Here's how the Alfests have built a strikingly large group of diverse young talent at their planning firm.
Once a month, employees gather around the conference table
at L.J. Altfest & Co. Inc. in New York City for a family-style
lunch. Everyone goes by first names: Paul, Dawn, Ekta, Andrew. Banter
is light, driven by teasing and jokes from owners Lew and Karen
Altfest, who preside like proud parents over their flock.
It's casual Friday at the office, the one day of the week not scheduled for client meetings. Lew is having his Spartan meal of white rice and cold salmon. Everyone else eats pizza out of the box, and swigs Sunkist or Coca-Cola straight from the can. Close your eyes, and you'd guess you were in a college dorm.
You'd be wrong. For one thing, despite the casual atmosphere, both women and men dress in formal business attire, and no one even suggests removing a jacket. "We're a traditional firm," explains 25-year-old son Andrew Altfest. "We don't wear khakis and button-downs." Lew, who serves as president, sets the bar, sporting a perfectly tailored pinstripe suit in classic Wall Street style, replete with color-coordinated cufflinks, kerchief and cravat that match his dancing blue eyes and silver hair.
The look-rich, conservative, with a touch of wit-telegraphs his best qualities: a thorough, analytical mind, a traditional bent, and a fanciful flair in his thinking that has helped make this company one of the most original value-oriented shops in the business. Karen, as vice president, is more demure in warm brown tweeds, but the effect is complementary and reflects her personality: smart, confident, approachable, down-to-earth.
Of 18 employees, including interns, 80% are under 40. Their age, however, belies a great diversity of experience. They come from all over the world: Russia, Trinidad, India, Finland, Britain, Hong Kong, Bulgaria, Philippines. At the professional level, they're evenly balanced between men and women. With $340 million in assets under management, even the company's size is deceptive: The boutique firm has doubled its assets since 2003, with an average new account size of $1.4 million. They've even outgrown their Wall Street offices and will soon be moving to a larger space on tony Park Avenue.
Throughout this period of growth, the Altfests have somehow managed to recruit, train and retain the dream demographic-and they've done so without promising the farm in the form of equity stakes in the business. Generous wages, bonuses and an enviable esprit de corps have kept this group of heterodox youth in the fold, and every year a steady supply of new recruits rattles the gate.
The surge in business was fueled by word-of-mouth referrals following the firm's incredible performance during the tech bust. As the S&P 500 plummeted 43% over the three-year period from January 2000 to December 2002, the firm's clients posted modest gains, a considerable feat in that environment.
The firm's youth and diversity, Lew claims, reflects above all its location in New York City, just steps from Pace University, where he teaches and recruits from among his undergraduate and M.B.A. candidates. The firm also routinely hires outsiders, as well as graduates from nearby New York University and Baruch College. "I don't care where people come from," Lew says. "I'll hire anyone with brains." Yet his curiosity and delight in the melting pot of cultures is palpable, reminiscent perhaps of a working-class Bronx boyhood in an era when the back door was always open and his father, a recent immigrant from Poland, worked as a wholesale meat supplier in the bustling New York City marketplace.
The firm's location in New York is a double-edged sword. On the one hand, the competition for clients is fierce. "We shouldn't be, but we're competing with everyone because the client doesn't know the difference between a bank and a wirehouse," Lew says. "They're comparing you with everyone and their brother down the street-and they are down the street." On the other hand, employee poaching has never been a problem.
Lew and his staff like to shrug off the suggestion that they favor quotas based on gender, race, age or any other factor. "We're looking for a lot of different ideas, not superficial diversity, but diversity of thought," says Paul Palazzo, a CFP licensee and director of financial planning, and a member of the firm's leadership committee that also includes the two principals, son Andrew, plus two outside consultants who've earned honorary seats (one is Lew's recently retired brother). "We hire people who are bright, energetic, enthusiastic, who can work independently and as part of a team," Paul says. "How those qualities come into the firm, whether it's age or anything else, just happens."
A former journalist and personal finance columnist for the Seattle Times, Paul is representative of an Altfest recruit. He joined the firm with little practical experience in 2000, but quickly rose through the ranks on his merit. "Paul is very bright and super-straight, like the Jimmy Stewart character in Mr. Deeds Goes to Washington," Lew says. "He's very sensitive to the needs of others, so he's great with clients and employees."
Like Paul, Dawn Brown was not hired solely on the basis of her work experience as an IT cost accountant for British Airways. During her initial interview, Lew asked many more questions about the investment club she had started from scratch, one that eventually was featured in national magazines and on CNN. "I thought Dawn was gutsy and very poised," Lew says.
He admits that he likes her British accent, too, but says her Jamaican heritage did not influence him at all. Dawn concurs. "I think it was the fact that I was curious and wanted to help others along the way," she says. "The position I applied for was on the FPA Web site, so it wasn't like they were looking for anyone in particular."
Clearly, not all new hires come from Pace University, but Lew's position as a professor of finance confers a distinct advantage for recruiting. For one thing, employees may audit his class or take courses for credit. As for Pace recruits, by the time they enter the firm, Lew knows well their strengths, weaknesses and analytical style.
Recruits tend to know what they're getting into, too. Some of Lew's students simultaneously attend class and work part time as interns, giving them plenty of exposure to the theoretical and practical dimensions of finance-and to Lew's idiosyncratic brilliance. Such was the case with one star student, Ekta Patel, who was hired as a part-time intern at age 23 and is now a senior member of the investment committee at 29. At the time she was hired, Ekta was completing her M.B.A. in finance and information systems at Pace. With almost no work experience, Ekta, who hails from India, believes it was her undergraduate degree in mathematics that got her foot in the door.
For the Altfests, bull's-eye hiring-even at the intern level-is a major factor in both client and employee retention. "The fit is really important," Karen says. "Because once you're accepted here, it's all the way."
That means employees are free to speak their minds and question the status quo. It also means that all employees-from investment advisors to interns and receptionists-have access to client records and sit in on internal client meetings. "We think it's important for the person who picks up the phone to know what's going on in a client's life," Karen explains. "Clients are clients of the firm, not of individuals."
As the practice has grown, the Altfests have occasionally brought in outside consultants to smooth the transition. Yet even these free agents have a history with Lew or Karen. Lew's brother serves as project manager for the move uptown. Recently retired from a large company, he brings a "corporate" perspective to the firm and its growth, Karen says. Abe Fenster studied accounting with Lew as an undergraduate, chose clinical psychology as a profession, and is now a professor of psychology at John Jay College of Criminal Justice in New York. He sits in on job interviews, polls current and former clients, and mediates family business conflicts between Lew and Karen, and sometimes between Lew and Karen and Andrew.
Over the years, Fenster has become an honorary member of the leadership committee, and is actively involved in important decisions. "Because he knows me so well, Abe is able to communicate with me in a way that your average consultant cannot," Lew says. "He reminds me to do the things I should do and helps me prepare a strategy for getting them done." Such interventions range from resolving conflicts with colleagues at Pace to convincing Lew to relax slightly on the dress code so that women could wear pants suits in addition to skirts.
Having a system in place to resolve employee conflicts is key to retention. The same care given to clients extends to staff members, who know they are welcome to schedule a personal appointment with one or both principals, whether to discuss the sale of a parent's home or any other private money matter. Employees are also free to call psychologist Abe Fenster to address personal or workplace issues. "They can even opt to have their anonymity preserved," he says. "Yet even when they are complaining about Lew, they will spontaneously praise his expertise and knowledge."
Indeed, employees cite intellectual challenge as a primary factor in their job satisfaction. "Lew looks at a portfolio from a variety of perspectives, and will bring things to your attention from an accounting or planning point of view that you might not have seen," Ekta says.
At the moment, the firm is moving money out of deep discount and into what Lew calls "plain vanilla," large-cap stocks with good records, an area that he says has been "neglected" lately and will benefit from any upturn in growth internationally. He's convinced that small- and mid-cap stocks have been picked over, and he's looking at some new funds and money managers. This year he has a major position in Japan that has appreciated significantly, and the firm also plans to expand the percentage of private investments, including real estate, for its more sophisticated clients.
Having worked on Wall Street as partner, director of research and chairman of investment strategy at Lord, Abbett & Co., Lew Altfest is not afraid to take positions. "We're waiting for all the speculation in high yield to result in bankruptcies and then we'll be buying all those distressed funds that have already had their heart attack." Despite Lew's investment skill, fewer than 10% of today's prospects bother to ask about the firm's investment performance, he says.
He won't let his staff get away with such complacency. "Even when I was new here, if we went to see a mutual fund manager, he would insist that we speak up and ask questions," Ekta says. Because of the firm's location-and reputation-on Wall Street, it's easy for even interns to meet with top money managers face-to-face.
Recently David Winters, formerly chief investment officer of the $40 billion Franklin Mutual Series funds, spent three hours at the office fielding questions about his new fund, Wintergreen. "It was one of the newest employees who asked about his sell strategy, which turned out to be a key question," Lew says.
Both Karen and Lew convey a youthful enthusiasm that is infectious. They formed their work ethic and love of learning as children. Lew's father, the small business owner, first taught Lew about the concept of value, the investment style for which he is known to this day. Karen's father owned several profitable clothing stores in her hometown of Montreal; her mother volunteered in the area of cancer research before such advocacy became fashionable.
Karen completed her Ph.D. in history and went on to receive her CFP certification after running the program in investments at the New School in New York for 16 years. Lew has a Ph.D. in finance and an M.B.A. in economics, plus the CPA, CFP, CFA and PFS designations. They have passed their work ethic and love of learning on to their children. Andrew now is in charge of the firm's training program and a member of the leadership committee. He also discusses financial planning and investments with the adult children of current clients. "He likes to talk investments 24/7," says Lew. Or as Karen puts it, "Don't get into a car with him."
Their daughter Ellen, a successful artist, chose not to work at the firm, but "takes a peripheral interest," Karen says, for example by donating some of her paintings, offering to select art for the new office, and now helping with feng shui, the ancient Chinese art of design for health and prosperity. Lew shrugs his shoulders, seemingly pleased at the new directions his company is taking. "We've just signed a $5 million contract in rent and fixtures over ten years," he says. "So you can see where our commitments are."
The Altfests complement one another, according to son Andrew. "My mother has a knack for reading between the lines and is really able to communicate on the level of the client. My father has a great passion for the fundamentals. He's interested in people, but he's much more the theoretical, analytical type."
Karen is passionate about educating women, working with clients, and is savvier at marketing, while Lew is driven by ideas. Karen has provided staff with a public forum for their ideas, through the company's newsletter and invitations to speak at the classes and seminars she routinely offers at colleges and women's groups around the city. Ekta, Dawn, Paul and others have gained experience this way.
She also feels compelled to help others, especially women, even if it means foregoing her fee. Her monthly personal finance column in a magazine called "All You," available until recently only at Wal-Mart and by subscription, is a kind of guilty pleasure. "Sometimes we do financial plans for people who will never be our clients," Andrew says. "My mother just spoke to 100 Teamsters last week. We're not likely to have them as our clients." On another occasion, Karen and Lew gave free financial advice to an agitated postal worker, still in uniform, who had walked in off the street.
On occasion, Lew's delight in the details-and desire to put clients first-gets in the way of profitability. "We lose money on every plan we do," he says, noting that a typical retirement plan takes 80 hours, compared with 20 to 30 hours at most firms. Yet Lew also recognizes that "financial planning is our persona."
In one of his common value equations, Lew compares the firm to New York City's top steakhouse. "Peter Luger doesn't make money on steak. We make money on asset management, not financial planning. Yet we have to do financial planning in the same way that Peter Luger does steak." Ever the teacher, Lew adds, "Value does not always mean low price." At the moment, Lew has three consultants overhauling the company's proprietary software, wrestling as much customization from each client plan as possible. His software allows him to trace back every result if questions should arise, and knowing Lew, they often do. He also has spent ten years writing what he believes will be the authoritative book, "Personal Financial Planning," scheduled for publication in March by McGraw Hill, on the nuts and bolts of financial planning, also not a terribly efficient undertaking from an ROI perspective.
"I know how I could run my business more efficiently, but it's not money that drives me," Lew explains. "I'd rather spend time on research and improving what we already have than on marketing or making the business more efficient." Luckily, Lew has a phalanx of young people bursting with ideas, not least of whom is his son Andrew, who has earned a reputation at the firm as an "idea man," suggesting ways to save money and time and serve clients more effectively.
Does the relative youth and diversity of the staff ever threaten clients? No, according to Karen, who says that her clients range from executives to doctors. "Ekta does not automatically work with Indian doctors, nor Dawn with Jamaicans or Brits."
Over the years, at most one or two untoward comments have been made on the basis of age or gender, in which case Karen has been more likely to fire the client than the employee. And tension between staff members is nonexistent, compared with the very real racial tensions Abe Fenster encounters in his college classroom. "Just counting birthdays, there is a generation gap between leadership and employees," Fenster says. "And there is certainly diversity. But I have found that because the firm is so united in its focus on finance, they have developed a common language."
Or as Dawn would say, "We are more diverse than other firms, but it's almost by accident."
Almost. "We choose the best of the best and then give them every opportunity to go as far as they possibly can," Lew says. "We give them a lot of personal attention, special assignments and areas of their own to develop." Yet Lew's pleasure and ease with young people, and his delight in difference, hardly seem accidental. "I like teaching young people and just being around them, " he admits.