Celebrating Our 40th Anniversary
It is said that 70%-90% of new businesses fail within a decade. Imagine our pride that the little investment business founded by Ralph Seger and Maury Elvekrog on July 29, 1981 will soon celebrate its 40th anniversary!
Allow me to share a trip down memory lane, 40 years of history in a 10-minute read. After successful careers as a chemical engineer and industrial psychologist, respectively, Ralph Seger and Maury Elvekrog took their hobby of stock investing to the next level. Both began working for a local investment firm and quickly realized their investment philosophy and client focus were more aligned with each other than with their employer. Seger-Elvekrog Inc. soon followed.
Imagine the boldness to start a new investment business in 1981 in the midst of back-to-back recessions and bear markets! In retrospect, it was a wonderful time, as the United States was on the cusp of a long bull market lasting almost two decades with only brief interruptions.
By the time I joined the business in 1992, we managed around $35 million for 50 clients. I was the third full-time employee, with three part-time administrative personnel. While we had software to track client accounts, the data was entered by hand. Accounts were reviewed by printing out all client statements and going through them one by one, trying to spot opportunities for improvement. Information was acquired by reading the Wall Street Journal and waiting for company news by fax or mail. There was no Internet so we only needed one computer to manage client data and prepare correspondence.
Having spent six years in the trust department of a major bank, National Bank of Detroit, I wanted to apply some of the business practices of a large company to an entrepreneurial and client-focused business like Seger-Elvekrog. That process has never stopped, and has become a key ingredient in our success and longevity.
About half of client accounts were custodied by a team of three brokers at Kidder, Peabody (sold to Paine Webber and then to UBS) and the rest were spread among about ten other firms. Trading was chaotic and involved long days of multiple phone calls.
I approached Ralph and Maury about simplifying our client trading by moving to two custodians. It was supposed to be Kidder, Peabody and Schwab, but one of the ten brokerage firms we used was upstart Waterhouse Securities and they made us a very attractive offer. My wife and I visited Waterhouse in New York and found its “Institutional Division” was all of six brokers plus a president and a salesman. But small Waterhouse was a perfect fit for small Seger-Elvekrog. Trading became much easier with two primary brokerage firms. A year or two later, it became even more efficient when Kidder, Peabody fired our brokers and we moved the remaining clients to Waterhouse.
In the mid-1990s, the Internet leveled the playing field for smaller money managers like Seger-Elvekrog. Investment success was once limited by access to information, but the Internet democratized that information. Company news and economic developments were announced online for all to read at the same time. We all had computers on our desks by now. Equal access to information highlighted the value of a strong investment philosophy and good analytical skills, which we already had. Best of all, no more fading, curly fax paper! To help manage our growing business, we acquired new software in early 1999 which allowed us to combine a household’s accounts into one large family portfolio.
Our growing business also necessitated gradually expanding our staff and adding hours to the schedules of our part-time employees. Pat Beach became full time and we hired Doreen Phelps in 1999. I met Dan Krstevski who worked in Waterhouse branches in southeastern Michigan and addressed a need in sales, marketing, and client service by hiring him in 2001. Dan further cemented his professionalism by earning the Certified Financial Planner designation.
Dan Boyle was a major addition in 2004. We met Dan through a mutual connection in the investment industry. Dan worked with a firm making private investments in debt and equity securities, and had the right professional knowledge and entrepreneurial drive. Soon after, we faced a critical challenge that dooms many small businesses—the retirement of a founder—when Ralph Seger retired at the end of 2005.
As a college student at the University of Michigan in the early 2000’s, Miles Putnam came to a seminar in Ann Arbor that we put on jointly with Waterhouse. I was impressed with his intelligence and maturity, and brought him in as an intern in 2004. I offered him a permanent position upon graduation, but he wanted to see the big world. We kept in touch. He needed a project for his masters degree at U-M and we had him evaluate software that would help manage our client trading process which hadn’t really been improved in almost a decade. He concluded the software wasn’t ready yet. I offered him a job once again, but he wanted to do other things.
Waterhouse became known as TD Ameritrade after its acquisition by Toronto Dominion Bank and subsequent merger with Ameritrade. Our association with the firm came to an end shortly afterward due to multiple major technology lapses including a data breach by hackers and its inexplicable failure to accurately track client withdrawals. We moved to Fidelity in late 2007.
2010 was a big year for us. Miles finally answered the call and came on board. Pat Beach planned to retire and we hired Pam Parks to take her place. At the end of the year, Maury Elvekrog retired. We had another vacancy to fill on our administrative staff and someone who previously interviewed for a job suggested a friend, Terri Buchanan. Terri joined in early 2011 on a part-time basis, becoming full-time in 2019.
In 2011, we began using that software Miles evaluated several years earlier. It still wasn’t perfect, but represented an improvement over our processes at the time. In 2020, we converted our client accounting software to this same firm after 21 years using a different product. We went from entering our own data until 1999 to having data downloaded onto our own server to now having our data hosted in the cloud without having to take our own time fixing misinterpretations between our custodian and our software.
In 2013 we changed our name from Seger-Elvekrog to Provident Investment Management. Provident is defined as “planning carefully for the future.” We were always provident, and now we had the name to go with it!
We also kept hiring. James Skubik joined the investment team as a stock analyst in 2017. James caught our attention because he and a colleague had the gumption to leave good jobs to start their own investment management business. We like people with entrepreneurial fire. Plus, he had already earned his Chartered Financial Analyst designation like Dan Boyle, Miles, and myself. A year later, we added Eric Pozolo who is responsible for fixed income investments and is our in-office technology expert. Eric earned his Certified Financial Planner designation after joining Provident. In fall, 2020 we brought Jeanine Russ to our capable administrative team.
Last fall, we implemented our new client accounting system. In the early stages of that implementation, we began discussions with our exclusive custodian, Fidelity Investments, over mutual dissatisfaction with our relationship. We felt the quality of Fidelity’s administrative services had declined significantly. Fidelity felt we weren’t sufficiently profitable customers; their “solution” would have saddled our clients with additional costs that our competitors’ clients didn’t face. We couldn’t resolve our differences and are in the process of parting ways.
It is interesting to me how one thing leads to another, how one good decision or good hire sets us up for success in ways we didn’t originally envision. It would have been impractical to change custodians had we not updated our client accounting software to the cloud. That software decision has roots in past actions. And we finally arrive at Schwab which recently acquired Waterhouse (TD Ameritrade), the custodian we originally coalesced around 26 years ago, having passed over Schwab for Waterhouse’s strong offer.
Here we are at 40 still evolving our practices to pursue continuous improvement, finding new people to help us achieve excellence, and all the while staying true to our foundational belief in the wealth-building power of investing in shares of well-run, growing companies at reasonable prices. Thank you to all our clients for joining us on this journey!
Scott D. Horsburgh, CFA