When advisor Noah Farberow is at the office with his
mother, Ronna, he calls her by her first name. If they have an issue at
work, he says, they solve it at work. "But when we leave the office, I
go from being her business partner to being her son again," he adds.
It's no secret that sons have long followed their fathers into business. Since the 1970s, when increasing numbers of women began entering the workforce, more daughters have begun joining Dad at the office too. Over the last 20 years, many more women have started their own businesses, and that has led more recently to another trend: More grown children are following Mom's footsteps into the family business.
Many women-owned businesses have now been around long enough to have created significant wealth for their owners, some of whom are beginning to consider retirement exit strategies, says Sharon Hadary, executive director for the Center for Women's Business Research in Washington, D.C. The center is studying succession issues faced by women business owners at or near retirement and plans to release a report in April. Available data, Hadary adds, indicates that daughters more often are successors in women-owned businesses.
Succession is an issue that more advisors are likely to be considering going forward now that financial planning as a profession has been around long enough to have established, longtime practitioners, many of whom are looking to bring younger people into their firms. In some cases, the younger people are turning out to be their own children.
But just how many female advisors will face this issue is difficult to answer. Statistics aren't available on the number of planning firms owned by women, but some data suggests an increase. The 2004 FPA Financial Performance Study of Financial Advisory Practices shows that 57% of those surveyed are owners or principals in their firms, says Ken Evans, financial analyst for Moss Adams, which produced the study sponsored by SEI Investments. The number of CFP licensees was 11,308 at the end of July, more than double the number in 1991, according to the CFP Board. Taken together, those figures could lead one to guess that the number of female-owned firms has grown too.
We looked at one side of the changing face of planning by interviewing female planners who have brought their children into their firms. Some similarities surfaced. All the mothers are Certified Financial Planner licensees and are at least in their mid-fifties. Almost all started their businesses at least ten years ago, and in most cases their children didn't join their firms until 2000 or later.
Also, many of the women didn't have many clients when they started their firms, and rapidly increasing the number of relationships wasn't the top priority. In addition to slowly growing their businesses, some were raising children, teaching CFP courses or volunteering for the emerging financial planning industry or other causes.
Although most didn't target particular kinds of clients, they had a clear idea of the ethics and values that would guide their approach to them. Building a big firm wasn't the goal; building a successful business where they enjoyed working was. Today, these long-established firms have stable, loyal client bases and are far bigger than when they started, with some managing more than $100 million in assets.
Though they are relatively small planning firms in an industry where more very big players are emerging on the scene, these women see a place for their firms, too. And with their children coming into their practices, they may be a step closer than many other advisors to having resolved the twin problems of succession for themselves and generational continuity for their clients-although many of the women see themselves working as planners for a long time to come. And because most of these firms have four employees or less, the issue of nepotism, which often simmers beneath the surface in family businesses with more complex organizational structures, isn't a major problem. What follows is their stories.
Ronna Del Valle And Noah Farberow
Many people don't know what career to choose even after they graduate from college. Not Noah Farberow. In grade school, he was very interested in what his mother did for a living, and by the time he was in high school they were discussing plans for him to join her in the financial planning business.
But his mother, Ronna Del Valle, did have some concerns. "I was trying to be negative, trying to be the devil's advocate. It was always my feeling that he should go out into the corporate world and really learn the ropes a little bit, to get beat up a little," she says. So after college Farberow worked for a bank in West Virginia and then one in Pittsburgh-but he never stopped thinking about going into business with his mother. In 2001, that's just what he did.
"My mom and I sat down before I started and she said, 'If at any point you feel this will jeopardize our relationship, go ahead and leave,'" recalls the 29-year-old Farberow. "It made me feel pretty good. I was four years out of college and joining her practice of 20 years, so I had big shoes to fill."
Farberow joined his mother at Allmerica Financial, but in little more than a year's time, the company restructured and notified them and many others that their contracts were being terminated and they had 30 days to make other arrangements, Del Valle says. What started as a shock became a great opportunity: It led Del Valle and Farberow to become independent advisors and form the Pittsburgh-based Golden Strategies Financial Group, which is affiliated with broker-dealer ING Financial Partners. They have a three-person firm, including administrative assistant Susan Shayuth, and have 300 clients who come from all walks of life. The firm is compensated through fees and commissions.
It was a practice that Del Valle, now 56, started in the early 1980s with certain values in mind-at a time when her approach was the exception rather than the norm. She put her family first and refused to measure her success by the traditional yardsticks of that era, such as how many phone calls she made, how many people she saw in a day, how many sales she made yesterday. "I just wanted to think of people as people and not as a number. I didn't want to be forced to see a certain number of people and to sell every relative I had," she says.
Del Valle gradually transitioned from an insurance agent to a financial planner, and diligently focused her practice on a concept she calls Generational Continuity: showing clients how to take steps to pass on their values and financial gain to their families. Part of that effort has involved cultivating relationships with attorneys and accountants she trusts who can help clients with specific issues.
"With Ronna and with her son Noah, they have great personalities, are very professional, and we know we can trust their financial information. What more can you ask for?" says client Philip Yeske, president and CEO of Fluorous Technologies, a Pittsburgh technology firm serving the biotech and life science industry.
"She knows what she's doing. She doesn't treat you like a client; she treats you like a friend," says client Lorraine Pappafava, who with her daughters owns a 200-employee factory that makes tungsten carbide forms in Greensburg, Pa. After Pappafava's husband died, her oldest daughter took over running the company.
Pappafava needed financial help and turned to the advisor her husband thought highly of: Ronna. "She talked about wills, investing and retirement, and worked with me feverishly. I was panic-stricken," Pappafava recalls.
Ken Dwyer, a Pittsburgh-area client and accountant who has referred many others to Ronna, praises her for a down-to-earth, yet professional, approach. "Ronna speaks in plain English. As much as I know about income taxes, I don't know a lot about investments," he says, "and I don't want to know about investments. It's something I like to leave to experts."
She's handled stock and mutual fund purchases for him and helped him set up an annuity with a pension rollover. She also has helped many of Dwyer's clients with financial matters, including a contractor-in business with his son-who wanted to sell his share of the business to a third person. Rather than sell his share, Ronna came up with a plan for the third person to invest while the contractor remained an owner, but retired and collected a pension. It worked to the contractor's advantage because, although capital gains rates he would have paid if he sold his share are lower, the pension income was not taxable at the state and local level, Dwyer says.
Being well thought of by clients could be a springboard to building a very big practice-or selling to a much larger firm. But Noah doesn't have that in mind-he likes the boutique size of Golden Strategies. "I enjoy what I do. It's fun," Noah says. "I worked in a big, corporate environment for a long time. Here you are in charge of your own destiny."
Patricia, Sean And Ryan Houlihan
Perhaps it's not surprising that Sean and Ryan Houlihan joined their mother, Patricia P. Houlihan, in her Reston, Va., planning firm, Houlihan Financial Resource Group, when one considers they got a first-hand view of the business for many years.
That's because Patti moved her planning business home after she and her husband divorced in the early 1990s. Sean was a junior in high school and Ryan was a few years younger. Patti had been a high school math teacher before becoming an advisor, so she knew the teenage years could be some of the toughest. "I didn't want Sean and Ryan home alone. I put my desk right at one end of the family room," she remembers. "If anyone came to the front of the house, I could see them coming in the front door or I could see them going to the garage door."
At the time she had about 25 or 30 clients, whom she called and told about the change. The truth was they didn't mind that she would be coming to their homes instead of them having to drive to her office in congested Washington, D.C., says Patti, the firm's president and CEO.
Nevertheless, it wasn't easy balancing everything under this new scenario. There were times when she stayed up all night finishing a financial plan so she could have time to go to her son's baseball game the next day. "But this is what I needed to do. I was taking care of my kids and doing the business, and they were really happy days," says Patti, now 57. She also found time to do volunteer work for the industry, and served as chair of the CFP Board from 2000 to 2001.
Although Sean, 31, and Ryan, 28, were familiar with Patti's business, joining her firm wasn't something either dreamed of while growing up. It was after Sean took a few finance courses and changed his major to finance in college that he started to become interested, he says. He was working in the mortgage field when Patti needed help and asked him to join the firm.
He didn't hesitate to say yes. Sean was aware that Patti was well thought of by other planners with whom she had volunteered and that she had been written up as top planner in various publications. He also knew a lot of her clients. "They were always praising her. Saying how helpful she was," he says. "I just knew she did things the right way."
Patti was still working from home when Sean came on board in 1998. In 2001, they moved the business out of her home to an office in Reston. "Sean is a techie. He's like a sponge, and he literally came in and transformed my practice. He put in systems and processes. He does all the downloads and trading," Patti says. Sean also directs fixed-income research and does portfolio management.
Ryan joined the firm full time in 2000, although he also worked there during college vacations. "He breathes the stock market," Patti says. "He understands and loves the market, and he's the head of research for us."
Ryan adds that he enjoys working in the firm. "I'll be asked how it is working with the family, and I tell them that I had to work with my mother for 18 years but now I choose to," he comments.
Clients also enjoy working with Patti, Sean and Ryan. "She's an intricate part of the family. If I have a problem with my builder, I call Patti. We even invited her to our daughter's wedding," says client Tina Moje of Charlottesville, Va. After her father died, she learned her father's estate was far greater than she expected, and she sought help from Patti for herself and her mother after interviewing other advisors.
Longtime clients Jim and Cathy Fort of Madison, Va., have been pleased enough with Patti's work that they've recommended her to other family members. They've also periodically had meetings with their three children, their estate planner, accountant and Patti to review "the state of our estate," Jim says. The Forts also have consulted Sean and Ryan on investing and other money management issues.
The four-person firm also includes Joni Alt, a portfolio manager. All four work closely on providing financial planning and asset management services to about 50 families, Patti says. Right now the firm has about $80 million under management, and in the next couple of years they'd like to double that number and add more employees, Sean says.
Also sharing space in the office is Patti's husband, Dirk Edwards, a CPA and attorney, who also has an office in Portland, Ore., where the couple has a houseboat on the Williamette River. They met when she was CFP Board chair and he was chair of the executive committee of the PFP division of the AICPA. They married in 2002 and go back and forth between their Oregon and Virginia homes. "We try not to be apart more than a week or two," she says. "We're building a house here, though, and Dirk will be here more often."
Carol C. Pankros And Carin Pankros Roman
Carol C. Pankros founded fee-only CCP Inc. Financial Planning Services 20 years ago. In that time, the Palatine, Ill., firm has expanded significantly-it now manages $125 million in assets and has seven employees, one of whom is her 28-year-old daughter Carin Pankros Roman, who joined the firm four years ago and is a planner.
Carol, 56, is the sole owner of the firm and has no plans to retire at the moment, but thoughts of succession-and how to do it fairly-have crossed her mind. "Most of our employees were with me before Carin started. I'm not sure what thoughts employees had about succession planning prior to Carin's arrival. Of course, it's a natural inclination for all to assume she might take over. Neither Carin nor I is making such assumptions."
Carol says her succession plan is a work in progress. "Carin and I are talking through her wishes, her lifestyle, my wishes, my lifestyle. We are talking with employees, a coach-type person, accountants, attorneys and family members for insights. We are formulating multiple scenarios. One things is clear, in 2005 we will put together a succession plan should either Carin or I become disabled or die. We will create a letter in the ready that can be sent to clients should I die."
Carol also has been working over the last several months to take advantage of the firm's growing talent. One example, she says, was the decision to promote a planner who has been with the firm for more than nine years to senior planner and make her more autonomous with client contact. "We have created a situation with her that, should she feel the transition isn't to her liking, she has a client base that she could take independent of CCP," Carol adds. "Neither of us has the desire for this to happen, but she has a senior planner role with independence."
Although Carin had an interest in financial services, she hadn't thought after college that she'd work with her mother. Instead, she wanted to work for a bigger company, and got a job as an analyst for William M. Mercer Investment Consulting Inc., where she worked with pension fund clients.
But she found institutional investment consulting frustrating on a personal level, she says, because she was working with boards rather than individuals, for whom she'd directly be able to see the results of helping them achieve their financial goals. "It started to impact me sooner than I ever would have imagined, and at the time CCP was growing more and making some changes," she recalls.
Carol hadn't expected either of her daughters to follow her into the firm. Previously, Carol had worked for her family's vending business, but when her father sold it in 1983 she decided to make a career change. "I had two young children, they were six and eight, when I started studying for the CFP. I just remember sitting at the dining room table and saying, 'OK, so we're all going to study now.'"
In the first ten years of her business, Carol notes that she didn't have a lot of clients. Her husband was in management for Walgreens and they lived on one salary. Carol spent a lot of time volunteering for financial planning organizations and taught CFP programs, partly to make sure financial planning was indeed a profession and would go in the direction of clients' best interest rather than embrace a sales mentality, she says.
Her volunteer efforts led to her getting quoted often in various publications, and over time helped her build her business. "As long as I had good clients who believed in the philosophy and were willing to pay a fee-only price, I didn't want to close the firm," she recalls. "The other component was I needed good employees. As long as I could continue to combine good clients and good employees, I was content to grow the business."
Linda And Lauren Gadkowski
Not all family businesses are forever. But the timing and fit couldn't have been better when Lauren Gadkowski joined her mother, Linda Gadkowski, in business about four years ago.
Linda had a very successful practice in Centerville on Cape Cod, but a big piece of her business was in Boston, where she frequently traveled to give financial planning seminars to employees of various companies. Lauren, a former high school teacher, was at Putnam Investments, where she had worked in its human resources department helping to administer the giant fund complex's internal 401(k) plan and also in its institutional 401(k) department handling client concerns and presenting educational workshops at client sites. She also got her CFP certification while at Putnam.
Linda desperately needed help, but Lauren didn't want to move back home to laid-back Cape Cod. Why not open an office in Boston and have Lauren do the seminar work?
Lauren, now 35, did join the firm, which they renamed Beacon Financial Planning. When she first worked for Beacon, she simultaneously did 401(k) seminars under her own consulting agreement for Pepsi and Shaw Supermarkets.
As she learned the financial planning business, she took on more responsibility at Beacon. "We hired a business coach and she worked with Lauren in the beginning. The coach talked to her several times a month on the phone," recalls Linda, who is 60. "I'm not a good delegator, although my communication skills are great. I wanted her to have an objective third party."
Delegating wasn't something Linda needed to do much of, since she had been a solo practitioner for many years. She became a planner in 1990 after selling a Sylvan Learning Center, but her interest in financial planning was sparked long before.
"My husband is a physician," she notes. "We always were bombarded by some guy who wanted to sell us something, and we got burned many times. When I sold Sylvan, I had a lot of money, and I decided it was time to take charge. Being a schoolteacher, I thought I could learn anything that was placed in front of me. I thought, why don't I become a CFP? I ended up taking the courses at Northeastern [University], and it wasn't as easy as I thought."
But she did very well, and the university asked her to teach there when she was finished with the program. As part of her fee-only planning business, she also put together a course, which she called Money 101, to teach people how to better manage their money. She met a lot of business people at Northeastern, and some at high-tech companies that took off in the 1990s asked her to teach the course to their employees. Her seminar work blossomed from there.
Beacon continued to grow, reaching about 150 clients and $25 million in assets in 2004. Last fall Linda decided to sell the Cape Cod portion of the business. Lauren wanted to stay in Boston, where she had plenty of financial planning work, and wasn't interested in taking over the Cape Cod clients. Linda contacted Business Transitions, which helped her carve out the piece that would stay with Lauren and find a buyer for rest.
Linda now works for the planner to whom she sold Beacon in January, but she doesn't put in as many hours as before. As for Lauren, she took her portion of the business and merged with a Boston firm belonging to another woman. They are called Compass Planning Associates. Today about 30% of Lauren's financial planning business is seminar work.
Lauren says she loved working with her mother. "It's just amazing to have a mentor like that," she says. "I am 35 and have my own practice. A lot of people my age don't have that because they don't have someone to mentor them."
At the same time, Lauren says, there is one benefit that came from not working with her mother any longer. "When I'd come home on weekends, we'd work on this and that," she recalls. "There never was a down time. It's been nice having my mother back, as opposed to a business partner."
Judy A. Stewart And Marcie Grube
Advisor Judy A. Stewart describes her 25-year-old daughter, Marcie Grube, as an artistic, free spirit. Two years ago, Marcie decided to quit her job at Starbucks and went back to college, majoring in business management.
"That shocked the heck out of me," says the 57-year-old advisor. "Then I asked her, 'Do you want to come to work for me?'"
Ever since, Marcie has been working part time for her mother's firm, Stewart Financial Services in Carlsbad, Calif., a member of Cambridge Advisors. Marcie works about 15 hours a week for her mother and also works in the children's department for their church, where Judy is treasurer.
At the firm Marcie has helped improve technology, and now the office is getting ready to go paperless. She also organizes files, downloads statements and trading transactions, helps with auditing on accounts, manages the firm's Web site, and sends quarterly reports to clients on their 529 plans as well as birthday greetings and a newsletter.
Judy started Stewart Financial Services in 1998. Previously she worked at a bank, but could see that a merger was likely and began wondering what she would do with the rest of her life. In 1995, while still at the bank, she began taking CFP courses after reading in Working Woman magazine that financial planning was ranked first on a list of careers for the future, she recalls.
When she established the firm, she knew she wanted to keep it small so she'd have time to do other things in life. She started Stewart Financial as a sole proprietorship and works three days a week. Her husband helped at the firm in its first few years, but he stopped doing that after he began battling advanced-stage prostate cancer, she says.
Judy describes her clients as very much middle market, with many planning on retiring in the next five years. Although none of her clients were in the high-net-worth category when they started with her, some have moved into that bracket as a result of stock options and California's appreciated real estate, she notes. About 35 of her clients are charged a retainer, and for others she does hourly work. She also does about 60 tax returns a year for clients.
Judy would love for Marcie to choose financial planning as a career after she graduates in December from the University of Phoenix in the San Diego/North County area. Marcie says she's considering it. "I don't know if I'd be a financial planner, but one thing that inspires me and especially Mom, too, are clients who come in with financial burdens, and after two or three years those are alleviated," Marcie says. "Helping people see their dreams come true, that's really the goal for me. It's an awesome experience."