Making my way

(Recently there’s been a good run of financial bloggers talking about their start in the industry, including Cullen, Ben and Patrick. I thought I’d take a turn as well.)

I was 21 years old, just out of college and had just gotten married, and I had no idea what I was going to do with my life. I knew that I needed a job if we were going to pay the rent. I applied for a job with Columbia mutual funds (then owned by Bank of America) for their inbound call center.  I knew close to nothing about investing but I found it very interesting.  I got the job and spent 6 weeks crammed in a room with 30 other 20-somethings preparing for the Series 6 exam (to discuss and/or sell mutual funds). I passed the test and was shown to my desk on the floor.  The call center required no selling and allowed no advice.  I read people information off of a screen that they could have found for themselves.  Fund prices.  Account balances.  Historical performance. I changed their addresses and sent them checks.  I placed the occasional fund exchange. I was a glorified automated phone system.

The job was not exciting, but it did open my eyes to the investment business. Co-workers talked about which funds had good performance and which ones looked terrible.  Some of them loved to roll the dice on mid caps and emerging markets and some had all of their 401(k) in an intermediate bond fund. We (ignorantly) felt priveledged to be able to buy funds without the sales load and imagined that we knew which funds would do well in the future (the ones that had just done well, of course!). In reality it is frightening how little we collectively understood about investing in the markets.  I am thankful that we were not in the advice business!

I quickly burned out at the call center and found a job working for a broker/advisor.  Initially I was a paperwork monkey but at this office I passed the Series 7 and was now officially a “Registered Representative.”  This office was a case study in What Not To Do.  My boss sold expensive, illiquid and ultimately unprofitable non-traded REITs.  He pitched oil & gas drilling programs, railcar leasing partnerships and other private placements that paid a big commission and promised investors a big stream of income.  He told retirees they could spend 6-7% of their portfolio every year and bought long-term BBB corporate bonds to get them enough yield to justify that figure (nevermind portfolio risk or inflation). Investors were sold C share mutual funds and (as memory serves) charged advisory fees of 0.50% – 1% on top of them. Clients were sold big, expensive permanent life insurance policies that carried huge commissions. I eventually became responsible for placing all client trades, and there was hell to pay if the weekly commission numbers weren’t up to par. It didn’t take me too terribly long to realize this was not the type of business I wanted to be in.

My penultimate move was to a large wealth management firm here in the Denver area. Ethically it was a world away from my previous employer.  We focused on asset allocation, financial planning, tax planning, rebalancing, tax loss harvesting and many of the hallmarks of sound financial management. During my tenure I was primarily responsible for research and due diligence of mutual fund and managed account strategies for client portfolios. I poured over data, spoke with fund managers, did on-site due diligence, talked about track records, strategy, philosophy, process and people and ultimately we as a committee made decisions to hire, keep and fire managers. Collectively our investment committee had many graduate degrees, CFP®s, CIMA®s, etc.  And yet I was ultimately hard-pressed to find that this process was adding value for our clients over an index fund, after all taxes and fees were accounted for. I grew weary of explaining underperformance to clients and frustrated that our best attempts to find the “best” managers seemed left to chance.

It was during this time that I began to question the validity of asset-based fees for financial advice.  Most clients had the same planning and service needs, but wealthier clients paid a multiple over the firm’s smaller clients (effectively subsidizing them). Eventually I became uncomfortable with the absolutely dollar value larger clients paid to sit down for a formal meeting a few times a year and chat on the phone or email once a month. I know some expensive lawyers in this town, and my hourly rate was blowing them out of the water.

So I spent a year or so tinkering, thinking, planning and brainstorming for what eventually became Bason Asset Management. I knew that I wanted to give clients advice based on real evidence, not speculation.  I wanted to give them the best chance at their future success, and I wanted to give them the advice I wanted to take myself. I wanted to be truly independent and not earn income from any source other than my clients. I wanted to sleep well at night knowing that I gave the best advice I could under a fee structure that made sense to me, and in September 2012 I filed the registration for this firm.

Looking back, what stands out the most is how little I seemed to know about markets in the past compared to what I believe to know today.  My definitions grow and expand.  I become more certain of a few things and less certain about a great many things.  I say “I don’t know” a lot more than I used to. I am much more willing to admit that most things are measured in shades of grey. I have a few hills that I will die on, but they are truly few (namely that managing costs and taxes are a huge part of growing long-term wealth, and that index funds and ETFs are the most efficient way to invest).

Like you, I am a product of my environment and experiences.  I learned over time to be wary of complex investments that are accompanied by 200 page offering documents. I’ve learned to doubt people who seem overconfident.  I’ve learned that there is no additional return without risk in some fashion.  I’ve learned that all decisions have an opportunity cost and that some things can be simple but not easy. I’ve learned that there is value in being skeptical but also optimistic. I’ve learned that in the future, what I know to be true will be different than what it is today.

Continue Reading

Confessions of a Financial Services Worker (Prag Cap)

Trial By Fire (A Wealth of Common Sense)

The Worst Time to Start in Finance (Millennial Invest)

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