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.