’The Right Thing to Do’

Why in­de­pen­dent ad­vi­sories need to have fam­ily leave poli­cies that are sim­i­lar to what large com­pa­nies of­fer.

Financial Planning - - CONTENTS - BYANDREW WELSCH

Why in­de­pen­dent ad­vi­sories need to have fam­ily leave poli­cies that are sim­i­lar to what large com­pa­nies of­fer.

Three days af­ter giv­ing birth in 2011, ad­vi­sor Nina O’neal left the hos­pi­tal, dropped off her new­born son with fam­ily at home and re­turned to work. An in­de­pen­dent ad­vi­sor who had launched her prac­tice 18 months ear­lier, she had clients who needed tend­ing and re­fer­rals to fol­low up on. Her body, how­ever, wasn’t quite ready. “My preg­nancy was hor­ri­ble. It was de­bil­i­tat­ing,” she says. Af­ter O’neal left the hos­pi­tal, she couldn’t sit com­fort­ably. Her hands hurt. She was in “ex­cru­ci­at­ing pain ev­ery day.” Her plight re­flected a grow­ing prob­lem in a male-dom­i­nated, ag­ing pro­fes­sion that tra­di­tion­ally has re­quired new­com­ers to de­vote them­selves to build­ing a client ros­ter but now finds it­self need­ing to at­tract more women and fresh tal­ent. That means it must find ways to be more sup­port­ive of ad­vi­sors who want to start fam­i­lies. “The in­dus­try has not done any fa­vors to young ad­vi­sors,” says in­de­pen­dent ad­vi­sor Douglas Boneparth. In 2017, plan­ners over­see­ing roughly $40 bil­lion in client as­sets moved to RIAS or IBDS, seek­ing greater flex­i­bil­ity and free­dom to struc­ture their prac­tices as they saw fit. But gen­er­ally, that free­dom of­fers fewer ben­e­fits — in­clud­ing those that might be par­tic­u­larly at­trac­tive to younger ad­vi­sors think­ing of build­ing fam­i­lies. At the same time, many large Amer­i­can com­pa­nies, in­clud­ing Mer­rill Lynch and some com­peti­tors, are mov­ing to of­fer more

“His­tor­i­cally, firms that of­fered fi­nan­cial sup­port did it through dis­abil­ity in­sur­ance, and they counted be­ing a mother as a dis­abil­ity,” says Sarah Ka­plan, of the Uni­ver­sity of Toronto.

ro­bust ma­ter­nity and pa­ter­nity leave ben­e­fits. That might leave many break­away ad­vi­sors re­spon­si­ble for pay­ing for ben­e­fits that Mother Mer­rill would have cov­ered. Mer­rill Lynch of­fers 16 weeks of paid leave and an ad­di­tional 10 weeks of un­paid leave to men and women in cases of birth or adop­tion, a spokes­woman says, for all em­ploy­ees work­ing at least 20 hours weekly and at the firm for at least one year. This pol­icy, in­tro­duced in 2016, im­proved upon an ear­lier one that of­fered 12 weeks paid and eight un­paid. “I feel the ben­e­fits at Mer­rill were, by and large, good,” says Sarah Keys, a for­mer Mer­rill ad­vi­sor turned in­de­pen­dent. She and her three fel­low ad­vi­sors at Car­dan Cap­i­tal Part­ners, a $700 mil­lion RIA in Den­ver, are cur­rently de­vel­op­ing their own ma­ter­nity and pa­ter­nity leave poli­cies. “It would be hard for peo­ple to come with us if we had said, yeah, we’re go­ing to give you less ben­e­fits,” Keys says. Data on wealth man­age­ment firms’ fam­ily leave ben­e­fits are hard to come by. Cerulli As­so­ciates, a lead­ing in­dus­try re­searcher, doesn’t keep track of such poli­cies, for ex­am­ple. But based on in­ter­views with ad­vi­sors, wealth man­age­ment does not ap­pear to be out­per­form­ing na­tional trends. Na­tion­ally, 15% of all U.S. work­ers have ac­cess to paid leave and 88% to un­paid leave, ac­cord­ing to 2017 data from the fed­eral Bu­reau of La­bor Sta­tis­tics. This does not in­clude dis­abil­ity leave. Work­ers at large firms are more likely to have ac­cess to paid leave than those at smaller firms, ac­cord­ing to BLS data. A quar­ter of the work­ers at com­pa­nies with 500 or more em­ploy­ees had ac­cess to paid leave, com­pared with 10% at firms with fewer than 50 em­ploy­ees. A big part of the prob­lem is cost, says Sarah Ka­plan, a pro­fes­sor and di­rec­tor of the In­sti­tute for Gen­der and the Econ­omy at the Uni­ver­sity of Toronto’s Rot­man School. “If you have a lot of smaller firms in wealth man­age­ment, then it will be fi­nan­cially harder for them to make it work,” Ka­plan says. “And then there’s the lo­gis­tics of it. When you are a small firm, you might not have the re­sources to hire some­one tem­po­rar­ily.” The sit­u­a­tion is com­pli­cated at firms that have both in­de­pen­dent and em­ployee chan­nels. Ameriprise and Ray­mond James have poli­cies that cover their em­ployee ad­vi­sors, which num­bered 2,176 and 3,053, re­spec­tively, at the end of the first quar­ter. But both firms have far more in­de­pen­dent ad­vi­sors: Ameriprise has 7,705 and Ray­mond James has 4,551. All of them are tech­ni­cally in­de­pen­dent con­trac­tors. While these bro­kers get higher pay­outs than their coun­ter­parts on the em­ployee side, they’re re­spon­si­ble for pro­vid­ing their own ma­ter­nity and pa­ter­nity leave, as well as for other ex­penses as­so­ci­ated with run­ning a busi­ness, in­clud­ing real es­tate and of­fice equip­ment. A fed­eral law, the Fam­ily Med­i­cal Leave Act, guar­an­tees em­ploy­ees the right to 12 weeks of un­paid leave each year. But many peo­ple don’t take ad­van­tage of it be­cause of fi­nan­cial con­straints. “His­tor­i­cally, firms that of­fered fi­nan­cial sup­port did it through dis­abil­ity in­sur­ance, and they counted be­ing a mother as a dis­abil­ity,” Ka­plan says. State laws vary. Some re­quire noth­ing of em­ploy­ers. In New York, a new law that took ef­fect in Jan­uary re­quires em­ploy­ers, re­gard­less of size, to of­fer eight weeks of paid leave to their em­ploy­ees, capped at $652 per week. Some in­de­pen­dent ad­vi­sors are de­ter­mined to cre­ate their own fam­ily

leave poli­cies. In Douglas Boneparth’s case, it goes be­yond what’s re­quired by law. Boneparth’s New York prac­tice, Bone Fide Wealth con­sists of him and one as­sis­tant. Still, he is of­fer­ing his as­sis­tant, who is preg­nant, two months’ leave at full pay, plus one month to work from home. He has had the pol­icy since found­ing Bone Fide Wealth in 2016. He says he knew from the get-go that “I would want to ac­com­mo­date that. No. 1, it’s the right thing to do. No. 2, it’s about tak­ing care of your peo­ple and let­ting them know you want them to grow,” Boneparth says. He was mo­ti­vated in part by first­hand ex­pe­ri­ence; Boneparth and his wife have a 2-year-old son. When his as­sis­tant is on leave, he in­tends to han­dle her work him­self. “I know I can cover this by work­ing a lit­tle harder,” he says. If more firms were to of­fer fam­ily leave, it might boost the num­ber of women in a pro­fes­sion with far more men. Only a third of all ad­vi­sors are women, ac­cord­ing to BLS data. “It’s not one of those is­sues that would stop a woman from get­ting into this pro­fes­sion, but it might pre­vent a woman from stay­ing in the pro­fes­sion,” says Jo­ce­lyn Wright, man­ag­ing part­ner at As­cen­sion Group and an ad­junct pro­fes­sor at the Amer­i­can Col­lege of Fi­nan­cial Ser­vices. “We have to think about those types of con­cerns.” This is­sue goes be­yond com­pen­sa­tion. “I still re­ceived pay. We have re­cur­ring rev­enue,” says O’neal, a part­ner at Archer In­vest­ment Man­age­ment in Raleigh, North Carolina, and a Fi­nan­cial Plan­ning con­tribut­ing writer. When she re­sumed work three days af­ter giv­ing birth. she says, “it wasn’t so much about it be­ing paid; it was that there was no one to do the work.” This is not a prob­lem just for ad­vi­sors at small RIAS, which some­times num­ber two or three em­ploy­ees. Solo ad­vi­sors at large firms can face the same dilemma. Yet some help might be on the way. An in­creas­ing num­ber of ad­vi­sors work on teams, and tech­nol­ogy makes it eas­ier to work re­motely via email, Skype or an­other tool. “I worked right up un­til I had my son, and I made sure when I was home with him that I was al­ways avail­able for a call,” notes ad­vi­sor Liz Weikes. “Some­times that’s all a client needs.” Weikes, who works at J.P. Mor­gan Se­cu­ri­ties, the bank’s high-end bro­ker­age unit, took six weeks’ paid leave when she had her first son. Its par­ent, Jpmor­gan, which has roughly 250,000 em­ploy­ees, of­fers 16 weeks of paid fam­ily leave to the pri­mary parental care­giver and two weeks paid to the non-pri­mary parental care­giver. This is on top of other ben­e­fits, such as a men­tor­ing pro­gram for moth­ers re­turn­ing to work, ac­cord­ing to a spokes­woman. Weikes is due to give birth to her sec­ond child this sum­mer and plans to take six weeks off, she says. “Ob­vi­ously, I’m not look­ing for new busi­ness op­por­tu­ni­ties while I’m at

“When you are start­ing a fam­ily, you re­fo­cus on how you are build­ing your busi­ness,” says J.P. Mor­gan Se­cu­ri­ties ad­vi­sor Liz Weikes.

home with a new­born,” she says. In­stead, Weikes and other new par­ents in wealth man­age­ment say they have rethought their ap­proach to client ac­qui­si­tion. “When you are start­ing a fam­ily, you re­fo­cus on how you are build­ing your busi­ness. So in­stead of go­ing out for drinks af­ter work, you reshuf­fle, and you say, I’ll go out one night a week, and I’ll do lun­cheons in­stead,” she says. When O’neal gave birth to her sec­ond child, she fo­cused on del­e­gat­ing more tasks and eas­ing her way back into work. “Our sec­ond time around, I would check my emails in the af­ter­noon,” she says. “Our op­er­a­tions per­son sent me a daily up­date to let me know what was go­ing on. I re­sponded with what­ever in­put was needed. I think we were over­all bet­ter pre­pared. We ac­tu­ally joke that our busi­ness grew more that quar­ter, so maybe I was bet­ter off at home.”

‘Not a Piece of Cake’

Man­age­ment also needs to as­sure em­ploy­ees that they are wel­come to take ad­van­tage of avail­able ben­e­fits. “Com­ing back to work when you have a lit­tle one at home is not a piece of cake,” says John C. Abu­said, pres­i­dent and COO of Hal­bert Har­grove. In ad­di­tion to the four months of leave man­dated by the state gov­ern­ment, the firm, based in Long Beach, Cal­i­for­nia, of­fers two weeks’ va­ca­tion at the be­gin­ning of ma­ter­nity or pa­ter­nity leave, as well as flex­time for em­ploy­ees. “We be­lieve that, if you in­vest in peo­ple, you’ll more than get your re­turn in the long run,” Abu­said says, not­ing many of the firm’s roughly three dozen em­ploy­ees are at the age at which they could be start­ing fam­i­lies. Still, the ef­forts of a few small in­de­pen­dent ad­vi­sors who are for­ward think­ing might not be enough. “It re­quires lead­er­ship from the larger play­ers who can gen­er­ate the most im­pact be­cause they have the most dol­lars,” Boneparth says. He ac­knowl­edges that it is a com­plex is­sue: Is there a one-size-fit­sall ap­proach for an in­dus­try with a wide spec­trum of busi­ness mod­els and firm sizes? But tack­ling this prob­lem, Boneparth says, would go a long way to­ward help­ing in­de­pen­dent firms at­tract and re­tain young, di­verse tal­ent. Should more ad­vi­sors have ac­cess to such ben­e­fits, they might have ex­pe­ri­ences sim­i­lar to that of Parker Tras­borg, who took two weeks’ paid fam­ily leave plus two weeks of va­ca­tion af­ter the birth last year of his daugh­ter. A plan­ner with CJM Wealth Ad­vis­ers in Fair­fax, Vir­ginia, Tras­borg says he loved those four weeks. “I took her out for walks be­cause it was the end of Au­gust through Septem­ber. It gave my wife a bit of a break, since she was the one mostly deal­ing with the lack of sleep,” Tras­borg says. “It was prob­a­bly one of the long­est pe­ri­ods of time I’ll get to spend with her un­in­ter­rupted un­til maybe I re­tire.”

“If you in­vest in peo­ple, you’ll more than get your re­turn in the long run,” says Hal­bert Har­grove COO John C. Abu­said.

Ad­vi­sor Nina O’neal, with sons Lowe and Em­mett O’neal, fo­cused on del­e­gat­ing more tasks at her prac­tice af­ter the birth of her sec­ond son.

Af­ter the birth of his daugh­ter, ad­vi­sor Parker Tras­borg took paid leave to help give his wife “a bit of a break.”

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