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Financial Planning > Tax Planning

Just Right

By Staff Writer

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Everyone wants the story of his career to read like a fairy tale, but the story of Annette Simon’s really does. No, not because it’s a rags-to-riches fable, or ends with “happily ever after.” It’s because, despite the fact that she hasn’t been slurping porridge, testing chairs, or trying out mattresses, Simon’s recent job history sounds very much like the tale of Goldilocks. The first planning firm Simon tried, back in 1996, was too small. The second one she tried was too big. With fingers crossed that the third firm’s a charm, Simon is hoping her newly launched practice will be just right.

When Simon left her fee-only planning firm in spring 2001 to join the nine-member Baltimore-Washington Financial Advisors in Ellicott City, Maryland, she seemed to be following a familiar story line: The solo Planner, hearing the footsteps of the evil ogres Bank, Wirehouse, and Accountant, bands together with other planners to outwit the giants. This spring, however, she’s added her own plot twist, seeking her fortune in a way that doesn’t fit the mold at all: a two-planner partnership, one for financial planning (herself), one for investment management. That’s it.

What makes her think this structure is “just right”? Simon had joined Baltimore-Washington Financial Advisors (BWFA) after several years on her own because she’d found it tough to offer exclusively financial planning. “I had made a strategic decision to offer only planning, not investment management, because I felt that as one person, I couldn’t competently do both,” says Simon, 43. “Unfortunately, the hard facts of this business are that most people just can’t make it on financial planning alone.” Joining a multi-faceted financial firm that offered everything from investment management to tax services and estate planning seemed precisely the answer.

After a year at BWFA, however, she realized that it wasn’t the right fit, either. The hefty commute was wearing her down, and logistical obstacles prevented her from working from home as much as she had expected. What’s more, she adds, “I realized something that I think I’d already known, which was that I’d been on my own and independent for too long to be a very good employee!”

In order to offer investment management services and avoid having a boss other than herself, Simon decided she needed a partner. She’d met Veena Kutler, a CFA and former T. Rowe Price fund manager, while presenting a workshop on stock options last summer, and the two women had hit it off immediately. Over the subsequent months, as they discussed their respective goals, skills, and ideas about running a firm, they realized that they’d make a great match. “Veena and I are enough alike that we can work together really well, but our talents are complementary, since I’m much more comfortable with financial planning and she’s really knowledgeable about investments,” says Simon. “We think that between the two of us, we’re going to have a really powerful package.”

Starting Anew

In the new firm, Mosaic Financial Advisors, Kutler will be setting the ground rules for investment management (among other decisions, the firm will use TechFi for portfolio management) and Simon will do so for financial planning (the firm will use Simon’s preferred planning software, NaviPlan). Simon and Kutler plan to open a joint office soon, but have no plans to begin assembling a large staff. “I think we’ll hire one administrative person, and we’re talking about outsourcing some of the work,” she says. “But managing employees is a lot like raising children sometimes, and”–she laughs–”we both already have kids.”

In large part because of those kids, both Simon and Kutler hope to work from home much of the time. “Our kids are about the same age, so we’re both kind of living around their schedules,” says Simon, who has three children, ages 10, 14, and 16. “I think we’ll telecommute quite a bit.” Although they realize that working from home may deter some prospective clients, they figure the “right” clients will understand. “We’re going to lose a certain percentage of people right off the bat because if they hear the dog barking and the kids in the background, they get worried,” she says. “But a lot of our clients are people like us–dual-income families in their 30s to 50s who are dealing with many of the same issues we face. I think lot of them would like to be able to work from home, too, so they can relate.”

Are Clients Concerned?

Nice plans aside, you can’t help wondering what Simon’s clients think of her job-hopping. After all, from last spring to the present, her clients have had the names of three different firms–Prosperity Planning, BWFA, and Mosaic Financial Advisors–printed across the top of their account statements. Who could blame them for being a bit discombobulated, or even switching advisors?

But they’re not, and they haven’t. In fact, says Simon, they’ve hardly blinked. “My clients are an understanding bunch,” she says. All of her clients made the leap with her when she transferred to Baltimore-Washington Financial Advisors, and, though it’s too soon to say definitively, it seems most will make the jump to the new firm as well. “They’re attached to me more than to any particular firm,” she says.

Simon wasn’t unaware of the risks inherent in juggling her clients from firm to firm. She even considered sticking it out for another year at BWFA, just to give her clients a little more stability. “I felt badly about moving them again, but when I started to talk to them about it, none of them seemed upset about the idea,” she says. “All they cared about was that they stayed with me.”

One intriguing change for Simon’s clients is that they will be considered clients of the new firm, rather than hers alone. For a planner whose past experience with client loyalty indicates that “all they care about is that they stay with me,” it’s a surprising decision. Yet Simon believes that she and Kutler can make it work. First of all, there are only two of them, and she’ll stay involved. Besides, Simon believes that having clients of the firm is the only way she and Kutler can hope to lead normal lives. “One of the problems we both found when we were on our own is that you don’t have anybody to take over for you so you can take a day off,” says Simon. “So I’m going to be learning enough of what she does to be able to cover for her while she’s gone, and likewise she’ll cover for me.”

Going to Market

None of their plans will mean beans, however, if the two planners can’t reel in new clients. Simon realizes that marketing will play a role in the new firm’s success or failure, but hasn’t quite figured out who to market to, or how. “I have to say that my marketing hasn’t been terribly proactive, and I think that that was one of the things that kept me from succeeding as much as I would have liked when I was Prosperity Planning [her solo firm],” she says. As a one-woman show, Simon depended primarily on referrals from other professionals, other planners, and the NAPFA referral program. “One of my biggest clients came from the NAPFA program,” she notes. “I had a guy walk in off the street with a million dollars from that program.”

But million dollars or no, the new firm will have to do more. “We’re talking about developing a niche, but haven’t really decided on one,” says Simon. Attorneys and entrepreneurs are under consideration, particularly the latter because of the many planning opportunities available to the self-employed. “But [choosing a niche] is still ahead of us–figuring out if we have a niche, what it will be … and if we don’t, will we survive?”

For the moment, in any case, the clients of Mosaic Financial Advisors range in age from thirtysomething to early fiftysomething, and are mostly professionals and what Simon calls “successful Washington types.” For many planners, retirement is the primary financial issue in a client’s life: how to plan for it, how to pay for it, how to get to it sooner by making smart money decisions. For these clients, however, retirement plays second fiddle to more immediate concerns: work, for instance. “For this age group, some of the main triggers [that lead people to seek out a planner] are that they’re looking to change jobs, or one partner wants to leave the work force,” says Simon. “They’re leading complicated lives, and they’re trying to figure out how to get everything under control and improve their quality of life.” Though she never planned it this way, her own recent workplace changes have actually enhanced her ability to relate to clients’ job transition fears.

For clients changing jobs or leaving the workforce, insurance coverage is an important issue to be addressed. The exercise of stock options used to be an issue, and while it often still is, it’s not nearly as much fun as it used to be. “We don’t have the happy cases we used to have,” she says. “These days, people come to us thinking they’re coming for advice on what to do with all this money, and instead we have to tell them they’ve got this enormous tax liability, and try to guide them through that.”

The other events that trigger a visit to a financial planner among members of this age group are family changes, says Simon. “If one family member leaves for college, or they’re expecting a big inheritance, or a parent gets sick and they’re worried about paying for their care, that’s when they come to us,” she says. “Retirement is a little farther down the line.”

The average net worth of Simon’s clients is about $500,000, though it ranges from $100,000 to $2 million. While she does plan to focus on the wealthier end of the client spectrum in the future, she has no plans to follow common industry advice to throw her smallest clients out with the bathwater. “The higher-end folks generally need the whole package more than the people on the lower end do, but we’ll keep the old clients who first came on board,” she says. “Some of the really small clients were the first people to dare to hire me–I wouldn’t abandon them! Those people are very loyal to me, so I’ll be loyal to them, too.”

It remains to seen whether the third time will be a charm for Simon. But for the partners at Mosaic Financial Advisors, it seems the pieces are finally falling into place.

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