Breaking the mold

To many people on Wall Street, a CEO is a gray-haired man, so imagine the shock when I walk into a meeting. As the 39-year-old female CEO of our family-owned institutional brokerage firm, I face these challenges daily in an industry dominated by mega-firms with men at the helm. I don't fit their mold, and neither does the firm my father founded some 30 years ago. And that's our greatest strength.

Our firm, Capital Institutional Services (CAPIS), is an independent brokerage firm, thriving in an industry that teeters on uncertainty and consolidation. We are David in a world of Goliaths, a role we've played—and relished —since our earliest days. Running CAPIS has given me the opportunity to work with my father in ways that have strengthened not only our business, but also our family relationships.

The early years

My father, Don Potts, founded Capital Institutional Services Inc. in 1977, two years after the brokerage industry deregulated commissions, a move that allowed the market to set trading fees for the first time in almost 200 years. His goal was to provide a better way of delivering trading and research services to institutional investors. Building on that idea, CAPIS became one of the first firms to allow institutional investors to access independent research through the use of client commissions, which was a radical idea at the time.

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As with any new venture, the early years at CAPIS were quite difficult. My father worked incredibly hard to build the business. He was the sole executive, salesman and decision-maker. I remember him working long hours and being away from home extensively when I was young. Our family made sacrifices to help my dad grow the business. Money was tight. My mother sewed clothes for my brother and me and cut our hair in the kitchen. These lean times taught me the importance of a strong work ethic, and I admired my father's determination to pursue something in which he believed so strongly.

Within a few years, my father had built an excellent team, and CAPIS began earning a reputation for its customer service. Our ability to provide small to midsized customers with the service and attention usually reserved for only the largest accounts on Wall Street was—and is—a key differentiator for our firm.

As CAPIS grew, the big Wall Street firms took notice. Our approach was catching on in the marketplace, and challenged the way other firms had always done business. Because our business model differed from Wall Street's, we became subject to increased regulatory scrutiny, which initially threatened to put us out of business. Over the years, the CAPIS model has been repeatedly vindicated as a valid, appropriate means of serving the institutional community. Imitation is the highest form of flattery, so it was not surprising that other firms began to follow suit, looking to leverage the business model we found so compelling.

Despite these obstacles and increasing competition, CAPIS continued to prosper, experiencing strong growth in revenues and personnel. As the new millennium approached, we had more than 1,200 clients; reached the $100 million revenue milestone; employed more than 100 professionals; and had offices in Dallas, New York and London.

After a brief stint at Fidelity Investments, I joined the family firm in 1993. I spent time in almost every area of our firm, learning the business and working my way up to become the head of our compliance department, a critical area in our heavily regulated industry. I was 27 and sensitive to perceptions of being the boss's daughter, so, like many children of successful entrepreneurs, I worked overtime to prove myself.

Negotiating new territory as president

When the board nominated me for president in 2001, I was both honored and slightly overwhelmed. I had proved myself over the past eight years and felt confident in my abilities, but I realized that I would be leading CAPIS into its next stage of growth, together with my father, who would be CEO and chairman of the firm.

Up to this point, my father had run CAPIS essentially on his own, with the help of a few key managers. This type of control had both an upside and a downside for CAPIS. The plus was that management was centralized in my father, and he enjoyed knowing exactly what was going on in every area of the firm. But the minus was that all of the pressure and responsibility that comes with managing and growing our firm by himself was running him ragged.

When I came on as president, we decided to change the management structure. I started an executive committee to help with decision making, long-term planning and business development. The members of the executive committee included key personnel representing every department in the firm. I felt it was vital to give all departments a voice in the direction and future of the company.

Establishing an executive committee was one of the smartest moves we made. Building on my father's success, we have expanded the range of services we offer institutional clients and further invested in the technology solutions that keep us, and our clients, on the cutting edge. The executive committee has made it possible to focus on growing our business, as well as serving our customers. Today we are one of the only truly independent institutional brokers left in the business. Our former competitors either have been swallowed up by the Wall Street giants or have gone out of business. Our executive committee has played an important role in keeping CAPIS ahead of the curve in this fiercely competitive industry.

The other important step I took early on was to delineate the roles that my father and I would play. My father was still very active in the firm, and I wanted to be clear about our responsibilities. We decided that he would oversee the progress of the executive committee and the state of the firm overall, and I would manage the day-to-day operations while guiding the direction of the firm. This laid the groundwork for the rest of our working relationship. And while it has become much less formal over time, the role definition helped us get off to the right start.

One of the first difficult decisions I made as the new president was to consolidate our New York and London offices and move operations back to Dallas. Like many financial institutions, our business was affected by the events of Sept. 11, 2001, and I could no longer justify the expense of our London office and our separate bond desk in New York City. My father was available for advice and counsel, but this was my decision.

The move to consolidate was the right direction to take, and a decision that has reaped us benefits over the long term. Today, Dallas is our company headquarters and our traders execute global equity, global fixed income and option trades for more than 1,400 institutional customers worldwide.

In 2006, the board promoted me to CEO. I continue to run the day-to-day operations of our firm and, with our executive committee, oversee our long-term strategic planning efforts. My father remains chairman of the firm, and thanks to the success of our early years of working together, we enjoy a more relaxed reporting -relationship.

For example. I was initially my father's official “go between” on any questions or comments for the executive committee or individual managers. Once he gained trust in our new process, he was able to go directly to the source when he needed something. This not only freed up some of my time but also resulted in a more informal exchange of information throughout our firm. Today, my father is my strongest adviser, and his advice brings different viewpoints to any situation.

Keeping the family in our family business

My younger brother, Cullen Potts, 36, joined the firm in 1997. He has assumed various roles over the years, but more important than his job title at CAPIS is the role he plays as the family negotiator. Truly the glue that keeps our family together, Cullen focuses on the “family” side of our family-run business. He has been the chief intermediary when issues have come up between my father and me. Most recently, he negotiated between us over a decision to relocate our office space. Cullen has worked to balance how our work relationship affects our family's personal relationships.

Recognizing this strength in Cullen, I have asked him to take the lead in formalizing our family business constitution. He has informally enforced this concept over the years, and I believe that we, as both a family and a business, have handled potentially thorny issues quite well so far. But looking ahead, I believe it is important for us to have a document that we all agree will govern our behavior in the family and in the boardroom. Cullen is the best person to articulate our family values and to identify the framework we use to deal with business issues that can potentially cause family disputes.

Our family also makes time for fun outside of the office. We meet for dinner once a week. We also share a family vacation house in the Bahamas, where we go with our extended families and friends to relax and enjoy the success from what we've built together.

More than 30 years ago, my father founded CAPIS with a view toward providing institutional clients the best in trading execution and quality independent research. Thanks to his foresight and the dedication of our executive committee and employees, we are well positioned to thrive in an industry that is constantly changing. As CEO, my goal is to build upon our successes and seize the opportunities that lie ahead.

Kristi P. Wetherington is the CEO of Capital Institutional Services in Dallas (www.capis.com).

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