Earlier this year in his weekend “Intelligent Investor” column in the Wall Street Journal, Jason Zweig wrote a memorial tribute to Jack Bogle, founder of the Vanguard Group, that compared him to St. Paul, the early Christian missionary. When Zweig wrote that Bogle “blazed with the zeal of the convert” the words jumped off of the page. I stopped reading, set down my coffee and let a rush of memories flow through my head.
The Zeal of a Convert
I had always felt a certain kinship to people like Bogle who held high conviction beliefs about investing, but I had not put much thought into his role as an evangelist or how he came to his beliefs. As it turns out, this champion of low-cost investing started out on the Dark Side, advocating for active management mutual funds and higher fees. It was only after being fired as Chief Executive of a mutual fund that he had his great epiphany: Investors could benefit from a firm like Vanguard being run with their interests at the forefront. An investing revolution ensued, and Bogle embraced his role as a zealot.
Anyone who knows me professionally could attest that I have strong beliefs about the business of financial advice. I believe that the only standard of care for Advisors should be the Fiduciary Standard. I believe that the brokerage business works against the interests of investors by using confusion and conflict of interest. I believe that good advisors are stuck in bad business models because their clients are “owned” by their parent company. I believe that wise counsel is the true value of any financial professional.
What many don’t know about me is the rocky path that I have followed to my current role as a leader of a Registered Investment Advisor (RIA) firm. The truth is, I was fired. Cast off by the Wall Street firm that brought me into this business. I was left to rebuild my career as an advisor, as a professional, and as an advocate for a profession that could and should be better. On a different scale, Jack Bogle and I both had conversions on the Road to Damascus that changed the course of our careers. Here is my story.
My Origin Story
In 2005, I told my wife that I wanted to change my career path to embrace what I thought I had learned through my study of history and business in college and through my leadership experience as an Army officer. Specifically, I wanted to provide advice, leadership, and perspective to clients as a financial advisor. That meant leaving a corporate job, finding a firm to hire me, train me, and support me as I built a client base. What I didn’t tell my wife, who was pregnant with our first child at the time, was that it would help to know people in our community (which I didn’t) and know how to sell (which I didn’t). My first sale was to convince an established Wall Street firm to hire me. They admittedly took a chance in giving me a job after I failed whatever personality test that they included in the interview process. It probably told them I couldn’t sell lemonade in the Sahara.
I remember at one of the interviews they asked me to present my business plan. The only part I remember about the plan is that I titled it “Morton Advisory”. The branch manager took one look and reminded me that I worked for this big Wall Street firm, not “Morton Advisory.” My response was to say that the only way I will succeed is to frame it that way, as my own.
After passing my licensing exams, they sent me to three weeks of training to teach me how to sell investments to my clients. There were two ways to go about growing your book of business, the trainers told us. You can be a traditional broker and sell stocks, funds, and annuities to earn commissions and eventually become a top “producer.” Really? Producer not Advisor? The second option was described as what the forward-thinking brokers were starting to do. “What you want to do is build a sustainable, fee-based practice where you earn your flat percentage fee over time and it aligns your interests with clients.” That’s it! This makes sense. I don’t have to sell, so much as consult. I will do that.
Finding my Path
I returned home and thought about business model #2. This is long-term, sustainable, and something I could be proud of. But there are trade-offs. I explained to my wife, who had just given birth and was planning to stay at home, that commissions would pay us more up front. It would ease the financial burden of this career transition. Flat fees would take a long time to develop into an income stream for us but would position me to be a true advisor, focused on the long-term. Are you ok with that? Yes, she said in an unflinching vote of confidence.
Then there were the details about how my success would be measured by the firm. In my fee-based business model, success would be defined by growing the number of households that I advise and my assets under management. Success for Wall Street, though, was and is measured on the amount of commission generated each month. If I earned enough in commissions, I would get to attend a second training session. If I sell even more product, I can attend a third training session. There was one more important detail. If, after 18 months I didn’t generate enough commission business, regardless of how many families I was serving and the amount of assets they had entrusted to me, I could be fired and my clients distributed out among the branch.
Doing things the right way
I understood. It was going to be hard. I couldn’t turn to old neighbors or community friends. Every day I had a sheet with the numbers 1-200 written on it. Every time I dialed a phone number, I crossed off a digit on my sheet, until I reached 200. Every day for 18 months. If I was going to do this, I had to be the best cold-caller in the branch. Within six months I was training new hires on how to build relationships over the phone. But I also saw my peers racing ahead. While I was talking about investing for the long-term, they were selling annuities and pitching the stock of the day. I didn’t qualify for the second training round and I don’t think they even told me about the third. The best training that I could get was by picking the brains of the people in the office who I respected the most. I was looking for anyone to tell me that yes, with a little blind faith, my model could work out.
A few small wins and lucky breaks started to go my way at the one-year mark. People who I had been calling for a year started to ask if I could look at all of their statements. I began working with my first clients with substantial planning needs. I started to gain confidence that there was demand for this role that I had imagined. Some other brokers in the office handed off small clients and I was able to build them into meaningful, wholistic relationships. I no longer had to believe without seeing. It was starting to take shape. I convinced myself that my employer would see value in what I was doing.
When Your Best Isn’t Good Enough
That was my mistake. In late August of 2007, I was called into the branch manager’s office where he showed me a memo that I had signed when I joined the firm. “Do you remember signing this?” Yes, vaguely. The memo had the exact date for my last day if I didn’t earn enough in commissions. The date was in two weeks. The manager would go to bat for me. New York told him that the firm had to be consistent in evaluating all 16,000 of their advisors. If I did not sell enough high commission products, it didn’t matter how many great, long-term clients I had. He wanted me to stay, but he might need to fire me.
I went home that night and caught my wife just as she was heading out the door to an evening meeting. I broke the news and she did not bat an eye.
“Have you done this the right way?” Yes. “Is this a career that you love?” Yes. “Then we will figure this out.”
Says the confident wife to her broken husband, the family’s sole breadwinner. Only two weeks earlier, she had given her final notice to her former employer and closed the door on going back to her old job. We had burned the ships. We were committed.
Phone calls were made, letters were written. At the end of September, I received the verdict. While New York appreciated my efforts and it was obvious that the local team wanted to keep me, they had to toe the firm line. I was fired. Immediately.
The next morning, before I could begin making calls to other investment firms, my former colleagues were already reaching out. They offered to make introductions, they offered encouragement, they expressed disbelief. I couldn’t help but notice that I was fired while all of the other trainees a few classes ahead and a few classes behind me were quitting. The only ones surviving the cuts were the product salespeople.
Within a week, the old firm had reached out with a path forward. “We think we have a way to bring you back in, as if you never left. You will just have a different title.” That is what we did, and I continued there for another six months, before leaving to join an independent advisory firm. Upon my resignation, the branch manager asked me, “How will you attract clients without the strength of a large brokerage house?” Ironically, the question was asked in a month (March, 2008) when the firm’s stock was 60% lower than it had been nine months prior.
leaving Wall Street
I left behind the Wall Street model forever, but the lessons learned were many. No one who knew me at the firm had any influence over the true decision makers in New York. The best interests of my clients were never a consideration throughout my entire employment process. The incentives of the brokerage world were and are warped and short term. I knew right then what the advisory business should not be, but had yet to discern what it could be.
The next 10 years of my life were devoted to that journey, culminating in the founding of Morton Brown Family Wealth in 2018. In a very positive way, I am proud of what we stand for as fiduciaries, professionals, and advisors. Based on my early experience, though, I also have strong feelings about what we stand against. The financial industry is still fighting against the Fiduciary Standard. It is still not training and developing the talented people needed to serve clients. And it is still, if you read the fine print, protecting the conflicts of interest that serve the company first, all others second. In reflecting on my growth in the last several years, my passion for delivering this better model was kindled in the tortuous experience of losing my job.
I had never thought of myself as having the “zeal of a convert” like Jack Bogle. Zealot is a strong word, because it implies an uncompromising spirit. But maybe the shoe fits. I have seen behind the curtain and observed the sorry state of the brokerage business. I have seen what is possible in the form of visionary advisory firms around the country who are changing the profession of financial advice. If a zealot is someone who keeps a “Motivation” folder in his desk containing the letter firing him from Wall Street as a reminder, then maybe I should own that identity. It is my story of Independence.
We all have a moment in our lives, personal or professional, when we found our purpose. I would love to hear your origin story. Contact me at [email protected].