Published July 2003

MANAGING DREAMS
Financial adviser Kathleen Cotton helps clients reach their goals

By Kimberly Hilden
SCBJ Assistant Editor

“I am extremely happy with my choice of career because it stimulates me intellectually, yet also allows me creative expression.”
— Kathleen Cotton, “Beyond Wealth: Now that You’ve Got the Money, What do You do with the Rest of Your Life”

Sitting behind her desk in the Lynnwood office of Cotton Financial Advisors Inc., Kathleen Cotton is relaxed and smiling as she talks about her work.

As a fee-only certified financial planner, Cotton is in the business of helping people identify their life goals and establish a financial plan to get there. It’s a job that combines her people skills with her number skills.

Snohomish County Business Journal/ KIMBERLY HILDEN “The way to keep clients is to know them intimately, to care about them, and I do. My clients can call me anytime,” said Kathleen Cotton, founder and head of Cotton Financial Advisors Inc. of Lynnwood. A certified financial planner who completed a program at the Coach Training Institute, Cotton works with clients’ life goals to establish their financial plan.

“For me, work is not work. I just love it,” says Cotton, who heads a four-member staff that manages millions of dollars in investments.

An author of five financial books, Cotton has been named one of America’s best financial advisers by Worth magazine, and her firm twice has been selected for Bloomberg Wealth Manager’s survey of the top wealth managers in the United States.

But the road to financial success and professional recognition has not been without its bumps for the Mukilteo resident, who was in her 40s, divorced and raising three children when she decided on a career in the financial industry.

“My drive was enormous. My children would probably say I was obsessed with finishing college so I could make my own way in the world.” — Kathleen Cotton, “Beyond Wealth”

It was the late 1970s, and Cotton, newly divorced, working as a secretary and raising two teen-agers and a 6-year-old, enrolled at City University to earn a bachelor’s degree in business administration with a minor in accounting.

During the next few years, Cotton says she “took a lot of weekend courses and had no social life.” She also received help from her two older children, who watched her youngest while she studied in her bedroom at nights. In 1981, she graduated from the university with honors.

“I always tell women that they can do it, because I did it,” Cotton says of the desire to better her life.

During the next few years, she continued to work as an administrative assistant for GTE while she studied for her financial planner certification. Soon after receiving that designation, she quit to begin a new chapter in her professional life, one that would bring more satisfaction but greater financial uncertainty.

First, Cotton was a broker on the product side, working for an accounting firm and a bank, selling investment products and saving money toward her own venture.

“I was basically hanging on by my fingernails, financing my career with my net worth,” she said.

By 1987, she had saved enough money and was back to building her own business, then called K. Cotton & Associates, but it was still a product-side investment firm, a point Cotton was not comfortable with.

“I never was a good salesperson, and I didn’t like selling if I didn’t believe in the product,” she said.

So in 1990, Cotton converted from an investment broker to a fee-only financial adviser, offering wealth management and planning services without selling financial products or being tied to a single brokerage firm. Instead, her company uses the services of discount brokerage firms for clients’ investment needs, including no-load mutual funds, stocks and bonds. Bonds are bought through a variety of brokers to get the best yield, according to the company.

There are no commissions, only client retainers and hourly fees. Cotton and her staff of financial planners suggest investments to be made — without a sales fee — and, if they are managing a client’s investments, will make the purchase for that client on a no-load basis.

“We don’t sell anything, we consult,” Cotton says. “From that point forward, the business bloomed.”

Today, more than 70 percent of Cotton’s client base is 50 or older and financially independent, with the remainder still in the work force planning for their future. The company brings in annual revenues “in the mid six figures,” she said.

For Cotton, financial planning is about more than dollars and cents. It’s about building relationships with her clients and helping those clients build their dreams.

To better help them, Cotton in 2001 completed a yearlong program with the Coach Training Institute in California to gain coaching skills that she could integrate into her advising, which focuses on clients’ personal values and goals.

“At the onset of a financial planning relationship, there’s an extensive period where you talk about life goals, the dreams you have but never thought you could attain,” Cotton said.

“The way to keep clients is to know them intimately, to care about them, and I do,” she added. “My clients can call me anytime.”

“When the financial advisory relationship works well, there are a multitude of benefits.” — Kathleen Cotton, “Beyond Wealth”

Cotton’s caring attitude extends to her colleagues as well.

A past president of the Washington Chapter of the International Association for Financial Planning as well as a past regional and national board member for the National Association for Personal Financial Advisors, Cotton is happy to lend a helping hand to others in her field.

“She gravitates to leadership positions in any organization she is in,” said Nancy C. Nelson, a fee-only financial adviser based in Olympia as well as a fellow member of NAPFA. “Some people go to leadership positions for visibility; she truly does it to help the profession.”

For instance, Cotton has used her own experience to organize and teach workshops for financial planners transitioning from commission-based to fee-only practices.

“She has been very generous about sharing ideas,” Nelson said. “It is scary — if you can imagine an income stream that you’re used to, you kind of have to cut that off and start from scratch.”

Cotton also has been active in creating a NAPFA workshop focused on the technical aspects of running a business, said Alice Rhodes, a fee-only financial adviser based in Lake Forest Park.

“She helped me get established as a new planner back in 1996-97,” Rhodes added, by providing management contract forms and how-to advice on running a practice.

“She just has a very warm heart and is known for her willingness to get people started,” Rhodes said.

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