Keeping it all in the family can be tricky business

Running a successful family financial advisory business is much tougher than the smiling portraits posted on many firm's websites would lead a client or prospect to believe. Although thousands of registered representatives and financial advisers work with their family members, sometimes family or business conflicts can spoil both sides of the relationship (InvestmentNews, April 13). The prevalence of teams of husbands and wives, fathers and sons, and mothers and daughters working in the financial advice industry, which is dominated by offices of five people or less, is perhaps greater than many realize. The Financial Planning Association of Denver and the National Association of Personal Financial Advisors of Arlington Heights, Ill., don't track the number of members who work with relatives. But according to a recent InvestmentNews survey of almost 1,000 advisers, 31% said that at least one family member worked at their practice. And that relationship is often stressful, according to the survey results. Of the advisers who responded to the survey and said that they were qualified to weigh in, 69% said that working with family members was just as stressful, and sometimes even more stressful, than working with non-family members. Of course, when it clicks, working in business with a son, daughter, parent or spouse adds emotional and spiritual awards, advisers and industry experts said. When it doesn't click, however, it sure isn't easy. First and foremost, advisers have to pay attention to key issues beyond asset allocation or new client accounts. "You really have to know your own psychology and the psychology of the people you're working with," said Joan DiFuria, co-director of the Money, Meaning and Choices Institute, a consulting firm in Kentfield, Calif. To work together successfully, families of advisers need to ask the big questions, she said, starting with: * Do you get along with the other family members? * Are you excited about the business? * Do you agree with the firm's values, culture and vision? Business relationships between fathers and sons are particularly fraught with challenges, with sons looking for answers to questions around personal identity and self-worth, Ms. DiFuria said. In that sort of relationship, the question is raised of whether the son is getting credit for what he does, she said. One adviser who has started the process of positioning three of his sons more prominently in the business is well-aware of the importance of taking care of both the business and familial sides of his practice. "Two years ago, I moved each of the three boys off commission," said Malcolm Makin, whose practice, the Professional Planning Group of Westerly, R.I., is affiliated with Raymond James Financial Services Inc. of St. Petersburg, Fla. "It made it much more competitive," said Mr. Makin, whose firm manages $363 million in client assets. "Each saw himself as being very skilled and being the guy," he said. Mr. Makin has a succession plan, but it falls short in many important ways, he said. It doesn't include designating the president of the business if he "dies tomorrow morning," he said. So with that in mind, Mr. Makin, 64, recently mapped out a 10-year plan to hand over the business to his three sons. That transition will include gifts of stock to his sons and life insurance to fund their purchase of the firm from his wife when he dies. Mr. Makin has also divided his clients into three groups, and each son manages the relationship for a designated group. Additionally, each of the three sons is in charge of a specific segment of the business, with one each heading up the investment committee, compliance, and long term care and annuities. "I sort of moved them in that direction but capitalized on what was there already," Mr. Makin said. "The big emphasis is to focus on the team," he said. "Right now, the website shows my individual picture." When financial planner Carol Pankros brought her daughter, Carin Pankros Roman, into her firm eight years ago, she enlisted a specialist in case their relationship suffered. Ms. Pankros hired a business coach and instructed him that his main focus is keeping their relationship friendly. "I hired and designated an intermediary, but it turned out he didn't have to do too much," said Ms. Pankros, whose firm, CCP Inc. of Palatine, Ill., has $107 million in client assets. She and Ms. Roman reached out to the coach just a few times over the years. "But he was there if we needed him," Ms. Pankros said. For advisers, like others in various types of family businesses, maintaining a healthy personal relationship is still the top priority. After 10 years of working at his father's practice, Richard Feight left last year to start his own financial advisory firm. "It was disappointing," said Theodore Feight, who planned on handing the reins of his fee-only business, Creative Financial Design of Lansing, Mich., to his son. "I think he wanted to do it on his own." They differed on key business issues, such as divvying up referrals. And Richard Feight didn't want to work with his father's smaller clients, many of whom the latter has had for decades. So they parted ways, but they kept their father-son relationship intact. "I value the time Richard worked with me," Theodore Feight said. "But I wanted to make sure we'd always be family." E-mail Bruce Kelly at bkelly@investmentnews.com.