If not, then you probably haven’t heard of Robert Wasilewski. I mentioned him in my best-selling book, Millionaire Teacher, and for very good reason.
He builds index portfolios for clients, charges less than any advisor I have ever come across, and often convinces his clients to fire him 3-6 months after the account is up and running.
More Info: RWInvestmentStrategies.com
This Maryland-based advisor is a rare breed, and it’s a pleasure to interview him for this series:
Andrew: Your fees are the lowest advisory costs that I have seen with any advisor….anywhere. Can you explain your fee structure and the varying degrees of services you offer?
Robert: I charge 0.4% to manage assets less than $1 million and 0.3% for assets above that. I offer three services: hourly consulting at $150 an hour, investment management, and investment management with the goal of the client taking over investment management after 3 months or 6 months (actually I might be the only one who does this!).
Andrew: I have heard the Aperio Group of advisors sometimes fire themselves as well, while often hanging on as consultants, like you do. With the selfish reputations many advisors earn, it’s great to know that there are some good ones in the field. I’ve also always felt that the best advisors require more than a little gray around the temples. Experience, after all, counts for a lot in this industry, and you certainly have had a long relationship with stock market investing. Can you explain that history and how it shaped you, as an advisor?
Robert: I guess I was in high school when I first became fascinated with the stock market. I know that when I decided to major in Economics in college it was with the perspective of what I could learn about capital markets. In graduate school I read all the academic literature on efficient markets theory and econometric studies on how data such as earnings surprises affect stock prices. At this point, of course, I had no real appreciation for the impact of costs on long-term investment performance! Job wise I started on the institutional side as an advisor to the Trustees of a multi-billion dollar multi-employer pension plan – the United Mine Workers of America (UMWA) Health & Retirement Funds. An important part of this position was working with high priced consultants to identify the best investment managers in the country. To make a long story short it became pretty obvious to me that track records were not predictive of future performance and that institutions such as pension funds would be better off if they didn’t pay high consultant costs and active manager fees. I eventually became a managing director of one of the largest money management firms in the Washington D.C. area when it slowly dawned on me how economies of scale in money management resulted in grossly excessive(IMHO) salaries. Basically you do the same work if you manage a $10 million account as for a $20 million account – same number of reports, meetings etc. In buying shares you buy 2,000 shares of IBM instead of 1,000. Furthermore, if the market is up 8% you get an 8% raise! In 2000 I semi retired and started teaching Economics but found myself following markets closely each morning and managing my own money. Finally, in 2006 I couldn’t stay away and took a position with a local wealth manager. They charged 1% and invested in individual stocks and mutual funds. I found them reporting performance in a way that I wasn’t comfortable with and eventually they asked me to promise a certain performance in a seminar ( the President of the company wanted me to say to the audience that if they invested with the company they would have better performance than in the Vanguard funds they were presently using!)and I decided it was time to hit the road. This was when everything came together for me. I decided to offer investment management services at a fair price.
Andrew: As an advisor, what are some of the challenges you have faced?
Robert: There are many challenges – this is what makes it fun! First off, our industry is only slightly above that of used car salesmen in the eyes of many consumers. When it comes to people’s finances we are asking for an enormous amount of trust. In some instances with potential clients I have felt I was dealing with a badly abused animal. A lot of people have badly wrecked finances because of fast talking Wall Street types. And the Wall Street brokers are formidable foes with their fancy charts and ability to pick the 5 funds out of 50 that have performed well in the recent past. Secondly, there are potential clients who are like young children standing at the end of the diving board. They are afraid of this volatile entity/thing called the stock market that dropped 37% in 2008! They are afraid because they constantly hear on CNBC and in the newspapers that the U.S. is going off a”fiscal cliff” and Europe is breaking apart. I am constantly surprised at the people who have significant sums in money market accounts earning zilch and getting eaten alive by inflation. Thirdly, because of genetic makeup or whatever there are some (actually many) who are convinced they are the next Warren Buffett! Overcoming these challenges, of course, makes it extremely rewarding when you get people on the right path and invested appropriately and they see their wealth growing in a way they understand. I have to admit it is frustrating when you see potential clients that can obviously use your help but can’t take the necessary step. These are the people who will jump in after the market rises 20%!
Andrew: Do you have friends in the financial advisory world who think that you’re crazy for doing so much, for so little?
Robert: Sure, they don’t get my approach but I have to admit I’m not sure how they sleep at night. Most are on the wrong side of the market and then charging a hefty amount for their bad judgement. Thus, we tend to talk about markets and products but not so much about business models. I have to also say I was helped along the way as well. To register as an investment advisor in the U.S. generally costs a couple thousand dollars – I found a guy who did an excellent job leading me through the process for around $600. I also had a guy set up my web site for a nominal fee. If people are willing to look there are quality services in many areas at reasonable prices.
Andrew: Do you think most advisors realize that most of their clients would be better off if they invested passively, with indexes?
Robert: I’ve asked myself this question often and I’m still not sure. Some advisors I talk to seem somehow to have never been exposed to the arguments and especially evidence in favor of passive index investing. I am convinced however that the message is spreading and advisors are becoming more aware. Like you I believe strongly that the passive investment approach should be taught in high school and that high school students should understand they are responsible for their retirement and with a bit of frugality and investment savvy they can have an extremely satisfying final 20 – 30 years of their life.
Andrew: You have had a great investment blog for a number of years now. What motivates you to keep writing?
Robert: I appreciate the compliment! In my business life I felt many times I was writing what other people wanted me to write. With my blog I write what I feel like writing. For me, this is really refreshing. It is one of the most fun things I have ever done and I have met many interesting people because of it.
Andrew: From your experience, do you think that most people are capable of rebalancing their own portfolios of indexes, or are some people wired to fail, regardless of how much they learn about money?
Robert: Most people I find can rebalance (unless they are just too emotional) once they “get it”. They prefer to buy at lower prices and take an opportunity to take some profits off the table. Admittedly, it isn’t intuitive for most investors.
Andrew: I’m very impressed by your business model, and based on conversations we have had, very impressed with your level-headedness and knowledge. Are you accepting
clients? If so, from where?
Robert: I am accepting clients and accept them from most anywhere. I’ll listen to what they are looking for and if I think I can help I’ll take them on.
Andrew: How long have you been in business and how many clients do you have?
Robert: I have been in business almost 3 years. I manage money for 11 clients who are not interested in managing their own money at all. They typically either have high pressure jobs or are retired and just want to do other things. Two are basically math phobic. Then I have about 35 I advise on an ongoing basis. We meet once or twice/year. Some of these include clients I managed assets for to get them set up and now they are managing on their own.
Andrew: You would have a lot more clients if you didn’t keep firing yourself every 3-6 months.
Robert: Yes, I certainly would!
Andrew: Do you have any expatriate clients? If so, can you describe how you helped him or her?
Robert: I do have expatriate clients both advisory and asset management. I help by advising on asset allocation and asset selection. Most have U.S. addresses so they can open an account at Schwab. I have also consulted with 1 client who prefers to invest in ETFs domiciled in Ireland. Most plan to return to the U.S. within the next 10 years.
Andrew: Are there investment firms or products that you admire greatly, and why?
Robert: You’ll probably get a chuckle out of this but I thought I had an original business model when I started thinking of offering low cost, indexed ETF
investing that avoided market timing and at a reasonable cost. Then lo and behold I found a number of firms that offer the approach. These include MarketRiders, AssetBuilder Inc., Evanson Asset Management, and Index Funds Advisors. I also admire Vanguard and T. Rowe Price. I also like the Thrift Savings Plan (TSP) (limited number of minimal cost indexed choices) used by the Federal Government. If I had my way it would be the 401(k) plan used throughout the country. On the product side I use Charles Schwab and really like their online reporting and that they have up-to-date performance versus an appropriate benchmark. Sadly, I can’t say that I’m positive about their representatives. In my experience they haven’t always been knowledgeable about their products.
Andrew: Are there any investment products that annoy you? If so, could you explain?
Robert: High fee funds and load product are annoying but happily I believe they are slowly but surely going the way of the dinosaur. On other fronts, Wall Street has a habit of taking useful products and going too far in its greed, resulting eventually in a bust. This happened with derivatives, mortgage-backed securities and more recently with credit default swaps. Along these lines I expect that leveraged ETFs will have a blow-up one day. Their only purpose as far as I can tell is to gamble and this is a sure indication of trouble down the road. I also am concerned with high frequency trading. It does provide greater liquidity and years ago it played a role in lowering commissions but will cause problems if not regulated to some degree.
Andrew: How can interested, prospective clients reach you?
Robert: The easiest way is to email me at [email protected] or give me a call at 443-896-4123. I would add that the biggest surprise for me has been how rewarding it is to work with individuals and families and to get them on a solid financial path. Many times there is a moment where it is like a weight is lifted from their shoulders when they realize they are on solid footing with their investments. Also, young people today especially do not understand the value of time in the investment process and the payoff to introducing a bit of frugality in their lives. They are constantly bombarded with messaging from very creative and intelligent sources with the objective of getting them to live beyond their means. Without trying to get over melodramatic it literally is an ongoing battle to help people in this struggle.