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By 
May 23, 2018 at 07:12 PM
The most common question I get from investment advisors is: how can I run a solo investment advisory firm with clients who have hundreds of millions of dollars of company 401(k) retirement plan account assets?
Well, let me show you — by running the numbers.
In January 2018, I was advised by my CPA firm to upgrade my company accounting software. I had used the same old accounting software since I formed my investment advisory firm in 1999.
After I loaded my financials into my new company accounting software, I could perform a much more detailed level of financial analysis on my 2017 company revenues and expenses.
The analysis showed that more than 80% of my company revenue last year was generated by providing investment advice to individual company 401(k) retirement plan participants. Further, my company could keep just over 85 cents of every dollar of revenue generated.
And that’s net of all associated costs of running my company — rent, utilities, research software subscriptions, marketing costs, consultants, etc.
Two Key Steps
Looking back, I now realize that I’ve built a successful and highly profitable solo investment advisory practice primarily because I solved the two most important practice management issues that all investment advisors face.
First, I have always been able to find new individual company 401(k) retirement plan investment advice clients on a consistent basis. From the beginning, I differentiated myself from every other investment advisory in my local market.
As a solo investment advisory firm, I learned long ago that I would never be able to compete with the Vanguard, Fidelity or Schwab generalized investment advisors. More recently, I realized the very same thing about the current generation of robo advisors.
There is nothing “general” about my investment advice product. I provide stock and bond market tactical asset allocation and risk management advice on the default menu of mutual fund options found on a client’s company 401(k) retirement plan menu.
My product is a very specific investment management solution to the company 401(k) retirement plan investment management decisions that are required on a default company 401(k) retirement plan mutual fund menu.
My marketing strategy is targeted to retain and attract individual company 401(k) retirement plan investment advice clients at specific companies in my local market.
I monitor about 20 company 401(k) retirement plan menus. At each company, I have anywhere from 10 to 25 individual clients. The average company 401(k) retirement plan account is at least $500,000. Most of my individual company 401(k) retirement plan accounts are over $1 million.
My average annual investment advisory fee is just under 1%. If you do the math, you will figure out that most of my individual company 401(k) retirement plan account investment advice clients are paying me between $10,000 and $15,000 per year.
More Issues to Tackle
