My first day of work was June 4, 1990 in NY City at Gabelli Mutual Funds. My Mom bought me two polyester suits, a few button-down shirts and Dad told me, “Don’t let the bastards wear you down.” I sat with three other folks in a cramped copy/fax room with no windows and answered calls regarding the Convertible Bond Fund. Needless to say, I was clueless, but fortunate to have a job given that we were just starting a mild recession. I adapted and immersed myself in the industry quickly realizing that success is not a linear journey, but one with setbacks and life lessons.
Twenty-eight years later, I left as CEO of a Mutual Fund company. Along the way, I made some fantastic friends, traveled across the US (47 states and counting), presented to over 20,000 Financial Advisors/clients and laughed too much – often at inappropriate times. I was never the brightest guy in the room, but always reminded myself that no one would out-hustle me. I remember Mario Gabelli telling a group of people that he liked to hire P.H. D’s…Poor, Hungry and Driven. I always liked that phrase.
So here I am, 50 years old, deciding to pursue two new careers: Academia and Consulting. I view both paths as evolutionary. I always enjoyed public speaking and teaching students just seemed like a natural fit. Given my past experiences and accomplishments, consulting is an obvious next step. I have been exposed to over 100 asset management firms in my career and have watched the dramatic evolution of the business. When I started in 1990 a client paid a 5.5% load, there were no ETFs and no wrap-fee platforms. It takes time for firms to embrace change and management tends to be the biggest obstacle. This business is full of big egos and folks that like to pontificate from their Ivory Tower while not willing to get their hands dirty and see what is actually happening in the trenches.
Unfortunately, in life and business, if you don’t adapt you tend to die – look up the word “Entropy.” Management assumes that the same activities and metrics that they have used for years will always work. Then they wonder why they aren’t gaining market share and THEN they blame outside forces that they can’t control. Active managers are very quick to lose market share to passive ETFs without a worthy fight while financial advisors would much rather give their clients what they WANT vs. what they NEED. And, let’s be honest, a 10-year bull market tends to create a lot of complacency.
I have learned, and witnessed, that there are three key ingredients to successful asset management firms: Performance, Distribution and Culture. It is very difficult to grow and sustain a business without all three. Raising money when performance is strong is easy provided you have a cohesive message that resonates with your audience. Retaining money when performance falters (and it always will at some point) is very difficult, but much needed in order for shareholders to experience long-term success. Culture is the trickiest part. Firms like to believe they have a good culture but that is usually a falsehood borne out of employees that tell management what they want to hear. My definition of a good culture is easy. Ask yourself the following questions:
- Do they treat you fairly?
- Do they give you autonomy?
- Do they recognize your contributions? (verbally and monetarily)
- Do they foster an environment to share ideas, create accountability and provide a pathway for career growth?
Sounds easy…but it ain’t. Why? Because egos get in the way. Again, those damn egos!
So here I am, starting this journey thinking I can make a difference in helping firms maximize their potential. My goal is to update and distribute my observations once a month (or so). I will keep it as brief as possible and will simply list some observations and anicdotes via LinkedIn – so make sure you follow the Rutti Consulting page. I would encourage folks to send me emails (via LinkedIn) if you want me to include any of your observations, questions, etc.
Wish me luck, Jeff