A Young Advisor Finds His Niche

Editor’s note: In this edition of What’s Working Now, an AdvisorRADIO feature in which Horsesmouth members tell us about recent success they have had running and growing their businesses, we hear from advisor Michael Howell, who initially built his business by specializing in college planning.

The following article includes edited excerpts of Michael’s comments. Or you can listen to the full interview by clicking the audio file below. Please note, we experienced some distortion while recording Michael’s interview, but have chosen to post the audio anyway for those who prefer listening. We apologize for the reduced quality.

I graduated college in 2009 then went on to get my MBA in business administration. I started out in the banking industry, but quickly realized that I was more passionate about helping people grow and strategize with their finances than just lending money. So after a few years I got into financial planning, and realized that this was where I could join my passions and my story with business. My wife is a CPA, so between us it works pretty well.

It was hard for me as a young advisor—25 years old—to get started in the business. There’s a lot that you don’t know. I was lucky to have great mentors who had experience on the securities side and the insurance side. But I think this is an industry that has a tendency to eat its young.

Your natural market, in my opinion, is 10 years plus or minus your own age. Well, there aren’t many 15-year-olds I’m looking to do business with. And even 30-somethings aren’t really in their peak earning years to build up my AUM. I hate being marketed to through cold calling, so I couldn’t do it myself. I think there are a lot of younger advisors who don’t engage that way, and that’s been a culture shift over the years. But I’m good with people, building relationships and networking in my community.

Connecting my own story

I attended a webinar a software company did when I was at my first broker-dealer. That was how I got started with college planning. I realized, “Wow, there’s a lot more to this.” Very seldom do I come across a parent who isn’t concerned about the rising cost of college for their kids. It’s a great talking point. It initiates a conversation, and I think that’s what most of us advisors look for. An opportunity for someone to open up a conversation so that they can see your expertise and get to know you, like you, and trust you.

My own story emphasizes the need for college planning. My family were not planners in any sense of the word, financially or anything else. When it came time for me to go to college, I applied and hoped for the best, hoping there would be scholarships along the way because we didn’t know anything about the financial aid process. I think a lot of parents and students are in the same boat, because our financial aid system is overwhelming. You just hope there are scholarships, but often there aren’t. I had to take out loans, and graduated with quite a bit of debt.

College planning was something that gave me credibility as a young advisor. Even though I graduated with debt, I have real-life experience. I’ve filled out the FAFSA for myself. I learned financial planning through necessity and am now in the industry as a professional. It really gave me a push as I was trying to build a niche. It became a talking point that started more in-depth financial planning conversations with folks.

Pinpointing the need for education

Once I decided to dive into learning about the financial aid system and how financial planning goes along with it, I started to position myself as an educator in the community. The reality is that most presentations parents get are through a college financial aid night at a high school.

Most of the information they get there is related to admissions and very little to finances. It’s beyond the background and expertise of most high school counselors. Even those who are well-versed in it are not licensed to talk through larger financial planning issues with people.

How is a high school counselor going to coach a parent, saying, “Hey, tell me how your retirement plans are doing, and how is that going to work out if you’re spending a hundred thousand out of pocket on college? How does that change your retirement plan?” That is just not going to happen in that setting.

Becoming a community educator

I saw a real opportunity there. I started being a resource by presenting at public libraries. A lot of libraries have adult education programs, and they have their own marketing. They put ads and notices in the local paper, social media, and elsewhere. Then I used my own network to spread the word that I was doing presentations.

I said, “If you’re aware of people who’d find this helpful, by all means, encourage them to attend.” I built up an email list and made personal phone calls to people I thought would pass along the word. I didn’t have a lot of money to do direct mail or other efforts. But I think if you’re willing to communicate what you’re doing, people will listen if you’re really making the effort.

Of course, some libraries had better marketing than others. Turnout varied from as few as five or eight to as many as 15 or 20. I also live in a somewhat small, agricultural town. I soon found that I liked the smaller audiences. I tended to have higher conversion rates, and it’s easier to connect with people in a small group.

These were my first presentations, and I felt like I cut my teeth doing college presentations at the libraries. I didn’t know these people personally, and it helped to get great feedback and grow in my confidence of the subject material. I think it’s a great way to start, no matter what topic or niche you pursue.

Taking it to the next level

As I grew, I found that strictly doing library presentations wasn’t bringing enough of the sort of clients I needed. I moved into doing seminars at local private high schools and lunch-and-learns for businesses in the area, and being a resource for a couple of CPA firms. There’s also a local credit union that primarily serves teachers, and they invite me to do college planning workshops. They don’t have financial planners working for the credit union, so it pairs well. When I’m invited to be a speaker at these locations, I find that I get more qualified people who are in a position to pursue a financial planning relationship.

However, it was the library presentations that helped me gain expertise and relationships to branch out into other locations. I reached out to the private schools and asked, “What do you guys do each year to educate families? I specifically work in helping parents understand the financial implications of paying for college.” Almost every single time they agree that there’s a lot of information on the academic side but very little about financials. They think I’d be a great complement to the resources they offer.

And it all started with me just going out and saying, “Hey, this is what I’ve been teaching on in an area where we can provide value to people. What would you think about a presentation?”

Getting your timing right

The busiest time of the year is June-December. In June the students are out, but it’s the time to get in front of counselors and other people who bring you in to do a presentation. Then, most of the presentations happen between September and December. One year, I did 14 presentations between September and December, but now it will probably be more like three or four.

I also build brand awareness by offering a college newsletter. In our industry converting people to clients is all about timing. You have to put some hooks in and try to build an audience. Sometimes you might have great conversations with people and you’re optimistic about a potential future relationship, but nothing happens because the timing just isn’t right. So I quickly realized that I needed to be providing continual value.

I don’t want to bombard people; I provide valuable information about college planning. I call it the CollgeFocus Newsletter, and it goes out in an email. At one point I was doing it every month, but that became too much and now it’s generally every two months. Horsesmouth has been incredibly helpful in that area, through talking to Lynn O’Shaughnessy and reading her newsletters. It gives me a lot of ideas for material.

In addition, these newsletters set me up as an expert and a resource for CPAs, attorneys, and COIs. They’re not sending me clients just to open 529 accounts, but because I’m able to help them in an area where they have questions. And as I answer those questions, it opens up financial planning conversations.

Seguing into the first meeting

So I have clients coming in from presentations and as referrals from COIs. I learned through my presentations at the library not to rush the part at the end where you’re trying to “sell” the first meeting. Most people attend because they want to learn more so they can be better prepared and help their student, but they’re overwhelmed.

The reality is that even if you’re an advisor just starting to learn the material, you probably know more than the people at your presentation. So I close my presentations by saying, “I know we’ve shared a lot of information in this presentation today. You probably have a lot of personal questions related to your own circumstances. I want to help you, just be a resource to you and help get your college planning questions answered.” I present my feedback form, which asks for what they thought of the presentation, and also allows them to sign up for a meeting with me.

Once they’re in the office, I give a two-minute infomercial about the other planning services that we offer. I say, “We’re a small independent firm, so we don’t have the money to advertise in the Super Bowl and have Peyton Manning as our sponsor. This is our way of advertising. You’re sitting here in the office with us, and we talk about college planning and provide these opportunities just as a resource to you. If this is helpful to you today, and you like what you see, we’re open for business.” And we just leave it as simple as that. It’s very non-threatening, no pressure, and I think consumers value that.

At that meeting I use proprietary software to generate a report with the family’s Expected Family Contribution and other facts about schools of interest. At the workshop I usually have a slide that explains what we’ll talk about at the meeting—the EFC, schools of interest, and specific financial circumstances.

In my opinion, if you’re going to help with college planning you’ve got to dig in and ask questions about retirement planning as well. It opens up doors, but the real hook is the EFC. Yes, there are free online tools available, but most families don’t know what to do with the number once they get it.

To charge or not to charge?

I went back and forth on whether to charge for an initial meeting. I think the demographics of your region probably matter in that regard, and I think, at least in my area, charging for an initial meeting would be a barrier for some. And, because this is a close-knit community, I would rather have someone leave my office feeling better and more informed about their circumstances than when they first walked in.

If they do that, even if they aren’t a good fit or don’t become a client, it spreads word around town. They’ll talk to other parents about how helpful Michael was. I get a lot of phone calls from people who have heard of me from their friends. The time spent on an initial meeting doesn’t always pan out financially, but people can turn out to be good connections.

Converting to clients

Anyway, at that first meeting I can quickly gauge what their financial situation is and what kind of assets they have. I explain what I offer and what we charge. If they are interested in becoming a client and bringing in assets, then the college planning becomes part of the services we offer to clients—85 to 90 percent of the people who become clients take this route. The rest of the time, people may already have an advisor, and they just want someone to help them build college lists and do that planning. We charge by the hour to do that.

If you’ve got an affluent family, they’re not going to qualify for need-based aid, but a lot of affluent families don’t realize that merit scholarships are available if you’ve got a reasonably gifted student. You don’t need to have a 4.0 GPA to get merit scholarships. But a lot of times students and parents are short-sighted and don’t expand their horizons looking for schools to apply to. When they’re given more options, its sets them up for success. What we do is look at retirement planning and help them understand how that ties to college planning and how much they can spend in that regard. And we build lists of schools that offer great merit aid.

It’s hard to put a number to it, but I would say roughly 15 to 20 percent of my clients now are coming in through college planning, whether that be workshops or referrals. And that’s not counting occasions where I might have had an initial conversation about college planning with an attorney or CPA who eventually refers me for another reason.

My advice: Be passionate about it

Starting out in the college planning business is all about having the right expectations. It’s good to understand who else is out there in your community talking about it. If you try to go straight into college nights at high schools or whatever, you might run into a lot of resistance. Some high school counselors are distrustful of advisors because of past experiences with more transaction-oriented advisors. That sours people’s interest.

So, just like anything, you’ve got to build relationships with people to get your foot in the door. If you look at college planning just to open 529 accounts, you’re missing the boat. You should be passionate about it, and have a personal story to share. People relate to stories, and they see the passion come through.

You have to focus on being a source of valuable information. Yes, there’s a lot of information on the Internet, but that doesn’t mean it’s all good. If you can be a valued resource in your community, your name will come up again and again, and you’re going to see benefits from referrals over time.

At this point, I’m not marketing myself exclusively as a college planning advisor. It’s not my primary area of business. In my region there really aren’t enough families for that to be a profitable business. But it is still a great tool for conversation starters. And there’s nobody in the community talking about it, so I am still meeting a significant need here.

College strategies

When I first started doing college planning, part of the allure was being able to figure out different strategies to lower the EFC, asset sheltering and whatnot. In practice, it’s not always practical to move that money. Sometimes, these strategies do work, and you should talk to parents about that.

But I think where I help people the most is in the college selection and admissions process. I can’t emphasize enough that this is where the savings come in. I applied for college hoping for the best, that scholarships would curb the cost a bit. But I could have approached it differently, looking for schools that offer generous need-based or merit aid. Most students apply to one to three schools, especially a dream school. But they don’t think outside the box for other schools that offer a lot of aid.

I help parents understand if they are likely to be a need-based or merit aid candidate. And I help them be smart in applying to schools, choosing six to a dozen with reasonable financial aid packages, which gives them a lot more options. Just being more informed in the process is helpful, because you can be more confident in the decision and potentially get better offers.

Then there’s graduation rates and how well a student will do at the school. Are they likely to goof off, or will they be diligent? What’s the culture of the school going to be like? How quickly are they graduating students? If they consistently graduate students in four years versus five or six, those are some significant dollars that a family can save.

There’s no question that helping a parent become more informed and working with the student to be more strategic leads to better outcomes, and I think people see the value.