Advisors usually preach the benefits of diversifying investments to their clients. When it comes to building their own practices, though, many planners choose to work with clients in a particular profession or workers with a single employer.
Some industry-specific practices have benefited from planners' ties to former employers or proximity to large institutions. Planners who build such a client base say the employer-specific or industry-specific knowledge builds trust and a loyal following, ensuring continued referrals.
Jerry Verseput, a principal with Veripax Financial Management in El Dorado Hills, Calif., worked at Intel for 15 years as an engineering director before starting his financial practice. More than half of his clients are Intel engineers.
As with most planners who specialize, Verseput says he's not worried about his practice's focus, even if there's a tech bubble that bursts. "I'm not tied to the success of Intel at all," Verseput explains. "If they do well, my clients are doing well." But if Intel and other tech giants were to stumble, his clients would need help more than ever, he says.
Verseput began approaching prospects using an email list of virtually everybody with whom he had ever worked. "I had an extremely long potential client list that I just started working through," Verseput says.
His former colleagues would not have responded to a direct sales pitch, he says. So Verseput created a monthly email newsletter discussing financial topics. "I still send that out every month," he says. "That's probably been my best marketing tool." He follows up by inviting former colleagues to meet for coffee. And he always keeps it low key. "As soon as they sniff out a sales pitch, you're done," he says.
Since his clients are data-driven, Verseput says, they read up on financial planning. "It takes me now about 10 minutes to go through enough things that they may never have thought of" to convince them his approach is better, he points out.
For Alan Hewitt, a planner based in Palmdale, Calif., the transition to helping former firefighting colleagues with their finances came gradually. As a Los Angeles firefighter in 1990, Hewitt began preparing tax returns for his co-workers, saving vacation and comp time to accommodate the tax season rush. At the same time, both he and his wife Josette, who is also a tax preparer, enrolled in a CFP program. By the time he retired in 2003, he had been a certified financial planner for nine years.
The early tax work served as a calling card for Hewitt's planning practice, where 70% of his business is word-of-mouth and cross-selling to firefighter tax clients. Hewitt, though, doesn't dismiss other forms of promotion.
"We advertise in magazines specific to California, trade magazines that they get at home and also at their station," he says. Last year, he mass-mailed information to Los Angeles Police Department officers, generating some additional clients, although firefighters remain the core of his practice.
Hewitt, like Verseput, also put his thoughts in writing. His free 80-page online document, The DROP Book, explains many of the intricacies of the Los Angeles Deferred Retirement Option Program, which allows city firefighters and police officers who have worked for at least 25 years to keep working while accumulating service pension payments. Their pension money is shifted into 401(a) money purchase plans until they retire, after which the public employees can receive a lump-sum payout.
Hewitt's book addresses the tax rules and investment options that can be confusing to workers in the program. The free information has been an excellent marketing tool, says Hewitt, who has signed up a host of clients who have read the book.
Briaud Financial Advisors in College Station, Texas, draws on local brainpower. More than half of the firm's business involves advising college professors. It's no accident, given that the firm is headquartered near the home of Texas A&M University. Half of Briaud's clients, however, live outside the immediate area. Some are former A&M faculty who moved to other institutions, while other clients are referrals. "Academia is its own community within a community," says Roger Pine, a Briaud advisor.
Professors form communities that grow beyond university boundaries. "Referrals come that way," he adds.
The client base once grew through a traditional marketing tool: giving talks about financial topics. Pine says that Janet Briaud, the firm's founder, would regularly speak at colleges. These days, he adds, many institutions do not allow outside vendors to give talks on campus. "That really shut down a major source of business for us," he says.
Fortunately, technology provides leads. Pine has been experimenting with Google Alerts, which he has set to flag stories about faculty hires. Pine sends the newcomers a "welcome to the community" letter.
Practicing in the shadow of a major institution also has shaped the business of Peter Melsness, a financial planner in Rochester, Minn. With a population of about 100,000, Rochester is home to the Mayo Clinic, which employs about 30,000 people. Not surprisingly, about 60% of Melsness' clients are physicians.
Melsness does little traditional marketing. "I find that word of mouth tends to be the best, especially when you're focusing on a niche," he says. "Most physicians are comfortable working with somebody if they know that you're working with others similar to them."
Melsness sees an advantage in working with clients who share a single employer. "I can learn their benefits backward and forward," he says. "And Mayo Clinic's got excellent benefits. They even have staff on site to help them with financial planning," he adds. Even so, plenty of physicians are wary of taking financial advice from their employer, which keeps Melsness' practice thriving.
One downside to a single-employer practice, Melsness says, it's that some topics are off limits. Because the Mayo Clinic is a nonprofit entity, its physician employees can't get a stake in the business. "So I just don't deal with some of the planning issues that other financial advisors would deal with, such as stock options."
The physician clients that Melsness serves tend to arrive at his office without preconceived notions about investments and financial planning. "Their training is all in medicine," he says.
Jason Romano's practice with Los Angeles-based Moss Adams Wealth Advisors, where he is a partner, is concentrated in two industries, but he views his client base as diversified. About 80% of his AUM is divided equally between the entertainment and apparel industries.
The financial planning needs of writers, directors and actors, whose employment can be erratic, are significantly different from those of studio executives who receive steady paychecks. His clients in the apparel world, on the other hand, range from high-end clothing manufacturers to T-shirt makers.
Stability comes from his firm, he says, which serves clients in food and agriculture, energy, forest products, wine-making and dealer services. "As a firm, we are very well diversified," Romano says.
Joseph Lisanti, a New York financial writer, is former editor-in-chief of Standard & Poor's weekly investment advisory newsletter, The Outlook.