The Case for Catering to HENRYs

When Dann Ryan founded Sincerus Advisory in March of 2019, the average age of his clients fell overnight from 76 to 36, along with the assets he managed. It was exactly what he wanted.

Ryan previously worked for RCL Advisors (which is now part of Wealth Enhancement Group, an RIA that manages $13.8 billion) and Brownson, Rehmus, & Foxworth (a Chicago-based RIA managing $5.5 billion). Those firms, like most in wealth management, were focused on high-net-worth and ultra-high-net-worth clients. But Ryan says there is opportunity in focusing on a group he believes is underserved: HENRYs, or the “high earners, not rich yet.”

HENRYs, generally defined as young, early-career professionals earning more than $100,000 per year, have far more income than most. In 2018, the average net compensation in the U.S. was $50,000 and the median net compensation was $32,838, according to the Social Security Administration.

But, although they are well-positioned to, HENRYs haven’t spent years accumulating wealth. Without nest eggs to invest, financial advisors often don’t seek them out or take them on as clients. Most RIAs charge clients a fee based on a percentage of the assets they are managing and the typical 1% fee might simply fail to equate to a meaningful dollar amount to the advisor.

Ryan isn’t worried about that. He and David Flores Wilson, who joined Sincerus Advisory this year, are eager to work with young, high-income earners. It’s good for the HENRYs and good for the RIA.

“There were just not a lot of solutions out there for them,” Ryan said, and HENRYs want and are in need of financial advice. “My average client age went from age 76 to 36 overnight. That didn’t mean that my clients had any less need or financial complexity in their worlds.”

Older investors still tend to view financial advisors as investment managers first, according to Ryan. Meanwhile, HENRYs are “embracing advice” and expect advisors to help them with all of their financial decisions.

Many of Sincerus Advisory’s clients are business owners, or they work for technology companies or startups. They are an exceptionally busy group and are also weighing whether to rent or buy a home, starting a family, or how much they should be saving or spending. Some are considering starting or selling their business, or have company options vesting and are wondering what to do with them. Much of a HENRY’s financial plan is dedicated to optimizing where capital is going at any given time, in a tax efficient way.

Sincerus Advisory works with clients to determine what type of fee is best for them. Some clients pay an upfront $3,000 fee for a financial plan, then a recurring fee (the RIA charges as much as $3,000 to $15,000 annually). For others, a fee based on a percentage of the assets might make more sense. For example, Ryan said it was determined the latter was better for one cash-crunched client, at least for now. The RIA currently manages $51 million.

The company doesn’t offer financial advice by the hour. “The hourly model, in my experience, it feels very transactional. The substantive level of the planning just gets better over time as we understand each other,” Wilson said.

The RIA argues the benefits to the HENRYs compound over time — they aren't just parachuting into their lives before retirement. Ryan and Wilson are usually the first advisor their clients ever work with and they want to be their last. Getting to know clients, as well as their families and businesses, will inform the advice they give them down the road. That resonates with the clients, they said.

“At the end of the day, they are paying us for wisdom, not just education,” Wilson said.

One client called in March amidst the historic market downturn and asked about using some emergency funds to buy stocks. Wilson told him to hold off and it was a good thing he did. The client was laid off shortly after and needed the cash. 

Also related to the pandemic: Clients are now totally reconsidering how much time they spend in New York City, so the RIA is back to the drawing board, helping them determine if they can afford a second home and all the other considerations that might come with that (for example, living in a different state and paying different tax rates).

And working with HENRYs will be good for business down the road. Especially with the guidance of an advisor, they are likely to accumulate wealth and will need someone to help them manage it. An RIA with a cohort of those clients stands to grow assets considerably in the years to come.