Cheryl Holland, President of Abacus Planning Group

MidlandsBiz:
What is your educational background? 

Cheryl Holland:
I was raised in South Carolina and did my undergraduate work in economics at Bryn Mawr, a liberal arts, women’s college in Philadelphia.

MidlandsBiz:
Why a women’s college?

Cheryl Holland:
Studies continue to show that a single gender education allows young women to enter into leadership opportunities that they probably would not explore at other institutions.  There are simply more leadership opportunities to go around at a smaller college.  Single gender also allowed me the opportunity to do well in school without feeling self conscious about my choices – it was cool to like math.

MidlandsBiz:
Did you have any women who have inspired you in your career or acted as mentors?

Cheryl Holland:
At a women’s college you have ample opportunity to see women in leadership roles who are excelling in their field of study.  I remember being impressed that the whiz of the math department was a woman with beautiful gray braids.  Another woman economics teacher had a profound impact on me and encouraged me to continue in economics. 

I have worked fairly independently for most of my career.  Countless people have helped me through the years with their generosity and their kindness, but no one person has acted as a mentor except my parents.  My mom had a stellar professional and volunteer career as a school librarian while at the same time raising a family including sewing all of my clothes.  I’m lucky to get my daughter fed and out the door on time.  My dad always had supra faith in me and my abilities.  He’s also the best listener in the world which isn’t a bad skill for an advisor to learn at the dinner table. 

I am on the Board at Bryn Mawr and also at the American Bible Society.  When you are privileged enough to be at the table with world class leaders, you learn by observing how people lead with humor, how they deal with conflict, and how they lead change with grace.

MidlandsBiz:
What was your first job out of college?

Cheryl Holland:
My first job was working directly in my field of study doing econometric research. I quickly realized that while I love crunching numbers and using my left brain, I missed being around people. 

I was living in Alabama at the time and pursued a job as a stockbroker at Merrill Lynch.  It was a great experience and I learned a lot about the industry.  After attending a conference in New Orleans on a new trend that was developing in our industry – comprehensive advice for a fee – a light bulb went off in my head.  I decided to pursue a career in wealth management that utilized this approach.  The commission-based sales model was not a good fit for me. 

Shortly thereafter, I left Merrill Lynch and started working towards my Certified Financial Planner (CFP) designation with a goal of learning how to truly become a professional in this industry. 

MidlandsBiz:
When did you start Abacus?

Cheryl Holland:
I started the company 11 years ago.  After leaving Merrill Lynch, I went to work part time at a law/CPA firm in Alabama. I offered financial planning advice for $25 an hour. I also learned how to be a professional –do what you say you are going to do, finish what you start, keep everything utterly confidential and show up on time.   In 1990, I moved back to Columbia to be closer to my parents.  I realized that if I wanted a career and a family at the same time that I needed some help!

I worked here locally for J.E. Wilson Advisors, another early pioneer in the wealth management industry.  I became a partner at that firm, but after about 8 years, we decided to go our separate ways. 

MidlandsBiz:
What is your core business?

Cheryl Holland:
We offer fee-only financial advice to those who are seeking a holistic advisor:  someone to listen to your dreams and goals, map your retirement needs, develop a strategy to minimize income and estate taxes, and manage your money to meet these goals.  In a nutshell, we help people make smart financial decisions.  We do not sell products and we make the same amount of money whether we recommend you invest in stocks or pay-off your mortgage. 

MidlandsBiz:
Explain fee-only.

Cheryl Holland:
There is a spectrum in this industry from full commission to fee-only.  On the commission side, whenever there is a transaction such as the purchase of a life insurance policy, a long-term health care policy, or a mutual fund, the person selling you the product earns a commission. 

There is another model called fee-based where the financial company charges a fee, and the financial advisor also receives money from the vendor (the mutual fund company, the life insurance company etc). 

Then there’s fee-only, a system similar to how lawyers and doctors earn income. Should you choose to come on board as a client at Abacus, we tell you exactly how much you are going to be charged and that fee is deducted from your account on a quarterly basis.  We offer full disclosure up front that we don’t get paid by anyone else.  Our allegiance is to the client, 100% of the time. 

MidlandsBiz:
Has the sales model changed for brokerage firms over time?

Cheryl Holland:
The advent of no-load mutual funds and index mutual funds (that were pioneered by John Bogle at Vanguard) are two major innovations that caused our industry to start offering more comprehensive financial advice rather than just pushing the hot stock or bond of the day.  These two trends helped drive down the cost associated with investing in the market and gave consumers more flexibility to invest in the market on their own.

In the 1980s, the model was 100% commission based.  Many of the large firms may still have their brokers working on a commission only basis, others will start off a broker with a base pay for a year or two, but eventually phase in a commission based pay structure where your income is determined by how much you produce or the amount of assets you gather under the firm’s platform.    

In my opinion, the issue is not so much how you charge your clients; it’s the clarity about the fee in the mind of the client that is critical. Some firms are very transparent about fees with their clients; others are not. 

MidlandsBiz:
Did you have existing clients when you started Abacus?

Cheryl Holland:
Yes.  James Wilson and I spilt our clients.  Abacus started with a good nest egg of assets under management (AUM) in the range of $35M.  

MidlandsBiz:
How many assets under management do you have now?

Cheryl Holland:
We reached $525M in AUM at our peak, but with all the challenges in the equity markets these days we are at $488M under management. 

MidlandsBiz:
How do you measure success?  Is it assets under management (AUM)?

Cheryl Holland:
Bloomberg’s Top Dogs, Barron’s 100 – these ranked lists use AUM as one of the important factors by which firms in our industry are judged.  The more you are managing, the more likely you are going to be seen as a success because more people have come to your firm and trusted you with their assets.  AUM is certainly how you keep score in our industry. 

We are p
roud at Abacus to be competitive nationally on a number of metrics. We have had above average industry growth in AUM every year of our existence.  To have above average industry growth in New York or Chicago where there is a much greater concentration of wealth is one thing, to have it in Columbia, South Carolina is much more challenging. 

We did not create Abacus with a goal of reaching a certain magical number of assets under management.  Maybe it’s the female side of me coming out, but I’m not into that kind of scorekeeping.  At Abacus, it’s more about the number of clients that we have and the quality of those relationships.  We work with 160 families; that’s how we measure success.  Our retention is a consistent 98%.  When we do focus groups with our clients, the most important message that comes out is that our clients trust us and have peace of mind about their futures.  They share with us that they will or have referred their best friend to us.

MidlandsBiz:
Are most of your clients from South Carolina?

Cheryl Holland:
Around 80% of our clients are from South Carolina.

MidlandsBiz:
It has been a tough year in the equity markets.

Cheryl Holland:
No doubt, our industry is in turmoil right now and the meltdown has caused many to revaluate how we think about investing. Almost no one saw this coming and it all happened within a span of about 8 weeks in September and October of 2008.  The surprise was that everything was trashed at the same time: stocks, commodities, bonds from respected corporations.  The only investments that held value were cash or Treasuries.

Everybody in this industry is looking themselves in the mirror and trying to understand how to adjust for better risk management in the future.  We have to learn from this year and become better at what we do.

MidlandsBiz:
Have you had customers saying to you that they wish you had simply put them in cash over this past year?

Cheryl Holland:
Sure, but a portfolio shift to cash involves an extremely difficult process of predicting not only when to get out, but also when to get back into the market.  Since January we have seen fewer clients asking about a move to cash because there are signs of life out there that diversification does work.  While the US market is relatively flat for the year, emerging markets are up 30%, so we are back to an environment where a stool with many legs approach can yield better results.  I think that most of our clients also gained an appreciation for owning bonds and cash.  The insurance of owning low return assets paid off.

At Abacus, we tend to be conservative when projecting our clients long-term retirement cash flow needs.  We think about such basics as future taxation rates, inflation, the viability of Social Security, etc.  If the market returns are lower than expected but our other assumptions were overly conservative, the client’s financial plan is still on track. Few of our clients have had to make serious adjustments to their lifestyle. 

MidlandsBiz:
What trends do you see developing in your industry as a result of the meltdown?

Cheryl Holland:
Recent polls across all demographic sectors suggest a growing demand to work with independent financial advisors versus the large traditional brokerage firms.  The large broker dealers will continue to attract business by virtue of their sheer marketing power and by the fact that they continue to attract and retain some very talented individuals.  I see challenges with the model of selling something that you are manufacturing – in this case – mutual funds or structured products.  The most recent crisis unveiled the inherent conflicts in this model.  The market share of these large brokerage firms will decline over time. 

People also want to work with an advisor who puts their interests first.  Abacus holds itself out as a fiduciary – we put the interest of our clients ahead of our own interests.  This language is in our contract.  People appreciate working with a firm that champions this approach.

MidlandsBiz:
What is your leadership style?

Cheryl Holland:
I have the ability to think strategically and creatively.  I am willing to sacrifice in the short-term in order achieve long-term goals. 

I try to lead a very flat organization where everybody feels listened to and knows their opinion counts.  My goal is to harness the potential of everyone in the firm.

I try to make sure that we celebrate our successes and our blessings. 

Another key part of leading for me is having some fun.  Big kudos to the person on the team who can give me the biggest belly laugh of the day!  We work hard so it’s nice to have a party once in a while.  Get out of the office and float down the Saluda River in a canoe!

MidlandsBiz:
What are some challenges going forward at Abacus?

Cheryl Holland:
When I started out in the early 1980’s it didn’t seem to matter where you put your money – real estate, stocks, bonds – they all appreciated in value.   We are now in an environment where the wealth regime has completely changed and how we think about creating wealth will be much more challenging.  Helping clients navigate this new environment will require new ways of thinking and advising.  We have always believed in paying down debt, saving for your future and broadly diversifying your investments at the lowest cost possible.   It’s boring but true.

When you hire talented people in your organization, you quickly realize that if you want to retain them, you need to offer them a viable career path.  That is a challenge for all companies – growing and motivating your human capital.  Leaders of companies need to continue to delegate their sphere of control so that the firm’s acorns can grow tall and strong and eventually stand on their own.  I would say that one of our strengths here at Abacus is our incredible bench depth. We have CFPs, CFAs, CPAs, an attorney and a top notch operations team.   We have a strong succession plan in place over the next 5 to 10 years. 

MidlandsBiz:
Abacus has won some national recognition.

Cheryl Holland:
Yes, the first Schwab Pacesetter Award and inclusion on Barron’s Top 100 Independent Advisors – you don’t win awards like that without a great team around you. 

The one that means the most to me is the Top 50 Women in Wealth Management.  Every woman on that list is a thought leader who is keenly aware of the critical role that women in our industry must play in public service and who practice the philosophy of as you climb in the world, lift someone with you.   I admire people who are more concerned about service to others than the dollars beside their name. 

MidlandsBiz:
What advice would you give to entrepreneurs?

Cheryl Holland:
The thing about successful entrepreneurs is that they probably have made a lot more mistakes than you would think.  Don’t be afraid of those mistakes. Dust yourself off and reinvent. 

Working with multiple entrepreneurs over my professional life, I have also noted that most pursue a passion not a financial outcome. 

A challenge for all entrepreneurs, and particularly women, is that running your own business can be lonely at times.  Women tend to love their social connections, so it’s not going to be easy when it comes time to make tough decisions as the leader of your company.   Surround yourself with a supportive spouse, family, and friends.  I am blessed to have a husba
nd who always says, Go for it!

MidlandsBiz:
You are moving into a new location at the end of August. 

Cheryl Holland:
In partnership with my architect husband, Doug Quackenbush, we bought an old building that we are currently recycling into a new storefront on Devine Street.  It’s been a joy to work on a project together and we hope a positive addition for the community. 

MidlandsBiz:
What books would you recommend?

Cheryl Holland:
I always have my nose in a book and probably read three books a week. 

The E-Myth Revisited is a great book to help you systemize and harness your entrepreneurial spirit. 

We have everybody at our office read Phone Power which is a guide for how to provide excellent service over the phone – an essential skill for anybody in the service industry. 

I also love The Trusted Advisor by David Maister.  It’s a great book for lawyers, accountants, financial advisors, advertising, or public relations – anybody who acts in a consultant, advisor type role with their business.

Have you ever read Bernard Baruch’s My Own Story?  It’s a great book about how sometimes it’s not clear why you worked at a particular job in your career, but how each step of the way you learn something positive that helps prepare you for the next level.  That was a very important lesson for me to learn.  Sometimes you need to be patient with your career.

As far as industry specific books, I also recommend anything by David Swensen, Charles Ellis, or Roger Gibson – they are all gurus on asset allocation.  We keep a list of recommended books on our website – www.abacusplanninggroup.com

MidlandsBiz:
Who are your customers?

Cheryl Holland:
We work with entrepreneurs and owners of closely held companies, divorced or widowed women, physicians and other professionals.  Generally our clients come to us with a minimum net worth of $3M and are seeking holistic advice not just money management.  

MidlandsBiz:
Can you offer any simple financial advice for those maybe just getting started, who are not at that $3M in net worth?

Cheryl Holland:
Save 10% of everything that comes in the door.  Consistently invest in a low-cost, diversified mutual fund like the Vanguard Star fund, and don’t think about it.  Buy a house you can afford to pay-off in 15 years.  Get a will. Enjoy sharing your wealth with others through charitable or family giving.   There’s some simple advice that applies to everyone.  

And if you have children, for goodness sakes involve them in discussions about financial matters so they are comfortable talking about money.  Teach them how to budget, how to manage credit and how to invest.  Plant those seeds for future financial success.  Go to the library and check-out Financial Fitness for Kids.  It’s a great roadmap!