#FASuccess Ep 403: Carving Your Path As An Investment Nerd By Building A Fractional CIO Solution For Other Advisory Firms, With Eric Stein

Resources Featured In This Episode:

• Eric Stein: Website | LinkedIn
• Mario Nardone

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Full Transcript:

Michael: Welcome, Eric Stein, to the "Financial Advisor Success" podcast.

Eric: Thanks, Michael. I'm a long time listener, so I'm excited to be a guest.

Michael: I really appreciate you joining us today for what I think is going to be a little bit of a different episode in discussion than what we typically cover on this podcast. So much of what we do here and have over the years is just all the different ways that financial advisors often come into the industry, and find this way to get clients, and work with clients, and talk to them about all the financial and investment stuff that we tend to do as financial advisors. I've realized over the years, I've sort of unwittingly painted this picture of the only way you can come into the industry if you're interested in finance and investments is that eventually and always you're supposed to go get all your own clients, and do this for your own individual clients.

And that's really not true. That's not the case. There are many folks out there who really, I'll say 'just' enjoy digging deep on financial planning, analyzing the plans and don't necessarily want to build client bases. And they are going into director of financial planning kinds of roles and building up planning departments. And there are folks that come into the industry that just love the investment side of the industry, dare I say, I'll say, are investment nerds that don't necessarily want to do all the client stuff because they're kind of tedious sometimes, and just want to spend time being really good at investments. And I know this has been a path for you through the industry of how you navigate when you really enjoy investments, and want to stay focused on and get better at and up your game and build your career in the investment realm. And so I'm excited to talk about what these career paths look like when you're happy to keep nerding out on investments and pursue that as the career.

Eric: Yeah, I'm happy to wear that investment nerd badge very proudly, Michael. So I'm happy to talk about it.

Michael: I appreciate that. I appreciate that. So I think to get us started, I'd love to understand just the business and what you do today. And then we'll talk a bit about what the journey's been and how you've gotten to get to do this as a self-professed investment nerd.

Comparing Advisor Focused OCIOs To Institutionally Focused Firms And TAMPs [06:04]

Eric: Yeah, I appreciate that. So right now I'm a partner with East Bay Investment Solutions, and we refer to ourselves as Outsourced CIO or Outsourced Chief Investment Officer [OCIO]. And that moniker, acronym means a lot of different things to a lot of different people. For many people, it's more on the institutional side where people are focused on pensions, foundations, endowments, again, all on the institutional side. And that's not what we do at all. So our role is focused on relationship- and planning-focused advisors. And we support the advisors from a CIO perspective. So we want to be their investment team. So imagine you're a $300 million RIA. You're growing. You are focused on your clients, your business growth, your client growth. And you don't have the time, the energy, or the desire to focus on all of the investment related things you do all day. You hire us, you engage with us, and we become your outsourced investment team to do all the heavy lifting while you get to continue with all the decision making that you want to do. So it's not a cookie cutter solution. It's very customizable. And again, you have the ability to really do and customize what you want without having to do the heavy lifting yourself.

Michael: I appreciate the explanation, including the clarification, because I'll admit, my brain goes to the same place. Like you said, outsourced CIO. And my brain goes to the OCIO services, at least that I feel like I mostly see in the institutional world. And that's like a solution for mid-sized pensions and endowments that can't afford to build out the whole internal investment team, but don't just want to work with consultants, and so they engage with an OCIO solution. So I'm fascinated, your version is not focused on the institutional space. It's, I'll call it, more traditional advisory firms that are simply in that stage where I've got a good amount of assets, but I have a lot of clients to serve and a lot of business things that I'm dealing with. Your example was a $300 million RIA, which is usually a stage where we have a lot of stuff going on. Like my team is growing, and my advisor headcount is growing, and my client count is growing, and all this stuff is happening. And oh my gosh, I'm supposed to have the time to analyze all these investments as well. Gets a little squeezy. That's the segment that you're going after. Do you do both versions? We do the institutional version and the independent advisor version, or is your whole business, "We're just trying to do this with advisory firms and not the institutions at all."

Eric: Yeah, we are 100% advisor focused, and we feel like that's part of what our niche is in terms of...in addition to the type of advisor we serve, just again, focused on planning. Because what we find is advisors want to focus on what they do best and where they think their time is going to be best used and most successful. And if it's not on the investment side, they don't want to feel like they're giving their clients levels of investment expertise that doesn't meet what their expectations are. So they can allow us to, again, see what their vision is, help them find out what that solution is, but they don't actually have to do the manager searches, the wholesaler calls, the ongoing due diligence, the collateral writing for their quarterly pieces and all of the stuff, if you will, that comes along with it. So they can focus on what matters most to them, and we can do all the heavy lifting on investments. And working with just advisors, again, we feel like that's our niche. That's where we want to focus because there are different worlds between the institutional side and the advisor space. So just focusing on one for us is really where we want to spend our time.

Michael: I'd love to understand a little bit more of what you do. Because I think, in my head, I'm trying to differentiate between what a firm like yours does versus using a TAMP [Turnkey Asset-Management Platform] or an SMA [Separately Managed Account] or some other provider that also nominally is outsourced investment management to do the investment things for my clients while I do planning. What is it that you're doing, and how do you distinguish it from solutions like TAMPs and SMAs?

Eric: Yeah, it's a great question. I think what differentiates us a little bit is if you think about $1 billion-plus RIA, $2 billion-plus RIA, they're going to have their own investment person, maybe an investment team. If you're a $300 million RIA, you don't have likely the financial resources or the need, frankly, to hire an internal person as your full-time CIO. But you still have a lot of those needs. So how do you find the solution? We are that solution. So if I think about a TAMP, a TAMP can be a wonderful solution for a lot of advisors. And it is. And that's great. And we think if we look at a TAMP, I'll call it the 3-legged stool. One leg of the stool is the paperwork, account openings and things like that. There's the trading and rebalancing. And then the third leg is the investment piece. So we cover that third leg, the investment piece. But unlike a TAMP where it's sort of you get this solution and that's the solution you get, with us, it can be very customizable. So we can give you customized models. We can work with you to create a very specific solution for some of your clients, depending upon what it is. If they have specific needs, specific concerns, specific desires, we can do that for you. And then again, we can customize our writing, our collateral, whatever it is that specific advisor needs, we can be there for them on a very individualized basis.

Michael: I like how you frame that around the 3-legged stool of what the traditional TAMP offers. There's all the paperwork administrative support, account opening, transfers, and such. There's the trading, rebalancing, execution. I always call that "who hits the button," who clicks the button to hit trade at the end of the day. Because he who clicks the button has the liability of trade errors. So it's a really big deal who's responsible for hitting the button, and whether you do that in-house or outsourced, and how you manage it. And then there's the investment part as well. The investment research, due diligence, building models, monitoring holdings, everything that goes in. I guess as I'm interpreting and hearing it, you're essentially kind of unbundling these layers for the advisory firm that already has built some of the staffs. We've got someone that's doing the trades, and we've got a client service admin that handles all the paperwork. But, at least I find usually for the kinds of firms you're talking about, "But I, the advisor, I, the founder, still have to actually do all the investment research and pick what's going to go in the models, and what's going to change out so that my team can then do the trading and the rebalancing and the supporting paperwork. And I in the founder seat don't necessarily have the time or the capacity or the inclination anymore to be doing all of that investment research."

Eric: Yeah. Unbundling it is a great way to describe it. And one of the differentiating factors between us and the TAMPs we generally have seen is a TAMP often charges basis points. So as a firm grows, their fee to their TAMP grows. And again, that solution works for a lot of advisors. It doesn't work for other advisors. For us, we decided very early on to charge a flat fee. And our clients love that because as their AUM grows, our fee doesn't increase at the same level from a basis point perspective. They're paying that flat fee for us on a monthly subscription basis. So it's a great way for an advisory firm to continue to grow. Their pie gets larger. Our piece of the pie actually becomes smaller portion of the pie over time. It's a great solution for them.

Michael: Right. I mean, which again, makes sense to me in the context. When you're doing the paperwork and the trading and the rebalancing, there is, at least to some extent, a phenomenon. Just look, the more clients and assets you have, the more literal paperwork and trading rebalancing there is to do. So if I'm in a position of a provider that's doing that on an outsource basis, I kind of feel like I need my fees to move at least in some way in line with the growth of your practice, because there's literally going to be more of that activity to do. Whereas one of the beautiful things about the AUM model or the investment management component of AUM in the first place is one model, many clients. We got to do all the planning work for every client. We have to do the meetings and engagement with every client, which is why we have to hire more advisors as the client headcount increases. But your models that work, work whether you've got 1 client or 50 clients or 100 clients or 1,000 clients, that is the scalability that comes from the investment management side. And you can do the exact same thing with what you do when you've unbundled down to focusing on the investment piece. You can recreate the same scalability that firms can create internally because that is the part that scales well.

Eric: Exactly. Yeah. And you've summarized it perfectly, Michael.

The Services That East Bay Offers Advisors [15:54]

Michael: So then help me understand a little bit more just literally the services you do, what gets done in the investment piece of this? And I'm just trying to visualize, for a firm that is still doing its own trading implementation. What are the things that you guys end up doing for a firm?

Eric: Yeah. At a high level, we're going to cover, I'll just say, any investment-related issue, question, conversation that comes up in an advisory practice. So it's simple things or straightforward things like helping them create what their model portfolios are going to look like and how we're going to implement them, doing ongoing due diligence on the holdings that are in those models, seeing if there are new investments that are arguably better than what we've included in the past, there's new product development all the time. I'll call it the table stakes. Those sorts of things that we obviously do for our clients and are part of the offering. And then there's all the other, I'll call it stuff. It's things like delivering collateral to them on a quarterly basis so that they can white label it and share it with their clients. It's in times of significant market events, whether it's COVID, a banking crisis, a Lehman type of event, for example, we are providing collateral and information to the advisors. They don't have to read The Wall Street Journal, CNBC, all of these different things. So when the client calls and says, "Mr. and Mrs. Advisor, I'm concerned about XYZ market event. What are you making of this?" We're supporting them through those types of conversations.

Michael: Meaning, you're writing quarterly investment commentary the way a lot of asset management firms do, you're writing the specialized market commentary letter, "Hey, this crazy thing happened," letter from our chief investment officer about how to interpret the recent week's crazy market events. Those kinds of investment pieces you're writing, creating either for advisor education or pass along to clients?

Eric: Yes, absolutely. And we try to write it in a way that's not only advisor friendly, but end client friendly as well. We talk to advisors all the time. And while I'm not talking to their end clients all the time, we hear regularly, clients may not know the difference between a stock and a bond, or they don't understand the difference between an ETF versus a mutual fund. So we try to keep the language very simple and straightforward. So it's not complicated. It's not complex. They get very quick summaries of what happened. We're not trying to predict the future of why it happened. And then just giving them peace of mind that they know that their plan that they're working with their advisor on is being implemented in a way that should help them achieve what their goals are.

Michael: So when you're creating this kind of investment commentary that advisors might put in front of their clients, does this go out as East Bay commentary? Or does this go out as my firm's commentary? Do I get to white label this if I want to?

Eric: Yep. We make it all so that it's very easily white labelable, if that's even a word.

Michael: And is there a world where you talk to clients directly, or is the whole nature of this, you're supporting advisors behind the scenes? Because if you're talking to clients, it's like a whole other regulatory compliance dynamic.

Eric: Yeah. So we do not talk to end clients directly without the advisor involved. So if you're an advisor and a client of ours and you're meeting with a large client or a large prospect and you'd like us to be part of that conversation, we'll be part of that conversation. If you're doing a webinar and you want to have a 5-minute portion of your webinar talking about investments, we're happy to participate. But we do not communicate directly with their clients. I don't know who they are. I don't have their email addresses. We would never take a phone call from them or an email from them. And frankly, it's never happened where we've had to say no to them. So we work directly with the advisor. It's completely B2B [Business-To-Business].

Michael: But on the flip side, if the advisor says, "There's a whole bunch of investment stuff going on, I've got a really complex client. I need you guys to support on it." You can be in that client meeting talking to the client, supporting it just because I brought you in and there are 3 of us in the room now. You just won't do it direct.

Eric: Correct. We'll literally be in the room. So we can travel to our clients if it's an important enough client or prospect. We will offer that. We can do it via Zoom very easily. We can do it via phone call. Again, we're very flexible and want to be full service, white glove service for our clients.

Michael: And is there a particular investment philosophy approach that you guys espouse or come from in the first place?

Eric: Yeah, it's a great question. And I would say that investment fit is one of the criteria that is most important to a successful OCIO relationship. So whether you're working with us or looking at another OCIO provider, I would argue the most important thing you should look for is investment fit. Because if that doesn't exist, the collateral we provide, the answers we provide, the guidance we give is not going to fit with what you want. The relationship breaks down and nobody's happy. It just doesn't work. So investment fit is critical. And I'd say from our client's perspective and our perspective, because most of our clients are planning focused, the majority of their time they want to spend in their client meetings talking about the client, talking about the plan. They don't want to spend most of their time talking about whether manager A beat benchmark B. It's just not a good use of their time. So almost by definition, our clients tend to be more passively oriented, whether that's things like index funds or things like Dimensional and Avantis. Our clients tend to lean that way. But that doesn't mean we can't support clients that have active management as well. It's just not the first thing we're going to focus on.

Michael: Which helps. I'm trying to visualize the relationship and the business and what you do overall. I get it when the firm is fairly passive. There's a lot of work to do upfront to build models. There's obviously some layer of ongoing monitoring and due diligence. Although if most firms have a lot of similar passive investment philosophy, there's probably a fairly heavy overlap in what they use, DFA, Avantis, iShares, Vanguard, etc. So you get some commonalities and economies of scale and the due diligence that you guys have to do internally because you can due diligence the same fund across multiple firms that you're supporting. Whereas, I just imagine, if for a firm that's being active, you can have a full-time CIO that is completely consumed with the time it takes to just do the active investment research and trading for one active investment strategy. It seems a lot harder to scale and be efficient relative to the efficiencies that come when firms are more passive.

Eric: Oh, 100%, Michael. If all of our clients were fully active and there was no consistency in their active management strategies, A, our team would have to be a lot bigger, and B, we'd likely have to charge a lot more. We're structured the way we're structured because we believe in it and it helps us grow. It helps us scale, but we also think it's the right solution for our clients most importantly.

Using An OCIO Service Vs Hiring A Chief Investment Officer [23:46]

Michael: Can you help us understand how does that price? What does it cost to do this with a firm like yours?

Eric: Right now our base pricing is $3,875 per month.

Michael: $3,875 per month. Okay. So annualized out, I'm a little under $50,000 a year.

Eric: Correct. Correct. Yeah.

Michael: Okay. And so when I'm thinking about that relative to hiring a chief investment officer who's likely a CFA type with a healthy 6-figure salary that might not even start with a 1, that's not a small number, but relative to hiring a full-time CFA to be your chief investment officer, that's actually a pretty small number on my business owner P&L by comparison.

Eric: That's exactly how we thought about it is if you go to any of the benchmarking studies and you look at a full-time CIO that has their CFA designation, like Mario and I do as partners of the firm, and we would expect any other partner of our firm to also have their CFA designation as well as we bring on new people. You're going to be, like you said, in the 6 figures. And if you're hiring somebody that we think is really solid, it's not going to start with a 1, in our opinion. So we feel like we're a significant bargain for those types of clients that need the support that we provide, get access to us, help them grow, allow them to focus on what matters most to them while also feeling really confident in their investment approach.

Michael: And I guess now connecting the dots, this is why your example earlier was a $300 million firm, and you're saying $1 billion plus firms often are hiring their own CIOs because that's kind of that middle spot. If I'm a solo, I mean I guess I could do this if I'm a solo, but $50,000 may still be a pretty large number for me if I'm a solo, if I'm a $1 billion plus firm and I'm coming north of $10 million of revenue, if I'm that deeply into the investment side of the business, I can make the $200,000-plus investment for the CIO with a CFA. If I'm in that like giant middle zone, whatever it is, 50 million of assets up to hundreds of millions, even closing in on a billion, I need the support. I'm getting very busy as founder-advisor, and full-time investment person is really expensive if it's not something I or one of my founder partners want to do.

Eric: Yeah, what we have found just through time and frankly through working with advisors of various sizes, we have kind of found that $50 million AUM mark tends to be the sweet spot where clients can start affording us. We're still the largest line item on their income statement at that point as an expense. But we want to be seen as an investment not as an expense. So if you look at us as, "I can now spend more time finding more clients, and I can bring on more prospects and new clients, and I can grow my business." Again, that piece of the pie doesn't change. It's our clients have been able to scale up fairly significantly through their growth, and again, have the support that they feel like they need, want, and again, just allows them to grow more freely.

Michael: And I guess similarly in that vein if what I'm comparing to is the salary to hire a person, I'm already kind of thinking in flat dollar terms as opposed to basis points. Advisory firms typically don't pay their investment team basis points, they pay salaries. So if you can grow your business, you can grow the revenue to scale through the cost of investment staff hiring. I feel like what you're describing from the pricing model, just wearing my business owner hat, it puts me in the same mentality. It's like hiring an investment person so I can staff that part of my business. It's just I can get you guys on a fractional basis instead of needing to use the popular fractional CMO, fractional everything, I can get a fractional CIO from you instead of needing to hire the whole person internally at a much bigger number.

Eric: Yeah. And it just helps differentiate your practice. So you know if you're a $300 million RIA and you're competing against other RIAs in your local area that don't have a dedicated investment professional, this is just another resource that can help differentiate you versus some of your competition. So we see it as a great way for advisors to help win business.

Michael: So maybe that becomes the new label. It's outsourced CIO if you're institutional, it's fractional CIO if you're advisory firm. I feel like everybody's marketing fractional something services to us these days as the world goes more virtual and remote, and fractional employees become feasible in lots of areas.

Eric: We're seeing it in lots of places. We're seeing outsource for fractional planning, fractional marketing, trading, compliance. You can outsource a vast majority of your practice if you really wanted to.

Michael: So then I do have to wonder from just the technical, regulatory, compliance end of things, do I put this on my ADV? Is this a disclosure to my clients?

Eric: Generally, what we've told advisors in this space is to talk to your compliance consultant about what they would recommend because we have seen different recommendations. I do not believe most of our clients will include us on their ADV based on what we've heard, but I think it's up to the compliance professional to tell them what is appropriate for them.

Michael: Because I guess relative, again, to relationships like TAMPs, you're not actually a sub advisor, you're not executing trades which means you can't do all the problematic things that get supervised in sub-advisory relationships, like, "You're trading our clients. Are you giving them best execution? Are you like front running the clients that we're giving you? Are you like trading your big firms more favorably than your small firms?" Is the virtue of this kind of fractional CIO framing is, and per your 3-legged stool analogy earlier, you're not doing the trading part so you don't implicate all the other compliance-related things that come up from that end. You're 'just' doing the pure investment research manager due diligence monitoring components that come with the investment research function itself.

Eric: Yeah, we are not a sub-advisor from what I understand the definition of that to be. We are consultants. I don't have access to your clients, I don't have access to your custodians, we're not placing trades, we're giving advice. That's all I have to really 'sell' is our advice. And ultimately it's up to the advisor to determine if they want to take our advice or not. So we'll talk about, "Here's what we might recommend from a model allocation perspective, or this is an investment we might recommend over what you're doing." I can't implement that. The advisor ultimately has to implement that, so we are not a sub-advisor from that perspective.

Michael: Which again, just when I think on the spectrum of options, sure if you're an advisory firm that really doesn't want to do all that stuff, off you go to the various TAMP providers that do this. But if you want to keep some of the client service and trading capabilities, but you need the investment research support, this is where it plugs in. I guess to contrast, because we also live in this world now where every asset manager and their brother has created model marketplace options that I can pick models from a drop down menu on a lot of platforms now if I want to. I'm sort of presuming or inferring between the lines here that the advisors who want to retain the control would work with the solution like this instead of fully outsourcing to a TAMP, where you've got a little bit more of a shift in control. But I'm working with you because I may have some views or opinions about portfolios and how they should get built that I don't just want to use BlackRock or Vanguard or someone else's pre-built models in the model marketplace.

Eric: That's part of it. And the other part is we believe that we're doing a lot more and adding a lot more value than just the models and the managers. You can absolutely get those for free and that's what some advisors do and that's a great choice. We just feel there's a lot more to what our relationship actually delivers than just the models and the managers. So for the advisors that want more of that component, we can be a great solution for them. TAMP can be another great solution for them. It's just nice having various tools in your toolbox for advisors to choose from what fits best for them.

Michael: And how do you distinguish beyond the, as you said, the models and the managers? That's the investment commentary, that's the ability to just pick up the phone and talk to you guys about what's going on and get some advice more directly, is that how you compare or distinguish them?

Eric: That's a big part of it, and also we're providing independent advice so some of the model marketplaces are proprietary to a certain asset manager, some of them may use different asset managers. But yeah, we're going to be there to not only give you what the model changes might be, but also the right understanding of why we're recommending those changes. And we're also there, some model changes happen regularly in these model marketplaces. We tend to be more strategic. So what we sometimes hear from some prospective clients that are using the model marketplaces, for example, is they might say, "I'm using the models from asset manager XYZ, but they make changes fairly regularly and we don't want to make changes that often, so we don't really follow them all. We might follow some of them." And then you start asking questions, "Which ones do you follow? And why do you follow those and not the other ones?" And they realize...

Michael: Having to keep track of what you actually are doing when you're kind of deviating from their models more and more over time because you skipped 3 of the last 7 trades that they recommended because you don't want to kick off capital gains.

Eric: Exactly, exactly. We can help with all of that.

Eric's Introduction To Finance And Investment Management [34:40]

Michael: Now, help me understand just the journey that you went through to come to this kind of work, which again, relative to how we started the discussion of the paths we go when we enjoy being an investment nerd? Were you a born and bred investment nerd as it were? I mean were you playing with spreadsheets as a child and went to college with the dream of finance? Has this always been the path for you?

Eric: Yeah, it was one of those things where I don't know that I had a pure passion going into college. I was trying to figure out what I wanted to do. Growing up, most of the people around me were doctors, lawyers, business professionals, that was sort of what I saw mostly. So it was, "All right, which 1 of these 3 things am I going to do?" I did not enjoy science and that was out. I didn't want to be arguing which I thought is what a lawyer did all the time, so that was out. I kind of fell into finance for lack of a better term. A happy accident we'll call it because I really did enjoy it. I liked the numbers, I liked the theory, I liked all the investment components. I wound up going to a great business school at Indiana University, and really just kind of enjoyed what I was doing, learning all the different parts of finance. But frankly, when I went to school and college, most of what we did in finance was corporate finance. There wasn't this whole CFP path. If you did investments, it was mostly investment banking. It wasn't asset management or investment due diligence like we do today. That really wasn't part of the path that I saw available to me frankly.

Michael: I was going to ask what finance meant then? Sorry, I don't mean to date you, but what decade are we off-to-college talking about, the studying finance and business school?

Eric: Early '90s.

Michael: So financial planning is barely emerging, the AUM model basically doesn't really substantively exist yet. RIAs are barely out there, the financial advisor world's mostly broker-dealer selling mutual funds.

Eric: Or individual stocks even at that point, yep.

Michael: And so the finance realm isn't necessarily pushing people into the asset management industry, yet you're learning how to actually do the planning and analysis of a corporate balance sheet. This is, would it be a good idea for us to build this factory based on our forecast of widget sales, that kind of finance?

Eric: Yeah, it was a balance sheet, income statement. It was a lot of accounting that we had to take in order to have a finance degree. And in my junior year we took a pretty intensive semester in our first semester in business school, and there were 3 classes. It was corporate finance, operations, and marketing, just to kind of give you an idea. They wanted you to be well rounded. But finance was again corporate finance of there might be some asset management in it, but it was valuations of stocks, valuations of bonds. It was very, very technical and it wasn't sort of theoretical in terms of asset management or diversification. It was just really none of that from what I remember back in the day.

Michael: So when you're getting this corporate finance style business school degree, what did you actually do then when you graduated with said finance degree?

Eric: I started my career in 1994 in commercial banking, so I thought commercial banking was for me. I didn't enjoy some of the other aspects of what I was doing in finance, I didn't want to be like an equity analyst, I didn't think I wanted to do investment banking, and I really didn't want to go to a big city at that point because I grew up right outside of New York City and I didn't think it was for me. I felt like I needed a smaller city, a smaller sort of place for me to be. So I wound up in commercial banking in Cincinnati. And for a variety of reasons just wasn't the right path for me, it wasn't the right time. I was lucky enough...

Michael: What was the nature of the job at that point? What were you doing?

Eric: I was called a bank associate, I think was our formal title. And it was supposed to be a 12-month rotational program where you spend 2 months doing let's say commercial banking. And if you like it at the end, and there's a role open, you can post for a role and if they like you, they hire you into commercial banking. I didn't get the rotations I necessarily wanted. And there was a lot of pressure to post for positions that I didn't personally want, especially not having gotten through the rotations that I did want. So just wasn't the right fit.

Michael: Which rotations did you want? What was the interest since you said it wasn't equity analyst, it wasn't investment banking? What were the things you were trying to gravitate towards then?

Eric: At that point of my career, which again was very young in my career, less than a year into my career, I thought it was things like commercial lending, consumer lending just on the lending side. I thought that was what I wanted to be doing.

Michael: Where you can analyze the profile of an opportunity and its risk, and try to make a recommendation about whether and how much to lend at what rates?

Eric: Correct, that's what it was.

Michael: So you couldn't get a rotation to do that with the initial bank that you went with, so where did you go next?

Eric: I got lucky. I wound up going home for a few days of vacation, and I wound up meeting with someone who worked for...someone named Seth Glickenhaus. I'm sure it's not a name most people know, but he was known as a value investor. He at some point was the largest owner of Chrysler stock, he was investing until his 80s or maybe even in his 90s because I think I was working with him when he was in his 80s. I found somebody that worked there and they were hiring. And just talked to them about what I did, what I might be interested in, and he said, "If you're willing to move to New York City, and go through the interview process and are successful, then this could be a role for you."

Michael: That's not quite the same small city as Cincinnati.

Eric: It was definitely a big question of do I want to do this or not, but it was, "This is a great opportunity." It was sort of, "This is an awesome opportunity. I might not get this opportunity again. I know I'm not happy doing what I'm doing. I need to make a change." It was not something I did overnight, but it...actually was overnight, it happened pretty quickly. I interviewed, got the job, quit my job, and was working in New York City 2 weeks later. So it happened very quickly but it was not a decision I took lightly at all

Michael: So what was the job, what kind of role did they offer you?

Eric: I was more of I'll just call it an analyst. Honestly, I didn't really know what I was doing at the time I remember my first couple days on the job my boss gave me what at that point was an AIMR [Association for Investment Management and Research] book. So those of you that know GIPS [Global Investment Performance Standards] compliance, AIMR the group that started before it was considered GIPS. It was about performance reporting and composite construction, and all of those wonderful things that I can get really wonky on what that stuff was. But a lot of my job was creating the composites for the Glickenhaus portfolios, maintaining them, working with the portfolio managers to make sure client reporting was successful and reported correctly. A lot of sort of just behind the scenes work working for the group of portfolio managers that existed at Glickenhaus.

Michael: Interesting. Because again, we're still in the 1990s. We're doing some of this with spreadsheets and customized software but we're long before the world of automated downloads and data feeds to continuously calculate performance in all the various performance reporting tools that we have today.

Eric: I was doing it by hand, Michael. Calculators, we were using Quattro Pro because there was no Excel.

Michael: I have never used Quattro Pro.

Eric: I mean the email distribution lists were just starting. So again, email was a new thing. There was a new company called amazon.com that everybody was like, "Why would you put dot-com in the name of your company?" I mean you have to remember where we were in the middle '90s, it was a very different time.

Michael: So you get the analyst role. How does it evolve from there as you're getting more into investment stuff, but now you've actually landed in the in the asset management side of the business?

Eric: I got a taste of the asset management side, learned about what custodians were and how they worked, learned about how portfolios are managed, and performance reporting, and client service, and sort of all the aspects that go with an asset manager. And it was a great place to sort of learn and be exposed to a lot of different things. The challenge was it was a relatively small firm, and there wasn't a lot of rungs on the ladder to move up, so to speak. You were sort of either an analyst, you might be a trader, you might be sort of a junior analyst to a PM, or you were one of the half a dozen PMs which they were not adding to that group at any point soon. So it was pretty limited. I'll say I was extremely fortunate I had a wonderful boss who's actually still a very close friend of mine today. And she saw and felt like I had potential to do more than what I was doing there, and suggested not only that I leave but actually introduced me to a recruiter, and would actually cover for me while I was interviewing. I don't know how many bosses would do that. I know I would do that today because I had that, but it was a very wonderful experience for me. And again, a very dear friend of mine that really took a chance on me and on her career to support me, which again, it was just a very wonderful thing.

Eric's Transition To Asset Management With Goldman Sachs [44:49]

Michael: Very cool. Where did you go next? What was the next hop on this journey? I guess so how many years were you at Glickenhaus and then what was the next hop?

Eric: I was there for probably 2, maybe 3 years. I don't remember the exact timeline but it was somewhere else between 2 and 3 years. It was one of those things where I was talking to the recruiter, and I was getting a lot of opportunities but they weren't opportunities that I wanted. I wasn't excited about them, I wasn't excited about the firms that she was putting in front of me. I think she got tired of working at some point and said, "If I could get you the ultimate firm, where would it be?" And I just shot out, I was like, "Goldman Sachs. That's where I want to go." She calls me up a few weeks later, and she's like, "I've got you to the interview. I've done the hard work. You do the rest, it's up to you now. Go." I interviewed there for I don't know how many months, how many interviews I went through. I wound up getting a big opportunity there. I started there in 1998, it was still a private company at the time, GSAM, Goldman Sachs Asset Management I think had been around for maybe 10 years at that point so it was still, again, a very young and growing organization, so it was actually a perfect landing spot for me.

Michael: And so what was the role that you got at Goldman? Were you literally in GSAM? Were you in asset management side of the business here?

Eric: Yeah. I spent my entire career at Goldman, at GSAM on the asset management side. I really started, again, sort of with the portfolio analyst hat on, so dealing with Goldman's composites and construction of monitoring the performance of all of their high net worth clients. And going through the composite construction. And that sort of morphed into a risk management role, so we were helping the portfolio managers monitor and manage the risk of the mutual funds, and separate accounts, and strategies that they were managing. Again, you have to remember back where we were talking about, Goldman and GSAM in particular was very young, growing rapidly, so when I started in my performance analyst group, I think I was 6th employee. Fast forward a couple years, we were in the 30s. So massive growth and it was an area where if you do something well, they would say, "Great, you did this well. We have an opportunity over here, are you interested in that?" And the obvious answer was yes. So you do that for a year, 2 years, whatever the case may be. You're successful at that, another opportunity presents itself and they say, "We're going to put you here." I was very fortunate in being in a growing area that had a lot of opportunity. I'll say I was arguably good at what I did, and just had a ton of opportunity to see tons of different asset classes, high-net-worth side, the institutional side, mutual funds, hedge funds, separate accounts, just got to really see all of the different aspects of a massive asset manager at work, and arguably a great asset manager at that.

Michael: It's kind of indirect note here, one of the benefits of being at a firm that's fast growing is there's just this constant expansion of new roles, new opportunities, new jobs at the firm. So I guess particularly when you're in this stage of career, there's lots of opportunity for, "I'm gonna do this and now I get to do this for a while, and I get to do this for a while." And sort of learn and try and do and have a chance to quickly get good at a lot of different things, because they're just growing and expanding so fast they got to hire someone for all of these. So if they're hiring anyways, you get a lot of first cracks at new positions when they open up.

Eric: It was, again, a great place to learn. I'm sitting here talking about all the wonderful things that I had as an experience, but what people don't see is I was eating 3 meals a day at my desk, especially in the early years. I was young, I was single, I was in Manhattan. I wasn't taking advantage of any of those things because I was working all day every day during the week. You're at your desk, you're eating 3 meals at your desk. And at that time if you left after 9:00, I think it was, or maybe 10:00, you took a town car home because for safety reasons, they didn't want you on the subway or the trains. So you're always working til dinner time anyway, you're like, "It's 8:00, I may as well stay for another hour. I can get a lot more done." And you just took a car home. So you get home at 9:30, 10:00, and you do it all over again the next day. And that's what we did for years. Again, a great opportunity I have nothing bad to say about my experience there, but...

Michael: So it's like the long grindy hours that we can do in our 20s when we have a lot of energy, and more time, and fewer family commitments.

Eric: Yeah. And at those types of firms, a chain is only as strong as its weakest link. And one of my fears was I didn't want to be that weak link, so I just did whatever I needed to do from working hard and putting myself out there in a positive way so I wasn't seen as that weak link. Just didn't want to be that person.

Michael: If you recall, what was your favorite work that you were getting to do at the time?

Eric: So some of the things I enjoyed was working with the portfolio managers, got to see tons of different just experiences, how they manage portfolios, the way they manage their staff, got to learn a lot about leadership, good and bad leadership frankly. And again, just got to see all different types of asset classes, different types of vehicles different types of market environments. Think about the internet bubble, think about Y2K, think about the start of the euro currency. It was just an exciting time to be part of a growing and successful firm.

Michael: For those who just don't have finance background, asset manager background, can you just give us a little bit more color of what were you doing? What is the job? You're working from...I was gonna say dawn until dusk. Dawn until many hours after dusk, and take the town car home, and come back and do it the next day. You're working these monster hours, weeks, but what are you doing?

Eric: It really just depended on the role. If you think about where we were in the risk management section of what we were doing, we were trying to help build, I'll say, tools that would allow a manager to look at a portfolio and say, "What are sort of the risks you're taking? What are the obvious risks, and maybe what are the unintended risks you're doing?" Let's go back again to the late '90s when I started there, and even the early part of the 2000s, the technology then isn't what it is today. So you can very easily look at risk metrics and a variety of tools today. Those tools didn't exist so readily in the past, or they were very wonky to use. So we were trying to find new ways to, again, look at risk, uncover risk, talk to the portfolio managers about what those risks were, what, if anything, they might change, what, if anything, the implications of a blow up could look. Was it a currency exposure, was it an exposure to a certain type of fixed income investment? Whatever the case may be, just trying to make sure that whatever we were doing bets were sized appropriately, we understood, again, to the best of our ability where things could go wrong.

Michael: You're doing a lot of, "How do we make sure that this manager isn't doing something that could cause a blow-up catastrophe?" A currency bet over exposure to a bond that defaults just outsize bets in general, that was the tone and context of it?

Eric: That was part of it. And then also determination of is there a certain amount of tracking error we want to take to a benchmark, and how are we measuring that tracking error? How are they sizing their allocations within the portfolio, is it appropriate, is it too high, is it too low, how are they making decisions on what securities they're buying? Risk in general is a very broad term but it was trying to uncover how can we get better in the process of building portfolios to generate more alpha in terms of active management. It's kind of interesting that where I look at my career today, you see a firm like Goldman and all these other active managers, you spend a ton of time, money, energy trying to outperform. And here I am in my career where I sit today, and so many of our clients just say, "That's not worth our time and our energy, let's just get cheap tax-efficient beta, and allow our clients to get the market return." And that's going to be a really, really good solution for them.

Michael: Which I think, just to me, is the interesting dichotomy of "what business are you really in." Folks really in the investment business typically are hunting for alpha because we want to show we're beating our benchmarks, we are adding investment value for our fees that we're charging. And a lot of more planning-oriented firms at the end of the day are quite content to just capture all the beta. If I could just actually get you market returns and keep you in the market, and not have you blow up and exit yourself from the market at a poor time, I'm happy with that as a planning-centric firm that needs to have your investments implemented as opposed to an investment firm that's trying to show how my performance beats benchmark net of fees.

Eric: Correct. Yep. Yeah. It's been a shift in my career certainly.

Michael: So how long did you stay at Goldman doing this?

Eric: So I was there, I'll say, about 7, 8 years. So I started in '98, left in '05. Yeah.

Michael: And so what did you do after...I guess why did you leave Goldman, and what did you do next? I know a lot of people stay at Goldman for a very long time.

Eric: Well, I was laughing when you said that question because I got that question a lot when I told people I was leaving. I'll say half the people said, "Why are you leaving? You're on a great path, you're doing great here, why would you leave this?"

Michael: "You realize if you leave, you won't be at Goldman anymore?"

Eric: Yeah. And the other half of people were like, "Wow, I'm really jealous of what you're doing, that sounds awesome. I wish I could do what you're doing." But basically it was a quality of life change for my wife and I. At the time, in 2005, I had a 2-year-old son. We both wanted to expand our family. And frankly we didn't see the son we had. He was in daycare about 11 hours a day. We were both commuting 3 to 4 hours a day. Our schedules were just crazy, and our weekends were crazier because we were trying to do all the things that we didn't have time to do during the week. And we just needed a change. She was very career oriented, but really wanted to be a stay-at-home mom and try that role. I wanted to be able to help her do that, and we needed to make a change. So we just packed up. I wound up finding an opportunity in Charlotte in our first trip to Charlotte frankly. Again, another happy accident. And spent 11 years in that role, so it was a very good happy accident for us. But it was a quality of life move that wound up being... I wish I had done it years before, it was the best thing we ever did.

Achieving Better Quality Of Life By Joining An RIA [56:27]

Michael: So what was the next role, what did you find in Charlotte and how did you find it?

Eric: So I found it through a recruiter. It was one of those experiences where I was talking to a recruiter and he would put me in touch with a variety of firms, and I would you know do this for my office in New York. I remember one of the people I was talking to said, "What do you love about Charlotte?" And I'm an honest person so I said, "Well, honestly, I've actually never been to Charlotte. I've heard great things about it." It was sort of a reminder that, "Boy, if I'm going to tell people I want to move to the city, I should probably go there and make sure that it's actually the right fit for us." So wound up booking a trip. I called my recruiter on a Monday and said, "Hey, we're going to come on Friday, just to let you know. And would love to just meet up with you." And he called me Thursday night and asked me what time I was landing. He said, "I've got you an interview tomorrow morning at 10:00, so hopefully you're going to make it."

So it was very, very lucky. It was with a large national RIA that was based here in Charlotte. And again, being perfectly candid, I didn't know what an RIA was at the time. I'd grown up on the asset management side, I didn't know what an RIA meant. I didn't know what it did. I didn't really know how it was different from a broker dealer, and I didn't really know how to do some of the things they were asking me to do, but I had confidence in myself. I liked the person I was going to be working with. He had confidence in me and we decided that we were going to do it. So wound up getting the opportunity. Sold my house in New Jersey and moved to Charlotte not knowing a soul or really what I was going to be doing in this new firm.

Michael: So what was the job? I mean, what had they listed for? What were they bringing you on to do?

Eric: I think the job title at the time was investment director. Ultimately, it was the senior investment person for this national RIA. Ultimately became the CIO role at this firm. And we were a small team. It was myself and one other person while I was there, and we were responsible for the investment platform which is kind of interesting because the things I loved about the role were all the investment-related aspects. I loved working with the advisors and helping them solve problems with their clients, and making sure their allocations were good. Frankly all the things I'm doing today is what I was doing there. The parts I didn't like about the job were working for a large organization, dealing with the politics of a large organization, sort of feeling like a cog in a wheel at times. So what's wonderful now is I get to do all the things I loved about what I did for 11 years at that firm, but I get to do it for my own firm without all the challenges of working for the larger firm that I didn't enjoy.

Michael: So what was the size of this firm? I guess the asset base or client counter advisor count?

Eric: So when I joined, it was a 2 billion dollar RIA. So again not small, quite large. And when I left 11 years later, we were over $6 billion.

Michael: When did you join? When was this?

Eric: I joined in 2005 and left 11 years later.

Michael: By industry context $2 billion is still a sizable firm today, but we have many that are tens of billions of dollars. In 2005 a $2 billion RIA was monstrous. Most firms were a few hundred million, and the big discussion from everyone was who can actually get to a billion? And almost no one was. So what was the context of the firm that they were already a $2 billion RIA this early on in the evolution of RIAs?

Eric: Yeah, so it was a wealth management firm that was tucked into an accounting firm. They did a great job of having the wealth advisor connected to the accounting professionals, the CPAs at the firm. A client comes in, they have all these accounting challenges, but they also have these assets that need to be managed. And either they weren't being managed at all, or they were being managed in a different way, arguably a worse way than what we would do. And the CPA would make an introduction to the advisor. The advisor would win the business, and often we're off and running. That's how we did it.

Michael: Interesting. And so striking, as well, so even at the time as a $2 billion firm, it was you and one other person in the investment function.

Eric: Yes.

Michael: So what did it look like when you showed up? I'm thinking back, 2005, models weren't really a thing yet. Multi-advisor firms usually meant every advisor made their own portfolios for their clients according to their own investment philosophy and approach. So how centralized even was the investment management when you got there?

Eric: Yeah, it was already partially centralized, and part of the challenge was trying to figure out how to continue to centralize it in terms of some advisors wanting more autonomy than less autonomy. Some advisors didn't want to subscribe to the models that we had. And it wasn't necessarily my place to force them into it. That was their boss's role so to speak. I was responsible for creating the investments. Somebody else was responsible for making sure that the advisors followed our prescription. So it was partially there. We had to do some work to create it and build it out. But again, it's important to kind of go back in time and think about where we were in 2005. Just as an example, one of my friends today was our wholesaler from Vanguard at the time. And you think of Vanguard today and just ridiculous amount of AUM they have, and the industry presence they have. In 2005 Vanguard was just starting to build out their team that serviced RIAs. So this person was 1 of 2 people that served the nation for Vanguard serving RIAs. So again, that seems ridiculous today, but that's where we were less than 20 years ago.

Michael: So help us understand a little bit more just the role and how the investment process and offering evolved as you went from 2 billion, I guess it's called semi centralized, to trying to adapt the firm to run on a more centralized model-based approach. What did you do? What worked? What didn't work as you were trying to create more uniformity?

Eric: Yeah, some of it was just trying to continue the education process of here's why we think having a more of a model approach and a centralized approach makes sense. We have the data and the analytics to kind of support what we're doing. We also have to remember, clients are emotional about their money. We have to remember advisors are people too. If you think back to the great financial crisis in 2008, it was a really tough time because not only was all of the media talking about, "Is Bank of America going to go under, what's going to happen with banks? Is your money safe in banks?" These were actual questions. I think we forget how tenuous things were at the height of that crisis. Clients were calling advisors. Advisors were calling me, "Are you confident in this approach? Are you sure it's going to work?" And it's one of those things of if we decide to tell a client that all of a sudden we're going to go to cash because we don't know, we are now market timers and we can never go back. We've opened up that Pandora's box. We can't close it back up.

Do I know what's going to happen next? I don't. Do I have confidence in our markets and in our system? I do, and I do think that it's going to come back. So it was just part of education, part of listening to advisors about what they thought they wanted, and what they felt like they needed to be successful in terms of I don't want to call it selling investments, but bringing investments to their client portfolio in a way that their client said, "You know what, I trust you, I understand this, this makes sense." Some of it's trial and error. Some of it is working with asset managers that you trust, and have good relationships with, and believe in their products. It's just trying to figure out and communicating with advisors, making sure you're listening to them about what they need, and how you're going to help make the firm most successful.

Michael: I love the framing there, "If we go to cash because clients are panicking this once, we're now market timers and we can't close that Pandora's box once we open it. So as long as we're still confident in the underlying capabilities that markets and the economy are still functioning, we can hold the course and get through it." I like that framing, particularly remembering how crazy it was in late 2008 and into 2009. So what else in terms of the growth and evolution of this firm as you went from $2 billion to $6 billion as an investment team, as a centralized investment capability?

Eric: That's part of the interesting part of the story. Again, we can talk about what went well in my career and what didn't work. We can talk about how I outsourced myself. The honest answer is we were still 2 people when we were approaching $6 billion and I knew I needed help. We were doing a lot of different things, and we weren't being able to support the firm and our clients the way I felt like we needed to. So I asked for some support and I wound up getting it in the form of I was able to hire an outsourced firm, OCIO frankly to help support what we were doing. And ultimately the firm decided that they'd rather just have the outsourced solution than the internal team and I wound up being laid off.

Michael: You got laid off for the OCIO that you introduced?

Eric: Correct. Yep.

Michael: I'm fascinated by that dynamic from the firm's perspective, what were they liking about OCIO as a $6 billion firm that they didn't like about having an internal team driving this?

Eric: I just think from their perspective, and I won't speak for them, but I think it was just access to more people. It was a larger firm that had a larger team and I was one person, and working with one other person. So I just think they felt like, "If we have this team rather than building it out ourselves, we can just outsource it and they'll do what we need them to do without having that internal team." I think the missing link there is sometimes you need an internal person to communicate that message or drive what you're looking for or ask questions you need sort of an independent person to ask the questions and really advocate for the firm, which can be missing if you don't have that.

Michael: Functionally, even if you're going to OCIO at some point, especially in larger environment, someone still has to have the accountability to lead and manage and champion the OCIO, because at the end of the day, they're "O", they're external.

Eric: In our relationships today, there's still an advisor that needs to make decisions or an advisory investment committee that needs to make decisions. That was really now missing. So that's just one example. That's my guess of what they were thinking, but they were the ones that made the decision, not me, so I don't want to speak for them.

Michael: I'm presuming some similar effect to ironically, what your firm does now, the value to a business to being able to hire fractionally and have access to a lot of more people and resources at a fractional cost than hiring full-time staff internally and need to expand full-time staff internally.

Eric: Yeah, that's part of the same model.

Michael: So I am struck though that just you had said part of the challenge as well is just the...it's the politics and complexity that comes up as firms get larger that I am struck that you felt...or at least sort of what I'm inferring, you felt more challenges in the politics and complexity at a large independent RIA than what you're describing at Goldman Sachs, which at the end of the day is a 100X that size, a 1000X that size. I think now they're trillions, maybe they weren't then. But what was the difference that a national RIA was a complex firm, but it sounds like you didn't have those same challenges at Goldman.

Eric: Yeah, I think part of it was where I was in my career. I started Goldman as an analyst, and I was at least, I won't speak for other analysts, but I was naive and oblivious to a lot of the politics going around me. I was working 12-hour days so I was focused on the task at hand. Give me a job to do, I'm going to do it to the best of my ability. All the other stuff was extraneous things that I didn't need to be a part of. You get promoted to associate, you start hearing more of that stuff but you really don't have time to get involved because now you're starting to manage some analysts, but you're still reporting up you know the food chain. I started to see more of that when I got to the VP level later in my career there but was still surrounded by amazing leadership there, at least that I was reporting to. Again, been very fortunate in my career to have some fantastic managers at several stops in my career. I saw it but I wasn't as directly involved in it. When I moved to the RIA, I'll just say I was more directly involved in it than I likely had been in previous stops in my career. I think it was more of a function of just where I was and the level of my seniority so to speak than one company versus another company.

Trying On Business Management For Size [1:11:10]

Michael: Where did you go next, where did you land when you got the bad news?

Eric: I decided at that point I was just going to try and make a change. I had been doing investment management for a long time and I wound up getting an opportunity at Nuveen to try and do business management. So looking at the overall business of Nuveen, they had just been acquired by TIAA-CREF, what products do well, what don't, where should we be adding things, the structure of the organization. Just overall total business strategy with an emphasis on investment support, but really just focusing on on more business strategy than anything else.

Michael: I almost feel like that's closest to the original corporate finance business degree that you got originally.

Eric: It was closer, it was definitely different than everything I had been used to. There were some aspects of it that I enjoyed, there were some aspects that were you know less desirable for me, but I think that's with any job.

Michael: What was working and not working for you in that kind of job?

Eric: I really liked a lot of the people, I liked the mission of what we were trying to do. I think the thing that I realized very quickly early on is I landed in another large organization with lots of politics and lots of moving parts. So you're part of Nuveen that's just acquired by TIAA, there's lots of change in org charts that's fairly consistent, and you become less of a person and more of a title if you will, and expense. Ultimately, they wound up just saying goodbye to our entire team after about a year.

Michael: The winds of change shifted internally in Nuveen, they said, "We don't need this business analyst group after all anymore."

Eric: Pretty much. They just laid off our entire team unfortunately. Here we are 2 years in a row being let go for different reasons in my career, so yeah, not all rainbows and roses.

Michael: I mean, is that part of the hazards and travails that come in investment jobs, in the investment side of the industry? I'm struck, relative to the advisor world, if you're an advisory firm and you get a deep relationship with the clients of the firm, most firms are quite afraid of firing anybody and letting them go on the advisor end, because they're terrified that if the advisors go, the client revenue will go with them. I'm struck that you very rarely hear anyone on the advisor side of the business talking about how their department team or division was laid off, and they lost their jobs. It feels like that's a very different tone shift on the investment side of the business.

Eric: It's a good question, Michael. I don't know if it's attributable to the investment side of the business. I think I could argue that it's really just attributable to big business in itself. Whether it's Bank of America laying off 10% of its workforce, or one of the big automakers letting go a lot of their workforce because they're closing a plant. I just think that with big businesses sometimes...again, there's so many different competing priorities that they may over hire, there may be a business shift change. Things just happen and it forces them to lay off workers. I don't think anybody enjoys it. It's an unfortunate part of large businesses, and it was certainly one of the less pleasant times of my career. I can tell you that for sure.

Michael: I guess, indirectly, that's perhaps also why…I've heard you a couple of times talk about working with recruiters to find the next job. As there's more...I was gonna say mobility. It's kind of like the good and bad version of mobility. but as there's more motion and job change in the investment side of the business. there's more activity to work with recruiters to try to find the right match to the next opportunity?

Eric: Yeah. With recruiters, I was always under the belief system that if a recruiter reached out to me and said, "I have an opportunity," I'm going to at least answer the call. For one, it might be an opportunity that I wasn't thinking about that might be really interesting to me, or I can also develop a relationship with a recruiter that if I do need a recruiter for any reason, that I know I have a relationship with one, I don't have to start from scratch. Because you know that's an important thing to have when you're looking for a job is you want to have those relationships already set up as best as you can. That was my belief system, I know some people don't like talking to recruiters, or wanting to spend their time with them, and they're like, "I'm happy with my job, I'm never going to leave." I just believe that the world changes, things change. I don't always have the ability to make that change happen for myself. Sometimes it's going to happen to me, so I should just be prepared and honest with myself of "Let's just see what's out there." Not that I was looking to move, not that I was anxious to move, but you just never know.

Finding A Partner To Provide OCIO Services For Advisors [1:16:43]

Michael: Where did you go next after Nuveen when you got the bad news?

Eric: Getting laid off at Nuveen was frankly the best thing that happened to me. You talk about a very low point and that was honestly the best thing that happened. Because after that, it was just thinking to myself, "What do I really want to do? What do I really enjoy?" I started thinking back to my time at the RIA and thinking I really enjoyed the investment management, I really enjoyed helping advisors, I really enjoyed seeing them grow and the success of their clients. I just really enjoyed that aspect of what we did and I wanted to get back to that, but I wasn't sure how. I knew I didn't want to go back to a large firm, but I wasn't sure what I wanted to do. So I started thinking about the idea of creating my own OCIO, I was like, "Well, it worked for the larger firms, could it possibly work for the smaller firms?"

I started to toss the idea around to people I knew in the industry, some friends, and just getting an idea of what they thought about it. And talking to a couple of people, the first one says to me, "Have you ever talked to Mario Nardone?" I said, "No, I don't know who that is." "Well, we know him and you should probably connect with him. He's already doing something that you're talking about." So I talked to a couple more people and his name would keep coming up so. I'm I think a fairly smart person, I was like, "I should probably call Mario and connect with him." So I did. We spent a lot of time, months just talking about, "Are you interested in a partner? What would that look like? How would we grow together? Do we have the same investment philosophy?" And you know you know, Michael, when you have a partner it's like another marriage, you need to make sure that you trust them, that you want to spend time with them, you want to build a business with them. You are connected with them, you have to feel really confident about that relationship. And we both took that aspect of it incredibly seriously. We just spent a lot of time together.

Michael: Can you talk about doing what? What was the business version of dating before you got married?

Eric: Honestly, I did some 1099 work. I just said, "What can I help you with? Let me write your quarterly collateral and see if you're happy with what I write. And if it matches with what you would write, and if your clients are going to be okay with that. Let me try that." So there's a lot of behind-the-scenes work that clients weren't aware that I existed, and that was totally fine with me. It was a lot of conversations about, "What do you want this business to be? Are you trying to build a lifestyle practice, or do you want to build something that can grow and really grow into something much bigger than the 2 of us? What is your investment philosophy, how do you think about this, what type of clients do you want, how do you respond to these types of questions?"

And really just doing all the things that you do during dating trying to think of different situations, different scenarios that we might be in. Are we thinking about things enough that we get along and differently enough that we can complement each other? All the boxes were checked, and fast-forward to late 2018, we decided to partner up and we've been just growing and having fun together ever since.

What Surprised Eric The Most On His Journey [1:20:07]

Michael: As you've now gone on this journey, what's surprised you the most about this building and evolution of an investment career?

Eric: That it's going to change. Just don't be surprised when change occurs. Again, if you told me in 1994 when I graduated college that I'd be a partner in an OCIO firm, I would have scratched my head. Had no idea what that meant, didn't know that I wanted to be an entrepreneur, even though I took entrepreneurship classes. Your career evolves, you need to be intentional about it, but you can't be so intentional that you...you have to let things evolve, and take them for what they are. Learn from them, grow from them, but figure out what you enjoy and go after it.

The Low Point For Eric On His Journey [1:20:53]

Michael: What was the low point on this journey?

Eric: I'd say the low point was probably when I got let go from Nuveen. Again, it was the second time in about 2 years that I had been let go from a firm. I'm in my mid 40s, got 2 kids that are nearing high school age. So worried about college savings and all that fun stuff. I was the primary breadwinner at the time within my family, so just a lot of responsibility, a lot of concern, a lot of questions about what was going to happen next. But again, fortunate I've got a great wife, very supportive wife, great kids. I went from that low to the highest we're at today. I don't even think about those times anymore, to be honest.

Michael: What carried you through in the midst of all that?

Eric: Supportive family, belief in myself, knowing that things are going to get better, just truly believing that. You figure out a way. I'm not one to just sit down and sort of complain about my situation. I'm more of a person to do something about a situation I'm not happy about. So it's like, "All right, what am I going to do?" Until I found Mario and until I found my partnership at East Bay, my full-time job as finding my next career move. That was my full-time job. You get up every morning and that's what you focus on 8 hours a day. That's all I did.

What Eric Wishes He Knew Earlier In His Career [1:22:33]

Michael: So what else do you know now you wish you knew back early in your career, 20, 30 years ago as you're trying to find this career path?

Eric: Just have fun. You have no idea where your career path is going to take you as a young person, so just try and enjoy the journey, enjoy the experience for what it is. Even if it's a bad experience, take things away from it. So if you have a bad manager, and unfortunately I've had a couple, learn from it, learn about what they do that bothers the people that report to them, and make sure that when you have that opportunity, you don't make those same mistakes. I'll say for myself, when I first became a manager, I was not a good manager. It took me making mistakes to to learn from it. I think enjoying what you're doing, having confidence in yourself, and having fun on the journey but not being afraid to make mistakes, not being afraid to admit mistakes, own your mistakes when you make them. I think those are all really important lessons that I've learned along the journey.

Michael: What was the manager mistakes that you saw, and then didn't want to do when you were in a manager position?

Eric: I'll speak for the mistakes I made. Honestly, I was a micromanager to start. I didn't let people own what they were doing. I was such a micromanager, "wanted control," I'll put that in air quotes. Just wasn't good, it was not the way to do it. When I've had opportunities in the past to grow from it, it's okay, support people but you hire them for a reason, let them do what they need to do. And understand they're going to make mistakes, but if they're accountable for those mistakes like I want to be, and if they figure out ways to make sure that the mistakes they made don't happen again, that's part of it. But you hire good people, let them do the job you hired them for, and don't micromanage them.

Michael: How do you get comfortable with actually letting them make the mistakes that you clearly saw coming long before?

Eric: It's really hard. It's kind of like your kids. When you see your kids doing something, you're like, "That wouldn't be the choice I would make." But you want to let them learn and the only way for them to learn sometimes is through those mistakes. If I see somebody making a mistake that's really important for the business, I'm going to say something before they make a mistake, or I'm going to ask questions so they see early on it's a mistake. But other times if it's a smaller mistake, if it's something that is a teachable moment, sometimes you just have to go through. It's a part of learning.

Eric's Advice For Newer Advisors [1:25:14]

Michael: So what advice would you give younger, newer folks maybe who have this investment inclination, and are trying to figure out how to start pursuing their career, how to differentiate from all the different channels because you pursued a lot of them over time? How do we help investment-oriented folks get oriented about where to start building their career?

Eric: I think the first thing is just ask a lot of questions. People are okay talking about themselves, most people I know are at least. We have tools today like LinkedIn that we certainly didn't have in 1994 when I left college. If you're young in your career and you're on LinkedIn, reach out to people, connect with them, see if they can spend 15 minutes with you asking about their career. And if you ask somebody for 15 minutes, take 15 minutes, don't take 30 minutes. But really just ask questions, try and figure out, "What is it that I want to do?" Try different things, it's okay to fail, it's okay to try different things and say, "I don't like this," and then pivot to something else. That's totally fine, we all do it, or at least most of us have done that. I think if you're yourself, if you're authentic to what you want to do, if you're authentic in how you present yourself, if you ask good questions and connect with good people, you're going to find out what you enjoy. As importantly, you're going to find out maybe what you don't enjoy. Bet on yourself and if you realize that you don't like what you're doing or you don't like where you're sitting, pivot.

What Success Means To Eric [1:26:53]

Michael: As we wrap up, this is a podcast about success, and one of the themes that always comes up is literally just the word success means very different things to different people. You've had this successful career as you've navigated all these different paths and now on a wonderful growth trajectory with East Bay and fractional CIO services. It seems the career, the business is in a really good place now. How do you define success for yourself at this point?

Eric: That's a great question, Michael. I think some of it is just sort of subjective on really what I'm trying to accomplish. To me, if I had to define success at a high level, it's sort of trying to set goals, creating a plan to meet them, and then working to achieve them. I'll say I purposely say working to achieve them because I think it's important to admit sometimes that goals are going to change, plans are going to change, goals may not be met or they might not be met in the original time frame, and I think all of those things are okay. And one of the things I learned about success and I'll say I learned this through a very odd way when I was a teenager was to try and celebrate success. I'll say it's something I'm not admittedly very good at all the time, it's something I've tried to get better at.

But when I was a teenager, I was a competitive tennis player in high school. I would have these days of practice where I would hit a string of good shots and then all of a sudden, I'd have this bad one. You hit 10 good ones, you hit 1 bad one. I'd get really frustrated and get angry at myself, or I might...I don't want to say throw my racket, but just hit my racket or just get really upset. And my coach was like, "Eric, you just hit 10 good shots. Remember the good shots you hit, don't focus on the bad 1. You hit 1 bad one. Remember all the good ones you hit." So for an entire practice he made me shout out, "Yeah," every single time I hit a good shot. It was quite embarrassing but it was a really good lesson of you have a lot more successes than you have failures. Learn from the failures, move on from them, but it's important to celebrate those successes as well because otherwise it just takes the joy out of everything you're doing.

Michael: I love that. I love that story. Thank you so much, Eric, for joining us on the "Financial Advisor Success" podcast.

Eric: Thank you, Michael. I really enjoyed it.

Michael: Absolutely, thank you