5 Years On . . .

On September 15, 2013, exactly 5 years ago, four of us took a leap into the unknown to launch RWM. Perhaps a few words on this crew, and how this all came together, is worth sharing. Take whatever lessons from these experiences that you may.

My own journey to asset management came about because I was miserable as a lawyer. If you look at the world via a 30,000-foot view, the detailed minutia of legal practice is probably not your best fit. Junior associates need not concern themselves with The Big Picture.

The best thing about law school was it taught you how to think – how to apply historical facts to new scenarios; marshal evidence and data to make an argument for a given perspective; and toto have a philosophy. It is not a coincidence that more than a few people in asset management have not an MBA but a JD as their background.

I began on a trading desk, moved to equity research, then to market strategy. That arc covered my first decade in finance. Two years before the financial crisis, I joined a colleague in a start-up, a hybrid broker-dealer/RIA/quant research firm.

Legal research applies rules to fact patterns, identifies a legal precept therein. That jurisprudential perspective stays with you. Over the years, numerous events presented themselves as opportunities to learn new lessons – the markets, my own experiences, what others did. Drill down, you can find potential for nearly any situation to present itself as a business and/or life lesson.

Markets presented a dynamic and fascinating and ever-changing set of challenges. There was no squishy “What did the judge have for breakfast” factor – it was a strict meritocracy, you either created value or you did not. I recall other traders discussing style and performance and skill and luck; those debates invariably ended with the line “P&Ls don’t lie.” Even the luckiest trader eventually encounters mean reversion.

Still, one needs more from one’s labors than income. At the hybrid broker-dealer/RIA/quant research firm, I thought I might have a chance to build and expand upon a developing investing philosophy: that data and facts matter; memes and heuristics were not the way to invest; that conflicts were deeply problematic.

Around this time, circa 2010, I met Josh at a conference in Coronado Island off San Diego. (He tells his version of that meeting here). If you know me, you already know who Josh is. That first meeting was simple: here was a guy who was obviously talented and smart and funny – how had the market overlooked him? I had seen his blog, thought he was an emerging writer with something to say and a sharp, intelligent way to say it. What was he doing on the wrong side of the street – the Sell Side? He asked what he needed to do to join the Buy Side, the answer was obvious.

Best trade I ever made.

As time went on, the inherent structural conflicts of the hybrid structure became increasingly problematic.

My regular media appearances and columns in the Washington Post were attracting inquiries from prospective clients. I was not running money then, but when Josh suggested we start taking these people on as clients, it was the start. A big thank you is owed to the clients who entrusted us with their assets, even though we were an unknown start-up. (In the future, I will explain how fortunate we were to have clients who understood our experiment and wanted to be a part of it).

All of that began to scale quickly. I made plans to move my game to Bloomberg, a decision made easier with Josh becoming a regular on CNBC.

In September 2012, we added Michael Batnick as a utility infielder to help with basic research. At the time, he was 27, just a kid.

I have watched him blossom.

If you want to learn what a person is made of, give them an open-ended job – “Hey, we need you to help out” – and see what they do with it. I have watched Mike grow into a full-blown rock star: starting as a research grunt, he became a CFA charter holder, then a crucial part of how the firm communicated with clients, and a vital member of the firm’s investment committee. Oh, and a published author along the way.

He used to joke that I have no idea what he did at the firm – but if you like Josh’s appearances on CNBC or my podcast at Bloomberg, or much of the research the firm cranks out, or the way we do quarterly conference calls, manage portfolios, reassess their risk and the methodology we use, his fingerprints are everywhere.

A few months after Mike joined us, we added Kris Venne to help out with account management. Kris had spent the prior 5 years at Wells Fargo. His bosses were old school wirehouse brokers, on the back 9 of their careers. At Wells, Kris earned his CFP, and used the time to learn everything there was to learn about practice management. We gave him a dozen legal pads filled with inquiries – literally millions of dollars in assets – and told him “Please call them back.”

He was aghast.

Again, if you want to see what someone is made of, give them an open-ended assignment – “Hey, can you fix this?” – and get out of their way. Kris built an entire client management system from scratch, from initial contact to financial plan to regular client updates. As we added more assets, he added CRM and other technologies to make it work faster/better/more efficiently. As we added advisors, he built a system to train and manage that as well. We never would have figured this out on our own.

These two guys literally make the place run.

At the same time, Josh was blossoming into an actual CEO. He is the person who executes on our vision. He has matured into the position in ways that far exceeded any expectations I might have reasonably had five years ago. You may think you know him from his media appearances – smart, funny, insightful – but you actually have no idea how talented he really is.

Talk about huge upside surprise: the consistent element with each of these people is that when presented with an opportunity, they each rose to the occasion, and then some. I could not ask for better partners to work with. When we launched RWM 5 years ago, Kris and Michael took a huge leap of faith doing this with Josh and I. It was not a foregone conclusion that any of this would work, much less capture any lighting in a bottle. Today, they are all owners of the firm.

Who could have guessed what this would look like 5 years later? We now have more than 25 employees – I could write another few 1000 words on how much each of these folks have contributed as well.

5 Years ago, on September 15, 2013, we launched RWM. I could not be more proud of what we have built, or more impressed with the people I am so privileged to work with. I am excited to see what this experiment will look like over the next five years.

 

 

See also:

Inverting Wall Street’s Research Business Model  March 14, 2016

Why We Do What We Do  April 24, 2017

What is your Value Add ?  April 12, 2018

Our Exorbitant Privilege  June 19, 2018