Kathy Stepp and Howard Rothwell are business partners and husband and wife, so they are a team on and off the court, so to speak. Calling them a "team" is also appropriate because the couple frequently use sports illustrations to describe their successful financial planning firm, Stepp & Rothwell Inc., located in the suburb of Overland Park, Kan.

One of the first sports metaphors that a visitor hears from them is that though they themselves may be the quarterbacks, they have gathered a good team of players to back them up in their business. They both have years of experience and have been on the financial planning scene nearly since its infancy. Stepp, who is 45, and Rothwell, who is 48, both started in financial planning when it was a fairly young profession and that is how they met.

"We were both fee-only financial planners in the 1980s when the industry was relatively new," says Stepp. "NAPFA [the National Association of Personal Financial Advisors] was young, and there were only a small group of us around the same age in our early and mid-30s, so we all knew each other. I was on the board of NAPFA and Howard was running national NAPFA conferences, so we kept running into each other."

The two found they shared similar business philosophies, as well as personal attitudes, and the rest, as the cliché goes, is now history. But it is a history that is still in the making.

Each had a business and a partner. Rothwell, located in Philadelphia, had been in the field since 1983, while Stepp started her own firm in 1992 in Kansas. After meeting through business conferences and other events, they eventually got married and merged both their personal and business lives, creating Stepp & Rothwell Inc. in 1998. They each retained about half their clients and gave the other half to their partners.

"We worked out of both cities for a while, but then we relocated everything to Overland Park because we love the Kansas City area and I had children in school and Howard didn't," Stepp says. They still have about 25% of their approximately 160 clients in the Philadelphia area, 60% in and around Kansas City and a few others scattered all over the United States. The clients are mostly high-net-worth individuals, and some have been with one of the two principals since long before the merger.

Since the firm was created, Stepp & Rothwell has continued to grow and has developed a reputation as one of the leading fee-only financial advisory firms in the Kansas City area. Assets under management and advisement grew from $280 million in 2004 to $470 million last year, and the client base expanded from 121 individuals to 165.

The firm does not require a minimum amount of assets, but their minimum fee of $10,000 a year in effect limits the clients to high-net-worth individuals. Stepp & Rothwell does work for some foundations and not-for-profits, though these have mostly been organizations formed by their clients. The fee schedule is based on assets and ranges from 0.75% of investment assets to 0.40%, plus a financial planning fee of 2% of earned income for the first year, 1% of earned income for the second year and 0.5% for the third year and thereafter.

Fees are not based strictly on investable assets because managing clients' investments is only a small part of what the firm does. "We do invest their money. That is true, but that is just a piece of what we do," says Ken Eaton, a principal in the firm who started with Stepp before the merger. "We help clients understand how each decision they make affects everything they do, no matter how big or small the decision. And we will help them make and carry out those decisions. That could mean anything from negotiating a mortgage for them or helping them buy a car to revamping their portfolio.

"Many of the people who come to us have amassed an amount of wealth but they do not even realize it. So instead of being just money managers, we help them manage their lives. We may end up telling a client to spend the money he or she has accumulated and enjoy it, not saving everything," Eaton says.

The firm's investment committee develops each portfolio individually. Its members do not have any type of investment that they feel has to be included in a portfolio or one that should be absolutely avoided. They believe in active investing, rather than passive, but tend to be conservative.
Jack and Marcia Bowerman have been clients for about eight years and like the type of investments the firm has used. "They are conservative, which I like," says Bowerman, a business consultant. "They don't recommend wild and fancy strategies, but stick to the basics."

The firm uses Schwab Institutional as the custodian for accounts but will handle other types of investments if a client has them when he or she comes to the firm. "There is nothing that we shy away from or that we say has to be in an account, except to say we make sure a portfolio is allocated across a lot of types of investments," Eaton explains. "For instance, regardless of how things are going now, there is always a place for real estate in a portfolio. We do not make people sell everything when they come to us, but we use Schwab almost exclusively because it makes it easier for us and easier for the client."

Because they stress complete financial planning, most of the firm's clients got to them by word-of-mouth rather than commercial advertising. "It is almost impossible to market what we do, because people are not coming to us to be money managers. They are coming to us to manage their entire lives," Stepp says.

The firm will not handle just part of anyone's investments and will not act solely as money managers. They do not prepare taxes or handle legal work, but insist on knowing about whatever affects the client's life and on reviewing all tax returns and legal documents, including those affecting estate planning, insurance planning, retirements and education funding. They will work with siblings, children and parents of clients if asked to do so or if it affects the client's circumstances.

"From time to time, Kathy and Howard have given advice to my son and daughter-in-law at no additional fee," says Bowerman. "It is the little things like that that they do that adds a lot of value to their work. Kathy is a great financial planner and Howard is good at investments, but another of their great selling points is that they have improved their bench strength to where it is really good."

Like many of the clients, Bowerman came to the firm after seeing Stepp on a local television show and reading that the firm was considered one of the top 250 in the country by Worth magazine. Stepp has done financial commentary for the Fox television network for many years and was a national spokeswoman for Citibank for several years.

"We are generalists, so that gives us a lot of media opportunities," she explains.

Bowerman adds, "Kathy's personality came across very well on television."

That personality translates into an advantage for clients, says Rita Cortés, who owns a commercial construction company with her father in Kansas City and has been a client for about eight years.

"I met Howard and Kathy when I was looking for a financial advisor for my parents. My parents wanted me to do the financial planning, but that is not what I do. We looked at a lot of people and ended up interviewing five. Kathy and Howard came across as having a talent for understanding the different circumstances of their clients and they work in a comprehensive way. I like that. They also have a good way of delivering information that may be hard to hear sometimes. 

"Because they do comprehensive planning, they may start with just part of the information they need and then they gently prod you to get everything they need," Cortés says. "I have also seen them in a room of accountants and lawyers. They bring a strong understanding of tax and legal issues to the situation and bring it all together."

Most of the Stepp & Rothwell clients have undergone some life-changing circumstances that have prompted them to seek a financial planner, and they have found in the firm people willing to take on the details of their lives. "You could say we are the quarterbacks and the client owns the team, which is our staff," says Rothwell. "Our clients do not have time to deal with details. We do it for them. We have 13 people in the firm, including six financial planners, but only two or three people will actually be involved in a client's investments. The others will be doing everything else for the client."

Stepp & Rothwell clients range in age from those in their 20s to those in their 90s and are facing different circumstances in their lives. Some are working and accumulating wealth; others are retired, recently widowed or facing other life changes. Most have between $2 million and $10 million in assets. Returns on investments range from a conservative 5.5% for the most risk averse to about 11% for the younger, more risk tolerant.

"In any given year we will exceed the major stock market indexes and in a bad year we may be negative, but we will only lose a small percentage of what others are losing," Rothwell says. "The real misconception among people is that clients know what they want when they come to you. Most have no grand, long-term plans." 

Determining those goals for the client and helping him or her achieve them is what the firm does. "Everybody brings different things to us to start with. We take that and build on it, but we are not looking to beat the market and we do not use exotic investments. Our clients know they have won the game and now they do not want to risk losing it."

For many clients, the firm becomes a second family, and some of the clients' interests become causes for Stepp & Rothwell, which encourages its employees to participate in the community and in charities. The firm has a two-for-one match of money for employees' favorite causes.

"One employee has a child with cystic fibrosis and that has become one of our causes," Stepp says. One client "is interested in anything to do with President Truman, who was from Independence, Mo., so we are involved in that. It keeps us connected to Kansas City and to the community."

Dolores Otto, who was recently named president of the firm, first met Stepp through their involvement in a local charity. Stepp & Rothwell is her third career (she was once the office manager for a U.S. senator and also worked for a major public relations firm) and she says this is a perfect fit. She manages the office and handles administration and compliance issues.

"Kathy and Howard are unparalleled in client services and have higher ethical standards than anyone I know, but what keeps me here is the family atmosphere," Otto says. "They encourage the staff to become involved in the clients' causes and charities, and they help the employees with their causes."

The firm also recently started an employee ownership program, and once it is established, four current employees will automatically be vested. "We were 100% owned by two people who are married to each other," Rothwell says. "In the last five years, we have had some very strong people come to work for us. We want to keep them here and not have them hang out their own shingle, which they could easily do. We want them to participate in the growth and equity of the firm.

"With a strong team, we can concentrate on the things clients care about perpetually and intensely, which is how their overall family situation relates to their wealth and all of the details that go along with that," he explains. "Our planners understand and take care of all of that for the client."