Who is Martha Stewart: Why work in financial services? Best known as a caterer, gardener and decorator who became a major force in media, including the founder of a major corporation, Martha Stewart had an earlier career in financial services that laid the groundwork for much of her future success.
Biography: Born Martha Helen Kostyra in Jersey City, NJ in 1941, she grew up in nearby Nutley, NJ. While a student at Barnard College (the women's division of Columbia University), she married a law student named Andrew Stewart in 1961. Martha Stewart graduated in 1963 with a BA in European history and architectural history.
In 1965, Martha Stewart began a career in New York as what was then commonly called a stockbroker or account executive (financial advisor today). In the same year, she gave birth to her only child, a daughter named Alexis. By most accounts, she was highly successful, building up a large book of business and becoming a very high earner. This was especially noteworthy in an era when opportunities for women as financial advisors were few, due to the mutually-reinforcing skepticism of clients (men and women alike) and reluctance of employers.
In 1972, she left her Wall Street job when her family relocated to the Connecticut suburbs. Here she soon gained expertise in home restoration, decoration and gardening. In 1976, she co-founded a catering business. Its success, especially with wealthy and influential clients, led to books, merchandising, a magazine, a TV program, and a major corporation with her as chairman and CEO. In 1999, Martha Stewart Living Omnimedia was listed on the New York Stock Exchange, making Martha Stewart herself briefly a billionaire.
In 2004, Martha Stewart was convicted of illegal insider trading, based on a 2001 sale of 4,000 shares of stock in ImClone Systems, a company led by a friend named Samuel Waksal. Heavy fines, five months in prison and five months in home detention followed. Ironically, her financial gain from the trade was trivial, especially relative to her own significant wealth: $45,673 is an oft-cited estimate. Despite the disgrace and ridicule she incurred as a result of this episode, her career has largely recovered.
Lessons: Martha Stewart is yet another example of someone using success in a financial services career as a steppingstone to other achievements. Her earnings as a financial advisor financed her relocation to an expensive suburb which, in turn, sparked the launch of her even more successful second career. Also, her years as a financial advisor taught her valuable lessons about money and markets, as well as in the art of persuasion: she chose a field that was distinctinctly unwelcoming to women, yet succeeded.
On the other hand, the Martha Stewart story is a cautionary tale about how even smart, savvy people can overreach, making foolishly high-risk, low-reward decisions. Such was the insider trading scandal. The small financial gains were not worth the risks, as subsequent events proved. She should have known that, as a high profile celebrity, she would be a target for prosecutors looking to make examples and send messages. Moreover, her prior experience as a financial advisor meant that she was even more aware of insider trading restrictions than the average CEO, and thus could not seek leniency on account of ignorance.
Lastly, there is the related case of her financial advisor during the time of the ImClone scandal, Peter Bacanovic. He had been highly successful in cultivating high net worth clients, especially the sort whose lives revolve around elegant parties, the theater, the opera, the symphony, art galleries and/or expensive restaurants. Whatever his prowess in investing money, Bacanovic was a master at entertaining clients and prospects from this lofty social milieu, and owed most of his success to his social graces and connections.
Through his knowing complicity with Martha Stewart's illegal trade, Bacanovic lost his lucrative position at Merrill Lynch, paid a hefty fine (roughly four times the amount of hers), endured identical periods of incarceration and home detention, and is banned for life from working in the securities industry. Financial professionals should note the dangers of skirting legal or ethical standards to mollify an important client, whether on their own initiative or under pressure from their superiors. In the long run, it often is best to just say no.
