Synopsis: Two advisors in New Jersey are engaging in one of the most creative outreach programs you've ever heard of.
Let’s suppose you have a smart advisor on staff who is interested in marketing your company’s services. But the traditional approaches-writing blogs, organizing seminar presentations, email marketing, cultivating centers of influence or PR contacts-don’t turn him on. Is there a more creative way for younger advisors to get your advisory firm’s name out in public?
Maybe you should consider having him collect economic data on behalf of the business community. Who better than a financial advisor to contribute to public policy debates on tax structures and investments in the business environment?
Meet Andy Kapyrin and Brian Kazanchy, Director of Research and Managing Partner/Wealth Advisor, respectively, at RegentAtlantic, Inc. in Morristown, NJ. Each of them has created a unique way to make their company’s brand better-known in the business community, and also to deepen their understanding of their clients’ business challenges.
Kapyrin has created something called the New Jersey Wealth Index. “The idea is to get a sense of the health of the wealth in New Jersey,” he says. “What are the things that impact whether people are getting wealthier or feeling poorer about their financial circumstances?”
The index he created is a weighting of four factors: home values (are they rising or falling?); the state unemployment rate; income levels (are they growing or falling in relation to the rest of the country?); and whether the stocks of locally-sited businesses are rising in value in pace with the market.
“Looking at those four factors, I’m trying to measure, over time, how conducive has the environment in the state been to wealth creation,” Kapyrin explains. “Is it doing great? Is it doing poorly? How is it doing relative to the rest of the nation?”
What has he found? “New Jersey was a great place to become wealthy in the 1990s,” Kapyrin says, adding that although he created the index three years ago, he was able to reconstruct it back to the early 1990s using historical data. “Home prices were very strong and our unemployment rate was two percentage points below the national average. Income was growing very quickly. And,” Kapyrin adds, “if you were an executive of a New Jersey business, you probably received compensation in the form of company stock from Johnson & Johnson, Merck or the Public Service Enterprise Group-our local utility. All of those companies were doing really well in the stock market.”
Fast forward to 2010, right after the recession ended, and the New Jersey Wealth Index was telling a different tale. “Home prices collapsed at about the same rate as they did all over the nation,” says Kapyrin, “and they still haven’t recovered, to this day.”
Since 2010, the unemployment rate in New Jersey has fallen, but not as fast as the rest of the country; today, it remains a percentage point higher than the national average. Average income has not been growing as fast as it is in the rest of the country and the Wall Street and Big Pharma firms are laying off workers.
“All of this data is interesting in its own right,” says Kapyrin, “but it’s also a conversation starter about what’s going on in New Jersey, what’s working well and what isn’t.”
In interviews, Kapyrin is asked to comment on the state’s political leadership-specifically how well Governor Chris Christie is managing the state economy. He takes a strictly numbers-based, non-ideological approach, but still manages to forge a stand on what is and is not being done.
“It’s tough when your governor was running for President, because I think it prevents you from facing reality,” says Kapyrin. “The reality in New Jersey is that our state debt is much too high, and the only way to fix the problem is to do some combination of tax hikes and spending cuts. It sounds political,” Kapyrin admits, “but to me, it’s not political; it’s arithmetic. We have room to raise taxes if it’s necessary, and New Jersey can also cut spending.”
Kazanchy, meanwhile, is involved in a bigger project that looks at some of the same data from a broader perspective. He has partnered with the New Jersey Business & Industry Association to look at the incentives-or lack of them-for businesses to stay in New Jersey or relocate.
“David Bugen [a founding partner at the firm, now retired] had done an initial study on New Jersey out-migration,” Kazanchy explains. “And my friends at the Association were telling me: we cite that paper all the time. It’s done a lot for us. At the time, there was no relationship between our organizations,” he continues, “but I decided to schedule a meeting down in Trenton, which is a two hour drive from our offices.”
The meeting went well. “They’re very passionate about advocating for businesses, and I’m very passionate about working with business owners,” says Kazanchy. “I said, if you’re willing to provide us access to your membership, we would love to interview them, learn more about the challenges they’re seeing here in New Jersey, learn about some of the positives and the opportunities that are still great here, and really focus on that in our next white paper. We would highlight some of the stories of business owners in New Jersey, some of the great things about being here, and some of the challenges.”
Kazanchy has spent the past six months talking with small business owners around the state. “So far, we’ve gotten through 80 interviews, trying to get a better understanding of what’s going on for different businesses in different industries,” he explains. Some of these conversations extended for three or four times as long as scheduled, as the business owners began to open up about their situation and realize they had an unusual opportunity to offer public policy recommendations based on their own experience. It has given Kazanchy a more comprehensive picture of the challenges that New Jersey business owners face, and a wealth of contacts throughout the business community that other advisory firms can only envy.
What did he find? “NJBIA surveys all of its members every year, and asks them for their economic outlook,” says Kazanchy. “They get 1,100 responses. We suggested that they add three questions.
Question one: If you were planning to expand, would you choose another location in New Jersey? “Only 38% said yes,” says Kazanchy. “62% of the respondents said they would consider expanding somewhere else.”
Second question: Do you plan to keep New Jersey as your domicile in retirement? “66% said no,” says Kazanchy. “That tells us the outmigration trend is very strong and likely to continue.”
Question three: Have the state inheritance and other taxes affected decisions about your business’s future? “67% said yes, it does,” Kazanchy says.
The white paper isn’t written yet, but Kazanchy has already observed some patterns in the conversations he’s been having. “A lot of business owners would like to see some form of tax reform,” he says, “focused on estate and inheritance taxes here in New Jersey, because that would help small and medium sized businesses with their succession planning. But,” he adds, “property taxes are pretty high as well, and we have a commensurate sales tax with other parts of the country. Overall, the tax burden is very high.”
Anything else? “Education is a real strength in this state,” Kazanchy says. “Our public school systems are incredible, and we have a nice group of universities. But when we looked deeper,” he says, “we were able to identify some issues on the technical education side. Business owners told us that there is a bit of a disconnect between the skills that are being taught in the vocational schools vs. what is really needed by the employers today-especially a shortage of infrastructure engineers coming out of the technical schools. Our companies are seeing cheaper labor in Pennsylvania and Ohio, and those states have engineered a better integration with some of that technical labor. The result is that the businesses here are incentivized to open their next location somewhere other than in New Jersey.”
Kazanchy also heard complaints about the health of the state’s infrastructure. “That may not be uncommon vs. other parts of the country,” he says, “but I think it’s particularly relevant in New Jersey, because there are so many great reasons to do business here. We’re close to the ports; we’re close to the New York City market. But the traffic going into and out of the city and getting around many parts of New Jersey just hasn’t been managed well enough. The cost of doing business continues to rise. If a truck is stuck on the road, you’re paying that employee time and a half and you aren’t going to be able to get that person on the road the next day. Meanwhile, the cost of fuel and maintaintenance goes up.”
Kazanchy’s research has been focused on smaller businesses, which happens to be his own planning sweet spot. “The state will fight to keep the larger corporations here with major tax incentives,” he says. “Those big companies are getting the attention they need. But I think New Jersey has to look forward and say, we’re not necessarily going to be able to rely on the large corporate presences the way we have in the past, and that is even more of a motivation to focus on small/medium-sized businesses, and provide them with the incentives to be here.”
They also need to come up with ways to keep this wealthy cohort of business owners in the state once they transition their firms to the next generation. “Nobody is going to fault anybody who wants to spend three months a year in a warmer climate,” says Kazanchy. “But it’s not uncommon for people to spend six months and a day outside of New Jersey, instead of the time they would ideally spend. And that impacts the economic activity that is left here. It impacts the charities and the other causes they support when they get involved in some other state where they’re spending so much of their time. It doesn’t necessarily have to be that way,” Kazanchy adds. “I think a lot of people want to be here in New Jersey, and enjoy being here.”
Like Kapyrin, Kazanchy believes that the information he’s collecting is objective, non-partisan, and definitely not self-serving. “This is not RegentAtlantic saying what should happen next,” he says. “It’s a collaboration with business owners, and how they think we could improve things.”
As Kazanchy and his staff have conversations with business owners, and as the white paper is published, reported in the press and used in legislative discussions, there is an obvious brand-building component to this effort. But there is also a priceless educational element.
“Roughly half of my 90 clients are current or retired business owners,” says Kazanchy. “To hear the interesting opportunities and challenges that they’re facing-it certainly adds to my understanding of what we do and what we need to do. All the different stories and experiences that we hear will really help us as we continue to work with our clients.”
Has he learned anything that really surprised him? “I’m discovering just how much business owners see their business as another child, where they need to be able to step away from the day-to-day supervision at some point and transition responsibility,” says Kazanchy.
This has led him to add a new cohort of interview subjects to the project.
“We’ve identified a group of attorneys and accountants, corporate and estate attorneys, as well as some valuation specialists,” Kazanchy says, “and we’re going to interview a select group of them, and have them be a part of the conclusions we outline in the solutions.”
Most marketing initiatives are designed to get publicity for the advisor and the firm, and the New Jersey Wealth Index and the upcoming white paper certainly address that goal.
But these creative programs also manage to achieve three potentially more important goals. They expand the understanding and knowledge of the advisors into the challenges that their clients are facing. They deepen and expand the firm’s relationship with leaders in the business community. And they help inform the decision-makers at the state level about how best to water, fertilize and tend their garden of businesses that represents the tax base, employers and drivers of prosperity in the state.
Win-win-win-win, for the firm, for the quality of advice it provides its clients, for the business community and the quality of decisions made in Trenton.
Why didn’t anybody think of this before?