A musician and former college teacher recently turned independent advisor, wants to build his practice around two target markets — artists and non-profits — and his passion for socially responsible investing. He's just not quite sure how to pull it off.
For advice, we turned to our panel of experts: Hellen Davis, president of Indaba Training Specialists, a management consulting and training firm in Treasure Island, Fla.; Philip Palaveev, president of Fusion Financial, an Elmsford, N.Y.-based network of advisors; and Chip Roame, managing principal of Tiburon Strategic Advisors, a Tiburon, Calif.-based market research and strategy consulting firm for financial institutions and investment managers.
Don't expect unanimity, however. This time, our experts offered widely divergent views on the best course of action.
THE SITUATION:
For 20 years, guitarist Michael Grodsky, 55, taught music at several southern California colleges. But, a few years ago, he started becoming more and more interested in financial planning — so much so that he decided to change careers. Since he's a musician — and his wife is an artist — targeting kindred spirits in those professions seemed like an obvious move. Grodksy's simultaneous interest in socially responsible investing, non-profits and foundations also makes them an attractive niche market for him. But how can he make those markets lucrative for him — especially when most artists aren't generally rolling in disposable income?
Grodsky started playing guitar in the seventh grade and stuck with it, eventually getting a B.A. in classical guitar performance in 1982 and a Master's in music theory and composition in 1993, both from California State University, Fullerton. Right out of college, he began teaching at a number of local colleges, including Santa Anna College, Fullerton College and the Art Institute of California, focusing on studio recording and sound design.
Then, several years ago, Grodsky hired a financial planner, and was struck by how similar the relationship they had was to the rapport he had with his students — working one-one-one to help them achieve their goals. In 2006, he decided he found the process to be intriguing and potentially lucrative enough to turn it into a new career. So, Grodsky took the big leap. Using his savings to live on, he enrolled in a CFP program at UCLA. He soon found an internship with a local, long-time financial planner who became his OSJ supervisor when he got his securities licenses in 2007. That spring, Grodsky officially launched his own solo practice, Aquarius Financial. Working from his Woodland Hills home, he knew that he could turn to his mentor for advice.
Figuring that he'd have more success if he focused on a specific niche, Grodsky chose two target markets: First, artists — a profession he figured he knew well. With a commitment to socially responsible investing, he also pinpointed non-profits and foundations, hoping, he says, “to help align their investments with their missions.” In the process, of course, Grodksy would also set up their retirement and health insurance plans and other benefits. To that end, he recently became certified in long-term care planning and is about to get certified as an accredited investment fiduciary. He's also a member of First Affirmative, a third-party asset manager that specializes in socially responsible investing.
But how to locate prospects? Grodsky has mostly found his clients by networking, for example, attending several art openings a week. But, he also looks at networking as a way to forge business contacts. In October, for instance, he attended a conference put together by an organization called “SRI in the Rockies,” where he met a number of advisors he's turned to for advice. He's also a member of the Social Investment Forum and just joined a local referral group.
At the same time, speaking to large groups feels like second nature to him after all those years he spent as a teacher. Grodsky is hoping that will give him an edge. He recently did his first public speaking stint, talking to students at a major arts college about financial planning. And he plans to get his foot in the door at foundations and non-profits by talking about how to align investments and missions. In addition to public speaking, he also writes a newsletter, which appears every two months or so on a blog called gyst-ink.com; it's aimed at helping artists learn how to approach their careers as businesses.
The trouble is, of course, that artists don't make a lot of money. So far, Grodsky has one client who earns more than $1 million annually, for which he set up a qualified retirement plan. Grodsky wants to accumulate $5 million to $10 million in assets from that account over the next 10 years. Meanwhile, non-profits are a tough market to crack. For now, Grodksy's assets total just $1.5 million; most of his revenues come from insurance commissions. How, wonders Grodsky, can he boost his practice and stay true to his plan?
The ADVICE:
Hellen Davis
Grodsky needs to realize that the non-profit marketplace is difficult now, especially since the Madoff scandal. They're not going to be putting their money with individual money managers. A non-profit board I'm on recently had an emergency meeting to make sure we're not investing with an individual. We had $60,000 with one person and we took it out. If he thinks a foundation is going to give money to a rookie, it's not going to happen.
As for artists, they usually have no cash base. Plus, when they get really big, they tend to leave their original advisor for someone else.
He should map out a business plan for the next 10 years with projected returns. For years one to five, he needs to determine his quarterly revenues. If he doesn't make those numbers for two quarters, he needs to promise himself that he will address another marketplace. That way, he'll get a reality check and will be able to make the appropriate changes in his strategy. I'd recommend he hire a coach, someone to hold him accountable.
I really think he should target more of the usual marketplace — small-business owners and executives. I would go to directors and above at large corporations. It doesn't take a lot of work to do that. He'd pick a local company with a lot of employees in mid-level management. And their needs would be very standardized. He'd handle their retirement accounts and so on, doing two to three a week. As a rookie, he won't have to know about tax laws or more esoteric things. He could also target teachers.
Another suggestion is that he go after orchestras. They pay their people fairly well and many musicians stay with an orchestra for 20 to 30 years, but getting into them won't be easy. He'll have to find a musician who can help him get referrals. But it's another place where people are paid on a regular basis and they're there for decades.
His passions may not pay the bills. He needs something that will bring in enough cash so he can then work with his passion.
Philip Palaveev
He has the potential to have a unique penetration in the artist market, one that not many people know very well. And being in L.A., he probably has access to numerous potential clients. If he were, say, in the Midwest, it would be a different story. And he's doing the right things with marketing.
Nonetheless, he's probably looking at many years before he reaches a level of maturity in his practice. I've found that it takes eight to 10 years for an advisor to establish a reputation and create a viable practice. If you're coming from another career and can network well, even then, it will be five years. And, in these difficult times, it may be slower. To break even, you need at least $200,000 in revenues.
Also, targeting non-profits requires making more formal investment proposals versus retail clients, where it's about establishing individual relationships. So, a different set of skills is needed. Working with individual artists and non-profits will mean being split in two different directions.
One suggestion is that he join an existing, well-established advisory firm rather than practice on his own. The ideal would be that the practice he joins shares some of his values and targets the niches he's interested in. It could give him faster traction. He'll interact with other advisors who may be able to help him in the sales process and with networking.
But that can also be more of an emotional decision, as opposed to a business one. Some advisors absolutely would not work for anybody else. However, if he really wants to be independent and own his own firm, he has to be realistic about the growing pains he will face.
Chip Roame
His real issue is how to segment his market. He has to be able to articulate the particular needs of the members of these niches and tell them how he can satisfy those needs. Every target market has particular needs. You have to be able to describe them — setting up a retirement plan when you don't work full time at a company, having money to buy a guitar, insuring your voice, etc. Don't start marketing first. Don't build your website first. Instead, decide what these peoples' needs are. I would spend some time interviewing individuals in the target market.
Once you are clear on their needs, you can spell out your services in three places: One is a website, where you show that you serve artists and address specific needs; second, a brochure; and third, a PowerPoint presentation, so that when prospective clients come to your office, you can demonstrate that you understand what they want.
To reach these markets, he has to speak at conferences where these people congregate. Additionally, he should be writing articles in publications they read; writing his own newsletter is a waste. Find the magazines and publications people already read and offer to write a free column. If he shows that he truly understands readers' needs, he'll be successful.
Fix My Business is a quarterly feature that seeks solutions to real-world advisory problems from a group of consultants and industry insiders. Submit your questions to [email protected].
