Clients embrace investment firm with family ties

For Michael Kabarec, the success of his business, Palatine-based Kabarec Financial Advisors Ltd., has meant an opportunity to mix work with a life-long love of golf.

Kabarec, who started caddying at 10, is now able to enjoy the sport his daughter calls him "obsessed with" by golfing on a regular basis with his clients, many of whom share his enthusiasm.

"He paid me for my golf," said Casey Halinski, a retired director of materials management and a 20-year Kabarec client. Halinski said thanks to Kabarec's services, he and his wife have been able to live off the interest from their investments and use that extra time and money to, well, play more golf.

The average client at Kabarec, which celebrated its 25th anniversary in May, is in his or her mid-50s; a corporate executive, doctor or attorney; and has a minimum of $500,000 to invest. The firm's six employees manage about $150 million for 177 clients.

"Sometimes you don't sleep; you still get nervous," says co-founder Karen Kabarec about the anxiety associated with managing the financial future of clients.

Family is the other ruling principle at Kabarec, according to the company's employees.

"It's like a small family," Marketing Coordinator Jennifer Krizmanich said. "We all know everything about each other."

Mike and Karen Kabarec want their clients to feel like they're a part of that, too. The husband and wife say their financial paraplanner, Michelle Borne, can recognize all of their clients by voice and she was hired precisely for that reason.

"I have felt very comfortable with Mike and the way he's surrounded himself with an organization that's almost like a family," Halinski said.

And clients like to spread the family-feel at Kabarec to their own families: "He spent his time at no extra cost to review my aging mother's finances. And my children have called him for financial advice," said client Renee Moeller. Her husband's parents are also clients.

In the absence of any formal marketing strategy, the Kabarecs say word of mouth has been the driving force behind their expansion. A lot of clients say they've recommended Kabarec to friends, family and co-workers.

Kabarec's revenues have grown to match the maturation of its clients' portfolios. In 2006, annual revenues hit the $1 million mark for the first time. Mike Kabarec expects the company to generate $1.2 million in revenue for 2007. The company averages annual growth of 8 to 10 percent, he said.

Kabarec's revenue comes primarily from its investments under management. The company gets a 1 percent return on investments up to $1 million and eighth-tenth of a percent on investments over $1 million.

Kabarec is "fee-only," which means it doesn't charge commissions like some asset managers. It's a rule that avoids conflicts of interest, according to Mike Kabarec. The company also generates revenue by charging clients for financial planning. Most clients use both the investment and financial planning services.

But for all the nerves associated with managing their large pool of assets, Kabarec isn't a risk-taking firm, it's operators say.

"We're conservative investors," said Karen Kabarec.

The firm's approach may not be for everyone.

"We're not aggressive enough for some clients, and it's not a good fit," Mike Kabarec said.

"We have a mutual fund that invests totally in Latin America and that thing is very volatile. So we sold half of it about a year ago," said Karen Kabarec. Some of Kabarec's clients weren't happy about the decision because the fund was making money, "but it reduces risk," Karen Kabarec said.

Kabarec, who earned his degree in accounting at Northern Illinois University, began working at an accounting firm right out of college but decided to start his own business in 1982. The move felt natural because Kabarec was already doing lots of financial advising and accounting services on the side for friends and co-workers.

His wife, Karen, quit her job in nuclear medicine and joined him a few years after. Twenty-five years later, the six-employee company has been featured in national publications including magazines Worth, Forbes and Money, and has been named by the trade publication Medical Economics as one of the 150 best financial advisers for doctors.

The Kabarecs' 33 year partnership in marriage has helped make their company a 25-year success, they say.

"We work well together because I'm the big picture guy, I'm the dreamer. Karen's more detail oriented. I think it's one of the reasons we've gotten along so well over the years," Mike Kabarec said.

Change is in store for Kabarec, though. Karen is planning to phase out her responsibilities and retire in the near future. According to the Kabarecs, Senior Planner Kirk Hackbarth will take over as partner.

Business Profile

Business: Kabarec Financial Advisors, Ltd.

Operations: Manages about $150 million for more than 175 clients.

Owners: Principal and owner Michael Kabarec, co-owner Karen Kabarec, Senior Planner Kirk Hackbarth

Location: 220 N. Smith St., Suite 220, Palatine

2006 revenue: $1,023,342

Employees: 6

Contact: www.kabarec.com, 847-934-7777

Motto: Large enough to serve, small enough to care.