Chasing HENRY, the Hottest New Prospect

Forget about “Where’s Waldo?” The search is on for HENRYs. That is, “High Earners, Not Rich Yet.” Forward-thinking advisors are pursuing this millennial subset, a young demographic packed with potential, as New York City-based advisor David Edwards, founder-president of Heron Wealth, told ThinkAdvisor in an interview.

Edwards, managing $295 million in assets, began prospecting for and cultivating HENRYs about four years ago. These clients now bring in 5% of revenue. Why pursue “High Earners, Not Rich Yet”? Because the vast majority of Edwards’ clients are aging baby boomers.

He realized that winning the accounts of folks 25 to 34 years old with lucrative jobs was a smart, necessary move to carry on his successful independent practice once the older generation dies off.

Edwards even has a young certified financial planner on his team who devotes her time exclusively to prospecting for and serving HENRYs.

These men and women comprise a distinct market segment — the term was originally defined with respect to families — whose advisory needs are different from those of their elders. For example, HENRYs are focused on financial planning, grappling with a load of student loan debt and how to save for a house or apartment.

Of course, HENRYs need a more casual approach and communication by phone and texting as opposed to face-to-face meetings.

Edwards, 55, formerly with Morgan Stanley and J.P. Morgan, charges HENRYs a $100 monthly subscription fee. Once an individual’s assets reach $150,000 ($300,000 for a couple), they’re switched to an annual asset-based fee of 0.75%.

Building a budding book of HENRYs is an outgrowth of Edwards’ practice transformation initiated 16 years ago when he ambitiously decided to grow AUM from $75 million to $1 billion. That required expanding from a one-man shop to building a diverse team of advisors, as well as undergoing an extensive technology overhaul. His growing firm is located in a lively Midtown Manhattan co-working space a few blocks from Grand Central Terminal.

ThinkAdvisor recently spoke by phone with Edwards, who named his firm “Heron” after the river-bank wading bird that waits quietly till it spies a fish, then quickly spears it. “We’re spearing opportunities as they come by,” says the wealth advisor. Here are excerpts from our interview:

THINKADVISOR: Why are you devoting resources to acquiring HENRYs?

DAVID EDWARDS: Some firms are focused on millennials, but most advisors are leaving the HENRY market untouched. We’re happy to swoop in first. My corporate strategy is to remain 18 months ahead of my peers.

When did you decide to prospect for HENRYs?

A couple of years ago we were confronting the issue of how to work with the 25-year-old sons and daughters of my clients. We have a $1 million minimum. If we said to them, “I’d love to work with you. Come back when you have a million dollars,” I’d never hear from them again. So I would have created a risk that, as my clients age, I would no longer have a value firm.

Then you sought HENRYs beyond your own book?

Yes. Once we figured out how to serve the sons and daughters of our clients, we started to look further afield. Certainly in New York City, there are plenty of young people making $200,000 or $300,000 a year but who are still paying off many thousands in college loans. So if we wait until they have significant assets, we probably will lose the opportunity to someone else.

How do HENRYs differ from boomers and other older clients?

HENRYs are very comfortable and confident doing a lot of [things] online because that’s all they ever knew. They’re not looking for the same service package as their parents or the same face-to-face conversation my older clients are accustomed to.

How do you prospect for HENRYs?

If you’re a creepy old guy like me, 55 years old, you probably aren’t going to have a lot of traction. You need to hire a younger person. I’ve heard of firms that go as low as 25 on their HENRY advisors, but someone around 30 or 35 is perfect. They understand HENRYs’ lives, so it makes the conversation go more easily and closing go more smoothly.

So one of your advisors, Samantha Gorelick, a 32-year-old CFP, is dedicated to working exclusively with HENRYs. How’s she doing?

Struggling to keep up with the pipeline she has. She’s already working with 15 clients that are sons and daughters of my clients, but she also has 15 clients of her own. She probably meets 50 people in a month and converts five to clients.

Why do HENRYs like working with Samantha?

She understands their career situations, their roommate situations, their desire to text instead of meet face-to-face. If she does meet with someone, it’s usually at a coffee shop. That’s much more casual, as opposed to my meetings with clients over a meal at a restaurant or at the Yale Club.

What’s your best advice to FAs who would like to cultivate HENRYs?

You can’t give them “advice lite.” You need to give them “advice different.” You’ve got to recognize that their interests run a lot more toward financial planning, a little toward investing and that estate planning isn’t even on their radar. They want to get rid of their student loans and when they’re in their 30s, buy a house. When they reach their 40s, that’s when they’ll focus on retirement.

Why did you decide to charge HENRYs a $100 monthly subscription fee?