Go to Top

Twenty-Five Years Of Trust

There was a moment over 20 years ago when the future success of my then-very-young and then-very-small business may have rested on a decision I was about to make, and I didn’t even realize it.

A client was calling about a tax notice he had received from the state of Minnesota. This client lived and worked in Connecticut, which is where we filed his state income tax returns. But he was an investor in a partnership that had generated some Minnesota income, perhaps through a sale of property, although I no longer recall the details.

In any case, the fact that this sale generated income in Minnesota had been reported to the client on an attachment to the partnership’s Schedule K-1 tax statement, but I had overlooked it. I did not prepare a Minnesota return for this client (who had never needed one in prior years), and now, after examining the partnership’s records, Minnesota was seeking the tax my client owed, plus a penalty for failing to file.

Of course I offered to prepare the missing Minnesota return, as well as an amended Connecticut return to claim a credit that would offset the Minnesota tax. But the client was still on the hook for that Minnesota penalty. It wasn’t a huge amount of money; in fact, it was immaterial to the client, who was not upset about it. He was merely calling to inquire whether he should pay the Minnesota bill, and he was happy to hear that a Connecticut credit would reduce the net cost.

But his penalty resulted from my oversight, not the client’s. He had previously had his returns prepared at the big accounting firm where I used to work. That firm would have made the client whole without a second thought. Now the question — at least to me — was whether I would give him the same benefit.

While trivial to the client, the penalty was not quite trivial to me. On the other hand, it was not unaffordable and was far below any amount for which I would have considered filing an insurance claim. (As our staff grew, we instituted multiple levels of accuracy and quality review, and we have never had a claim relating to errors or omissions.) Over the client’s objection that “You don’t have to do that,” I insisted on reimbursing him for the Minnesota penalty. “Look,” I explained, “it’s important to me that you know that there is no more risk in dealing with me than in dealing with a big firm. That’s the only way we can get and keep customers like you, for whom the big firm is an option.”

That man became one of our most loyal and valued clients. He was among the first to sign up when we launched our investment management affiliate alongside our tax and financial planning advisory services. He recommended us to colleagues and friends. He asked me to be his trustee, and after he died, we continued to take care of financial matters for his wife and son. Just recently, his son told two of our staffers that “my dad told me to always trust Larry and Palisades Hudson, and I always have.”

It was 25 years ago this month that I returned from a family vacation in Florida, unlocked the three-room, 900-square-foot office suite that my wife had found for me in a converted movie house near our suburban New York home, and assembled a desk so I would have someplace to work. My new company’s doors were now open, and I jokingly referred to myself as “the world’s smallest accounting firm.” Technically, however, I date the start of the company to December 1992, when I left my position as a senior manager in Arthur Andersen’s tax practice in New York City and became self-employed.

It takes a lot of trust to open the world’s smallest accounting firm. Critically, that initial trust came from my wife. Our daughters were 6 and 2, and she was staying home with the children. Without her act of faith and trust in me, supporting me in quitting my job at the world’s largest accounting firm to form the world’s smallest with absolutely no clients, I would not be writing this article and you would not be reading it.

Landlords have to trust you to accept you as a prospective tenant. A security deposit does not come close to covering the losses a commercial landlord can incur if a tenant goes bust or skips town on an office lease. One of the lessons I learned in running my own firm was that while your landlord is on the other side of the table when you negotiate a lease, in every other respect that landlord is rooting for you to succeed. It’s a basic business win-win.

It takes a degree of trust for clients to want to do business with your new business. This is particularly true for a financial advisory firm, at which clients and prospective clients routinely discuss and divulge highly personal details. I had six years at Arthur Andersen to earn that trust from clients and fellow professionals, who became vital sources of referrals in my firm’s early years. I tried to build on that foundation by launching this newsletter, Sentinel, just a few months after I opened my own office. Rather than repeating the same generic financial advice that most professional firms offer (usually in the most bland manner in order to avoid offending anyone anywhere at any time), I decided to write personally and from the heart, even when it meant I might get on somebody’s bad side. How can you expect anyone to trust you unless you are willing to let them know you? This philosophy may have cost business at times, but I suspect it has won more clients than it has lost. In any event, that was not the point. The point was that I wanted to build long-term, mutually beneficial relationships with clients, and that seemed most practical if I let the clients who were a natural fit gravitate in my direction.

It worked. One of the most rewarding things about having my own business, looking back, is the remarkably high quality of the clients we have attracted and the relationships we have built. They are the sort of people you want to come to work for, every day. Many of them have become friends, and in some cases mentors, to our staff. Whenever I announce a promotion or some other staff achievement, both the employee and I are apt to receive many warm congratulations.

Shomari Hearn

Shomari Hearn...

When you are a small firm competing for talent against organizations and brands that are much better known, the mere act of a new employee joining the firm is another demonstration of trust. I might have understood that in a theoretical sense at the beginning, but it took a little while to see it in broad daylight. Or rather, to have my wife see it.

Rebecca (Urff) Pavese

... Rebecca Pavese ...

Rebecca Pavese (who was Rebecca Urff at the time) joined our staff in the spring of 2000, right after graduating from the University of Pittsburgh. We were still in our ground-floor office at the converted movie house in Hastings on Hudson, New York. Rebecca’s desk was right outside my office door, away from the window. But my wife, Linda, who was (and is) our marketing and human resources director, could see what was happening outside. One day, about a week after Rebecca started with us, Linda pulled me aside and mentioned that she had noticed a tall,
graying man walking past our window several times.

Eric Meermann

... and Eric Meermann in the firm’s original offices in Hastings on
Hudson, New York, in 2001. All photos by Jessica Elkin.

“I’m pretty sure that’s Rebecca’s father, checking us out,” she said. We didn’t say anything to Rebecca right away, but we mentioned it later, and it turned out that Linda was right. Harry Urff wanted to see for himself that his daughter was in a safe place. As a father of daughters, I came to understand exactly how he felt, although I have never felt the need to inspect either of my now-grown daughters’ workplaces myself. As an employer, I accepted that the people in my charge are not just my employees. Each of them is someone’s son or daughter, husband or wife, mother or father, or some combination of these. Their families entrust them to our firm. While we have a right to expect quality work and exemplary behavior from our staff, they in turn have a right to expect a secure, respectful, supportive environment in which to do their jobs and grow as professionals. It took a while to learn how to put these ideals into practice. The nice thing about starting a company that lasts 25 years is that you have plenty of time to improve as a boss.

Larry Elkin

Palisades Hudson Financial Group
founder Larry M. Elkin in 2001.

I was 35 the day I assembled that first desk; now I’m 60. I get unsolicited phone calls and emails at least monthly, offering to let me sell or merge my firm into another entity. For the most part, these callers are not interested in acquiring my staff or our firm’s offices, which are now spread among five states nationwide. They just want my client list and, especially, the $1.4 billion in assets now under Palisades Hudson’s management through our registered investment advisor affiliate.

This is understandable. Many professionals who start their own practices are really just trying to keep themselves gainfully employed. They often don’t bother developing a continuity plan or an exit strategy so the business can go on beyond their own working lives.

That is not the case for me. Later in this newsletter, I describe my plan to transfer the business to another generation of management. Other than Linda, all of our employees currently range in age from around 22 to 42. We consider applicants of any age, but since we do virtually all our hiring at entry level, we naturally have tended to hire younger people and develop them internally. When you are in your 40s and 50s, and you are hiring people in their 20s and 30s — with an eye toward keeping them for the long term — they have to trust that you will provide for the business to go on without you. The same is true for new clients, who once tended to be a couple of decades older than me but now are just as likely to be a couple of decades younger, sometimes more.

So in the end, 25 years of business success really comes down to a matter of trust. When you have that, it can make 25 years go by amazingly happily and quickly. Thank you to everyone who has made this true for me.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.