Something Personal Episode 1: The Family Business, Start To Finish
In the first episode of our first season, Palisades Hudson founder and president Larry Elkin discusses how he went from a journalist with the Associated Press to running a business that recently marked its 30th anniversary. In an in-depth conversation, host Amy Laburda asks Larry about how the founder of a family business can avoid ending up like Logan Roy of “Succession”; the ups and downs of working with your spouse; how to attract and keep talented employees; and much more. Listen in to learn about Palisades Hudson's origins and for advice on taking a family business from the start to your eventual exit.
About the Guest
Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 30 states, from Maine to California, as well as in several foreign countries. He is the author of two chapters in our firm's book Looking Ahead: Life, Family, Wealth and Business After 55; Chapter 4, "The Family Business" is the subject of this episode. For Larry's full biography, click here.
Episode Transcript (click arrow to expand)
Welcome to “Something Personal,” a podcast where a team of financial planners share some personal finance advice and some thoughts on other things, like the show "Succession." I'm Amy Laburda, and I'm the editorial manager at Palisades Hudson Financial Group. I didn't come to this job with a financial background. In fact, I majored in theatrical literature at Sarah Lawrence College, so truly ending up at a financial firm was not my first plan.
But I've been with the firm for 13 years now and I've learned a lot about personal finance and also about how many of my talented colleagues think. Partially, I learned that by helping them write a book and partially just by working with them every day to communicate with our clients, with people who don't know us yet, and now with you. We're a financial planning firm that started out with a focus on complex tax and financial planning. And over the years we've expanded to investments,
and to entertainment business management. After 30 years of doing this, my boss and my coworkers have some pretty good stories and I'm gonna get them to tell us those stories. Our inaugural guest is none other than the founder of our company, my boss, Larry Elkin. Larry founded Palisades Hudson in 1992, though back then it was just called Larry M. Elkin because he was the only guy working there. Before that, he worked at the accounting firm Arthur Anderson
and he started out his career as a journalist for the Associated Press. Right, Larry?
That's right, Amy. And thank you. It's really great to be here on our first podcast. Thanks to the AP, I got to cover state government and Washington, DC and federal courts in New York. But in the end, I was not able to resist the glamor of public accounting, so I became a CPA.
I'm sure you get asked this question a lot. Wasn't it an odd transition from journalism to something so different?
Larry Elkin 02:02
I certainly do get asked that question a lot. And it's really not as big a transition as it seems because in both cases, we have to try to understand what the audience wants and needs to know, gather the information, and present it in a way that's clear enough that they can make informed decisions with it. So it's important for us to have someone like you, Amy, as our editorial manager, because even though my colleagues and I pay attention to our speaking and writing,
It's too easy for professionals to fall into useless jargon or to assume the audience has technical knowledge that even a well-educated lay person isn't necessarily going to have. You won't brag, so I'll do it for you. Folks, Amy is a world-class editor and she keeps our perspective grounded and our messages crisp and clear.
Thanks, Larry. Our firm has collectively written two books. Why did you make us do that?
Well, the reason for writing books in the first place is because we realized long ago
that there's far more people who want the kind of guidance and information that we offer than we could ever have time to reach individually. We did two books because people have different concerns and they impact them in different ways at different stages in life. So our book, The High Achiever's Guide to Wealth,
is targeted to younger adults in their 20s and 30s and 40s, whereas the first title that we ever did, called Looking Ahead, Life, Family, Wealth and Business After 55, is geared more toward people who have already had most of the, at least first career that they're going to have in their working lives and their concerns for shifting to other areas.
Okay. And here's the plug. We actually have a new edition of Looking Ahead out now. And in that book
you write about what drew you to starting a business that initially focused mostly on families and their financial planning. I think it's a good topic to start with because now we're also making a podcast about families and their financial planning, but we'll probably expand into other things too. So it's 1992, you've just quit your job at Arthur Anderson and you're going to strike out on your own. What kind of business did you set out to open?
Larry Elkin 04:14
I set out to open a financial planning business, but first I had to redefine what financial planning was because in those days, the field itself was, if not in its infancy, then it was in its early adolescence. Everything was siloed. Lawyers wrote your wills, accountants prepared your taxes, stock brokers or some money managers handled your investments, and insurance agents had the answer to all your problems.
I wanted to combine those fields and more in one place where somebody could go and have conversations that naturally flow across those topics and the many others that really get involved in personal financial planning because the emphasis, as I saw it, was on the personal and not on the financial.
I left Arthur Anderson to do that because Arthur Anderson, as what was at that time the largest accounting firm in the world, had its business focused elsewhere. We did have very good financial planners at the firm, but it wasn't anywhere close to the core of the business and I felt that I could develop the field further and develop my business
my ability to serve clients better by going out on my own.
So you started as a one-man shop, but some family businesses get really big. At what point did you stop considering something a family business?
Well, Amy, as you mentioned at the top of the program, when I left Arthur Anderson, it was just me. The first thing I had to do was build a desk so that I'd have a place to work. But I knew from the start
that I didn't want the business to be just me, that I would keep myself busy, find some clients, and then work until one day I would drop face down into the cornflakes, and that would be the end of the business. I knew that I wanted to create a business that would someday exist independent of me. That meant, of course, attracting other people to work with me, providing an environment where we could
develop the business and develop ourselves as advisors to the highest level that we might be able to achieve and have them know that someday the business would continue separately from me. When we started out, my daughters were very young. I did not anticipate that they would necessarily come into the business, but I knew that there would be opportunities for them
or for other young people to join the business and build their careers here.
So speaking of attracting staff, one thing I know, but listeners might not, is that your wife Linda also works at the company. She hired a lot of our staff, including me.
Yes, I've been very fortunate to have Linda working beside me in the business for pretty much the last 30 years. Linda had
a background in business, but hers was in marketing. She was not a financial planner. She had taken a break when we had our children in the late 80s and early 90s. And then she came back in and has helped develop the really wonderful staff that we have that’s now 30 people spread across the
country. It gave her an opportunity to get back into the workforce in a way that was flexible, that worked with our family life and our business life. We were well ahead of the pandemic attention to work-life balance
and we ultimately offered the same kind of flexibility to our employees that Linda enjoyed working here in the business because we understand that they also have families to raise in the midst of doing their careers.
So some listeners might think that being your spouse's boss can create a lot of complications. But how has it worked out for you working with Linda?
Well, first of all,
you have to remember that being the founder of a business only makes you the boss at work, not at home. That's important. My wife taught me that among many other things. Second, don't underestimate the value of working with somebody whose personal relationship with you outside the business lets them say, I think you're wrong, when even the best and most loyal employees might hesitate to butt heads with the employer.
Likewise, there's great value in having someone who's close to the boss and in whom employees might be willing to confide their problems or frustrations, which might otherwise just fester and be harder to address. Having Linda working in the firm has helped me become aware of situations when an employee was dealing with, say, a child's health issues or troubles at school.
She won't violate an employee's confidences, but she will tell me if she's free to do so, or she might just say that there's something happening at home and I need to manage that person differently for a while.
So what are some key points about managing a business that has family and non-family members in it?
When you're running a business, you have to make it obvious that everyone is going to be treated fairly, whether they are in your family or not. You have to make it obvious.
that a family member has earned any job that they're given and that they're qualified for any promotion or responsibility that they are assigned. Inexperienced relatives of the boss should enter the business at entry-level jobs just like everybody else. You want to make it clear also to non-family members that their own career paths are unaffected by having family working at the firm.
And if you're determined to keep the top decision-making positions inside the family, you should do that as a way of maintaining the firm's mission and values. You don't do it just to make sure that the highest paid jobs go to relatives. Every employee, whether they're family or not family, should be paid everything that they're worth to the business, but not more.
You have seen "Succession," right?
Larry Elkin 10:29
Yes, I have.
If you were in Logan Roy's place, what would you do differently?
Well, first of all, I would try to be a better father. Then I would try to raise nicer kids. And although I say that in a joking way, I mean that seriously. Because what you saw Logan Roy do in that fictional show is pit his children against one another, make them compete for his favor and affection,
make them feel that they were in a higher place on the pecking order in his enterprises than they actually deserved, which also alienated his non-family employees. The fact that his children did form bonds and in their own ways tried to be mutually supportive was accomplished in spite of their father rather than with the assistance of their father.
So those are the fundamental mistakes that "Succession" illustrated Logan Roy making. If one were to step back and say, well, what were the questions that Logan Roy should have asked himself if he wanted to set up an orderly succession for his business? It would have gone something like this. Who's going to own it? Who's going to control it?
and who's going to run it? Those things are not the same things, and they can be answered in different ways to make the business run better and be better positioned for long-term success.
So, Larry, in other words, Logan Roy didn't play favorites. He was manipulative and abusive towards family members and non-family employees too. In the much smaller but admittedly real world of Palisades Hudson.
How have you avoided some of Logan Roy's mistakes?
Unlike Logan Roy, who made his children dependent on him and his business, I was very supportive, along with Linda
of our daughters having their own careers, and they're both successful in their own professions. So when they do interact with the business, they do it in ways that everybody here understands and appreciates their contributions. For example, my daughter, Ali, and her husband, Joe, produce and direct this very podcast, because they are media professionals.
The family business, just to broaden this out a little bit, is a really fluid term. It does encompass the questions of who owns the business, who controls the business, and who runs the business. But that can mean so many different things in different contexts. In the Logan Roy fictional world, or in the Rupert Murdoch real world. You have
families that found a business and it grows and it becomes a public company. So that family's role changes over time. "Succession" was all about who would follow Logan Roy. This fall Rupert Murdoch finally turned over the reins at his age 92 to his son Lachlan, but Lachlan is not in a position to manage or run the company. It's way too big. The most he can do as the new chairman of the board
is to maintain the organization's values and direction as set by his father and adapt it to the times that follow. So family businesses have to grow and evolve along with the family. I think at the outset, a typical family business can be viewed as one that is owner managed.
In our case, I started the business. I was by myself. Linda came and joined it. Other people came and joined. But I was hands-on in terms of not only dealing with our clients, but helping to grow our professionals and help them build their careers here. As the firm grows, I had help come along and manage the business and,
as this podcast series progresses, our listeners will get to meet many of the people that have helped make Palisades Hudson what it is. So I still manage the business as president, but I have a lot of other people managing different aspects of the business going forward. Since my daughters have their own careers, and my sons-in-law have their own careers, that was also a factor in "Succession." It's going to change at some point.
My daughters may still be involved in the business from the standpoint of overseeing it, setting policy, being on a board, but they're not going to manage it. The management part is going to succeed to other people who've grown up in the business and are much more qualified and capable to handle the day-to-day.
So you mentioned that a lot of people start their careers here and all of us get developed here.
When did you decide and what made you decide that you wanted to work with people who were starting out in their careers mainly?
I think that's something that every founder of a business, especially but not only a professional service business, has to think about is, is your goal to simply perform the professional service and hire people to assist you in doing that until one day the bowl of cornflakes finds you?
Or is it to do something else? Is it to create an organization, create a thing that eventually becomes independent of you and can exist without you? And if that's the case, then you're looking for a certain kind of person or a certain group of people who can essentially carry on and build on the work that you've done up to this point.
In a professional services firm like ours, just to use our familiar example, that's gonna fall into two broad groups of people. We have the client service professionals that we bring in and train and introduce to our clients and help us build the business and serve the people that we work for. But you also need an administrative side, an organizational side, something that gives structure to the place. When I first started out,
I was the person who took out the trash at night. That doesn't happen anymore. Things get bigger. Functions become developed. And so for us, or for me, managing the business wound up having kind of two parallel tracks. For our client service people, we ask so much in terms of the expertise that they have to develop
that it's really, I've always estimated, about a 10-year process from the time you get somebody in the door until the time they have fully matured into the role that we play for the people that we work with. They have to become experts in income taxes, in estate taxes, very comfortable with insurance, very comfortable with cash flow, experts in investment management.
All these different skills combined in one person where any one of these things is a profession in and of itself. So this is something that's incredibly demanding. And not only that, but the types of people who have good aptitudes for business or finance or these topics
could succeed in any kind of financial firm, but here the emphasis is on the families and individuals we work with, not on just maximizing the bottom line. I've never met anybody whose primary goal in life is to die with the largest possible net worth. So in addition to having these financial aptitudes, we need people who are very empathetic, understanding human beings.
That's a special person. And since we hire at the entry level, most of the people we hire tend to be young. They're just out of school. They themselves don't know whether this is what they want. Nobody grows up really thinking about professional life in these terms. So there's a process of training on my part and
development on my part, and self-discovery on their part. And these are people that, by and large, could succeed almost anywhere doing almost anything. What ultimately happens is we know very quickly whether they are right for us. They take a little bit longer, maybe a year or two, to figure out whether we are right for them. And that's all fine, and sometimes we're not, and people move on to other things. But when they do choose to stay,
then we have the opportunity to build this long-term relationship between the individual and the firm, between the advisor and the clients, between my family and the people that work here and ultimately their families. So that's the client service side. But we need all these other things to happen. And so with our administrative side,
what's happened is we've tended to hire people again at entry level positions. In some cases, they were actually in high school or college working here part time and then came to work here full time.
Yeah, I felt like sometimes the odd person out because I was in my mid-20s before I started working here. It seemed like a bit of an outlier.
Yeah, you were the voice of experience when we got you in your mid-20s. But with those people,
again, it's been a process of discovery of what are their aptitudes, what are their skills and their interests, and then how do you merge those aptitudes and interests with the needs of the business and let everybody succeed. So internally, we've taken these people who came in in essentially clerical or administrative jobs and we've built one person who is an IT expert,
one person who is a facilities manager, one person who is our financial manager, one who is a human resources professional.
And then there's you, Amy. We have an editorial manager. We are a 30-person financial advisory firm with an editorial manager. And when I talk to some of my peers, they're so jealous. “How do you do that?” But I didn't do that. You did.
Yeah, as I mentioned at the beginning of our conversation, I certainly didn't expect to be working at a financial firm either. So it was kind of kismet on both sides. But,
yeah, it's been really interesting on the admin side to watch my colleagues also grow into these roles and expertise over time, where it's sort of to your point about the staff earlier: You've hired a lot of very smart people, if I do say so myself. And I think a lot of people who work here could succeed in all kinds of roles, but there's been sort of a symmetrical growth as the business has grown and as its staff has grown over time.
Larry Elkin 22:27
And what you call symmetrical growth, or I would have called organic growth, is really, I think, the mark of a successful family business. I've always said that a healthy business is like a baby. It cannot help but grow. Existing customers or clients stay. New ones find their way to you. They need more people to
help them as the business grows, it becomes more complex to manage and support. So you need to have a support infrastructure that lets that happen. It will all happen organically. You can force it or accelerate it through mergers or other financial techniques. But any strong business is going to grow over time in and of itself with the people who are in it. And I guess that brings me
to another dimension of a family business that I don't think I would have thought about the day I was starting this, but I've learned it over time. And that's the interaction between me as the founder and eventually the mentor or teacher of our staff and the parents who sent those young adults to me.
You don't necessarily think about a relationship between the business and the parents of the people that work there. But for us, it has been very important and incredibly rewarding. You know, as a parent of younger adult daughters myself, I appreciate when they work for somebody who
is interested in their personal and professional welfare, who helps them grow, who treats them decently. There's no need to do other than that, but not everybody does. So I appreciate it when it's directed toward my adult kids, and I feel very much a sense of responsibility to the parents who sent our staff to me to care for them and who
also, I think often probably without my knowledge, reinforce their children's decision to stay with us as opposed to doing all the other things that they could do successfully. Many of these parents I've met at company events over the years, some of them I haven't met, but we still interacted long distance, one set of that being your parents.
Amy Laburda 25:02
Yeah, as you mentioned, you've never met my parents in person, but especially my dad, I know, was an avid reader of our blog, “Current Commentary,” when it was still running. And I know that more than once, he definitely sent you his two cents along after things you'd written on there. But I know that they care a lot about what Palisades Hudson produces and how we grow and I'm sure that's true of a lot of my fellow staffers' parents as well.
Larry Elkin 25:31
It really has been. There was one incident very early in our firm's history that helped me learn this lesson. We started out in a converted movie house in Hastings on Hudson in Westchester County, New York. So our office was on the ground floor, kind of toward the back end of a sort of alley that led in perpendicular from the street. So we were the last storefront in this converted movie theater.
And it's around the year 2000. I've just hired a young female college graduate. Her name is Rebecca, and she's still with us today. But this was very early in her tenure with us. And so Rebecca was in the office one day, Linda, my wife, was in the office one day and Linda asked me if I noticed the gray-haired gentleman who walked past the window a few times. And I hadn't, but she had.
And it was Rebecca's father. He never came into the office, never said a word, but he came by to check and make sure that his daughter was working in a safe place because he'd never heard of Larry Elkin and that's what we were known as at that time. So he wanted to know that his daughter was
in a place that was healthy for her. And I guess he was satisfied.
Well, she's still here, as you mentioned.
She's still here. And I've become very good friends with that family. I know her parents very well and the rest of her family. There is a sense of duty to those parents that send our people here. You can do that in an owner-managed business.
We're 30 people. Even if I don't interact with the office assistant who's a student and a part-timer in Atlanta, his name is Jesus. I know his name is Jesus. When I walk into the office, he will know me. If Jesus has anything he needs to talk to me about, he can reach me. I am accessible. You can do that in a
30-person firm when the founder is still working there or when another family member of the founder is working there on a day-to-day basis. But as this firm matures, that's going to change. And managing that process of change so that it happens in a healthy and constructive way is really important to the long-term success of the business because if this business
looked like it was going to end sometime around my retirement, either because it would fold or because it would be sold, then how would I attract that young equivalent of Rebecca today to be here in the next 25 years? It wouldn't happen. So that's part of what makes us, us.
I think to circle back to a thing you said a minute ago about empathy, you know, I think it’s one thing that
is a strong contrast to the Logan Roy model of competition and backbiting. But it's a thing that it makes sense to sort of bake in behind the scenes as well, right? You're not only talking about empathy for our clients, where it's obviously very important to the business, but empathy between staff members, between levels of the organization, that sort of thing. And it sounds like that's a thing that you were focused on pretty early.
There was a school of management thought,
certainly, going back to the post-war years, right through the time I was in business school in the 1980s, there was essentially a zero-sum game. In some places, it was actually made formulaic at one time in some big, successful Fortune 500 companies managers were expected to cull a certain percentage of their people every year. The assumption was that talent
existed on a bell curve and you did not want to retain your people who were at the bottom of the bell curve. That is not necessarily true, and it's certainly not necessarily true in an organization that is small enough to be very selective of who it hires and who it retains and essentially winnows out the people whose best path lies elsewhere early in their careers.
Once you've gone through that refinement process, there's no reason to be winnowing out, and the objective should be to retain people. But that attitude that Logan Roy exemplified of making people compete, of making people become winners or losers because you couldn't all be winners, is not true in most areas outside
competitive sports. Success is not a zero-sum game. And in our world, we have different classifications of people on the employment ladder, but there's no quota that says, well, I can only have so many managers and the rest have to be associates. When somebody is doing manager functions which has more to do with
their set of responsibilities, either internally or with clients, then they're a manager. When they've developed that level of skill that lets them really be the primary caretaker for a client family, they're a senior client service manager. Or if they have other firm-wide responsibilities that are essentially strategic, not operational, well then they should be an executive. And there's no point in
defining that to mean, well, there's only X number of places on the organization chart that can be filled. And so over time, you're going to have sort of a top heavy seeming organization chart if you really are retaining people. But that's going to be because your people are performing at a high level. That's what you want. That's not something to be avoided.
Alright, so you’ve taken a lot of care assembling this staff, sort of
focusing on people's skills as well as their temperaments and their personalities. In your vision in an owner-managed business like yours, whenever you depart the scene, what are you picturing happening next?
My goal is for my daughters, other family members, potentially down the line, to maintain the essence of what makes our firm what it is, to benefit from it financially
but also professionally and intellectually and emotionally, because they'll be the caretakers of our mission, our values, the philosophies that let us in good conscience take a 21-year-old new college graduate and ask her to build her career here for decades to come. I hope they'll do that. The real world model, of course, is not the fictional
Logan Roy and Waystar Royco. In some ways it is the Fox News and News Corp model of the Murdochs, at least what he's attempting to do in passing on to his son the chairmanship of the company without expecting him to run those business units
day to day. One of the big differences between me and Rupert Murdoch is that I do not expect to hang on in the driver's seat until I'm 92 years old.
Okay. On that note, you also write in Looking Ahead about tax considerations that anyone approaching Logan Roy's age might want to think about, whether or not they own a business.
Taxes are really important for families with a lot of wealth.
Estate taxes are a big consideration, they kick in in the United States at 40% for estates in the low tens of millions of dollars. But there's a tendency among professionals sometimes to overstate and overemphasize taxes. They are important, but they are not necessarily what drives people's decisions. I had clients teach me that in a couple of ways when I was early in my career.
There was one time that really stands out in my memory. I was a young financial planner. I just learned all about the estate tax and how, if the older family members moved wealth down to their heirs at earlier points, you could shift a lot of future growth out of the tax system and save tons of money. We had a very wealthy client. This was when I was still at Arthur Anderson. I went out to meet with that client and his attorney. He
was already probably in his 70s and retired. And I watched, it was interesting to see the attorney settle herself on the sofa. She took off her shoes. She sat back and just to watch the show, she knew what was going to happen. She'd worked with this client for years. So I explained everything I knew about how this client could save lots of money in estate taxes by
shifting money to his children and grandchildren. And he listened very politely. And he said, “Thank you very much. I'm going to leave everything to my wife. I've already provided for my children.” This was a decision he had already made. His lawyer had already discussed it with him. She knew
what I was going to say and how he was going to respond. And that's fine. He had done what he felt he needed to do for his children. He had other intentions for his wife, who was not the mother of his children. And those were what mattered to him, and what mattered to him was what was important. There was another incident when I was also, in the early days of my career,
where I had a similar conversation with another client. This client had come into control of a family business that had actually been started by his father. And so I went through a similar explanation of the importance of moving funds down generations at the earliest point so you could get future growth out of the taxable estate. And this client looked at me and said,
“I don't want to give a lot of money to my children, because if they have more money than I do, they won't respect me.” So I absorbed that and whether I agreed with that or how I felt about that was not important. What mattered was that this was how this client felt and any planning I was going to be able to do with him had to take into account his situation and his family dynamics.
Amy Laburda 36:58
We talk in Looking Ahead about how we tend to build financial plans around both certainty and uncertainty. The certainty is taxes and the uncertainty is how long we'll live and how healthy we'll stay.
We talk about it in our books. We talk about it with our clients. We talk about it among ourselves. For someone my age, I think the most vivid reminder is the memory of 9/11. Think of all the people who were in the midst of their careers
and raising their families that day, or others who were just starting out. They went to work in the morning and they didn't come home that night. Nobody plans for that to happen. But most of us are in a position to prepare just in case on behalf of the people we care about.
In the end, financial planning is about setting priorities, making choices, getting our affairs in order, and then revisiting as often as necessary because life's going to happen whether we're ready for it or not. I had a client who used to talk about what would happen if the beer truck hit him. Well, the beer truck can come for any of us at any time.
Well the beer truck may come for us all,
that's definitely an uncertainty. So we're gonna talk a lot more about certainties and uncertainties on this podcast. Larry, thank you so much for coming on today. It was great to talk to you.
Same here, Amy. Thanks for having me.
In the meantime, thank you all for listening and welcome to “Something Personal.”
“Something Personal” is a production of Palisades Hudson Financial Group, a financial planning and investment firm headquartered in South Florida. Our other offices are in Atlanta, Austin, the Portland, Oregon metropolitan area, and the New York City metro area. “Something Personal” is hosted by me, Amy Laburda. Our producers are Ali Elkin and Joseph Ranghelli. Joseph Ranghelli is also our director, editor, and mixer.
Our firm has written two books, Looking Ahead, Life, Family, Wealth, and Business After 55, and The High Achiever’s Guide to Wealth, which offers advice for younger professionals, entrepreneurs, athletes, and performers. Both books are available on Amazon, in paperback, and as e-books.