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Firm Goes from “Lifestyle” to Turbo in Four Years

By Thomas Coyle March 14, 2017

With financial advisors challenged by evolving consumer expectations and the sheer weight of demographics, it’s not surprising wealth management software maker eMoney Advisor would put the spotlight on a financial advisor who has used its technology to boost his annual growth rate sevenfold in four years.

In a new case study, eMoney tells how advisor David Edwards took his New York-based RIA Heron Wealth from $65 million under management six years ago to $285 million now. By another measure, Heron Wealth went from a yearly growth rate of 5% to nearly 35%.

Edwards achieved this mainly by upping his technology game and turning his attention downstream to capture high-earning-not-rich-yet individuals — a.k.a. “henrys.”

In this light, says Drew DiMarino, head of sales for Radnor, Pa.-based eMoney, Edwards “is the exact example of what advisors should be doing in 2017.”

But as you might expect, there’s more to Heron Wealth’s recent growth than a technology upgrade and a new business plan.

The truth is, Edwards had been keeping his firm on a slow-growth path on purpose. From its founding in 1996 until about five years ago, he ran it as solo “lifestyle” practice so that he could be available to his kids as they grew up. “School plays, practices, I didn’t miss single thing in 18 years,” he tells FA-IQ.

“But then that era ended,” says Edwards. And pretty abruptly, from his description. “In one year, my kids went off to college, my wife divorced me and my dog died.”

Throwing himself into his work, Edwards set out to rebuild his firm by implementing best practices across the board and expanding his business with the ambitious goal of having $1 billion under management by 2022.

Examining his work routine, Edwards found he was spending about 20% of his time with clients and prospects and 80% fiddling with administrative tasks. Partly, this was the result of using a paper-based financial-planning tool that required Edwards to generate and email a new set of reports for every change in a clients’ situation or assumptions.

David Edwards

Switching to eMoney, he automated that and other routine functions — to the point he’s nearly reversed the ratio of time spent with clients. This efficiency also made it possible for him to consider clients below his traditional sweet spot of between $2 million and $5 million in investable assets.

For Edwards, working with smaller fry lets him bring bigger clients’ younger relatives and their referrals on board. After all, he says today’s “henrys” are tomorrow’s marquee clients.

That’s no small insight, says eMoney’s DiMarino. Figuring out how to work with down-market clients cost-effectively is a crucial ingredient of long-term growth.

To prove his point, DiMarino cites a 2016 Fidelity study that shows “a significant portion of clients under 45 will grow an average of 14.1% a year with annual revenue of $890,000 compared to an advisor with an older book who has current revenue of $810,000 and an expected growth rate of 7.7% per year.”

Edwards has also made Heron Wealth a multiple niche player. While he concentrates on senior executives and business owners, his colleagues handle other demographics. Specifically, Samantha Gorelick works with clients under 35 and Elizabeth Baggs has begun to specialize in the planning needs of single and divorced women.

Next up, if he can find suitable advisors to spearhead the missions, is outreach to African-Americans and same-sex couples.

Beyond hitting his goal of $1 billion under management, Edwards has in view a sale of some sort — though he views that as a challenge comparable to his firm’s present build-out phase.

“I want to be there by the time I’m 60 or 62,” says Edwards, who’s now in his mid-fifties. But he says he has to take a pragmatic approach to this phase.

“It’s not practical to count on being able to sell internally,” he says. “So it will probably be a merger with another firm — and I have to allow for a few years to make sure clients and staff are taken care of.”