This year we will interview over 50 financial advisors. We will only hire three.

This year we will interview over 50 financial advisors. We will only hire three.

This year we talked with amazing financial advisors from all over the country. There’s a self-selecting portion of the total advisor population (which is now around 300,000 in the US) that get what we’re doing and understand what the opportunity is for their career and their clients. Of this self-selecting group, a certain number reach out over the course of the year and want to discuss what it means to join the Ritholtz Wealth Management organization. We enjoy these conversations, even if they don’t go much farther than the first or second round.

The conversations that get farther than the second round do so because the advisor is an obvious Yes. Michael Batnick’s rule is that if it’s not an obvious Yes, then it’s a No. We don’t take shots on Maybes. This rule has saved us a lot of time. My partner Kris is on the front line of fielding these advisor inquiries and has absolutely no qualms with letting the candidate know there isn’t a fit immediately when it becomes apparent. Our experience is that the advisor appreciates this candor and that things end up working out well for both parties.

What constitutes an obvious Yes – a signal that we should continue to talk with a potential advisor candidate? Generally speaking, that person will look something like this:

* The advisor has enough experience with financial planning and building relationships that they understand what it means to earn the trust of a client and build relationships.

* The advisor recognizes the advantages of being part of a team and working with colleagues who are all pulling in the same direction, as opposed to running their own show and wearing every hat themselves.

* The advisor wants to be a part of something that is bigger than themselves.

* The advisor is less concerned with creating portfolios and acting as PM, more concerned with achieving results for their clients.

* The advisor is technologically savvy or, at least, willing to invest the time to learn.

*The advisor is more focused on the long-term advantages of growing with our firm, not payouts and splits and how much they can earn for themselves in year one.

* The advisor wants to be compensated on the basis of not just what they achieve on their own, but also based upon how well the overall organization is doing and the satisfaction of the firm’s clients.

* The advisor wants to learn from as well as contribute to a firm that’s rooted in behavioral finance, market research and a unified message of common sense and evidence-based investing.

* The advisor is someone I would be comfortable bringing home to have dinner with my family.

People who meet all of these qualifications are rare. The good news is, we are in no rush.

In some years, we hire no new advisors. Last year we hired just two. This is the right pace for a firm that is protective of its culture, and wants to be sure that everyone representing the brand makes us proud.

This past month, I learned that I am surrounded by CEOs who are pursuing growth at almost any cost in our industry. Virtually all of the people I came into contact with at the Market Counsel Summit – one of my favorite advisor get-togethers of the year – is talking about scale and acquisitions. Many larger firms have no choice – they’ve taken the growth capital from private equity firms and now they have to use it. Outside capital is planning to flip someday, what happens with the culture in between isn’t terribly important.

Some leaders seem to be more interested in making financial deals than in maintaining the existing culture of their firms. I look at these growth-no-matter-what situations and I think about all of the future headaches these people are gobbling up at the top of a bull market. How can any organization grow its advisory headcount that rapidly and honestly say that every hire (or acquire) is doing right by their clientele? And how excited will they be by this “scale” when they have a thousand clients being told different things by different personnel in a market crisis?

Building another version of LPL or Merrill Lynch – where depending on which representative you work with, the portfolio and advice will be radically different – seems highly problematic to me. Peter Mallouk refers to these types of RIAs as “Franken-firms” – five or six different cultures stitched together but sharing enough resources to be able to identify as a single company. Everyone running their own service model, everyone recommending their own portfolio strategies, everyone in a silo, saying god knows what to their own practice’s accounts. These firms are going to blow up in the next bear market because there’s too much inconsistency in the messaging to clients.

The empire-building stuff is not appealing to me or my partners, so we stay out of it. We’ve bootstrapped the firm since day one without taking a dollar in loans or outside equity capital. In 2019, we brought on over $255 million in new assets all by ourselves. Every one of our new clients is being told the same thing about the importance of adhering to a financial plan, having an investment policy statement, being rules-based in their portfolios and keeping taxes and trading costs low. A client in Texas would recognize the service and advice that another client in Pennsylvania is receiving.

One of the best pieces of advice I’ve ever heard in this business – from Mark Tibergien at Pershing – is to “Standardize the process, personalize the advice.” If you have people personalizing the advice in your firm’s name, then you’d better be able to trust those people and be able to see what they’re doing for clients and why.

As such, it would be impossible to train and develop financial advisors in a culture like this on an assembly line. Our systems were built to incorporate no more than a handful of high quality people each year. Which means we have to be super-selective up front and start with the right material. Which means we have to say No a lot in order to get to the obvious Yes’s.

I’ve been reading a lot about the deals and investments Warren Buffett made in the 1980’s, the decade during which Berkshire Hathaway went from $100 million to over $1 billion. The hallmark of this period at Berkshire was patience.

While corporate raiders and leveraged buyouts raged all around him, Buffett simply waited for the phone to ring. He got to know people personally. He accepted rejection only to circle back years later with another offer. He wrote letters to business owners with his offers, inviting the recipient to simply throw the letter away if there wasn’t any interest. He made deals with handshakes or over dinner. It was during this period that Berkshire invested in Nebraska Furniture Mart, Capital Cities / ABC, Scott Fetzer, and the Buffalo News – which led to some of Buffett’s most financially successful and spiritually rewarding relationships of all time. What he didn’t do was scour the country for the next big thing, make acquisitions just because he could afford them, hire a business broker to find opportunities or hob nob with investment bankers. Opportunities presented themselves and when it felt right, Warren and Charlie swung the bat.

We’re not forced to swing the bat when it comes to bringing on advisors at Ritholtz Wealth Management. There are no called strikes for us either. We don’t have hiring quotas or targets to hit. I hope it can stay this way forever. We’re 30 people now, 13 of whom are client-facing financial advisors. If we finish 2020 with 13, 14, 15 or 16 – while maintaining the caliber of client service we want to be known for – I’d be thrilled.

However, each month, dozens and dozens of potential investors come to us for help. And we need talented people on our front line to get to know them, explain what we do and offer them advice. We need people who are equally comfortable talking tax planning strategies, portfolio construction and retirement advice. But it’s far from mechanical; we need people who can speak to the hopes and dreams of our clients, who can address their greatest fears and anxieties, and who can bring constructive solutions to the unquantifiable future that all of us face.

This year, we’ll speak with over 50 advisors but hire only a few. We hope to give these advisors an incredible opportunity. We hope to change their lives. We’ve done it before and we’ll do it again.

If you think you have what it takes to be a part of this select group, tell us here. The greatest adventure of your career could be right around the corner…