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Advise Together, Rise Together

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J. Christopher Cooke never entertained the idea of working with his financial advisor father for fear that, he says, they “might kill each other.”

Similarly, Mike McNamara was “scared to death” that if he urged his son and daughter to join his practice, he would, he says, “wake up five years later and have them hate me.”

However, both FAs overcame the fear of filial team-ups and are now enjoying the financial and emotional fruits that only a harmonious family practice can bring.

So, too, are many other advisors, who have realized that in union there is strength, especially when that union embodies family members — and especially now, during the turbulent financial crisis.

“Having somebody to lean on that you truly trust, love and know they have your best interest at heart is invaluable,” says Cooke, managing director-investments, Cooke Financial Group of Wachovia Securities, a subsidiary of Wells Fargo & Co. Secondly, “trust is far greater than with someone that’s unrelated — it allows you to make quicker decisions.” The Group manages assets of about $1 billion.

When Laila Marshall-Pence brought husband Dryden Pence onboard 10 years ago, what had been a sole proprietorship notched a big growth spurt. That’s because “we decided to become a firm as opposed to an individual practice. It’s the business model that attracts larger clients,’” says Marshall-Pence, of Pence Financial Management, in Newport Beach, Calif., which is affiliated with LPL Financial and manages assets of about $400 million.

Family practices — be they welcoming an advisor’s spouse, children or other relatives — vary widely as to division of responsibilities and compensation structure. Yet, all have one major commonality: They pave the way for a smooth business succession.

“I have an ‘If-Mike-Dies’ agreement in place,” says the jocular Mike McNamara, 60, whose son Justin, 29, daughter Alyssa, 27, and son-in-law Kirk Reed, 27, became part of his independent practice, McNamara Financial, affiliated with Commonwealth Financial Network, within the past six years. McNamara says the succession plan essentially states that, “if Mike dies, they buy the business, Mom gets some money, they pay her for a few years — and everything is hunky-dory from there.”

Family Businesses See Gains

Family practices are created most often when advisors’ children hop onboard — sometimes overcoming their or the elder advisor’s early reluctance. What are the chief benefits to these joint ventures? A broader range of wealth management offerings, a state-of-the-art practice — and, net-net, greater profitability, experts say.

Donald B. Barter, a Merrill Lynch Wealth Management advisor who has run teams since the 1970s, had tight specs for taking on a new FA.

“I’d been looking for a spark plug for more than five years, but was unable to find anybody that excited me,” says the senior vice president. “I finally found someone — he just happened to be my son.”

Though both father, 62, and son, 34, had discussed partnering before, Donald felt it was important for Jonathan to first prove himself on his own. After college, he took a job on Morgan Stanley’s fixed-income trading floor; by 2000, he was working on Merrill’s institutional sales desk. In March 2008, Jonathan joined Dad’s Barter Group, a move to the retail side. The FAs now manage about $600 million in assets.

“I’ve never had a moment when I doubted what I did,” says Jonathan, a first vice president. “For me, it’s a great career path, and I can own a business as long as I choose to. For my father, it gives him a great succession plan. Part of the deal, though, is that he’s not allowed to retire officially. I always want to know he’s there.”

Frequently clients breathe a sigh of relief when a son or daughter joins an aging advisor’s business. It’s a signal that the practice will endure.

“Some clients were very nervous that my father would start taking more time off. But when I came in and they saw continuity, they began to bring in a lot more of their assets from other relationships, ” says Michael I. Schwartz, second vice president-wealth manager, The Schwartz Group at Smith Barney, who has worked with dad Harold W. Schwartz since 2004. Michael, 30, takes care of most of the financial planning.

“I wouldn’t even know how to put it through on a spreadsheet,” remarks Harold, director-wealth management, 64.

Michael, earlier with Lazard Freres, came to Smith Barney as an FA in 2002 working on his own. “I thought the next logical step would be to provide continuity to my father’s practice and see if we could take it to a different kind of level,” he says.

Every year since, the Group’s profit has scored significant increases. In Boston, the Schwartzes manage assets of approximately $350 million.

With Chris and brother Brian’s arrival at the Cooke Financial Group, in Indianapolis, profitability tripled over 15 years. “Some of that is new clients and young legs,” Chris says. A number of new accounts told him, “I always wanted to work with your dad. But I felt like he was too close to retirement, and I didn’t want to give him my money. But now that you and your brother are here, I feel comfortable joining your group.” In fact, Chris, 43, and Brian, 41, have taken over day-to-day responsibilities from their 69-year-old dad, John Cooke, a Barron’s Top 100 advisor.

The addition of Justin and Alyssa — both joining right out of college — and Reed — after two years at an engineering job — enabled McNamara to convert from a mutual fund A-share practice to primarily managed money and boost revenues. He has about $220 million in assets under management from 1,300 clients.

“I couldn’t have done [the conversion] without Justin designing the portfolios and making the recommendations. I’m basically a front man,” McNamara says.

Alyssa is Dad’s paraplanner. Her husband Kirk works in operations. All three young people are on “a junior partner path to be full-fledged financial advisors,” says McNamara, in Marshfield, Mass. Their participation has enabled him to devote 90 percent of his time to client meetings; since last September, that’s averaged a whopping 10 a day.

Merrill’s Barter Group has a unique arrangement: Donald is based in Syracuse, N.Y., as always; but Jonathan makes his office in New York City, where he previously worked on his own for 12 years and formed many business connections. The Barters communicate all day by cellphone; but they hold joint in-person client meetings in both locations several times a month.

Jonathan’s “definite goal is to double the business in three to five years. I beat that into my Dad’s head every day,” he says.

Already, the younger Barter has revamped the practice from a horizontal business model to a more efficient vertical structure, whittled down its roster of money managers to the best of the best and is introducing more automation. He says he’s giving the practice “a boutique feel” by “culling” the FAs’ book to focus on top-tier clientele. Father and son have also formed partnerships that, under the Barter Group umbrella, have other Merrill advisors working with certain accounts the Barter team acquires.

Unique Family Issues

In most family practices, clients are shared; yet compensation approaches vary widely from team to team. The Cookes are three equal partners; but each year a different split, based on individual achievement, is determined.

Jonathan Barter is paid on a sliding scale with “income supporting his lifestyle.” “Going forward,” says Donald, “he’ll have a bigger percentage than I will.”

The Schwartzes are partners “but not equal” percentage-wise. “I’ve been doing this 40 years and Michael, a lot less,” Harold notes. “But eventually this is going to be his business; so I think he’s compensated very fairly.”

McNamara has put his children on salaries, but bringing in new clients earns them commission as well. “Right now they’re functioning behind the scenes. The people side is what they need to work on,” says the independent advisor, who has the three sit in on client meetings and encourages them to speak up.

A close-knit family has always been top priority for Harold Schwartz. To make sure his excellent relationship with Michael doesn’t deteriorate as a result of business matters, he discusses problems calmly and keeps check on his emotions.

“We dissect issues and put them to bed instead of letting them fester,” Harold says. “If I do feel upset…maybe I’ll swallow a little. Then we’ll go back later and talk about it.”

Once joining the practice, Chris Cooke was thrilled to discover that he and Dad didn’t bang heads. Putting a toe in the water while working as a CPA, he’d collaborated with John on a project the summer of 1991. All went well. So two years later, after law school graduation, rather than practice law, Chris decided to become a financial advisor in the family business.

“Instead of being the junior guy at a law firm, I’m the senior guy here establishing financial plans… It turned out to be a fantastic partnership. My father has treated me differently as a business partner than as a son,” he says. “He did a really good job of losing that fatherly edge…”

Moreover, Chris’s laid-back younger brother Brian, who opted to swap a marketing career for financial advisory and joined the practice in 1992, helps mediate any inevitable disagreements.

“Brian does it in a beautiful way that makes everybody feel OK,” Chris says.

On the other hand, “sometimes we need to hear, ‘You’re screwing this up!’ Your brother or dad will look you right in the eye and say it. Sometimes you get good, helpful information that way,” Cooke says.

Jonathan Barter observes that since he and his father have become business associates, “there’s a more serious tone to our relationship [at least] in the office. “My dad listens to what I have to say, and he calls me a lot for advice. That’s really neat.”

Michael Schwartz hoped to show Dad how effective he could be at work, and it’s been a major motivator for him. “You want your father to think you’re good at what you do. You want to impress him,” he says. “That’s made me work harder and want to be a better financial advisor.”

Harold says he was “ecstatic” when Michael proposed coming into the business. “I had a terrific, young junior partner; but he wasn’t my son, and I wanted to build something. I was hoping Michael would join.”

The elder Schwartz’s biggest challenge is to restrain himself from phoning his son at home too often. “Michael is very good at separating work life from personal life,” he says. “I’ve got to give him more space in the after-hours.”

McNamara has no problem compartmentalizing: “Home is home, and work is work,” he says.

Neither is bringing home to the office what the Cookes are about. “If I walk into my brother’s or my dad’s office, I’m not there to say, ‘How was your golf game?’ We don’t stop and have that ‘How ya doin’?’ discussion. That comes up at home.”

Donald Barter tries to keep those two lives separate also with a few “rules” he’s instituted. “If we chat on the phone on Sundays or at night, there’s no business talk. But if we see each other at a family dinner or reunion,” he says, “we’re bound to have some things come up, only we try to keep it controlled and to a minimum.”

There are times, though, when being in business with family can strain patience. “Sometimes,” says Cooke, “it’s hard to remember that Brian isn’t my little brother but my equal partner and that I can’t just push him around.”

Most of the time, though, the Cookes “defer” to each other’s strengths. “I’m very logical,” says Chris — known as “the technical guy” — “but I’m not nearly as good as Brian ["the marketing guy"] with a nervous client, putting an arm around them and giving them a hug.”


The Cooke Group, which includes five additional FAs, has not yet established a written succession plan. “We haven’t pushed it. Ten years from now if my father were to pull back completely and my brother and I were to slow down, we’d need a formal plan. But right now [the others] would be a strong team without us. If something happened to the three of us today,” Chris says, “the business would continue.”

The Barters took care of succession in their written partnership agreement. “Jon is my only partner,” says Donald. “I would like us to be partners for a long time and for me to be able to turn the business over to him.”

Though Mike McNamara is leaving his practice to the kids, he worries “they won’t have the drive to succeed and develop it. Right now, they’re under no pressure to produce. They’re no slackers, but I’m concerned that they won’t be able to sustain and grow the business. But if they learn to take care of our clients correctly and grow old with them,” he says, “they’ll never have to make a cold call in their lives.”

To motivate them today, McNamara has frozen their salaries. “The only other way they’re going to earn more is on production — one-half of whatever they produce,” the FA says.

By its very nature, a family business can be stressful business. Still, it brings rich benefits other team set-ups cannot.

“If you’re having a bad day, you can lean on each other’s shoulder and say, ‘Man, I’m getting beaten up!’ The other guy will give you that quick hug that you give a family member and say, ‘I’m here with you. It’ll be all right.’ So,” Cooke says, “it’s more like you have a best friend there instead of just a business partner.”

Freelance writer Jane Wollman Rusoff is a Los Angeles-based contributing editor of Research and is the founder of Family Star Productions.