In the wine industry, few captivate a cult following quite like Screaming Eagle Cabernet. If you’re not familiar with Screaming Eagle Cabernet, it’s a legendary cult wine produced by Screaming Eagle Winery in the Oakville region of Napa Valley in California.
Screaming Eagle Wines are sold by subscription only, with no tasting rooms or ability to visit the winery. The label’s extreme popularity has caused a waiting list just to get on the subscription list, and each vintage is pre-sold. A bottle of Screaming Eagle will set you back $750, with subscribers often times flipping their purchase for $1,500 or higher. (The winery has been known to drop subscribers if they get wind that you’re immediately reselling their wine.) In 2001, a six liter bottle of ’92 Screaming Eagle set a world record for the highest price ever paid for a single bottle of wine through the Napa Valley Wine Auction, selling for $650,000.
For this kind of money you have to wonder what kind of experience a wine can offer to justify such a demand. Here was one explanation from a wine aficionado:
“It was as though we’d been sucking on the world’s most perfect blackberry… one single, perfect blackberry… and, at that moment, exactly 70 minutes after we had opened and decanted the bottle, the fruit had burst open, with dramatic, intense, ripe tastes of earth, minerals, acidity and sunshine. In the world of wine-lovers, this is what you always hope for but never expect: a brief, ephemeral moment of perfection.”
While most don’t expect an ephemeral moment from a broker-dealer, it is your experiences—of relationship, service, technology, belonging and feeling appreciated—that determine if your broker-dealer has a cult following that separates them from the competition. For the few firms that have achieved this cult status, we have found that, like cult-status wines, “Culture, Purity and Technology” are the traits that set them apart because they do them all and they do them well.
Culture: Learning the Business From the Ground Up
Screaming Eagle and other California cult wines share three common threads. First, they are all located in Napa Valley because the single most important factor in producing a great wine is soil, soil, soil. Second, these wineries are managed by wine school graduates, with the University of California at Davis (UCD) being the most common. Heidi Barrett, Screaming Eagle’s renowned winemaker, graduated from UCD in 1980 with a B.S. Degree in Fermentation Science. She cut her teeth working at numerous wineries, improving her craft along the way until she started making wine at Screaming Eagle in 1992. The third common thread is output. Cult wineries such as Screaming Eagle produce only 600-700 cases per year, while their commercial counterparts produce in the tens of thousands.
Cult-status broker-dealers also share several common treads. Broker-dealers with the best cultures are nearly always headed by a founder or president who was themselves a registered rep, learning and applying their craft over the years before starting their own broker-dealer. When a broker-dealer president has walked in the shoes of the representatives, it brings a connection that you rarely see when top management has backgrounds such as accounting or compliance.
In 2012, a top rep leaving a large broker-dealer was quoted as saying, “My broker-dealer doesn’t understand broker-dealer culture. They understand business but not culture.” The president of that particular firm didn’t have a registered representative background, so it came as no surprise to hear of the cultural disconnect.
As firms grow, maintaining a highly functional culture becomes increasingly difficult. One cult-following, mid-sized firm we place advisors with is keenly aware of this so they set a growth cap of 500 representatives in order to preserve the high touch qualities that attracted advisors to the firm in the first place. They also tell prospective representatives that their compliance department doesn’t cater to the lowest common denominator because they don’t have a lower denominator—they simply don’t bring on reps unless they have $200,000 or more in production.
A firm’s success and growth can be their greatest downfall if management starts to operate out of an Ivory Tower, granting access sparingly or only to the highest producers. Mark Cuban, entrepreneur and owner of the Dallas Mavericks, recalled his first job out of college with Mellon Bank, where he tried a bottom up approach to communicating with management. He started a “Rookie Club” where he’d invite senior executives to a happy hour to talk to younger employees. He also started a newsletter that discussed current projects. His boss called him into the office, ripping into him for going over his head, threatening to crush him unless he backed away. Cuban left Mellon shortly thereafter, realizing they were more concerned with their power structure and egos than making improvements. I’ve also witnessed a broker-dealer president who belittled and practically interrogated reps during recruiting visits, which is a time when he should be trying to woo them to join the firm. Recruiting is difficult enough without a bridge burning leadership mentality that turns off potential prospects. The intoxicating effects of power and success can turn a broker-dealer’s culture upside down as representatives’ contributions take a back seat.
To be certain, growth makes maintaining a highly functional culture increasingly difficult. If you want to have the ear of management, quality relationships with back office staff and a sense of belonging, a broker-dealer’s growth has the potential of being your worst enemy.