Sunday, February 19, 2017


I was pleasantly surprised by the response to my “It’s Over” blog.  As of this writing over 4,600 people have read the post.  My initial thought was that these readers must love NASCAR too.  I was wrong.  People read and commented on the blog because of its unique vulnerability not because of my firm’s failure.  I was also pleasantly surprised by several industry titans that reached out and wanted to understand more about what lessons could be learned.  One Titan had already given me advice when I started Sanctuary.  His advice then was to avoid stockbrokers.  I told him I wish I would have listened to him and he wryly shared that he had another item I should also be aware of - “Pro Wrestling is fake”. 

I grew up in The South and my mother instilled the importance of writing thank you notes.  Hopefully Mom will understand that writing 4,600 thank you notes is unrealistic.  I do want to thank everyone who read and commented.  Your support means the world to me. 

Mom, hope that works and I won’t be grounded next weekend.

Monday, January 23, 2017

It's Over

Recently I made the decision to close my firm.  It was more emotional than I expected so I wrote this blog to address the demons in my head.

As we grow older death enters our circle of family and friends.  Death is a traumatic experience however some people use their remaining time on earth to share honest and enduring advice.  Professor Randy Pausch and his Last Lecture resonated with millions.  The honest reflection of a person who knows they have a defined amount of time left on this earth cuts through the typical cocktail party or social media banter and addresses the elephant in all of our rooms.  We are scared of dying and when a dying person has the courage to share what the process is like we should listen.   A very distant second is our fear of losing our job.  Most of the time this is sudden and at best we have two weeks to clean up our desk and complete our exit interview. Your coworkers exchange pleasantries but they avoid you like the plague because they don’t want the boss to think they are simpatico.  The story is a little different with a founder.  They are the boss so the only people that can fire them are their investors.  I was recently told by my investors that I had three months to wind down my business and return as much money as I could.   A business death sentence that has forced me to reflect. 

I Didn’t Know What I  Didn’t Know

Mistake One - I underestimated the motivation of most breakaways to own and run a business.  Their common belief was that breaking away allowed them to make more money and be their own boss, which it did.  They also believed that their brokerage team could run the new business just like they did on Wall Street.  My firm’s business support was ultimately viewed as an expense that could be cut and it was by many of our initial firms. 

Mistake Two - The mechanics of running a business were much more important to me than my clients.  Another mindset change for breakaways that doesn’t happen on day one is the realization that they do need outside help to improve and grow their business.  An essential service most breakaways need is a compliance consultant.  Market Counsel isn’t the cheapest but they are the market leader for a reason.  Creating a credible growth strategy for the business is an essential item for breakaways who know how to sell but aren’t as knowledgeable on how to effectively position the services of their new independent business.  The people at CEG have helped several friends of mine and are worth a look.  Each breakaway will identify other needs based on their business plan and professional staff.  My only caveat is to not choose your consultants based exclusively on price.  Choose consultants who are not conflicted and offer their services at a discounted price that is offset by selling other high margin products you might not need.  Sound familiar? 

We both didn’t know what we didn’t know on day one.

Toughest Competitors
Over the last seven years My firm has competed against many of the top firms in our evolving space.  While each firm has a slightly different value proposition that can be confusing to breakaways and the financial press who both want to define each business in an easy to understand sound bite. Our internal internal research segmented the market into three groups.  The brand builders, the platform providers and the strategic investors.  The brand builders HighTower and United Capital were very difficult for us to compete against as they had scale, capital and unique advisory tools.  HighTower used its scale to develop a bench-marking tool called Blue Print for Growth and United Capital developed a planning tool called Money Mind.  The top platform provider Dynasty has a similar value proposition to my firm but they differentiate their offering by providing a client portal and internal experts like, Scott Welch.  The multi-billion dollar advisors and the firms they had built were drawn to the ownership structure and support of AMG Wealth Partners.  AMG was already road tested by elite money managers like AQR, Harding Loevner and 
Value Act.    

All of these competitors have succeeded because of their focused message and because of the ability to raise capital to implement their strategies.  Unfortunately my firm failed at both.

Business Death Bed Advice

The last time I blogged about death my readers wondered if something was wrong.  Nothing is wrong medically but I will say the entrepreneur’s trough of sorrow is deeper than I thought. I plan on jumping out of the trough soon and jumping into the serial entrepreneur pool!  Hope to see you there.

Wednesday, December 28, 2016

The Great Escape - 2016

I have been escaping my work every Friday for 17 years.  2016 was a bad year for me and an average year at the movies.  While average, the 84 movies I saw in 2016 were a good way to disconnect from the real world in a dark, quite Movie Theater.  Choosing my Top 10 movies is more difficult in an average year than it is in a blockbuster year as the difference between movie 10 and movie 30  is a close call. For those of you looking for Moonlight and Manchester by the Sea they are 11 and 12.

The envelope please:

10. Jackie - Get your gold statues ready! This film is amazingly acted by Natalie Portman and well directed by Pablo Larrain. It mixes three compelling story lines with historic footage that keep you engaged in a familiar story.
9.  Hacksaw Ridge - An inspiring story of a person who is guided by their faith but also has the courage and tenacity to be a great solder.
8.  The Innocents - There are so many items this film deals with I don't know where to start and I'm still processing most of them. The main subject that was dealt with at a deep and often disturbing level was the religious thought process of the nuns and their celibacy. The female director did a great job addressing this. The line that I can't forget. "Faith is 24 hours of doubt and one minute of hope"
7.  Sing Street - Great characters with surprising and real relationships.
6.  Tower - The perfect mix of animation and actual character interviews were hard hitting and poignant. Oscar worthy!
5.  Hell or High Water - Captures the crazy like a fox spirit of Texans. Glad to see Post get some recognition.
4.  La La Land - This movie takes an ordinary plot and transforms it into a great movie thanks to the trifecta of song, dance and acting! Ryan Gosling and Emma Stone prove they have deep artistic chops. 
3.  Captain Fantastic - What if we didn't shelter our kids from the harsh topics of the real world? What if we home schooled them too. This movie shows why that might be a good approach.
2.  Hidden Figures - All three characters are compelling on their own but together their contributions to our space program are heroic. The spontaneous applause from the sold out theater confirmed that my feelings were shared
1.  Fences - Santa and Hollywood make us wait for their gifts! Fences adopts many great aspects of the play it is based on, Incredible actors given the scene format from the play shine! Great dialogue and great performances make this worth the wait.

After a tumultuous year I hope these movies help you escape and start 2017 with a fresh and optimistic outlook

Saturday, December 17, 2016

You're Fired!

Our president-elect rode this phrase to astounding heights.  Recent news reports indicate that he still wants to ride the wave by continuing as the Executive Producer.  Why are we so enamored by this gut wrenching statement?  Is it schadenfreude or a power play?  Rather than brush it off we have decided to examine how this mindset has manifested itself in four major areas of our personal and professional lives.
Our wedding vow of “until death do us part” is proving to be too high of a bar.  Divorce statistics show that 50% of marriages end in divorce after less than 8 years.  Are we too quick to pull the divorce rip cord?   I propose that we supplement til death do us part with let’s bring in an experienced professional to help us work out our problems.  An experienced professional will help you understand that your struggles are not that unique and they will establish a detailed plan to get you out of your rut.

At the end of every season we watch as coaches are given their walking papers.  Is this another area where we give up too fast?  Upon further review I vote yes.  Seems like the most successful teams the San Antonio Spurs, the New England Patriots and the Alabama Crimson Tide all have tenured head coaches.  Might be worth further review.

Financial Advisors
Warren Buffet invests in companies with no intention of ever selling them. Compare that to the average holding period for other “investors” which has dramatically fallen from eight years in the 1960s to five days currently. Our hair-trigger approach has insured poor performance and guaranteed disappointment.   Most wealth managers establish policies for their clients based on the long-term (defined as 10+ years).  My anecdotal experience over my 28 year career is that much like the decreasing investment holding periods wealth management clients are prone to firing money managers and ultimately firing their wealth advisor before their 10 year plan can run its course.  We have also noted that tracking the number of times a client checks their account balance online, using Google Analytics, is a good indicator of how nervous a client is and a good reminder to give the client a call to address any concerns before the concerns grow to a level that needs to be addressed by firing the advisor. 

Our Jobs
Looking at our own LinkedIn profile and our friends’ profiles shows an average three year tenure at each job.  This reality is confirmed by a BLS study showing that the average person will change jobs 12 times in their career.  Most of the changes are instigated by the employee but some are the result of being fired.  Looks like our restless nature rears its ugly head in this area of our life too.  The outlier, a Wall Street stock broker, has a significantly longer job tenure of seven to nine years.  What is Wall Street’s secret?  Big money and restrictive employment contracts.

How can we exterminate the ants in our pants?  Our advice is to start by examining our behavioral mistakes and establishing timelines that can help you avoid quitting too soon or even worse yet getting fired.

Thursday, December 1, 2016

A Whole New World

In chaotic times like these I revert to Disney movies and channel my inner child to visit “The Happiest Place on Earth”.  Come join me as the three main characters from Aladdin reveal a Whole New World.  In our story the characters will be played by Goldman Sachs (The Genie), President - Elect Trump (Aladdin) and you (Princess or Prince Jasmine)

Love our hate them we all can agree that Goldman is smart and makes decisions based on where the puck is going not where it has been.  The firm’s recent decision to be middle men and offer many of their internal services to other firms is brave.  The new Goldman initiatives are named Marcus, Symphony, Simon and Kensho.  The “Old Goldman” would have never attempted these projects and wealth management firms should emulate not condemn these bold moves.  Goldman is also working on a robo investment banker that will automate the 146 steps involved in an IPO. It is a whole new world!

The DOL ruling and the FAQs shocked the financial services world and just when we had adapted our business models the presidential election results rocked our world again.  As any experienced pilot will tell you when you hit turbulence you need to relax and not make any hasty decisions.  Nobody knows what a Trump administration will do with the DOL rule.  What we do know is that the cat is out of the bag on the topic and while the DOL ruling might be modified we and our clients will never forget how shocked we were by the rule.  That feeling should guide our business decisions going forward.   Don’t wait for an updated DOL ruling with the hope that its loop holes will allow for business as usual.

Aladdin asked Princess Jasmine if she wanted to go for a ride and leave the castle and see the new world.  She asked is it safe?  He replied “do you trust me?” The DOL and the new president are definitely leading us to a new world.   Since we might not trust the yet to be named regulators and our new president we need to make sure our clients will continue to trust us. 

Let’s jump on Aladdin’s Magic Carpet and sing a song to help us pass the time and calm our anxieties. 
                It’s a whole new world
                A new fantastic point of view
                I’ve come so far
                I can’t go back to where I used to be

I feel better already. Thank you Disney.

Monday, April 14, 2014

Don't Be Controlled By The Calendar

As Tax Day approaches, we are reminded of the power of the calendar. 

April 15 is a date all responsible citizens are required to respect.  However, all too often, wealth advisors become slaves to the calendar and allow vital elements of their business to be ruled by it.

It’s a question worth examining because there’s no real reason for it.

In truth, the calendar is a convenient organizing principle, but it is in no way the optimal one for taking care of wealth management clients in the 21st century.

Three Areas Where the Calendar Currently Rules

Through their investment consulting, wealth advisors add value for clients in three ways. All of these have been under the thumb of the calendar.

The first is rebalancing a client’s investment portfolio. Most wealth advisors wait until the end of the year. That’s the way it’s always been done. However, some do take up the task more frequently, usually at quarter-end. 

With the recent volatility in the markets , intra-quarter portfolio rebalancing driven by a rules based system based on the client’s IPS is a better approach. Why should clients have to wait for the calendar to initiate something that should be done when it’s needed?

The second area dictated by the calendar is tax-loss harvesting. This also has been a year-end ritual. However, one of the best wealth managers we know has been implementing tax loss harvesting throughout the year  – whenever the opportunity presents itself. That’s absolutely the right approach. It’s also proven very successful for his clients.

The third area where the calendar has disproportionate influence is in selecting money managers based on 3, 5, 7 or 10-year investment performance.

Recently, five-year manager performance has caused a buzz because the negative returns from the financial crisis are now rolling off. It’s a new day for investment managers who were hammered by the events of March 2008.

Relying on any calendar time frame for picking managers is particularly perilous. A manager can go from a poor performer to a top performer in just one day.  We all know that’s not right, but those are the vagaries of the calendar.

In fact, money manager diligence should be more qualitative than quantitative. Qualitative due diligence needs to be an operational core competency of a wealth management firm – one that never ceases.

The Breakaway Calendar

The calendar has also controlled when breakaway brokers move from wirehouse to wirehouse. Historically, wirehouse brokers would move on a three-day weekend, which offers the maximize time to get organized and inform clients.

That may soon change.

The Wealth Consigliere believes that FINRA’s recent recommendation that brokers disclose the recruiting checks they receive when switching firms is likely to slow down the movement between Wall Street firms. The SEC will almost certainly make FINRA’s recommendation the law of the land.

* * *

There’s an old saying that a stock doesn’t know you own it. That might be expanded to say the calendar doesn’t know anything about wealth management.

But you do. 

Reminder - pay your taxes.

Friday, March 28, 2014

When I Was Your Age

My late grandfather, who was born in 1910, loved to reminisce about the good old days.

“When I was your age,” he would say, “I used to walk to school with all of my brothers. Didn’t matter what the weather was.  While we were trudging along, in sometimes freezing conditions, we always had a good time horsing around.”

We clearly got the point: The good old days seemed so much better.

We all knew they were much harder, too.

Today, people don’t walk anywhere. In fact, those fortunate enough to work in Silicon Valley ride in air-conditioned buses, with Wifi and lattes available for all. No three-mile walk in the snow for them.

American Heros

TV journalist Tom Brokaw defined my grandfather’s cohorts as The Greatest Generation.

Their greatness was the result of their worth ethic, their thrift and humility, and the incredible bond they formed in their personal relationships. This generation survived the Great Depression and World War II; very few complained.

The next generation, the Baby Boomers, did like many others before them: They set out to define themselves differently than their parents.

That meant not being satisfied with the frugality of my grandfather’s generation. Tight purse strings drove Baby Boomers crazy. As a result, they were motivated to make money and then enjoy spending it.

As post-War prosperity flourished, Baby Boomers sought out professionals to manage their newly created wealth. They chose reputable financial institutions to advise them on how to invest in the financial markets.

My Way Wasn’t Better

Today, we know the Baby Boomers didn’t get the wealth management equation right.  

As it turns out, their preference for brand name firms with big advertising budgets didn’t serve them well. The financial crisis is just the most recent example of a model that serves institutions better than clients.

The good news is that many Baby Boomers learned from the experience and they are not as brand-dependent as they once were.  They are either managing money on their own with the help of the Internet. Or, they are working with an independent wealth manager.

The Millennials: We Can Do Even Better

The current generation, Millennials, looked at their parents and said we, too, can do things better.

This generation has defined itself by fully integrating technology into their lives in the name of speed and efficiency. With social media and email, it’s easier and faster than ever to communicate and to base your self-worth on Facebook friends and Twitter followers.

That’s good, up to a point.  What’s not so good is that real face-to-face or even voice-to-voice interaction has gone missing.

Chickening Out

As actor Kevin Bacon said in this video, technology is robbing Millennials of at least one character-building experience that would make the Greatest Generation proud – the agony and ecstasy of dating.

As recently as the 1980s, you actually had to talk to the opposite sex if you wanted to ask them out.  No texting or email. You had to find courage, talk to the parents who answered the phone, and ask the question while your heart was racing.

In their quest for efficiency, Millennials rarely go old-school when it comes to forming relationships.

We Need To Keep It Real

Today, wealth management is a lot like dating. It’s about relationships and trust.

True, technology can enhance those relationships, but it cannot solve the biggest challenge: Finding out what makes a person tick. What are the real dreams and fears of individuals who are entrusting you with their life’s savings? Why is money important to them?

No questionnaire is going to elicit that information.  Questionnaires can’t ask follow-up questions based on what someone just said. Likewise, trust isn’t built in 140-character bursts. Rather, it happens when people talk and experience the challenges that present themselves in our daily lives.

Technology can free up time to spend with each other. That may be one of the most important benefits of technology.  Unfortunately, the Wealth Consigliere believes the lack of face-time is a huge failing of the Millennial generation and a weakness of technology-based wealth management firms.

As always in life, the pendulum can swing too far. The Greatest Generation took hardship as a badge of honor, but their lives were not necessarily fun-filled. And, they missed out on the joy of spending time with their family.

Wouldn’t it be nice if the next generation could meet us somewhere in the middle?