Ron Kelemen may never retire--at least not in the traditional sense. He's having too much fun. While other veteran advisors are planning to sell their businesses and hit the beach, at 55 Kelemen is not even remotely interested. An avid bike rider, snowboarder and hiker, he is far too active to enjoy a sedentary life. And with 25 years in the business, he's just hitting his stride.
In fact, Kelemen is in the process of reinventing himself--and his firm, the H Group in Salem, Ore., where he has been building a practice for more than two dozen years. Relationship marketing--creating raving fans who serve as goodwill ambassadors and apostles--is the firm's forte. Among them is the area's medical community. Thanks to strategic PR initiatives such as his monthly financial planning column in ChartNotes--the local medical society's 20-page newsletter--and establishing himself as a founding board member and current president of the Medical Foundation of Marion and Polk Counties, Kelemen has become the advisor area doctors seek out.
Salem residents for 32 years, Kelemen and his wife, Kathy, have built many other solid relationships as well. In the early years those relationships developed through their daughter's school and sports activities. They also became active as volunteers--Ron with Rotary, the symphony board, the food bank, the library board and mentoring; Kathy with tennis, book clubs, college counseling, exchange students, the Assistance League and the Salem Film Festival.
Eight years ago, Kelemen affiliated with The H Group, Inc., a large wealth management firm in the Northwest that provides umbrella SEC registration as well as E & O coverage and compliance and marketing support to numerous independent advisors. This affiliation has worked well for Kelemen and his associate Mary Way, CPA, CFP. In 1998, their AUM was $14 million; today it tops $110 million and they are adding more assets every day.
But this is all part of a larger story. Twelve years ago Kelemen made "the second best decision of his life" ("the first was proposing to Kathy") by bringing in Way to learn the business and help serve the firm's growing clientele. This relieved some of the strain Kelemen felt as a solo practitioner. But with two advisors and a seasoned staff, the firm filled to capacity once again. "For a while, we were actually afraid to market," Kelemen recalls. "What if people said 'yes'?" So Kelemen, Way and their support staff kept their noses to the grindstone, making clients happy by delivering the type of advice and service that earned them near perfect ratings on their last client survey (conducted by independent third party Advisor Impact).
About 18 months ago we referred Alex Sheppard to Kelemen. A talented 30 year old with an MBA in finance and four year's experience as an analyst for Franklin Funds, Sheppard had also done a six-month stint at an institutional brokerage. Along the way he discovered that corporate life was not for him. Alex wanted to get into financial planning, but did not want to build his own business--at least not yet. After getting to know Kelemen, Mary Way and The H Group, Alex determined to make the move. Way and Kelemen, who are both in their 50's, were thrilled; they wanted the fresh talent and young energy that Alex would bring to the firm.
While Sheppard took a pay cut to relocate to Salem, he has no regrets. "I was looking for a like-minded group of fee-based advisors and the ability to contribute over time," Sheppard says. "Since joining Ron and Mary, I've been given a great deal of responsibility. I immediately began sitting in on client meetings and have been quickly ramped up in client exposure."
Sheppard enjoys a salary and benefits. The principals have agreed to a three-year plan calling for Sheppard to assume many of their responsibilities and to earn his CFP as soon as possible. Kelemen is paying for the program and helping Sheppard fulfill the experience requirement. "While some newly minted CFPs might grumble and say there's no career path and that the money is not as good as they'd hoped, I'm quite happy with the situation I've got," Sheppard says. "The company takes all the risk and finances everything. Ron brings in most of the business. Since we are an open-book practice, we're a team in every sense of the word."
At the six-month mark, Kelemen brought Sheppard into the firm's bonus plan which includes all employees--even the operations manager and receptionist. "This provides a nice incentive. We are all committed to keeping clients happy and to boosting gross revenues," Sheppard says.
Now that there are three advisors to share responsibilities, Kelemen is free to do more of what he does best: meet with clients, work with the media, and promote the firm. "My unique ability is not running software or crunching numbers or obsessing about alphas and betas. That can easily be delegated to someone else who is much better at it than I am," Kelemen says. "My talents are in seeing the big picture, identifying problems, staying current on changes, using my 25 years of wisdom to devise client strategies, then communicating them to clients. With Mary, Alex and the rest of the team by my side, I can focus on building relationships and gathering more assets."
"The whole purpose of our ensemble is to provide a deep bench for our clients in the event of death, disability, vacation, or retirement of any of the three of us," he continues. "Our clients love it!" Kelemen adds. "In fact, I think they're relieved. Some of them have even asked with a smile if Alex is the new Ron."
Kelemen is even thinking of giving his big showboat office to Sheppard, "so he can be upfront in the office and visible behind the glass walls." Kelemen will then hunker down in the smaller, more private back office and do more writing --"something I've always loved but have not had as much time to do as I'd like," he says.
About a year ago, Kelemen and the team decided to go fee only. "The NASD and the brokerage firms have a totally different mindset about compliance, procedures and business models," he explains. "I dropped my Series 7 after 25 years in the business, and I can't tell you how good it feels. My broker/dealer (which has been very nice to me over the years) is a little slow in 'turning off the switch,' but in the first three days alone, I was able to ignore dozens of B/D emails, a mandatory compliance conference call, and a request for more information about my outside RIA business activities. Since we no longer have to deal with the NASD, my staff has less paperwork and there are no more ugly disclosures on (what was once) a broker/dealer approved Web site and other materials. We have more freedom to write articles for our newsletter, Web site and other publications."
After selling many small accounts where the trail commissions weren't worth the interruptions and hassles, Kelemen et als have a clear focus and a business model everybody understands. "Because of our affiliation with The H Group and the range of services provided through them, we can do just about everything we did before, and in some cases, more," he says." Even after giving up 15 to 20 percent of revenues that came from commission/trail business, we will still net more income this year. Many clients who hadn't converted to fees were more than happy to make the change to fee only. We also gathered some assets from existing clients who had small commission-based ancillary accounts attached to their larger fee-only ones. It doesn't take much to make up for the trails we left behind."
For the future, Kelemen has a rather unique "standby purchase agreement" in place with The H Group, "a pretty sweet deal" by his own admission. But he's not really sure when or if he'll use it. The agreement requires The H Group to purchase his practice at a predetermined valuation formula in the event of his death or disability, or should he decide he wants to retire. However, he has the right to terminate the agreement at any time. Ultimately he may choose to do so and to execute a new one with Sheppard when both of them feel that the time is right.
"I could go on like this forever, but on a reduced level by cutting down from four days per week to three and transferring more of the leadership and ownership responsibilities to Mary and Alex," Kelemen says. "Thanks to the services and the systems we have access to, I can work from wherever I want, pretty much whenever I want--and what I'm doing doesn't feel like work anymore."
Brent Hicks, CFP, is a veteran financial planner and a fee-based pioneer. He is the founder and President of FocusPoint Solutions, (www.FocusPointSolutions.com), a firm that specializes in helping financial advisors build profitable businesses and a balanced life. The H Group, referred to in the story above, is a FocusPoint client
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