In the 35th anniversary year for Investment Advisor, and the 13th year we’ve been naming the IA 25, we thought it proper to publish a special list honoring 35 people who have been most influential in and around the business of independent financial advice.
Listed by alphabetical order, we also thought it proper to include Five to Honor—investment theorists and practitioners who are in nearly every advisor’s pantheon—and Five to Watch—younger influencers who we suggest are not only influential now but may well be on the 2050 IA 25.
We remind you that this is a subjective list, but one that has been through multiple iterations, proposed first by the editor-in-chief but modified significantly via input from the entire editorial staff of the Investment Advisor Group. Shorter profiles of our honorees are here; we invite you to read—and comment upon—the extended profiles of the IA 35 for 35 on ThinkAdvisor.com throughout the month of May. Congratulations to our honorees—you’ve been instrumental in making this industry what it is today and what it will be tomorrow.
Ben Bernanke, a former Princeton economics professor who studied the Great Depression of the 1930s, managed to prevent another Great Depression during his tenure as Fed chairman.
The Fed under Bernanke became more transparent, instituting quarterly news conferences and economic projections disclosing when possible the degree of uncertainty policymakers attach to their projections.
Bernanke has been criticized for sowing the seeds of future inflation and another asset bubble with the policies he pushed, but so far that hasn’t happened.
Although he’s no longer a policymaker at the Fed, Bernanke still seems interested in influencing it. He’s started a blog at the Brookings Institution where he’s now a Distinguished Fellow in Residence with its Economic Studies Program, which is almost all about monetary policy.
In mid-April, Bernanke made a move that past Fed chairmen, Treasury secretaries and many of his former colleagues have made: he went to Wall Street. Bernanke is now a senior advisor to the Citadel Investment Group, a $25 billion hedge fund founded by billionaire Ken Griffin.—Bernice Napach
Ask Tom Bradley to look back at pivotal moments that shaped the advisory business and he recalls May Day 1975, the day the Securities and Exchange Commission deregulated commissions. “Two industries came out of that [deregulation]: discount brokerage and the independent registered investment advisor business,” Bradley said.
During his 30 years at TD Ameritrade, in which he’s steered both the retail and institutional businesses, Bradley has watched two major trends unfold: the role technology has played in reshaping the investor/advisor relationship, as well as investors “flocking” to what he calls the “newer” advice model—fiduciary, fee-based advice.
“We’ve gone from a straight-up ‘call us and we’ll write up a trade ticket’ [model] to what is being referred to today as omni-channels; you can still call us [and] walk into a branch,” Bradley said, but clients can now go online or use a mobile device to do business with TD Ameritrade. In fact, mobile is “one of our fastest growing channels,” he said, representing more than 15% of TD Ameritrade’s daily trades.—Melanie Waddell
Eleven; 27, 100+; 37,000, $8.5 million. While it can be misleading to use numbers to gauge the importance and reach of an organization, these numbers from the Financial Services Institute tell a good tale: 11 years of operation—emanating from the Financial Planning Association; 27 professional staff members in the group; more than 100 independent broker-dealer member firms; 37,000 individual advisor members in FSI; and a 2015 budget of $8.5 million that includes allocations to hire three new advocacy staffers, bringing the total number to 13.
Regarding Dale Brown, we can add another number: nine, for the number of years Brown has found a place on the IA 25.
When asked how the group, and specifically Brown himself, has been able to get the sharply competitive leaders of those 100-plus IBDs to put aside their differences and pull together for the FSI—and just as importantly help fund the group—he’ll say it’s FSI’s “laser-like focus on advocacy.”—James J. Green
This year marks the 50th anniversary of Warren Buffett’s takeover at Berkshire Hathaway, then a struggling textile business that has grown into a sprawling conglomerate.
“In its early Buffett years, Berkshire had a big task ahead: turning a tiny stash into a large and useful company,” wrote Buffett’s longtime business partner Charlie Munger in this year’s shareholder letter. “It solved that problem by avoiding bureaucracy and relying much on one thoughtful leader for a long, long time as he kept improving and brought in more people like himself.”
After 50 years under Buffett’s reign as chairman, president and CEO, Berkshire Hathaway is still going strong, with more than 50 constituent companies employing 300,000 workers, and with a market cap greater than $300 billion. Its sought-after Class A stock may be the most expensive of any public U.S. company, eclipsing $200,000 per share for the first time in August 2014.
“We have never invested in companies that are hell-bent on issuing shares,” Buffett wrote in his latest shareholder letter. “That behavior is one of the surest indicators of a promotion-minded management, weak accounting, a stock that is overpriced and—all too often—outright dishonesty.”
Buffett, together with Munger, built today’s Berkshire on a simple philosophy: “Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices,” Buffett wrote.—Emily Zulz
Chances are good that Joe Deitch is the only chairman of an independent broker-dealer that can claim a Tony Award for his work as a Broadway producer. Commonwealth Financial Network, the independent BD founded by Deitch in 1979, is used to getting other kinds of awards—through 2014, Commonwealth marked its seventh straight year as one of the best places to work (from The Boston Globe for its Waltham, Massachusetts headquarters) and was on the San Diego Business Journal’s best places to work list for six years, in addition to multiple honors from the likes of Computerworld and J.D. Power. Oh, and it’s won Broker-Dealer of the Year honors from this magazine 10 times.
But the most unique part of Commonwealth isn’t its numbers or accolades, but its culture. Deitch and his long-time partners, including CEO Wayne Bloom, act like a functional family: firmly committed to a common goal, wary of outsiders (such as might be the case if they acquired another BD and its problematic reps), fond of pushing each other’s buttons in an affectionate way and committed to each other—not just the partners, but all the employees and, by extension, the reps who throw in their lot with Commonwealth. And the charismatic Deitch remains a presence at the firm.—JG
Nearing its fifth anniversary, the Dodd-Frank Wall Street Reform and Consumer Protection Act—for good or ill—continues to reshape the financial services regulatory landscape.
While the law’s two authors have since retired from Capitol Hill, they still keep a watchful eye on the financial reform law’s progress. Former Sen. Christopher Dodd, D-Conn., now heads the Motion Picture Association of America, while former Rep. Barney Frank, D-Mass., is writing books and doing the speakers circuit.
Sparked by the financial crisis of 2007 to 2010, the Dodd-Frank Act requires that regulators create 243 rules, conduct 67 studies and issue 22 periodic reports.
GOP lawmakers have vowed a full court press this year on introducing bills to roll back the financial reform law (despite the fact that President Barack Obama vows to veto them if they reach his desk).
When talking about the financial reform law that bears his name on “Real Time with Bill Maher” in mid-March, Frank said that “one of the issues that will be before the American people in 2016 is do we maintain financial reform […] or essentially go back to the unregulated situation because the Republicans will be for undoing it while Hillary Clinton has made very clear that she’s for keeping it the way it is.”
Added Frank: “Between now and the election, I’m confident that the president is going to protect it.”—MW
There are a number of demographic, economic and sociological changes happening to affect people’s lives and, by extension, the financial services industry, according to Ken Dychtwald, president and CEO of Age Wave. “On the first day of the 20th century, the average life expectation was 47. On the last day, it was 78. Today, it’s approaching 80 and continues to rise,” Dychtwald told Investment Advisor. “In fact,” he said, “retirement is going through a massive facelift.
As clients envision a retirement that “is not simply an on/off switch […] but rather a time of new beginnings,” advisors will have to follow with “an entirely new set of understandings.” That includes a new appreciation of the products that will help retiring clients, as well as new skills to relate to people.—Danielle Andrus
When Harold Evensky started in the financial planning business, the industry was still young, and along with limited options in technology, there were few advisors with planning expertise.
“I taught the investment portion of the CIP program at the University of Miami and in my class was a UPS driver and a French teacher,” he said. “But that was fairly typical. I was an engineer who came from the construction business. Back in those days, everybody came from somewhere else; nobody started off in planning.”
Now, just as the industry has grown from UPS drivers and French teachers to trained experts, technology and planning software have improved to allow advisors to provide a level of quality in their work that “wasn’t possible before,” Evensky said.
“I believe, over the next couple of decades, simply to be competitive, we are going to have to significantly expand our value offering beyond simply portfolio management,” he said.—DA
Since she started her practice, billing clients by the hour, on April Fool’s Day in 1998—“You’ve got to have a sense of humor to be self-employed,” she joked—Sheryl Garrett has seen a lot of advisors follow in her footsteps. Over 320 advisors across the United States are members of the Garrett Planning Network, offering fee-only advice on an hourly basis to middle-income clients.
She sees the proliferation of robo-advisors as a change for the better, as they will put pressure on prices and make financial advice more accessible to more clients. There are limitations to expanding access to financial advice through a robo-advisor, though. “The majority of people don’t want to just turn to a website or a calculator. That might solve one or part of their needs, but they do want to connect with a human being to say, ‘Did I do this right?’”
Garrett stressed that serving more clients isn’t about serving more wealthy clients. “They have choices out there,” she said. For firms in the Garrett Planning Network, serving clients is about “finding new and different ways to meet the needs of younger people, millennials, people just getting started, middle-income clients and folks with even more modest means than that.”—DA
Despite a rough couple of years, probably no mutual fund manager is as famous or as influential as Bill Gross. In 2013, PIMCO Total Return posted its first loss in 14 years and in September 2014, Gross suddenly announced he was leaving the company for a new job at Janus Capital Group, just months after his co-CEO Mohamed El-Erian unexpectedly resigned.
Still, up until late September 2014, he ran the world’s largest bond fund, the PIMCO Total Return Fund, which he created in 1987 and grew to $270 billion in assets by 2012. The fund often outshined its competitors, earning Gross Morningstar’s Manager of the Decade award in 2010 for “investment calls and top-notch performance” that made investors $47 billion wealthier and Gross “one of the best investors of our era.” The Bond King ruled.
When he left PIMCO, $10 million immediately followed him to the new Janus Global Unconstrained Bond Fund, and legendary billionaire investor George Soros invested $500 million in a separately managed Janus account managed by Gross.
By April 10, assets of the Unconstrained Bond Fund had had grown to $1.5 billion. The growth, however, wasn’t due to only performance and inflows. Gross himself had invested $700 million in the fund, Janus Chief Executive Dick Weil disclosed in January.—BN
The wizard behind the Dalbar curtain is Lou Harvey, who has led the Boston-based market research firm since he founded it in 1976.
Harvey has kept Dalbar on the cutting edge of some key issues in financial services. For example, he helped popularize behavioral finance long before it was in vogue with the firm’s Quantitative Analysis of Investor Behavior” (QAIB) report, now in its 21st edition.
QAIB brought to investor consciousness the distinction between investment returns and investor returns. Its April update showed that stock mutual fund investors trailed the S&P 500 by over 8%.
Dalbar’s mission, which remains as valid today as it did at the firm’s inception, is that, as he put it, “by doing things right, we can in fact generate opportunities and profits.”
Among his biggest current preoccupations is Dalbar’s involvement in the fiduciary movement, albeit with a distinctly different spin from that of other fiduciary advocates: “As the industry organizes itself, the solution is to act in the client’s best interest […]. That’s really the only sustainable path,” he said in his dulcet Caribbean accent.
But to him, part of the fiduciary mission means “raising awareness of the folly of trying to mandate standards of quality.”
“It seems patently obvious,” he explained, “that simply changing the label that somebody wears isn’t going to change their character. If I’m acting in my client’s best interest […], I’m going to continue to do that regardless of [my registration].”
Besides his efforts to get advisors to operate at a higher standard, Harvey’s other goals include teaching advisors how to mitigate growing regulatory risks while showing them how to do business without being dependent on product manufacturers.
“I think we can show them how they can profit from a more aligned compensation system,” the fiduciary advocate said.—Gil Weinreich
Ten years ago, 25-year-old Angie Herbers raised a ruckus by writing about an under-reported issue. “The gap between successful planners and the next generation is wider than most people realize, and it’s growing.” She didn’t stop there. In her writings and speeches and research since—and in her day job at her eponymous company—she has been proposing solutions to bridging that gap, offering tough love advice for both veteran owner-advisors and younger planners.
Last year, Herbers merged her firm with Wealth Management Marketing, and in mid-April that firm became Kaleido, which offers a free business assessment tool to advisors—the Kaleido Scope. Kaleido’s goal, she said, is to help advisors “look at your business in a different way” to overcome growth hurdles. “What got you here,” she said, “won’t necessarily get you to the next level.”—JG
Tom James became CEO of Raymond James in 1970, succeeding his father Bob, and held that role until 2010; he remains chairman. Under his leadership, Raymond James not only built a successful public company but also a big tent for advisors. Under the RJ umbrella, you can be an employee advisor, an independent contractor or a fully independent RIA. Long before other IBDs and even wirehouses discovered that giving their advisors a choice of affiliation was a good rep retention move, it was business as usual at Raymond James.
Then there is Raymond James’ focus on financial planning, which in an April interview James said he learned from “sitting at my father’s feet on Saturdays,” while Bob James spoke to his clients. “When Tom came on board,” recalled 40-year RJ advisor Mike Hines, “he changed everything.”—JG
When it comes to investing theory and application, these five men being honored as part of the 2015 IA 35 tend to be in every advisor’s pantheon.
Interestingly, these are also men who have strong personal connections with each other—either as student and teacher, mentor and mentee, or business advisor and entrepreneur. Not that they always agree, but even in their criticism and their aversion to suffering fools gladly, they’re more interested in getting to the truth than they are in scoring points.
Let’s start with Graham: the father of value investing, yes, but more important, the person who democratized investing, explaining the ways of Wall Street while paving the way for advisors and clients to avoid the ways of Wall Street. Graham’s influence came through his collaboration with David Dodd in research, teaching at Columbia University and publishing seminal books. Perhaps his most famous student, Warren Buffett, called Graham’s “The Intelligent Investor” (1949) “by far the best book on investing ever written.”