When the Future Fades...

Libby Pachares felt trapped. It was the middle of 1992, and she had been back to work only a few months. Still torn about having ended her maternity leave, she became infected by the anguish and self-doubt that spread over Los Angeles with the flames of the riots. Assumptions she held before the baby was born--that she would readily go back to work--wrestled with her need to nurture and protect her two children.

But she had to work. Pachares and husband Alec Nedelman had moved into a new home in Santa Monica the previous autumn. With the house came much more room for their family--and a mortgage payment nearly five times bigger than before. What didn’t come were once-expected increases in their earnings. For the first time, Pachares felt the oppression of financial obligation that daily weighs down waitresses and factory workers, shoe sellers and bank tellers.

“That’s the hardest part . . . when you feel trapped: that you have no choice, that things had better work out at the job, that you have to tolerate things--because you really need the job,” she said.

The California recession was the leveling factor that put Pachares and Nedelman, both attorneys making six-figure salaries, on the emotional plane of insecurity and anxiety long populated by the working class. Through sleepless nights and long budget calculations, they and thousands of other Southern California professionals have ratcheted down their dreams to try, for the moment, to stay even.

The days of unchallenged high fees, unfettered growth and job security for doctors, lawyers, architects, accountants and other professionals vanished with the heady days and soaring incomes of the mid- and late 1980s. And even though the state is beginning to climb out of its economic hole, few expect to see those days again.

The sure route to the American dream--the path that made professionals the foundation of California’s upper middle class--has become littered with obstacles unforeseen only a few years ago. Clients today are hard to come by and harder to keep, and advancement is uncertain. Earnings no longer climb automatically to the skies.

Some professionals, faced with such sweeping changes in their careers and prospects, have become dispirited and angry. Some have packed up and left California for parts of the country more quickly rebounding from the recession--or where the changes are occurring more slowly. Others have had little choice but to follow job opportunities out of state.

Many more California professionals, however, have adjusted by making personal and professional sacrifices.

In Pasadena, architect Michael E. Shea and his business partner put in an extra 10 hours a week, but they don’t earn more money. Darrel Moss took back the headaches of managing the Van Nuys accounting firm where he’s a principal. Sherman Oaks lawyer Janice Kamenir-Reznik and her husband took out loans when their firm couldn’t pay their salaries. And 57-year-old Artine Kokshanian, an ear, nose and throat doctor practicing in Glendale, shortchanged his retirement account to meet everyday expenses.

Over the dinner table and at seminars, professionals share stories of colleagues who five years ago cranked the pace and price of their lives up to levels that matched their phenomenal incomes--and now are straining to pay the bills on a Palos Verdes lifestyle. Of those who could no longer afford private schools for their children and moved out of Los Angeles to higher-rated public school districts. Of friends whose self-esteem has plummeted, who have lost their businesses or are on what Shea calls the “bleeding edge.”

A couple of years ago, Charles Agapiou was seeing a lot of desperate sellers at his Rolls-Royce and Bentley dealership in West Los Angeles.

“A lot of people bought these cars as investments, then when the economy and the price of luxury cars went down, they were all bailing out,” Agapiou said. “People faced cash shortages, and the only way to meet their obligations was to liquidate.”

Even some professionals who weren’t strapped for cash, he said, were reluctant to display their prosperity while so many others were losing their livelihoods. Some of them traded down to less ostentatious vehicles, “to show a lower profile to the public,” he said.

The adjustments began in professionals’ offices before seeping into their private lives.

At Choy Associates in Los Angeles, architect Barton Choy has been facing the stresses of the recession alone since his father died in 1991.

They had a diverse practice, but “each facet of the marketplace just dropped off,” Choy said. “Residential was one of the first to go, then commercial slowed down and stopped, and (then came) institutional and government-funded projects.”

Choy has filled the gaps in work by taking on jobs the firm had not done or considered before, such as exhibit design, architectural graphics, landscape design and planning. And though he said he has managed to keep his income about even, “the stress level has increased (because of) the uncertainty of the future.”

“This has caused great stress between my wife and myself,” Choy said. They work longer hours and see each other less. Daily life, he said, is “more stressful and more precious. Architecture has always been a day-to-day business, but it’s particularly scary in this environment.”

At La Canada Design Group in Pasadena, Shea and his partner Lance Bird used to think of themselves as artists, not businessmen. “A financial statement--we had no idea what that meant,” Shea said.

But that began to change about four years ago, when the architects were seeing the first signs of a downturn and knew they had to prepare. Today, they preside over a staff of nine--half what it was three years ago--doing the same volume of work. They decided to take on as much of the burden themselves as they could, rather than piling it on their staff members, and they haven’t had pay raises in three years.

But their confidence has increased since they began running the firm more like a business.

“Now we’re pretty smart about that (financial) stuff,” Shea said. “We pay attention to business. We’re tenacious about our (account) receivables. . . . We’re constantly looking out for cash flow.”

Professional firms have had no choice but to get smart.

When customers got squeezed in the recession and learned to be better consumers, they put the squeeze on lawyers, brokers, accountants and other service providers. Clients began doing more work in-house; when they sought outside professionals’ services, they tossed aside notions of firm loyalty and knocked down the amount they were willing to pay.

At Cooper, Moss, Resnick, Spiegel & Co., a small accounting firm in Van Nuys, business was slow when Darrel Moss resumed the role of managing partner two years ago. He has racked up many long hours since, grappling with the headaches of bringing in more work and cutting the firm’s own costs.

After examining its own operations, the accounting firm cut some salaries last year by as much as 15% and this year laid off some employees. For clients struggling to stay afloat, it developed operational audits to identify areas for savings and efficiency.

Like Shea and Bird working extra hours for essentially less pay and Moss taking on a role he had filled before, many professionals say they just aren’t at a place in their careers--or their personal lives--that they expected to be by now.

Julia O. Chang was one of the Cooper Moss managers who got hit first by the paycut--and then was laid off. She bounced back, landing a job at the Long Beach office of the Ernst & Young accounting firm. Compared to friends and colleagues displaced by accountancy’s downturn, though, she says she has been “lucky”--especially because her husband’s income rose as hers was falling.

Dr. Mark Schwartz’s income fell too--and with it his dream of solo practice, cherished through all the years of medical school at Johns Hopkins University and residency at Cedars-Sinai Medical Center.

In 1990, at age 36 and after only eight years in private practice as a primary-care physician, Schwartz came to the wrenching conclusion that reality was overtaking his dream. He was losing patients to managed-care networks and his income was dropping: It fell 10% in one year. He tried working longer hours to be more accessible to patients, but still he wasn’t busy enough.

So he sold his Culver City practice and joined Bay Shores Medical Group, a health maintenance organization in Torrance. Now he’s as busy as he wants to be and doesn’t have to “worry from paycheck to paycheck like I did before.”

Was it the right decision? “I made the inevitable decision,” Schwartz said.

Managed care is the big gorilla in Southern California’s health care industry, one that grew out of economic and recessionary conditions.

As the state’s employers look to trim their costs of benefits, they have increasingly turned to managed care, HMOs and preferred-provider systems that reduce costs by controlling patients’ access to health care providers and restricting providers’ fees.

Today nearly 75% of Californians covered by health insurance belong to some kind of managed-care group. The big gorilla has embraced primary-care physicians and pediatricians working in groups and given the cold shoulder to specialists.

With fewer patients covered by traditional fee-for-service benefits, doctors feel compelled to go to where the patients are: the groups and the networks.

“If you can’t fight, join. If you don’t join, quit,” advised Kokshanian, the Glendale specialist. He tried to resist managed care, but he saw his practice shrinking. Now he has joined several health care groups.

Still, he has felt the pinch. He said he had been asking his wife to cut back a bit on expenses at home, but it wasn’t until she repeatedly heard it from their doctor friends that she believed “things are tough.”

Kokshanian is 57--still young for doctors in the Middle East culture from which he came. But he wonders whether as a single practitioner he’ll be able to hold on even until U.S. retirement age--or, conversely, whether he can afford retirement if he doesn’t stick it out. Last year, he said, he “didn’t put a penny” into his pension plan.

At 61, Donald Motzkin, a urologist, says retirement is still a long way off, although he thinks about it every day.

“It’s amazing how low insurance companies are pricing their structures and demanding that physicians comply if they want work,” Motzkin said. “Between the lower fees paid and removal of patients (who opt for or are forced into managed-care systems), it has a profound effect on income.”

Motzkin frets that when the time comes, he may not be able to sell his Van Nuys practice.

“The single practitioner is a dinosaur. Extinct,” Motzkin said. “I don’t know if a private, solo practice in a medical specialty has any value at all in 1994.”

Instead of thriving, as they were a handful of years ago, the area’s solo practitioners throughout the professions are feeling endangered at the least.

Many lawyers practicing solo and in small firms are facing financial hardships, according to a recent informal survey by the Los Angeles County Bar Assn.

Attorneys have had to close their offices and work at home, share law libraries, rent conference rooms by the hour and find other ways to scrimp. Some have sought counseling to deal with the emotional stress of having their careers upended.

The anxiety has infiltrated larger firms as well. In accounting, a wave of mergers and consolidations has thinned the ranks of partners at large and mid-sized firms. When Southern California’s real estate market bottomed out a few years ago, real estate lawyers from Santa Barbara to San Diego were left holding empty briefcases.

Large-firm partnerships used to provide a safety net for professionals. But now, instead of being carried along over the rough spots, partners are as likely to be eased out with early-retirement incentives or nudged into working elsewhere. Many have had to broaden their skills or change areas of practice.

David Vena had built a strong real estate practice at Latham & Watkins, one of Los Angeles’ top law firms, and was chairman of its real estate department. When real estate activity slowed, there was too little work to support the department’s many attorneys. Some were moved into different practice areas and some left the firm. Vena now is chair of Latham’s bustling health care practice.

The recession, and particularly the real estate downturn, cut a wide swath through the professional and personal lives of Janice Kamenir-Reznik and her law partner-husband, Benjamin M. Reznik.

Six years ago, Reznik & Reznik, a small law firm in Sherman Oaks, was a real estate practice top to bottom. But when “all the matters our firm had looked to for its bread-and-butter practice dried up,” Kamenir-Reznik said, the firm quickly moved into the field of environmental law.

“The recession . . . demanded we change the focus of our practice in a way that in the long run will benefit it,” she said. In the past four years, the firm has doubled in size. But there were times when clients didn’t or couldn’t pay their bills--some went bankrupt--and Reznik & Reznik had to stretch to meet its payroll.

“We’ve gone to the bank and drawn a lot of credit when we needed to borrow money to pay the staff,” she said. There were times last year when she and her husband “didn’t take salaries for several months in a row. We took out bank loans instead.”

Worse, though, was what the recession did to the couple’s expectations of being able to slow the pace of their work lives and spend more time with their three children. Instead, Kamenir-Reznik said, they are working harder than ever.

“This is not where we were going to be in our early 40s,” she said. “I expected that I would have more free time, that I could work 30 or 40 hours a week instead of 60, that I could be a team mom at Little League instead of just bringing snacks, and that I could devote more time to . . . my charities.”

Nor are attorneys Pachares and Nedelman where they expected to be.

Nedelman said he considered the group of partners just ahead of him in his law firm to be models.

“You look around, see what the partners are doing, and that’s what you’re supposed to do. . . . A lot of people ahead of me belonged to country clubs or luncheon clubs, like the City Club. But a lot of (attorneys) my age are joining the Y, not the Hillcrest or other country clubs.”

There were other adjustments. The couple put off a vacation cruise and remodeling. Nedelman cut back on expensive lunches with fellow attorneys and even considered selling his Mercedes. By the time baby Ariana was sleeping through the night, Pachares was not. Instead she was trying through the dark to stare down anxieties and budgets.

Pachares stayed on the job and now is comfortable with her position as vice president and in-house counsel for Metro-Goldwyn-Mayer Inc. in Santa Monica. But Nedelman, still reaching for a better economic future, switched law firms this summer, leaving his partnership at Loeb & Loeb for a new partnership in the Los Angeles office of Mayer, Brown & Platt.

“One reason I’m making this move is I think it will give me more business development opportunities. That’s what builds your income as a lawyer,” he said.

At one point, Nedelman had questioned his future working in a large law firm. “The recession created psychological pressures,” he said, “and I thought, ‘Do I want to change jobs, get out of this?’ But then I realized we’ve got a huge mortgage, I can’t. Where else would I get this kind of money doing this kind of work?

“I think all of us who are making six figures are incredibly fortunate, and we need to remember that,” Nedelman said. Despite the pressures, he said, “we have not been in the situation where we have to worry about not having a roof over our kids’ heads or being able to buy holiday gifts. All the problems we have, we have to keep in perspective.”