Wealth Clarity Blog

The adage about being lonely at the top has real meaning for those in charge of running a company, and leaders in general. When everyone reports to you, whom do you confide in and talk to about your problems and concerns. Without professional confidantes, you can start to feel like the Tom Hanks character in ‘Cast Away’ who, in his isolation, resorted to talking to a volleyball he named Wilson (after the ball’s manufacturer).

Talking to staff can lead to sharing information that isn’t appropriate. Sharing within the ranks might also undermine authority.

Friends and family are another option, but while they do care about you – this is an important component – they often do not really know enough about the circumstances and/or possess enough depth in your your field of expertise to provide meaningful guidance.

Your spouse, likewise, cares about you but might not be close enough to your professional problems to help solve them. Furthermore, involving a spouse can create an additional layer of stress in your relationship. You end up spending time out of the office working on office problems with your confidante and best friend when you should probably be working on your relationship.

For those in leadership positions, an obstacle to sharing problems can be fear. What will other people think if I have questions? What will they think if they find out I don’t have it all figured out or have all the answers? Will uncertainty look like weakness?

The tendency for those in leadership positions, who tend to be Type A personalities to begin with, is to say ‘I’m going to figure it out on my own.’ That only makes it harder for us to reach out and get help. That fear, that inability to unload your problems leads to isolation.

The solution for me was to join a local Vistage CEO peer group that meets once a month for an entire day. Vistage International is a 50-year-old organization with 15,000 members in 15 countries, made up of chief executives and leaders from various industries.

Our local group of 14 meets all day and dives deep into our businesses and all our issues. We set aside time to talk about our goals, finances, strategies, personal concerns, anything we want help with.

I could try, on my own, to meet individually with CEOs I know personally, but it’s likely that coffee or lunch we try to schedule will simply never happen, or happen too infrequently to be useful.

Vistage gives structure and commitment to your intentions. It has become so important to me, I can’t imagine missing a month. The meeting has become an amazingly powerful tool to break down that fear, shape my thinking, and give me an entirely different perspective on my problems. Our conversations are confidential. Everyone is committed. Everyone has to contribute. Everyone is held accountable.

The group isn’t afraid to ask you if you did what you said you were going to do. It’s like having a board of advisors that cares about you and wants to see you succeed without any agenda.

I would welcome your thoughts and opinions on the following:

If you are a leader or business owner, who do you talk to about problems and concerns?
What other groups or organizations provide counsel that is effective and conflict free?
Is the fear of disclosure about your issues keeping you stuck?

Many people don’t realize that the wealth management industry is not very old and has really taken shape only in the last several decades. In that time, the breadth of services provided has changed dramatically, while the way advisors are compensated hasn’t changed much at all.  Could it be time for a change in how fees are charged?

While the industry predominantly charges fees based on a percentage of assets under management (AUM), this compensation method undervalues the complexity of the issues involved and doesn’t always work in the client’s (your) best interest.

Sometimes, a percentage of assets approach is the most equitable way of paying for services if you are receiving primarily money management services. In other cases, when financial planning and financial counseling services are provided, a flat fee or even hourly fee arrangement could be more appropriate. That is why a firm’s compensation philosophy is just as important as its fee structure.

From the firm’s point of view, diligence, hard work and expertise should be accordingly compensated. From the client’s point of view, the firm should be motivated only by the client’s financial well-being.

Focusing on growing and preserving a client’s entire balance sheet is central to Highland’s philosophy, which means our role can include a broader set of services than traditional money management alone. For example, we will often advise on both traditional liquid assets as well as illiquid assets such as real estate. We also regard mortgages and other liabilities as important elements to consider when planning for a strong and sustainable financial future.

One possible solution for improving the fee system is to think outside the box and create a new approach that better suits the wealth management industry today. Just like transitioning from commission-based billing to AUM-based was a positive step towards eliminating certain conflicts of interest associated with commissioned sales, we believe it could be time to transform again by creating a retainer-type system as an alternative to AUM-based fees.

The AUM model is easy enough to grasp. On a basic level, it makes sense for a firm to earn a percentage of the assets it manages, typically only liquid assets. As those assets grow or decline, so goes the fee charged. But while AUM might be a good way to manage money (it’s not always a good way to provide financial counsel on a complete financial life). That’s because many client decisions can adversely affect the total value of managed assets. These decisions include:

- Buying a bigger home

- Giving a large gift to children or charity

- Paying off a mortgage

- Investing in illiquid assets such as real estate

- Leaving retirement assets in an employer’s 401K plan

Saying yes to any of these could be good for the client, but will influence how much a firm manages, and therefore the fees it can charge. Hence, a conflict of interest exists for the AUM-model advisor.

Furthermore, the AUM system does not always equitably reward workload. For example, if the markets (and therefore value of assets) go up, so do fees, even if advisors are not theoretically working any harder. Conversely, if markets go down, so do fees, and that is arguably when managers have to spend more time counseling and tending to client concerns created by the downturn.  Note: There are other issues such as recurring or large wealth creation events and added firm liability that make this discussion more complicated but I’m not choosing to address those items in this post.

What if the fee system was tweaked and improved to eliminate these natural conflicts of interest, putting the focus on optimizing a client’s overall financial life? What if the fee system was designed to compensate for only the services needed, and that those could be defined?

The factors that might be included in determining the retainer fee would likely include the following:

1. The size and composition of the client’s net worth—the assumption being that the larger the net worth, the greater the complexity.

2. The fees calculated under traditional AUM methods—since the AUM percentage rates are widely known within the industry, it is relatively easy to compute the costs at varying asset levels.

3. Special services required—a client may need additional help with things like philanthropy implementation, alternative investment due diligence, special family meetings, or other concierge-type services that are quantifiable from a time standpoint.

This new approach, we believe, could be a win for both firms and clients. It represents the logical evolution of fee structures in wealth management, according to industry thinker Mark Tibergien, in his book Practice Made Perfect. Being a wealth manager is more complex than just simply investment returns, and can mean different things to different people. Yes, our clients pay us to invest wisely; they also pay us to know them at an intimate level, and understand their priorities. It might just be time for wealth managers to let their fee philosophy evolve into something better.

Sound off and let me know what you think.

When I started Highland 13 years ago, I took a leap into the unknown. I had never run my own company before. I was not sure the clients I had been working with would follow me.  The downside paralyzed me in some ways but I wanted to experience the upside of courage.

I had bet my career on a brand new company, whose success or survival was not guaranteed. It was only by letting go of all the possible outcomes that I could move forward, that I could act, in other words, with courage.

As I looked back and thought about why Highland exists, and why we do what we do, I kept coming back to the same answer: courage. It is at the core of our mission here at Highland, to live fully and help our clients do the same.

Courage is not the absence of fear, but the ability to act despite fear. Applied to what we do, courage is the ability to trust your experience and training, to make choices when faced with uncertainty, and having faith in your beliefs.  Sometimes that means turning down something. Sometimes it means saying no, or confronting the truth, asking difficult questions, or making uncomfortable changes.

Without the courage to change, you can stay stuck where you are. If the enemy of living fully is fear, the antidote is courage.

The cost of courage is letting go of the outcome of your decisions. The future is an unknown and mostly beyond your control. Rather than focusing on an unknown outcome, you have to replace it with a faith in something bigger than yourself.

Sure, when I started the company, I thought I was smart and that I could do it, but I wasn’t really thinking about whether the company would succeed or not. Instead, I focused on how the decision was part of a bigger plan for my life.

To act with courage is easier said than done, of course. It takes practice and commitment and, in some cases, the time to heal from what wounds we might have. Growth, strength and healing are critical components to courage.

Healing can mean something big or something small, repairing a painful relationship perhaps, or letting go of a counter-productive habit. The important thing is to identify where you need to heal.

In the end, I know my company can be only as healthy as I am, and can only grow as fast as I do.

Do you want more from life?  If yes, then start by being courageous! 

“A small body of determined spirits fired by an unquenchable faith in their mission can alter the course of history.”   Mahatma Gandhi

The topic of today’s blog post is daunting, one that I’ve been mulling over for months as I’ve worked to craft a mission statement for our company. While some ideas for the blog come to me quickly, this one has taken a long time to form. You could say it has taken me a lifetime.

In this and other posts to follow I will attempt to answer the question of why we do what we do. Ostensibly, I am talking about the work we do at Highland, but in a larger sense I am talking about all the choices we make in our lives.

As I think about why Highland exists, why I chose to start it, and what drives me each day, I keep coming back to the idea: what it means to live fully.

It’s the phrase I used in a recent post, about the loss of my friend and colleague Steve. It applied then and, it occurred to me, should apply to all the events in our lives and the decision we make, even the professional ones.

Obviously the topic is too large for one post, so what I hope to do is to begin unpacking the suitcase of this idea of what it means to live fully.

What I hope to do is lay some kind of foundation to build upon. In future posts, you will recognize some of the concepts I talk about in this one. Living fully is more of a process than a goal, and so is writing about it.

I am convinced one of the most important components of a life fully lived is courage, the trait I was reminded of when Steve passed.

To start Highland, I had to summon the courage to make that choice. The company and all that it has become is the result of that decision.

Before I started the company 13 years ago, I was not living fully. I was stressed out, stuck in a dysfunctional job, feeling the financial pressure of having three children in private school and a new house and mortgage.

I knew I wanted a more balanced life. I wanted to coach my son’s baseball team. I wanted to get to know my wife better.  I could achieve neither without making a change, and that choice took courage. It took the willingness to step into something I didn’t fully understand.

It set me off on a process of self-discovery, healing and personal growth. It deepened my faith and sensitized me to the idea of life as a journey, one that I am still on. That, more or less, is the story of Highland. It is not just the company I run. It has become my canvas.

One of the most important relationships in people’s lives is the one they have with their money. As a wealth manager, I can play a role in that relationship. It can be a constructive one or a destructive one, depending on the choices you make. The paradox of money is that the more of it you have, the more prevalent feelings of fear, worry and perceived control can become. Prosperity sometimes encourages hoarding behavior and false feelings of self-sufficiency. People often say money is freedom. Sadly, money can sometimes lead to less freedom not more.

My hope is to be a lens through which people can view their relationship with money, and to help people make healthy, constructive choices. What does that mean?

It means understanding that money is a means not an end, that it is a tool, and we are not so much its owners as we are its stewards. It means seeing a client as a whole person, not just someone who earns money, but as someone with unique talents and passions, someone with an emotional and spiritual life, someone who is part of a larger family and community.

The more we all keep this in mind, the more likely we will have a healthy relationship with money, and the more likely we will live fully.

In the 13 years I’ve run Highland, I’ve yet to compose a mission statement, partly because there are always more immediate tasks to complete, but also because it has taken me all this time to understand why we do what we do.  I’m exicited about the energy this process has created and I’d love to share more of my story so please send me a note and let’s grab coffee. 

As mentioned in my previous post, I’ve been working on Highland’s mission statement for the past several months.  I can honestly say that we haven’t had a clear mission statement since the founding of the firm – partly because we were focused on building the company and surviving, partly because of busyness, and partly because the process of being a business owner was still shaping my views.  In short, I wasn’t ready.

Recently, while reading Patrick Lencioni’s book The Advantage, I realized it was time for Highland to take this important step.  My sincere desire is for Highland to become a great company, and I realized that not having clarity of mission might be keeping us from progressing as a company the way we could.  Taken even more negatively, it could be keeping us stuck.

Part of this journey was to write the story of Highland; what was going on in my life around the time I started the company.  (I’m not going to share that story now, but I may do so at a later time.)  Suffice it to say, it was a very transformative process for me.  It showed me what some of my motivations were, what I was afraid of, and what I was hoping to become. 

As a second step, I formulated the things I had learned from running the business looking back over the past thirteen years.  From this very different perspective, it was interesting to see how my thinking and priorities had changed, and what my life had become.  It was quite an emotional and spiritual experience that I would encourage you to try. 

As The Advantage states, there are three keys to keep in mind as you contemplate the reason for your company’s existence, and I found them to be extremely helpful in my own journey:

1.  Answering the “why” question is not the end of the clarity process.  Knowing that there will be a more tactical period to discuss practical concepts can allow you to think about your organization from a more idealistic standpoint.

2.  It has to be true.  It has to be based on the real motivations of the people who founded the company – namely, me.  In my case, because we didn’t clarify our purpose early on, the process was more difficult and required a lot of introspection around my motivations and the company history.

3.  The process cannot be confused with either internal or external marketing.  It is important to refrain from trying to come up with a cute tagline or slogan that will sound good to clients, employees, etc.  This step is only about clarity and alignment.  Without formal communication of any sort, the reason you exist should be evident to everyone concerned, because in time it will be part of the company fabric and culture.

In my next post, you will hear the “why” of Highland and the transformative impact this journey has had on my life and how I see it shaping and inspiring what we do going forward.  Stay tuned!

Over the summer months, I embarked on a sort of learning quest; to think about and understand Highland’s mission or purpose for existing.   One of the books that was integral to the discovery process was Start with Why, by Simon Sinek. 

The basic premise of the book is that companies greatly limit their success because they never really harness the power of why they exist.  Why is that so?  Because, for example, it’s easy to understand inspiration, trust, or passion at a gut level, but it can be very hard to articulate “why you feel that way” or “believe it to be true.” 

The book talks about what Simon calls the Golden Circle which has three parts, or questions, that must be answered in becoming a truly authentic company, ultimately getting to why.  They are:

1.  What do you do?

2.  How do you do it?

3.  Why do you exist? 

The order of these questions is very important.  For most of us, we tend to start with question #1, then proceed to question #2, and very infrequently companies answer question #3.  Why is that?  Well, we find it really easy to answer what we do, and even how we do it because these are very practical questions.  The problem is that neither of these first two questions connect with people at an emotional level that causes them to be aligned with us and what we believe. 

If we really want to capture the mind and heart of your clients and employees, the author argues that we need to start with question #3—why do we exist?—and move backwards. 

To help with understanding this approach, let me summarize Sinek’s definition of these concepts:

Why?—this is the reason the company was founded, exists, or why anyone should care.  It is a discovery process looking at the past not the future.  Sinek uses the example of an arrow being pulled back on a bow.  The archer pulls the arrow backwards 180 degrees before it can be flung forward to generate maximum impact and action.

It can’t be as simple as “making money” because that is a result.  Basically, the process asks you to keep asking “why you do what you do” until you land on a senior purpose that makes the world a better place.

How?—the values or principles that guide and bring to life the company cause.  These are more difficult to elicit, but tend to be the proprietary processes, unique selling proposition, differentiators that we all like to talk about. Unfortunately, this can also lead us to focusing our attention on the competition and what they are doing, thus stagnating our unique purpose and potential. 

What?—the “what” are the evidence of the “why we exist,” and the ultimate arbiter of authenticity. For instance, it’s the stuff that we all can articulate about our company and what we do; the services and products we provide.  In Highland’s case this would be that we are a wealth management firm serving high net worth individuals.

Put in the right order—why, how, what—generates real connection, influence, and aligned action that starts from the inside and moves outward. 

In my next post, I will continue to share with you what I learned and what we discovered about why.  If you haven’t gone through this process, I’d highly recommend that you take the time to ask yourself “why” you are doing what you are doing. 

Tim Tebow, the newly traded-for quarterback of the New York Jets, gave me unexpected inspiration about how to approach my own job and daily living in a recent ESPN interview.  By the end of the interview segment I was saying, “I want to be like Tim”. 

If you haven’t heard of Tim Tebow, you are either not a sports fan, or have been under a rock the past year.   

A polarizing figure, it seems people either love him or hate him.  He has created so much sports buzz because of his unorthodox and physical approach to playing quarterback, the now famous Tebow kneeling sideline prayer, and his overtly public Christian faith. 

In a sports world filled with plenty of overpaid athletes, huge egos, and anti-hero behavior, Tim has been refreshing in his positive attitude, clean language, encouragement, and passion to win.  In short, everyone loves an underdog and Tim has been that underdog done good. 

In the ESPN interview I mentioned earlier, and in many interviews I’ve heard over the past year, it seems everyone is looking for this guy to be a poser; I say that based on how they ask him questions.  They appear to be looking for chinks in the armor and where he might not be what he appears.   

He can’t be that positive or nice, right? 

Anyway, the ESPN interviewer tried every angle to get him to be frustrated about the media, angry about the criticism from sports fans, to comment about drama surfacing from teammates twitter messages, even absurdly asking whether he would be able to handle the Jets coach who is known to have quite a potty mouth.  

Through it all, Tim was an amazing professional; so much so that it caught me saying where did this guy learn how to be like that?  Who taught him those things?  Am I that positive about my job and my life? 

Gleening from the interview and taking some editorial license, here are three ways Tim approaches his life that can be applied to my life (and yours):

1. Tim focuses on looking forward and not back. He didn’t want to talk about what happened last year with the Denver Broncos, his prior team, other than it was a great experience and he was thankful for the blessing.  He instead wanted to talk about this new life chapter with the Jets.  So often I can get sucked into to worrying and talking about yesterday when I need to keep my focus on today and what is in front of me, not behind me.
2. Tebow views his life, and the current circumstances, as an exciting opportunity.  It is clear there are lots of things to worry about including a new team, new coach, new fans, and new system to learn.  It was clear in the interview that he wasn’t looking for something more or different; he was just excited about the opportunity right in front of him.  In my job it can be easy to be wishing the market would be higher, or the business would grow faster, or we had more resources instead of just being grateful for the problems we get to solve, and satisfied with the business I get the privilege of running
3. Tim is working daily to improve himself; the only things he can control such as improving his ability to read defenses, improve his strength and quickness, and throwing accuracy.  My own daily habits and routines whether they be in business, health, or spiritual, can all lead me to being a better and more joyful person.  I want to grow, too, and these daily steps are really the only things I can directly control. 

I hope that if ESPN interviewed me about my life and my business I would handle it with such professionalism and excitement as Tim did that day.  How about you?

As a business owner myself, there is no shortage of fears and worries that I either want to ignore or don’t know who I can talk about them with. It has morphed over the years, and I definitely feel more comfortable talking about deeper issues and concerns, but it has taken me a long time to get to this point.   

In retrospect, it was many times pride, fear of failure, and other times just the lack of someone (other than my wife) to talk to.  After a few years of dumping on my wife, and some counseling, we concluded it wasn’t good for our relationship.  Close friends may not be a good alternative either, because many times they just don’t have the experience or perspective to offer much value or guidance.  Key employees are also generally not good choices due to confidentiality and the potential for your raw thoughts to be shared with other third parties. 

But make no mistake, friend or no friends, these fears and worries are real and go home with the business owner every night, whether or not you consciously think about them.

The funny thing is, business owners are generally an optimistic bunch, and we really would much prefer to just focus 150% on running and growing our business and not waste energy on things out of our control.  However, this mentality only creates a false sense of security that can easily unwind into unintended consequences; namely, we aren’t really prepared for the uncertain future that awaits all of us. 

So, here are three fears you may want pay much closer attention to: 

1. Feeling isolated at the top—no one to talk to or be real with.  Advisory boards can be great, but are not always the best venue for processing your inner concerns, hopes, and dreams.  Unsure about whom to trust and with what information?  Concerned that if you trust someone with confidential information about the business it could get leaked? The need for a true confidant to listen to your joys and disappointments without an agenda and to hold you accountable is invaluable.
2. What if something bad happens?—get sick, die, divorce.  Who is asking you the hard questions without sugar coating it?  Is there a contingency plan to address these unfortunate potential events so your wife, family, and key employees aren’t left with a big mess to clean up?  Does someone know you and your situation well enough to help guide your choices that will impact your life and business?
3. Burnout caused by an out-of-balance life.  Who are you without the business?  Is there an overarching plan or legacy for all this hard work and time?  Consider a broader view of your wealth that includes intellectual, financial, social, family, and spiritual capital. Many times the business and financial capital is well developed and other areas of life are immature.   

I have lots of experience with these fears and many others and have carried them around for years.  It was about 3 years ago that I finally realized the importance of facing them head on.  The benefits have come in the form of lower stress, greater life satisfaction, and a clearer purpose and meaning for my life. 

If you have questions about my journey in this area, please drop me a note and let’s grab coffee.  I’d be happy to share my story.

I recently read a sign that said:

“The early bird gets the worm, but the second mouse gets the cheese”

This made me chuckle as I think about many businesses I’ve been a part of including Highland Private.  In my role as COO, I can frequently try to rush to market with a new product, service, or idea.  The myth is that the “early bird” to market is always going to create something disruptive and capture the outsized returns and rewards that go to the first entrant. 

However, a few historical facts give me pause:

• Facebook was not the first social media website
• Apple didn’t have the first smart phone
• Costco was not the first warehouse store

Jack Welch, the former CEO of General Electric was known to say that he didn’t want to be first to any innovation, but instead a close second.

I am constantly looking for the next idea; unfortunately, I am not that clever.  I have found that the best ideas are not really all that new, but rather ideas that have been successful with someone else; many times coming from a totally different industry.  Recycling these ideas and applying them to something of value in your business can have a much greater success rate. 

I recently read a book by Joseph Michelli titled The New Gold Standard.  The book is about The Ritz-Carlton Hotel Company and how they built an iconic luxury brand and legendary customer experience.  While it is a totally different industry, with a totally different story, the similarities to issues I face daily were amazing!  Their successes took a great deal of time and focus, and I learned a tremendous amount from their journey of success.  Why learn from your mistakes, when it’s easier to learn from someone else’s success? 

I don’t know about you, but I prefer cheese.

Who doesn’t want to part of something excellent?  When you are focused on excellence, you attract people who are also focused on it, and value it.  The end product is a great team.

While team greatness is a wonderful outcome, there’s a dark side of excellence: perfectionism. 

It is really easy to confuse excellence with perfection.  One of the beliefs a perfectionist will hold onto is “the irrational belief that you and/or your environment must be perfect”. (www.livestrong.com )  Not only is this unachievable, I believe the irony is that in this pursuit, the perfectionist becomes mediocre.

How can this be?  In the pursuit, the perfectionist is always looking to analyze more, polish more, think more, nit pick more, etc…, and suffer from paralysis.  Too many great ideas fail to get implemented, utilized, or even considered out of the fear that the outcome will not be perfect.

I am reminded of the General Patton quote, “I’d rather have a good plan executed today, than a perfect plan executed next week”.  The exception to this is if we are talking about life or death situations, and if so, I always defer to a perfect plan.

Ron Ashkenas, with the Harvard Business Review, wrote a great blog on “The Problem with Perfection”.   His thought was that rather than waiting for the perfect solution, start testing while collecting more data.  Start small, with low risk and be relentless in honestly reviewing the data.

Will you have a few duds? Maybe, but the advantage of field testing, reviewing and adjusting is a cycle that will accelerate learning, growing, and creating value.