Five Father-Son Teams Share Investing Secrets

Sure it’s a cliche;, but it happens to be true: You can’t learn everything from books. As important as a degree from a business school can be to the education of a young money manager or advisor, there’s nothing quite like the lessons imparted by an older, wiser, more experienced professional.

And who better to learn from than dear old dad?

‘Steve first became interested in investing when he was about eight years old and he found out that you could put money in a bank and it would earn interest,’ says Ronald Rogé of his son Steven, who together run R.W. Rogé & Co.and the Rogé Partners fund. ‘In other words, he discovered that you could make money without working,’ the elder Rogé says with a chuckle.

Later Steven was curious about mutual funds. He collected baseball cards at the time, so his father explained that a mutual fund was kind of like a pack of cards — a basket of individual stocks, some of which were potentially more valuable than others. By the time Steven was 12, he was hooked.

That’s a common theme among the father-son teams SmartMoney spoke with ahead of Father’s Day weekend. When talk at the family dinner table centers around stocks, bonds, mutual funds and the market, well, an interest in investing tends to get kindled at a very young age.

Even more important is that those relationships create an appreciation for history, for experience, for risk and for unconventional thinking — things that can’t necessarily be learned in an MBA program.

After all, when your dad’s been in the business a long time, you stand to benefit from his decades on the front lines of the securities markets. Here, then, is a look at five father-and-son investing teams — and some of the generational wisdom that has stood them in good stead. And lest we forget, daughters can benefit, too. Abigail Johnson helps run the company her family founded, mutual fund giant Fidelity.

Learn the investing secrets of Steven and Ronald Rogé and four other father-son investing teams.

Bryan and Bob Auer | Auer Growth Fund

Bryan, 73, had been managing his own investments quite successfully for a long time when his son Bob, 48, took a job as a broker at Dean Witter Reynolds in 1986. Bryan opened accounts with his son but wasn’t interested in the firm’s research or recommendations. Rather, he had his own stock-picking system — one the duo continues to employ at Auer Growth fund to this day: Cull through thousands of stocks looking for 25% earnings growth, at least 20% sales growth and a forward price/earnings multiple of less than 12. ‘Once a stock stops having those characteristics or doubles in price, we sell,’ Bryan says. ‘We started that process in 1987 and by 2007 our accounts had an annualized return of more than 30%,’ says Bob. So in late 2007 they launched Auer Growth, with Bob acting as portfolio manager and Bryan in charge of portfolio analysis. Naturally 2008 was an inauspicious time to start a fund, but for the year to date it’s up 22%. When asked what’s the greatest lesson he’s learned from his dad, Bob laughs. ‘Only how to compound money at 30% a year.’

Gordon, Kent and Russell Croft | Croft Funds

Gordon, now 76, had been a director and manager at T. Rowe Price for 20 years when his older son, Kent decided to leave his job at Salomon Brothers in 1989 and return to Baltimore to start a firm with his dad. ‘The first thing I did was make Kent president, so he has been the boss for 20 years,’ Gordon says. Russell joined the firm in 1999. ‘Both of them have the highest ethics and highest character that you can imagine,’ says Gordon, ‘and that holds you in good stead in this business.’ The Croft Value fund seeks out high-quality companies with low P/Es that can be held for the long term. It’s a strategy that’s allowed the fund to beat the S&P 500 over the last three-, five- and 10-year periods. Kent, 46, says the greatest lesson he’s learned from his dad is the importance of keeping long horizons on stocks. ‘When you’re younger you tend not to quite think like that,’ he says. Russell, 35, says his father taught him and his brother to constantly question the conventional wisdom. ‘That’s in our blood,’ he says. ‘The search for inherent, hidden value with a contrarian nature — we got that from our father more than anything.’

Lloyd and Larry Glazer | Mayflower Advisors

In 1989 Lloyd, now 70, was a partner at Bear Stearns in Boston, a place he had worked for two decades. His son Larry, 41, had senior positions at H.C. Wainwright, Trammell Crow and Bank of Tokyo. They had long talked about working together and decided that the time was right. So they formed what Lloyd calls ‘a terrific partnership,’ setting up their advisory, Mayflower Partners, within Advest, a regional brokerage firm. When Merrill Lynch acquired Advest in 2005, the Glazers’ clients urged them to strike out on their own. ‘And it has worked out wonderfully for us,’ Lloyd says. Mayflower was one of the first advisors to transition to a fee-based structure from a commission-based one, and was also quick to grasp the utility of ETFs for asset allocation and hedging positions, Larry says. But the most important lesson learned from Dad? ‘In our household we talked about debt and leverage at the dinner table,’ the son says. ‘I had that benefit from a very young age. As a result, our firm has no debt, and we advise clients to have little or no leverage.’

Stephen and Samuel Lieber | Alpine Funds

Stephen, 83, and Samuel, 53, used to do a lot of sailboat racing together. ‘That’s how we learned to work together as a team,’ says Stephen. That experience was critical to the 1989 launch of the Alpine International Real Estate Equity fund, the first global real estate offering of its kind. Not only did that wed the son’s experience in real estate and REITS with the father’s decades of asset and portfolio management, it taught Samuel a valuable professional — and personal — lesson. ‘In the late 1980s we were so big in the real estate sector that we found we were moving share prices around,’ Samuel says. ‘I expressed concern to my dad. He said look farther afield, broaden your horizons and look for other types of opportunities.’ That’s how the first international real estate fund was born. Today Alpine runs nine funds, but that first lesson remains key, Samuel says. ‘Take a broad, holistic approach not only to investing, but also to life.’

Ronald and Steven Rogé | R.W. Rogé & Co., Rogé Partners Fund

Ronald, 62, started R.W. Rogé in 1986 as a financial planning and advisory business. He first started stock picking in the early 1970s but found that he wasn’t very good at it. He was better at finding good fund managers — like his son Steven, 28, who joined the company in 1997. ‘I’m really good at strategy and looking at the big picture,’ Ronald says. ‘Steve is very good at finding undervalued stocks.’ Steven might have been a longtime disciple of Benjamin Graham and Warren Buffett, but his first job at Dad’s office was making copies and doing other menial chores. After seven years of learning the business, Steven become portfolio manager of the Rogé Partners fund, which launched in late 2004. The fund got off to a good start, posting total returns of 10% and 21% in 2005 and 2006, respectively, but cooled off in 2007 and, of course, 2008. But then that just makes the lessons instilled by the father all the more important. ‘When you are a value investor the most important thing is patience,’ Ronald says. ‘Warren Buffett watched Coca-Cola for 25 years before he purchased it.’

Dan Burrows