We drove Heron Financial Group | Wealth Advisors at 170 MPH for the last several years, achieving a 40% annual growth rate 3 years in a row, lifting our assets from $63 million at the end of 2011 to $171 million by the end of 2014, employee head count from 1 to 7.  We added only 12 families in that time frame (currently 87 families) as we concentrated on broadening and deepening our current client relationships.

We want to take this opportunity to recap HFG's transformation into a full service wealth advisory practice, and describe how our firm will evolve over the next decade.

David Edwards incorporated Heron Capital Management, Inc. in 1996 as a solo investment management practice investing individual clients in US mid cap growth stocks.  As time went by, some of these mid-caps grew into large caps, which he did not want to sell necessarily because of tax consequences.  He added small caps, value stocks and international stocks for diversification by 2000, but was still primarily an equity manager.  By then, clients were asking, "Is my all stock portfolio right for my retirement?"  "No!  We need to get some bonds in there."  So he began doing asset allocation among stocks, bonds, and cash, and also specialty sectors such as emerging markets, REITs and commodities.

The clients started asking other questions:

• "Is my 401K properly allocated?"
• "Can I retire early?"
• "Can I afford to buy a vacation home?"
• "How much can I give my child to pay for med school?"
• "I have a special needs grand-child.  Can I set up a trust for their care and support?"

 At first David would say, "Call your financial planner, call your trust & estate attorney, call your accountant."  That was NOT the answer the clients were looking for.  We had our hands on their money; clients wanted the answer from us!

David surveyed his clients in 2006 to find out how they valued his firm.  On the top ten list of reasons why clients liked the firm, investment performance was only #6.  The #1 reason why clients liked working with David was that they trusted him.  One client wrote, "Good news or bad, you'll always hear it first from Dave!"

David realized his firm was no longer just an investment manager, but a wealth advisor.  The difference is that an investment manager only focuses on investment selection; a wealth advisor is prepared to offer advice on any element of a client's life that touches money, which includes:

• Investments
• Asset Allocation
• Executive Compensation
• 401K planning for individuals and entire businesses
• Life insurance and Annuities
• College Tuition
• Retirement Planning
• Estate Planning
• Divorce Planning

 Either we have the expertise in-house, or we can direct the client to an appropriate professional in our referral network.  "Call our friend X, ask these three questions, he or she will take care of you."

In January 2008, David rebranded the firm from Heron Capital Management to Heron Financial Group | Wealth Advisors.  He was just about to undertake a major re-launch of the firm when some unpleasant events intervened:  First the financial crisis, which almost closed the firm for good as assets, revenues plummeted; second a personal health crisis, which took a year to resolve; third, an unexpected divorce.  Surviving those experiences made David so much a better wealth advisor, as he is so much more empathetic to other people's problems.

2009-2011 was all about taking care of current clients, no thought of expanding the firm.  By 2012, David was ready to move forward, but his solo practice was like a home built aircraft - David could fly it, anyone else would crash and burn.  He leveled the existing firm to the ground, built a new firm from the ground up with 100% "best practices" solutions for everything we do - investing, operations, marketing, web site, social media, search engine optimization and client acquisition.  David also committed to hiring the talent to necessary to support a major expansion, including: 

• Lucas Doe, CFA, October 2011, portfolio manager and research analyst, previously in private equity research, Darden Graduate School of Business MBA, same degree as David.
• Yvette Wheeler, May 2013, operations manager, previously a 21 year career with Salomon Smith Barney in operations and systems.
• Samantha Gorelick, May 2014, marketing coordinator, previously ran a family office in New York City.
• Shelley Fischer, CFP, July 2014, financial planner.  Shelley started a financial planning practice in 1999, previously the head of lending at Sotheby's Financial Services
• Stacy Marcus, September 2014, marketing and strategic projects, currently guiding the rollout of our digital advice platform (March 2015).
• Elizabeth Baggs, research analyst, December 2014, currently oversees a project to recompile our clients' historic performance numbers from firm inception to present.

 The benefit of building out this team is that David used to spend 80% of his time running the firm, 20% of his time talking to clients.  Now those percentages are reversed.  It is likely that HFG will employ 12 people within three years.  In addition to David, there will be other wealth advisors who are the primary points of contact with the firm, but a TEAM will serve the client, not just one person.

That's history!  Now what?

The way we do business today is different from the way we did business 20, 10 or even 5 years ago, driven by changes in clients' expectations, changes in regulations and compliance, and changes in technology.  The pace of change in the wealth advisory business is only accelerating.  In the 1990's, it was easy for a group of talented partners to gather assets, charge advisory fees of 1.5% or even 2%, and enjoy annual revenue growth as markets soared.  That model struggled post-2000 as US stocks returned 0.0%/year from January 2000 to December 2009.  Fees compressed, while costs for technology, compliance, and health care and employee benefits soared. 

The arrest of Bernard Madoff in December 2008 was a watershed moment, permanently destroying the "presumption of trust" advisors enjoyed previously.  Now we have to prove we are not Bernie Madoff before we can do ANYTHING for a prospective client.  We know families who went to 100% cash in 2008-9, refuse to invest still even 6 years later  - and will NEVER be able to retire.

Over the next ten years, we expect the number of advisory firms (currently 13,000) to drop by 50% - either merged into larger firms, or simply cease to exist, because these firms are not continuously reinvesting in the business to accommodate change.  We use the analogy of the travel agency industry.  20 years ago, a storefront agency sat on every third block of every city in the United States.  Expedia.com and Hotels.com wiped out those agencies because consumers could find and book business travel or vacations easily from home.  Certain niche agencies survived and thrived.  For example, one of our clients is a known expert on "all-inclusive resorts" - he visits about 25/year.  Rather than spend hours surfing travel sites, you just call him, describe what you have in mind, and he'll book the ideal vacation for you WITH a discount of 10%. 

Advisory firms that don't specialize will not thrive.  Heron Financial Group defined an ideal client (generally speaking, an executive family with $1-10 million in investable assets) and optimized our firm to serve that client.  Our service package is organized to streamline that client's life.  Our professional development, training and technology purchases are all oriented to improving that experience every year.  In the years to come, we may expand into different niches (for example, divorced & single women, 30 year old tech entrepreneurs.)  If so, the advisor serving that niche will be an expert in that demographic.

In 2014, our focus at Heron Financial Group was building out the support team.  In 2015, we are focused on building out our technology platform.  5 years ago, our clients did not expect that we would be available past 6PM; now clients expect to have their questions answered 24/7.  5 years ago, having a web portal for client reports was uncommon; now clients expect to review their accounts on their smartphone.  For the past 2-3 years, we have watched as different technology vendors have struggled to accommodate these needs; those efforts came to fruition this year. 

Over the next 6 months, we'll roll out applications to improve the financial planning process, the client reporting process and the task management process.  These applications are oriented towards mobile and smart-phone display so clients can check their accounts whenever, wherever.  We are doing a soft launch on a "digital advice platform" oriented towards younger clients, where much of the work currently provided by actual humans will be automated.  Needless to say, we will be testing this platform very carefully to make sure that the results are satisfactory.

Our other major initiative is upgrading cyber security to protect our clients and ourselves.  Next month, we will distribute to our clients and friends "How to be vigilant (not paranoid) about cyber-security," which details what we are doing at Heron Financial Group, and what you can do at home.  Be assured that we initiated a cybersecurity review last spring to find vulnerabilities at our firm, implemented a 6 month action plan starting last August to address gaps from highest to lowest risk.  Heron Financial Group is now recognized by our peers as being well ahead of the curve (David will present at three compliance conferences this winter on this topic.)

It's a fabulous time to be a wealth advisor!  We look forward to only getting better!