At 39, Scott Hanson is one of our youngest Leaders, yet he speaks with a wisdom beyond his years and exhibits a media and marketing savvy that would be envied by planners of any age (for more about the IA Leaders’ Council, see sidebar on page 32). Moreover, Hanson McClain just passed the billion-dollar mark in assets under advisement and is among the top producers in the Securities America representative rankings. Plus, he’s got two other companies–a reverse mortgage firm and a company that supplies marketing support to other advisors. Finally, he’s also figured out how to make a living providing financial advice to clients whose average account size is relatively small and who are on the cusp of retirement, all while paying salaries to 11 CFPs. For those reasons, and the passion with which he speaks of his profession (a trait shared by the other Leaders, by the way), Hanson is eminently qualified to be on the IA Leaders’ Council. He spoke with editor Jamie Green in mid-April.
On the state of your practice.
Our investment firm, Hanson McClain, started in 1993, and we just topped a billion dollars. We have 11 CFPs and another 25 support staff, and about 2,500 households as clients. We really serve middle America. Our typical client is between ages 55 and 60 and our average account size is about $400,000–that’s our sweet spot. I really like working with those people, because I know we add some value to them, and they are good, genuine people. We’ve done some niche marketing in talking to a couple industries and working with their retirees, so we understand their needs. We’ve also been doing a radio program for 11 years with the number one radio station in Sacramento–every Sunday my partner and I do a two-hour call-in radio program. There’s also a column I write for the Sacramento Bee every week, which I’ve been doing for eight years, and now it’s been syndicated by Scripps Howard. There are 60 or 70 papers that use the column on a regular basis. The media has been very good to our business.
On your partnerships: You’re an RIA, but with a broker/dealer relationship?
Yes, with Securities America. We also do a lot of business in C-share mutual funds . . . they’re a lot less expensive than most wrap accounts, especially for the size of the clients we deal with.
On past experiences that affected how you run your practice now.
My wife and I were in this engaged couples class, and there was another couple where he was a certified financial planner. I had yet to get my CFP, so I thought he was somewhat successful. Two weeks later, I’m at the gas station and go inside to pay and who’s the guy taking my cash? Mr. CFP. It kind of freaked me out. Here’s this guy who’s got all this education, he seems like a nice enough guy, and yet here he is working at the gas station because he didn’t have enough business. It told me that it doesn’t matter how good a financial planner someone is, if he doesn’t have any clients to serve, he adds no value to anyone’s life, and he’s going to be broke. At that point I said “I need to be in the marketing business as well as the financial planning business.” We need to be great at financial planning, great at the investments, but we need to be excellent marketers as well because that’s the only way we’ll make the business grow.
On your clients.
I stopped taking on new clients six years ago. My partner Pat McClain and I had all the clients we could handle. Most people in the industry say you need to cull your smaller clients and just work with the bigger ones. We made the decision that we wouldn’t do that. These people who trusted me when I was the young kid and didn’t really know what I was doing, I want to respect that relationship and work with them. So if someone comes to the door now and they have $500,000 or $5 million, I will not be their main relationship person. I know the $1 million client generates a lot more revenue than the client with $100,000, but the thing I enjoy the most about my job are the friendly clients that I work with.
On the services provided to clients.
The main thing we do is give them honest answers to their financial needs, and hold their hands through the financial markets. The greatest value that we’ve provided over the past few years–when we went through the great bear market–was keeping my clients from getting out of the markets.
Our advisors are all paid on salary, no commissions, so when they’re talking to a prospective client, whether the client comes on board or not won’t have any impact on their paycheck that month, unlike many other organizations. It puts the freedom there to be honest with them.
On how to find and keep employees.
Finding them is a lot easier now than it was–our name is pretty well known in the community, so people search us out. But the way you keep them there is by having a growing organization where people have career paths. It’s our responsibility as employer to provide those opportunities.
On how to provide income to clients in retirement.
I can’t say I found a silver bullet. There are a lot of people in denial over what their needs will be [in retirement]. What’s most disturbing is that we have some clients that we know their money won’t last. We tell them, and they do what they want to do anyway. So, I tell clients, you can’t come live with me.
On where to find returns.
Ten years ago I would have told someone that with a balanced portfolio you could expect an 8% annual return, and today it’s more like 6%. It’s a challenge. And then fixed income, where do you go today for a good return? People still look at a nominal return more than absolute return.
I think they’re going to have to go up soon, what with this deficit spending we’ve got.
On advice for an advisor starting out.
First, don’t try to be all things to all people. It’s important to specialize in something. We learned everything there was to know about retirement in the telecommunications industry and utility industry, and exactly what their needs are. When you’re first starting, it’s a question of survival, but early on, people should find a niche and focus on it.
On who constitutes the competition.
Wirehouses, that’s where we take most of our business from. Even more so now are 401(k) providers–Fidelity is one of our competitors. We have a lot of 401(k) rollovers, but Fidelity does a phenomenal job of keeping people in their 401(k)s after they retire. They do a good job of putting pension rollovers into 401(k)s, too.
On what your peers need most now.
Marketing, and finding and keeping the right people, with the ability to delegate. Most people get to a certain point where they’re no longer in survival mode and can count on a certain level of revenue, and they get comfortable, so they’re afraid to go beyond that. We always said we want to build this business to sell it, even though we have no desire to sell. To be as efficient as possible, we’re big on systems–if something’s going to be done more than once, we want a system to do it.
We spent $80,000 on a phone system to make sure that there’s a live person who always answers the phone. We’re totally paperless, so no matter what office I’m in, I can log in and have all the information on my computer, and the phone system works like I’m in any office.
Editor-in-Chief Jamie Green can be reached at firstname.lastname@example.org.