For a good number of years now, we’ve been running regular profiles of advisors wrestling with a wide variety of challenges, from how to find a successor to whether to write a book. And we’ve offered advice from a panel of three experts about how each business owner should address those issues.
But we’ve generally left it at that, without finding out what paths the individuals profiled took to overcome their hurdles and what did or didn’t work.
With that in mind, we decided to check back in with three advisors to see where they’re at these many years later, whether they ended up taking the experts’ advice, and the challenges they’re facing now. Here’s what we found out.
Joanne Amorosi: Jumpstart Needed
The background: The subject of our inaugural column way back in 2005, Amorosi had recently retired from her 33-year-career as an elementary school teacher and launched a new life as a financial advisor. She had allied herself with a general agency in Tarrytown, N.Y., affiliated with MassMutual, the better to have access to specialists and other resources, like a CPA and estate-planning attorney working on site. In business for around a year, she’d landed about 15 clients, many from educational seminars she’d put on for teachers. Commissions came to about $30,000.
Her goal, at the time: to target small business owners by running seminars through local chambers of commerce. Eventually, she hoped to focus on women, especially entrepreneurs, and use her educational skills to “demystify finance,” she said.
The advice: For our first column, the panel of experts included Philip Palaveev, now CEO of The Ensemble Practice LLC, his new practice management business consulting firm; Lloyd Williams, an executive coach in West Hollywood, Calif.; and Harold Buckner, now COO for AEGON, in Austin. And they were in complete agreement: Amorosi needed to forget about small business owners and go with her natural market, educators. Those clients, in fact, might have more money than might first meet the eye, especially when it came time to retire, they said. What’s more, as respected members of the community, her teacher clients could become centers of influence. Also important, according to the panel: she would need to create a road map for the next three to five years, with revenue and profit goals.
The update: Amorosi, who is now based in White Plains, N.Y., followed the experts’ advice and decided to focus on educators. They now comprise about 85 percent of her client book. That’s paid off, she says, not only because she has easy access to educators, but also due to her in-depth understanding of their financial situations—what benefits they receive, for example, and how their pensions are structured. But she’s also stuck with her interest in working with women. Many of her clients are divorced, widowed or single. Often, after she’s held a workshop on financial planning issues, women will speak to her privately asking for help. As for small business clients, Amorosi has some, but that’s usually because they’re spouses of an educator who has signed up to work with her.
Recently, she’s also started targeting a new niche group: families that are caring for special needs children and special needs adults. These households require long-term planning to ensure their progeny will be taken care of even after their caregivers aren’t around anymore—and, Amorosi reasons, represent a potentially lucrative market. They sorely need specialized financial advice. She recently got certified as a chartered special needs consultant through The American College; it’s a curriculum open only to MassMutual agents for now. She’s scheduled a series of meetings and workshops for the fall at school districts, special education PTAs, and nonprofits.
All in all, Amorosi, who doesn’t charge a fee on assets under management, is pleased with her progress. Her commission revenue, for example, has “quadrupled” since she started. Sounds like success.
Kevin Meehan: The Good Problem
The background: Back in 2006, Meehan’s then-four-year-old Itasca, Ill. practice, CDHM Financial Advisors, had been growing nicely. He had 325 clients and $130 million in assets. But after hiring a consultant to analyze the business, Meehan discovered he was spending too much time serving small, money-losing accounts, which was hurting his profits. Trouble was, he couldn’t devote more attention to attracting more affluent clients because he was so tied up with smaller ones. The answer, it seemed, was to shed his C-list accounts, switching them to another advisor or referring them to a different, more appropriate firm. Meehan wasn’t sure he wanted to do that, however. How, then, could he improve the bottom line?
The advice: Most of the experts, who included Palaveev, along with Julie Littlechild, president of Advisor Impact, a training firm with offices in Toronto and New York, and Hellen Davis, president of Indaba, a consulting firm in Tampa, Fla., specializing in coaching top-performing financial advisors, suggested Meehan should indeed let go of less-profitable clients, freeing himself up to focus on bigger fish. “One advisor can handle only so many clients,” said Palaveev. Doing so needed to be done gradually, perhaps by instituting a new minimum fee or making referrals to another firm. In addition, they counseled Meehan to refine his target market, narrowing his niche.
The update: Meehan has made a lot of changes since we met him last.
For starters, he did decide to pare down his client base and eliminate those who didn’t fit his target asset range or weren’t interested in financial planning. In one-on-one meetings with these clients, he offered to refer them to an advisor with another firm. As a result, over a period of several years, he says, “We removed a good percent of those C clients who weren’t profitable”—perhaps 40 to 50, in all.
He took other steps to cut down the number of unprofitable clients, as well. Most important was putting his foot down when it came to accepting new business. “We stopped bringing in people like that,” he says. Specifically, he decided to focus on two types of new accounts—“growth” clients, who pay a minimum of $5,000 a year, and “ideal” accounts, who are charged a fee of $10,000 or more. Anyone who could not afford those rates was not accepted as a client.
In addition, Meehan changed his referral strategy, fine tuning his approach when working with centers of influence, like accountants, bankers and lawyers. That meant being considerably more specific in his description of his ideal client, “so they would understand who is a good referral and who isn’t,” he says. The result: While he gets fewer referrals per year—about 50 compared to 100 previously—those that come through are considerably more affluent. Total number of clients: about 300 compared to 325 six years ago.
Then there’s his personnel strategy. Three years ago, Meehan hired an associate to help him serve clients and supplement the work of another employee he’d hired a few years before that. For one thing, that’s helped to free up his time to concentrate on bringing in new business. What’s more, because he and his associates all are different ages, once he finds new clients, Meehan, now 54, can assign them to the advisor closest in age.
As for narrowing his target market, Meehan has chosen to stay with his original strategy, focusing on business owners, professionals and high-level corporate executives. “It’s the same, but we’ve moved upmarket,” he says.
Also, in 2007, Meehan decided to end his relationship with CDH Financial Group, an accounting firm, buying out the company’s share in his business and changing his firm’s name to Summit Wealth Advisors. Assets are about $235 million and profits have gone up “substantially,” he says.
Leon Rousso: Changing Gears
The background: When we encountered Leon Rousso in 2005, he wanted to expand the investment side of his business, Ventura, Calif.-based Leon Rousso and Associates, which he had started two years before. A former musician, Rousso sold insurance for 15 years, eventually getting a Series 7 and 65 and handling investments and financial planning out of an AXA branch in Woodland Hills, Calif. Then, he decided to start his own business, with a mix of employee-benefit plans, financial planning, investments and life insurance.
His plan for boosting his investment business—he had about $25 million in assets—was to hire a young junior partner to serve B clients, enabling Rousso to spend more time on financial planning and rainmaking. The idea was that the junior partner might eventually buy the practice. And he planned on expanding the sales responsibilities of his insurance administrator. But, he had trouble finding candidates—and was unsure of just how to structure compensation without breaking the bank.
The advice: Rousso needed a roadmap—a mission, vision, and timeline that set intermediate goals and metrics. That was the unanimous opinion of the experts, who included Steve Sanduski, now a consultant with Omaha-based Peak Advisor Alliance; Tash Ellwyn, now president of the private client group at Raymond James & Associates; and Stewart Lee, president of Lee Training, a Wellston, Okla.-based firm that provides training to financial services professionals. Our experts also recommended that he segment clients, offering them different levels of service; that he fire some clients so that could pamper the best and get more referrals; and that he spend less time with small insurance clients. As for how to compensate a new advisor, the general consensus was to give the person a salary, at least temporarily. “He’s not just spending money,” said Lee. “He’s investing in his practice.” Lee also suggested Rousso encourage his insurance administrator to get a Series 6 and 7.
The update: For Rousso, the advice made sense. “It reaffirmed what I’d been thinking,” he says.
About six years ago, he brought on a recruit, initially to take care of operations, with an eye toward doing advisory work. That allowed Rousso to spend more time with clients and boost assets, which are now around $40 million. According to Rousso, individual account size also has popped; he’s been pulling in two to five new investment clients a year. And revenues have almost doubled over the last five years.
Eventually, however, the advisor Rousso hired left the firm and, recently, he hired a replacement. He receives a salary plus a payout on new business he brings in.
As for pruning his client base, Rousso says that’s a work in progress. He has a total of 200 clients. That includes employers for whom he’s sold health insurance or runs a 401(k), as well as accounts to whom he’s sold mutual funds and about 80 fee-based investment clients. (Technically, there are many more clients, if you include employees of the companies he handles). He’s also tried to segment his client base, but, according to Rousso, that’s easier said than done, because so many accounts started out as health insurance clients, but then became financial planning or 401(k) clients, as well.
Now, at age 64, Rousso’s focus is finally formulating a business plan and transition strategy. “The advice was sound,” he says. “I just never found time to get it going.” He wants to hit $1 million in revenues by next year, so he can hire another employee to provide service to insurance clients. Recently, he made his insurance administrator, who is in the process of getting her Series 7, a partner. At the same time, they signed an agreement that, in case of Rousso’s death, she has the right of first refusal to take over the business. But if she doesn’t get her license, then Rousso probably will try to merge with another firm. “I don’t have that much time left,” he says.