10 Things I Have Learned Launching RWM

In 2013, four of us launched RWM as an independent RIA. At the time, I announced it with a short post. Six years since then (9.15.13), we have grown to ~35 employees serving nearly 1,000 families with more than a $1.1B in assets.

When we announced our launch, I wrote we were aiming to accomplish three things:

1. Serve our clients’ interests;
2. Rethink Traditional Beliefs; and
3. Pursue the truth, wherever it takes us.

We have remained true to those goals, and we continue to pursue those objectives in everything we do. But more than these core beliefs, we (hopefully) continue to grow and learn and improve.

Over the course of these six years, we have learned a thing or three. Since its our anniversary, it is a good time to reflect on some of those lessons learned.

1. Build an Ensemble Practice: We originally launched as four guys who all kinda did everything. It quickly became apparent that there were huge advantages to allowing each person to do what they were naturally suited for and did best. (Imagine me doing payroll and Josh managing employee healthcare and it becomes obvious there is a better way). The idea of all of us doing everything quickly became each of us focusing on our individual strengths, with different areas of responsibility. While I don’t agree with the idea that every RIA firm will eventually be rolled up into six mega firms, working with people whose skills complement your own is strongly recommended.

2. Maximize your advantages: When we launched, we knew a few things about managing assets and attracting clients — things that some firms struggle with. We understood the value of a basic indexing approach; we knew investor behavior and cognitive issues could be re-applied to help clients reach their goals; we understood the importance of integrating planning into asset management from day one. We pressed all of those forward to make managing client monies as simple and understandable as possible.

We also were aware that our media footprint allowed us to spend less time and money marketing, enabling us to put more effort into client services. We leaned into that hard and rolled out projects to take advantage of opportunities in newer areas (like Wealth/Stack, YouTube, and Alexa).

3. Recognize your weaknesses: We are pretty aggressive at identifying our own shortfalls: It’s a strength to jiu-jitsu those weak spots and work to improve them. We brought on an outstanding CFO (Bill Sweet) who handles so much of the admin work, from budgeting, to payroll, to hiring new advisors, to financial projections. It also helps when you have two pros (Erika & Patrick) running operations in ways that continually raise the bar. When we started to notice we were all a bunch of dudes, we made a much greater effort to bring on more women. When we recognized our lack of expertise in corporate retirement plans we brought on two experts in 401ks (“The Two Dans”) and two more in 403bs (Tony & Dina).

4. Build Systems to take intelligent risks: Launching a firm is a risk, hiring someone new, adding a different business line, hosting a conference, changing a core portfolio – these all have up-side potential, but carry the risk of significantly damaging you in myriad ways: brand, costs, revenue and reputation. But risks can be made more manageable if you develop a process to allow decision-making to be both intelligent and repeatable. We keep striving to get better at getting better.

5. Make mistakes, but improve: As a new firm, we make errors all the time. There are trade errors, potential hires that didn’t work out, clients who might not be a great fit. Rather than dwell on mistakes, learn from them and get better. Build processes that have auto-correction built in – so errors are identified quickly, and your system learns (and the mistakes do not get repeated). Expecting mistakes to occur and quickly addressing them allows errors to be part of an ongoing business growth and improvement — not the source of its demise.

6. Measure what matters: We generate a ton of data, in a variety of areas: Not just our assets, but our advisors, clients, hiring, processes, company websites, media, etc. We specifically brought Nick on to help us with this challenge, and he has delivered big time. Peter Drucker famously said, “You cannot manage what you don’t measure,” and we took his insight to heart. Measuring our own data in greater detail and applying what we learn is a path to improvement.

7. Corporate Culture: Its become a cliché because its true: The philosophy of the firm, how you treat people, setting a high bar for behavior, and then communicating all of this to clients, employees and industry partners are crucial if you want to have any longevity. Becoming a place where people want to work and industry partners want to connect with only occurs by making this a priority.

8. Employees’ stake in the enterprise: We knew early on we wanted more than just Josh and I as equity owners. Mike and Kris took a chance with the two of us when we launched the firm; they became owners shortly afterwards. New employees have an opportunity to become equity owners after three years. We also built an automatic adjustment into employees’ compensation that increases as the firm’s net revenue increases. Its a core belief: All employees should feel like they participate in the upside of the firm, and eventually have the opportunity to become owners.

9. Never underestimate someone’s potential: If there is one theme that is the unexpected lesson from the past six years, it is that people will surprise you. Lots of RWM people have shown unexpected skills and creativity and initiative in ways that have benefitted our clients and the firm alike. There are way too many to list, but it is a series of very smart ideas, big and small, that collectively just make us better.

My lesson? A very big part of any company’s senior management is to enable and empower your people to be their best. Give them the tools and the skills; explain what the goals are; delegate to them; then get out of their way. If you do this, they will reward you with their ideas and enthusiasm and insights that you never imagined.

10. Complacency is the enemy: My biggest concern is that we take all of this for granted, get lazy and complacent. Thats how every company that crashes and burns begins their downward spiral; there is always someone newer/younger/faster/cheaper/smarter coming to eat your lunch. A little Andy Grove paranoia is not a bad thing for any company to have in the hyper-competitive marketplace that is modern capitalism.

I am sure there are many more things I am overlooking, but its a never ending quest to continually learn from our experiences.

A big thank you goes to all of our clients who have supported our vision and philosophy, to the RWM employees who work tirelessly to make those clients have the best experience, and to the industry who recognized our voice and encouraged us, and to everyone who reads or listens or watches our stuff, and supports us to keep at it. We greatly appreciate all of you, and it is our privilege to serve you.



See Also:
Ritholtz Wealth Management

Rescuing Investors (August 5, 2019)

Real World Application of Behavioral Economics (December 13, 2018)

Our Exorbitant Privilege (June 19, 2018)

What is your Value Add ? (April 12, 2018)

5 Years On . . .  (September 17, 2018)

What is Your Value Proposition ? (May 30, 2017)



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