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Joshua Brown: The 2012 IA 25 Extended Profile

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Joshua Brown, the bomb thrower behind the blog The Reformed Broker, has always had his eye on the financial services industry.

“In the mid to late ‘90s, everyone was becoming a broker,” he recalls. “It seemed like the thing to do. It seemed really exciting and thrilling to work on Wall Street, and it was pretty much the only thing that I wanted to do.” Following a series of internships at brokerage firms in Manhattan, Brown settled on one where a family friend helped find a sponsor for Brown’s Series 7. Then, he was “off to the races.”

Now Brown is a blogger, an author and a vice president of investments at Fusion Analytics in New York.  

2012 IA 25“I was blogging before there were blogs,” Brown says of his early days. Every morning, he would clip articles out of newspapers that had the most impact on his clients’ portfolios and on the markets each day and write a quick monologue. “I would call my 20 or 30 most active clients, almost before the opening bell, and I would give them the quick update each day on what they could expect to happen that day in the markets,” he says. As his practice grew, the number of clients—not to mention the “cataclysmic events” of 2008–became too great to keep up that kind of effort, so Brown set up a WordPress account and started blogging.

“Of course, the compliance officer almost had a heart attack when I told him I wanted to. Eventually, I was able to write up enough samples so he could see that it was innocuous.” Brown took it upon himself to call the SEC’s advertising department in Washington, get an outline on what he was allowed to write online and sent them a few samples. “Once I got a hang of what I could do and couldn’t do, I just started writing every day. Fortunately, I found an audience quickly, because if I didn’t I probably would have just given up. Blogging is a very grueling, sometimes unrewarding, enterprise.”

Advisors were the first to take notice. “People in the industry were reading first,” Brown says. “They think I was extremely honest and raw at a very difficult time for people who are in the industry.” And the response has been “overwhelmingly positive,” he adds. “The things that I’m saying are the things that all brokers and advisors think, but would never say out loud. When they see someone like me, that’s one of them, say it, people freak out.”

His book, “Backstage Wall Street,” tells the history of the Wall Street and Main Street relationship, he says, with introductions to products like mutual funds, ETFs and IPOs. Following a successful presale response, the book was released two weeks early.

Over the next 12 to 18 months, advisors will face “the same old challenge, which is figuring out the right asset allocation given an environment where the old bond math doesn’t work anymore,” Brown says. While higher weightings toward equities didn’t make much sense for retirement in the past, it now makes more sense than what used to be conservative, such as a higher bond allocation.

And, of course, regulatory changes will be a constant hurdle going forward. “At a certain point, the fiduciary standard is going to be applied to every single person who deals with the public,” Brown asserts. “A lot of people who are doing the majority or a good portion of their revenue in commission and selling concessions, they’re going to have to accept the fact that that’s going to go away too. You can’t be someone’s fiduciary and sell them an A-share mutual fund with a 5% up-front load.”

Brown also foresees a growing move toward independence. “The industry is going to become more entrepreneurial,” he says. “The old marketing doesn’t work, with the giant wooden sailing ships and the mighty oak trees and the brochures with the silver-haired grandpa swinging his grandkids around on the front lawn.” Those images don’t resonate with Gen Y the way they did with boomers, Brown says.

Additionally, doors that used to open for big financial houses like Morgan Smith, Smith Barney and Merrill Lynch are now locked. “The public has seen something that can’t be unseen, which is the largest firms on Wall Street basically blowing themselves up,” he says. The prospect of a firm that lost $39 billion of its own money offering to manage yours isn’t as appealing as it used to be.

Technology will play a major role in the “renaissance” of financial planning, Brown says. “People on their own now don’t have any disadvantage in terms of support and capabilities because of what the web has enabled us to do.“

In the financial services industry, Brown says, wealth managers have handled the crisis with the most aplomb. Pre-crisis, bankers and prop traders at Wall Street firms were the rock stars. “If you look at the aftermath of the crisis, what are the big firms most focused on? It’s wealth management,” he notes. “In the wake of the crisis, there’s almost a newfound respect for people like myself in firms all over the country, and the old culture, the bankers and the traders, is not as exciting. It’s a good time to be an advisor.”


Find out who was named on the 2012 IA 25 in Investment Advisor’s May issue.

Check out more extended interviews of the 2012 IA 25 at AdvisorOne.