with women clients because she understands how they want to be treated. During her career as a director of human resources for financial services firms, Paula says she noticed that women weren’t always given the same access to information as their male co-workers. “When I joined Bill in practice three years ago, I thought it was important that we continue to reach out to women; they are very bright, and they just need someone to educate them a little, not talk down to them, not patronize them,” she says. “We’ve had tremendous relationships with our women clients because we treat them that way.” Cornerstone now manages $20 million for about 75 clients.
It’s a good thing that Paula came aboard, because “women want to deal with women,” William says. “If Paula wasn’t here, I’d have a tougher time,” he says, because the majority of women who come to Cornerstone would prefer “to have a relationship with another woman.” For instance, here’s a comment that William got from a prospective client recently: “‘I have enough testosterone at work. I don’t need to deal with you!” Says Paula: “We’re still waiting to hear if she’s going to come with us.”
While William and Paula get most of their referrals from existing clients and local life coaches, they also get a good number of clients through networking, particularly at the Downtown Women’s Club in Boston. Being able to articulate a niche to prospective clients goes a long way in winning them over. Most advisors tick off a laundry list of services that they can help clients with, and the “consumers’ eyes glaze over,” Paula says. “When we tell people our niche, immediately their mind goes to the five people they know in that niche, and it usually expands beyond [that group], and they say, ‘Okay, I’m going to tell this person about you.’”
To get to know prospective clients and figure out their hot-button issues, William and Paula never talk about money in their initial discussions with them. Instead, their conversation focuses on four goals-based questions, called the Future Focus Quest, Paula says. The first question: Three years into the future, what has to happen professionally and personally for you to feel satisfied with your progress? The second question: What are the three biggest dangers you want to eliminate–the things that keep you awake at night? Third: What are the three biggest opportunities you want to focus on? The final question: What are the biggest strengths you want to reinforce and maximize? The questions “really outline the roadmap of where our relationship goes,” Paula says.
The Harrises usually find out that the women have similar goals and challenges. Since most of them are high-level professionals, they’ve reached the pinnacle of their careers, but they often feel unfulfilled personally. “They realize they want more out of their lives and are often looking to make a job change,” Paula says. Then there are women who feel they want to give more to charity; some have a goal of getting married or having a baby by a certain age, while others want to know how to fund their child’s education, or how to start a business. For instance, one client wanted to leave her job as a wholesaler for a hedge fund firm and become an interior designer, while another corporate executive in financial services wanted to go back to school and become a professor. Sometimes these dreams are hard to make reality, however, once William crunches the numbers and shows the client that such a career move would mean her salary would drop from $400,000 to $50,000.
Cornerstone now charges $3,000 for a comprehensive financial plan, but that will increase to $5,000 come January 1. The planning firm also charges a separate 1% fee for managing assets.
For busy women executives who are strapped for time or who travel, Cornerstone also offers a program called the Financial Retreat. This one-on-one, day and a half workshop takes place at retreats like hotels in Boston, Cape
Cod, or the Berkshires in Western Massachusetts. William and Paula dine with prospective clients and get the scoop on the client’s financial situation and future goals. The next day, they give the client a complete financial analysis. The retreat costs $9,500, and Cornerstone provides ongoing follow-up and support throughout the year.
To get more information about clients’ personality traits, Cornerstone uses the Kolbe Index (www.kolbe.com), which was created by Kathy Kolbe, and measures a person’s problem-solving instincts. “Most financial planners are using [Kolbe] to help them hire people and run their own practices,” William says, but “we’ve been doing it on our clients.” He says the Kolbe A Index in particular has “been a breakthrough, because we can find out real quickly how to deliver information to [clients], and how much stick-to-ittiveness they will have to a plan.”
For instance, William recently applied the Kolbe A index to a couple that was earning a combined salary of $200,000 but wanted to save more. The couple “was spending money like crazy, and had no idea where it was going,” William says. After performing the Kolbe tests on both clients, William discovered that the one who was paying the bills had a “quick start” instinct, and a “preventative ‘follow-through’ instinct,” and was not paying the bills regularly so they were racking up late fees and higher interest charges. The other spouse, however, had a high “follow-through” instinct, and “was inclined to create organizational structures and systems,” William says, so it was a no-brainer to see that this person had to become the household bookkeeper/bill payer/budgeter if they were to build a savings program. After getting the couple on track, “they are debt-free except for their mortgage,” William says, and now put $500 per month into a savings account.
Kolbe has also helped the husband and wife team sort out their work-related kinks. “We’ve had our share of butting heads,” William says. “Kolbe has helped us diminish that; it’s helped us maximize our energies and use our natural instincts,” he says. “It’s helped us define roles within the business, and create natural economies of scale.”
To keep pulling in wealthy women clients, the Harrises are now updating their corporate image and revamping their Web site to reflect their niche services. As the financial advisory space gets increasingly crowded–with everyone from insurance agents to stockbrokers–calling themselves financial planners, establishing a niche hasn’t been the only competitive edge for Cornerstone. The planning firm is also getting a lot of new clients from the wirehouses. Clients, especially well-educated businesswomen, have “woken up to the fact that there are fee-only planners out there,” he says. “We’ve grown our fee-only revenue by 40% in 2005.”
Washington Bureau Chief Melanie Waddell can be reached at email@example.com.