Next-gen advisor breaks the standard RIA mold to grow with her young clientele -- many with $100,000 or less of assets
Thirty-year-old Blair Hodgson was born into a boom and has seen her share of busts -- and it's had a profound effect on how she views markets.
The advisors in our Spotlights typically feature baby boomers with mature, successful and growing practices. So why are we spotlighting 30-year-old Blair Hodgson and her very modest practice just outside of New Orleans? Because Hodgson just might represent the next generation of advisors. Restless in her career, geographically mobile, tech savvy and determined to succeed with an investment philosophy born of a boom-and-bust economy, Hodgson is many things your dad’s advisor wasn’t.
Name: Blair Hodgson, principal
Firm: Ferro Financial, LLC
Partner: Shelley Ferro
Location: Metairie, La.
Ferro Financial AUM: $6 million
How did you become an advisor?
I studied finance at the University of Georgia, in Athens, and did an internship with Smith Barney. My first job was with UBS; I was there from 2004 to mid-2009. I spent the first several years of my career working in wealth management with and for advisors, in behind-the-scenes roles. I even managed advisors. I eventually realized that I was missing out on the joy of forming relationship with clients. After the market crash, I ended up becoming disillusioned with working at a larger firm, so I left to go to an RIA.
What’s wrong with the wirehouse world?
There are a lot of really great people working for those firms who want to help clients better their financial futures. But I believe the industry is set up to fail for clients. The advisor is working to make money for the firm first, themselves second and the client third.
In 2009, you joined Wealthstream Advisors, Inc., an RIA in New York City. What did you know about RIAs before then?
I had heard the term RIA and knew they were independent firms. But I did not understand the dynamic of working solely on fees, and how that really puts the advisor on the same side of the table as the client. It was very eye-opening.
At Wealthstream, I learned an entirely new investment philosophy, which is more passive and allocation-based. I earned my CFP (Hodgson has a CFA as well) and learned the ropes of financial planning, which can make more of a difference in clients’ lives than their investment returns.
We had a two-advisor model. It was a $200 million firm and I worked with about $100 million. I wasn’t building my own book of business, but I did look at the way they did business as my foundation for how I wanted to build a book.
Then you moved on after a year and a half. Why?
It was a life change. I’m originally from Alabama and I wanted to be closer to home. I also had aspirations to start my own book of business.
How did you hook up with Shelley Ferro
Through Google. I searched RIA firms in the area and e-mailed several of them to see if they had any interest. Shelley [a wirehouse veteran who broke away to form her current firm in 2006] responded positively and after many conversations and several face-to-face meetings, we decided that we wanted to be become partners.
Tell us about your business model.
My focus is on working with young professionals and families. I think that market has been overlooked by the mainstream financial industry because they often don’t meet the minimum.
By helping them make initial financial decisions, I’m hoping to ensure that later on they do meet those minimums—and that they won’t be looking to change advisors.
I find, down here at least, that the market is very small to provide comprehensive financial advice to people who have essentially no assets because they’re tied up in a retirement plan or a house.
So you’ve chosen a path where you’ll manage minimal assets now in return for a ready-made pool of assets as these clients start to retire?
It may not be retirement! People don’t work for the same company their whole career anymore. Younger people especially are very mobile in their jobs. It could be that rollovers come out of those changes. I also envision that they will become highly compensated and start accumulating assets outside their retirement plans. So it’s not retirement I’m waiting for—it’s for them to become more prosperous. The idea is that my clients and I will move through life together.
You say you target younger clients. Define young.
The definition of young has changed. My clients range from their late 20s through their mid-40s. I call it the next generation. They’re waiting longer to get married, and couples in their mid-to-early 40s may have young children.
What are the typical services that you provide for them?
Financial plans, budgeting, debt reduction strategies, tax planning. I help them choose investments in their 401(k) and decide how much to put into them; I help them set up 529 savings plans, anything from how to set up automatic contributions to determining how much they should be saving to what investments should be in those plans.
I analyze home purchases—are they too big or the right size, and I work with mortgage bankers and real estate brokers if they need that; it’s very broad.
What do you charge for your services?
Some clients prefer just come in for a one-time hourly engagement, and I charge a fee of $150 per hour. I do prefer to get clients on retainers: Clients’ not feeling like they’re on the clock with me is a big help. The retainer is about the cost of a utility bill every month. It’s working for my clients and it works for me too.
What are your account minimums for asset management clients?
$100,000, and I envision that going higher. Many of these next-generation clients don’t meet my minimum currently, but I work with them because I believe they will.
So far you have just a handful of clients. Are you breaking even?
Well, I made it through the first year and kept my head above water; that was my goal. I recognize that it will take a while to build the business.
How do you do your marketing?
The majority of it is word of mouth. I network with CPAs, trust and estate attorneys, mortgage bankers, real estate professionals. I volunteer in the community (through the Junior League of New Orleans) so I meet members of my target market that way.
My strategy is to find clients whose earnings are higher than average, so that they have financial planning needs and the income to pay someone to do the planning for them.
I also have an active online presence, through the company website, my blog, LinkedIn and Twitter. I do think younger people tend to search for information online.
So do you think social media is a good marketing tool, or has it been overhyped?
I philosophically agree 100% with using it. I’ve seen stats showing a large percentage of people check their online social media before they get out bed in the morning.
Are there particular strengths or qualities you feel you bring to your job as a result of your age?
Absolutely. On a boring, academic level, a lot of people don’t realize that modern financial theory didn’t begin until the ’50s. It wasn’t taught in the U.S. until after that. A lot of important financial concepts are very recent—and I was very fortunate to study them at a university level. Someone 40 years my senior wouldn’t have had access to that, much less things like derivative pricing models or behavioral psychology.
And are there ways you relate to younger people that your older peers might not be able to?
I do think technology is a big deal: This next generation really did grow up using computers and technology in different ways to live our lives. There is a sort of barrier between those who did and those who did not.
Also, younger people have a shared experienced in that a lot of us were born into booms, then by the time we started saving, the market had started going up and down every couple of years—both the stock market and the job market. We’ve kind of gone through that together.
What do you see as some of your key challenges looking ahead?
A big challenge, but also a passion I have, is debunking all these get-rich-quick myths perpetuated by the investment industry and the financial media—which I call financial entertainment. There’s a lot of money being made [at investors’ expense]. It’s nearly impossible for investors to get accurate information about how to invest and how the financial markets are.
The advice I give clients is: “You don’t make your fortune in the market—you make your fortune in your career. You become wealthy by spending less than you earn and saving diligently. The market is simply an [instrument] to help your savings keep pace with inflation.
What’s been the worst day of your career so far?
I won’t name a particular day, but they are the times where clients have had a negative life experience. When clients are laid off, when a loved one dies, when there’s a divorce … being the advisor, you know you’re going to get a call when something bad happens.
And the best day?
The best day was the first day a client hugged me. It wasn’t because I did anything fantastic; we’d had our first meeting, and then as she was getting up to leave, she gave me a bear hug. It doesn’t pay the bills, but it definitely feels good!
There are a surprising number of smaller RIAs and many of them are driving the significant growth of smaller custodians. See: A peek inside the rising RIA custodians fighting to overtake the Big Four.