John Olmstead and Judy Lau merged firms because their practices were different yet complementary.
If financial advisors have assumed anything in the last three years about growing advisory practices, it's that consolidation might be a necessary evil to create economies of scale to gain more operating leverage to enhance a firm's competitive position.
In contrast, the notion that two separate independent firms might enter into a merger agreement because their two leading principals have disparate, but highly complementary, skill sets was relegated to the backseat. But that's exactly what Judy Lau of Wilmington, Del., and John Olmstead of New York City did when they decided to merge practices earlier this year to form Lau Olmstead LLC.
Throughout most of their careers, Lau and Olmstead moved in very distant circles within the larger financial planning/wealth management universe, circles that rarely touched each other. Lau was a skilled but more traditional financial planner whose practice, like those of many other advisors, gradually gravitated upstream toward the wealth management arena in the 1990s.
A former teacher, Lau switched careers to financial planning in 1985. "I had an experience with a financial advisor that was not comfortable, and I wanted to do it right," she recalls. "Two or three years later I started to get inherited-wealth clients, and over time they started referring more business." Today, her client list includes some of America's wealthiest families.
A one-time civil rights litigation attorney in the South, Olmstead also earned a master of laws (LLM) degree in taxation, worked in Citicorp's private banking arm, and then, in the mid-1980s, became managing director of a very large family office. "I found I wanted to deal with more than one family's affairs," he says.
In 1991, he formed his own firm, Olmstead & Co., and used his expertise with hedge funds and other alternative investments to work with affluent families on a project basis. "I acted as a project manager, helping people achieve a particular business or philanthropic objective," he explains. "Finding creative ways to accomplish goals, sometimes mixing business and philanthropy, was very rewarding."
Over the years, he has helped several families buy and sell major assets. One of his roles has entailed keeping a careful eye on investment bankers. "This means selecting the investment bank, structuring the transaction and managing the implementation of the purchase or divestiture," he says. Today, he also serves on the board of a venture capital firm.
During his years at Citicorp, Olmstead became an expert in international taxation, a specialty that attracted clients from different corners of the globe. One affluent American family he worked with engaged in extensive philanthropy in foreign countries. Another project involved helping a family build homes around the world.
Because of the project nature of his work, Olmstead's practice lacked the recurring revenue stream that Lau's possessed, though he was often deeply involved in several projects and rarely at a loss for business. "Normally, I've never had more than five projects or family groups [clients] at one time," Olmstead says.
His in-depth focus on one or two issues of paramount importance to clients who had no shortage of potential advisors reflected the quality of advice he could provide. But intriguing as this work was, Olmstead felt something was missing. "What I had not done was develop their organizational issues," he says. "I hadn't developed services for budgeting, bill-paying and other functions. Without this, it can be difficult for them to address the larger goals within their lives."