You may think that after 15 years of building a $1.2 billion investment advisory firm that Scott Hanson, co-founder of Hanson McClain, would want to swim upstream (which means, in the money management world, dumping less-wealthy clients in favor of richer ones). Well, you'd be wrong.

"We have no plans to increase our $250,000 minimum," says Hanson. "And if I can figure out a way to work with folks with $100,000, I'll do that, too."

If you think Hanson is a little out of sync with the real world, think again. Along with his partner Pat McClain, he has built not only a world class nine-office advisory firm, but also built and sold a reverse mortgage company in the course of five years to Genworth for a whopping $50 million (the duo's original investment was just $1 million). Considering that Hanson's advisory firm is poised to go to $5 billion in assets in the next five years, you may feel compelled to reverse engineering their process to find out how they did it.

The two advisors launched their shop in 1993 with a secretary, just $10 million in assets and very few customers. Now, they don't need to work anymore. But they do. In fact, they both still have clients.

And that's just the way the clients of Hanson McClain like it. In fact, when former Pacific Bell employee Bill Harrington considered taking an early retirement buyout 12 years ago, he went to three brokers and advisors before finding his way to a Hanson McClain-sponsored seminar geared specifically to folks pondering the possibility of early retirement (the firm specializes in telecommunications retirees and their benefits plans).

"When we tried to ask the other firms a question, they didn't have an answer," says Harrington, who retired at the ripe old age of 56 after hiring Hanson McClain. "Scott and Pat McClain were very knowledgeable. They answered questions about Pac Bell and our retirement plans on the spot."
Hanson McClain's stress on diversification also saved Harrington from an overconcentration in Pac Bell stock (now AT&T's). "When I first met with Scott, he had me change a lot of my investments. He asked me: 'How do you feel about Pac Bell stock?' I said: 'Well, I don't know them as well anymore; they've been bought.'"

As a result of Hanson's advice and management, Harrington sold off a significant portion of his Pac Bell stock to create a much more diversified portfolio that has sustained him and his wife for more than a decade in retirement. "Almost all the people who live on my street are retirees, and I'm the only one who hasn't had to go back to work," Harrington says. "We also like the fact that Scott and Pat are young (41 and 45, respectively) and that makes us feel good that they'll be around for a good long time to watch our money."

Meanwhile, Hanson and McClain have aggressive growth plans in place. The $1.2 billion organization generated $14 million in gross revenue last year, with a 40% gross profit margin and growth of some 15%-which is low, Hanson says, because of the cost of the company's aggressive expansion and hiring. The firm is preparing to go to $5 billion in the next five years, which will mean opening up new offices and doubling its current roster of 15 advisors. Hanson McClain hired its first CEO last year and created its own broker-dealer in January. "Our first focus has been getting our immediate house in order as we open up our broker-dealer," says the new CEO, Dan Streetman, a former telecommunications consulting executive. "Our next focus is where do we open new offices? Where are the best acquisition deals?"

The company currently has nine offices in California, Chicago, Texas and Michigan and expects to open up as many as 20 additional offices in the next five years, starting in the San Francisco Bay Area. Not surprisingly, the company heavily targets areas where retiring communications workers live-since these people make up more than 50% of its clients. To grow, Hanson McClain is also in the market for firms with between $100 million and $500 million that have similar operating philosophies.

The company still services the Hanson McClain Retirement Network-a group of more than 100 outside advisors who use the marketing program for retiring telecommunications workers the partners launched after leaving Jackson National in 1993. Today, members of the Hanson McClain Retirement Network manage $4 billion in assets and pay the firm royalties for the use of its marketing systems. In fact, Hanson McClain collects 20% of the fees generated by assets from the network advisors.

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