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.