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Practice Management > Building Your Business

Happy Together

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As nearly all small business owners can attest, opening and nurturing a business can be a task that can consume the owners and put serious strain on their family lives.

Take a financial planning practice. The process of writing business plans and mission statements, finding efficient and comfortable office space, screening the proper investments for clients, and attracting and keeping ideal clients, all while complying with SEC, state, or NASD regulations, can be quite a challenge. Your significant other and your offspring will just have to wait.

However, there are two advisors in San Diego who have successfully built their own small business, Creative Capital Management Inc., while keeping their children happy and maintaining a strong marriage that leaves work at work, and home at home.

“Peg and I are total opposites,” laughs Bob Eddy about his wife, Peg Eddy. “Peg is the people person and I am the numbers person” at Creative Capital, he says. Bob and Peg know their roles in the business, and know when to let their partner’s strengths compensate for their weaknesses. For example, Bob will have the final say if a decision needs to be made concerning technology or research; if the issue is client relations or writing, Peg’s the boss.

“We complement each other,” adds Peg, though she notes that there is some overlap in responsibilities. Since they began the practice together, their individual areas of expertise were clear, she says. The last 30 years have been successful because of that clarity, she argues, and the fact that Bob is “laid back. “

“We started the business on Jan. 15, 1975,” Peg recalls, just five months after they were married. “We had no mortgage, no children, and no money. We had no choice but to succeed. Bob kept telling me that we were young enough to get other jobs if we had to. Luckily, we haven’t had to.”

Forging Family Ties

Creative Capital serves about 130 different “household units” or clients, most of whom are small business owners. Small business owners are unique in that they have more of their own and their families’ well-being to lose if their businesses do not succeed, especially if the business is run by several generations of the family. “As a business owner myself, I know how it feels when I start trying to do things that are not in my area of expertise–that’s when I get in over my head,” Peg says. “I see that a lot in entrepreneurs. Often it’s tough to delegate.”

The dynamics of the family and the business are interconnected, and that requires extra care on the part of the financial advisor. There are so many issues to take into consideration, Bob notes. Children may not want to take over the business, but may feel obligated to do so; or their children may not be ready to take over despite the parents’ desire to retire. Parents may not want to let go just yet, even though their children may be well prepared to run the business. Then there is the issue of what the parents will do with their time and talents when they are no longer in charge.

“Part of our job is to make sure the parent and the child are on the same page and if they are not, then we make sure they talk about it,” Bob says. “Every parent would love to have their child take over their business, including us, but only if [the children] want it and if that is their passion.” Unfortunately, some parents don’t care what their child wants to do and feel as though the child would be a fool not to take over, he says.

Another problem small business owners have is planning for life after they leave their business, Peg says. “I know we have a problem when I hear the words, ‘If I die.’ We try to teach them to say ‘When I die.’ Their identity is so tied up in their business that it’s very difficult to gradually back off and allow their children to flourish while they are still here and can see it,” she says. “Succession issues come up a lot for us.”

Once clients do realize that there is more to life than the business, they almost feel guilty about enjoying their wealth and retirement. “Some of our clients are starting to sell off pieces of their business to outsiders and find themselves with a lot of money,” Bob explains. “They were never big spenders and have become the ‘millionaires next door.’” That is very unsettling to some people, he says. “We help them feel comfortable with it, show them numbers, and let them know they can buy that house they’ve always dreamed about.”

“People call us happiness planners because we help them find things that will make them happy,” Peg laughs. “It is very much a privilege to do the work that we do and to have our clients allow us into their lives.”

Finding and Maintaining Clients

With the majority of their inquiries coming in as referrals, Peg, who is responsible for the marketing and compliance efforts of the firm, has a strict screening process for selecting potential clients. First, Bob and Peg spend about a half hour on the phone together with an interested investor. “I have a list of questions in front of me when we are talking,” Bob adds. They find out who referred them to the firm, ask what keeps them awake at night, why they think they need a financial planner, if they have had any help in the past, if they are calling to discuss a portfolio they might already have, and, most important, what they consider a reasonable rate of return for their portfolio and what they expect from an advisor.

“We don’t waste any of their time or ours in that initial appointment,” Peg says. “Time for most people is a very precious commodity and we don’t want to take someone in and give them false hope that we can solve all their problems.”

If after that first phone call it looks as though the client and the firm are a good match, Peg will set up an initial hour appointment at no cost. After that meeting, she writes up details of the financial plan, and figures out a flat fee, she says. “I can pretty well tell what our time involvement is going to be with each client from the beginning.” After that meeting, Bob will do the majority of the work on the financial plan and Peg will do the writing and editing of the estate plan or business planning strategy.

Building a financial plan and managing the portfolio are separate freestanding services at the firm, Peg explains. There are financial planning clients, investment management clients, and family business clients. “Sometimes there is overlap and sometimes there is not,” she explains. Bob also does tax planning and preparation for clients.

“We think it is important to charge people for financial planning, because then their chance to achieve their goals is much greater,” Bob explains. “People seem to want to do things when they pay for them. If they don’t pay, they think ‘Gee, that was nice,’ and move on.”

If Creative Capital cannot help someone, however, Bob and Peg will offer resources and contact information for their local FPA chapter or to other planners in the community. If someone calls about debt problems, they will refer him to consumer credit counselors. “We don’t leave people hanging, but we don’t want to set ourselves up for a bad relationship,” Peg says. “We won’t give up on them and generally they are very thankful.”

Once someone does become a client, her investments are customized to her needs. “We start from scratch with every portfolio,” Peg says. For example, someone in a high-tech business with plenty of his own money tied up in the business is better off investing in value funds, offers Bob. If that isn’t the case, then they do some research and figure out a personalized plan that works best for the client.

Delivering the News

Believing in the definition of value as taught by Benjamin Graham and Warren Buffet, Bob says they are not indexers and stick to their core investment values. “In October 1999 we wrote a list of what our investment beliefs were and why we wouldn’t go into technology,” he recalls. “If you don’t stick with your beliefs, you’ll end up switching styles like a lot of people did.”

Each year on the portfolio’s anniversary date, clients have a full review. “We talk about their risk tolerance, their current allocations, and find out where they stand,” Bob explains. “I tell them if they need to stay where they are or if they need to be more aggressive.” Plans for the next 12 months are made and their investment policy statement is revised as needed. Previous tax returns are considered and a full spreadsheet of the client’s portfolio activity is reviewed.

“I know exactly what their capital gains, losses, and carry-forwards are, and what their current investments are,” Bob continues. “The clients get a copy and we also list all their transactions so they know exactly how much they are paying in charges.”

All of this information is summarized in an eight- to 10-page Word document with objectives, assumptions, conclusions, and recommendations. The entire document is in text rather than a spreadsheet format so the client can easily read through it, Bob says.

“About 60% of our clients are personal business owners,” says Peg. “A lot of them have MBAs and have written their own business plans, so they are used to that kind of format. It’s not a canned description but is totally personalized, and that is why by design we don’t work with a high volume of people.”

In addition to yearly reviews, each client receives a one-page quarterly statement and additional communication if there is some kind of major event. “Because of 9/11, we e-mailed and sent letters out giving clients a feel for what was going on,” Peg says. For their investment management clients, Bob and Peg are sure to teach them as much as possible, help quantify risk tolerance, and allow for an appropriate amount of cash in their portfolios. “We don’t send them off and say ‘Check back next year,’” she says.

Building a Business

When Bob and Peg first began their practice, Bob remembers walking up opposite sides of the street in San Diego with Peg doing cold calls to small “mom and pop” retail shops. Though the businesses they focus on now are much larger, they continue to regularly work on their business plan. “We have always run the practice as a business first,” says Peg. “It is not a property, it is a professional firm.”

Annually for the last 20 years, Bob and Peg have taken their one part-time and two full-time employees off site for a business planning meeting to summarize goals for the next one, three, and five years. “We know how important it is to work on our business and not just in our business,” Peg continues. “For the last four years our two sons [the older has a consulting background, the other a PR background] have also attended the meeting to offer a fresh set of eyes.”

Though they only meet once a year to focus on their business plan, the Eddys don’t wait to make any necessary changes as they come up. “We are extremely proactive and our team knows that our processes can always be made better,” Peg continues. “We are selling our time, our expertise, and our charm, but we are constantly revisiting procedures and revamping them, which makes it very exciting. We never want someone to join our firm and be bored.”

While succession planning is a necessity for their clients, Creative Capital also has its own succession plan. “We couldn’t not do it for ourselves,” Peg offers. Though the practice has grown in revenue over the last 30 years, its staff size hasn’t grown in tandem. Over the next one to three years, however, the Eddys plan to add two professionals to the staff. They also plan to add two paraplanners over the next three to six years. The couple has a “death plan” in place, and should they “get hit by a truck together,” have lined up another firm in San Diego that matches their values to cover their clients. Now they are working on a lifetime transition plan, Peg says.

“We have told other professionals that we are looking to add to our staff,” she says. “I think it is great that the FPA is doing more to match professionals with other professionals and paraplanners. I think it’s wonderful that our profession is now starting to think about succession planning so clients are well cared for.”

Peg is proud to say that the firm has long had a code of ethics, that it has always focused on business owners, and it has always integrated matters of the heart and the head. “You can call it life planning or whatever you wish,” she says. “But we have always asked clients about dreams and goals and what makes them joyful in addition to the hard numbers and the data.”

Megan L. Fowler is a freelance business journalist in Fairbanks, Alaska. She can be reached at [email protected].


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