← Managing Your Practice
Loading summary
Transcript36 lines
- [00:07]
A
Hi, everyone. Kathryn Williams with Dimensional Fund Advisors. And we're coming to you live from our annual practice management symposium when we hit the fourth quarter of every year. And I know for many of the clients we work with, nothing denotes that fourth quarter like getting the invitation in your inbox for strategic planning. What are you gonna do over the next year? How are you going to move your goals forward even beyond 2026? In this case, and for many of the clients we work with, one of the ways, one of the areas that we first start with is revisiting, examining, if you will, your mission, vision and values. Why do you exist? What do you want your business to look like as you move forward? And what will be the values, the guideposts that you will use to make decisions as you go? That's really where we're going to spend our time over the next little bit here. And joining me for this conversation, it is my pleasure to introduce our co CEO Dave Butler. Dave, it's great to have you with us.
- [01:03]
B
Thank you, Kathryn. Appreciate it.
- [01:05]
A
This is a fun environment.
- [01:06]
B
This is great. I love it. Look at this crowd. It's great.
- [01:08]
A
I know many will be listening to this only, but we've got a great live audience behind us and lots of good energy today. But I think so much of what we've been talking about at the conference this year really does come home to roost around. Why do you exist? What is your goal? What are you trying to deliver to your clients? How do you want to grow your business going forward? And I'd love to start, if you don't mind, with you with a question, thinking back even to your early career, pivoting from basketball, looking at the industry, looking at opportunities in the industry, and really beginning to maybe think about what your own value systems and how that could inform the direction you wanted to go with your career. What, when I put that out there, what comes to mind during that period of time or what attracted you to think about the direction you ultimately headed in?
- [01:55]
B
Yeah, no, I think it's a great question and it's a great question that everybody needs to answer in their career, in their life at some point. I did a podcast this morning and basically said I had this moment called the Aha moment, and you've heard this story before, but I was sitting in New York and I had decided I was gonna get out of financial services completely and go be a teacher and a basketball coach and randomly. And luckily I found an ad in the Wall Street Journal and it turned out it was dimensional and I applied, put A resume in for that ad. And turned out that I went out to Santa Monica, had this great interview with Merton Miller and David Booth and Dan Wheeler, all the legends that kind of really started the firm here and kind of pushed the advisory business along. And that was really the start of it. So for me, it was sort of a moment. I think we all, again, have to reflect on what's a job versus what's a passion or a career. You have to have an alignment with your own personal values and things that are important to you. Fortunately, Dimensional came along, and what I heard from Dan and David and Merton was the story about markets. And that rationally made a lot of sense to me. Then the second part about advice and how this advice model could be changed, it could be different, and these advisors could act as fiduciaries and act in the best interest of the client. So those two concepts just resonated for me completely. And it just gave me the opportunity to get on an off ramp that led me to dimensional 30 years ago. And it's been great ever since.
- [03:27]
A
Well, and one of the reasons why I wanted to start with sort of you as the individual, if you will. And we're going to talk here for most of our time about what happens organizationally, thinking about those mission and vision, the values. Here at Dimensional, we refer to those as guiding principles. We're going to talk in a moment about how those came to be. But really, at the end of the day, to your point, it does come down to an alignment, that individual alignment with the larger organization. And those two need to match up over time. And so we'll come back to that as well, too. I am curious, did you physically mail your resume or was it an email attachment?
- [04:01]
B
I don't think there was email in those days, actually. So I think it was definitely it was a physical mail.
- [04:05]
A
Good old days, right? Yeah, I love that. I love that. All right, so let's talk about a little bit of the processes I mentioned here. At Dimensional, we refer to as guiding principles, the process of. Of developing that, of creating something that the organization is anchoring to. I'd love to take you back to that time when the people that were in the room, the process of that. Because often, even when we're engaging with organizations that are 20, 25, 30 years old, they may have worked something up that looked really pretty and lovely a few years ago, but there can be some heartburn to revisiting it. Do you have the right people in the room? What does that process look like? Take us through a little Bit of that process and what that looked like here at Dimensional.
- [04:46]
B
Yeah, I think it was a, you know, everybody in this struggles with this kind of what I would call entrepreneurial environment into what I'd call an enterprise environment. And we did as well. So when I started in 95, we were 9 billion under management. And by 2003, we had gotten to 50 billion. And David Booth and team at the time decided that we needed to kind of have a better vision around how we were going to build out the firm. And so one of the simple metrics was if we stayed in the same growth rate from start of our existence in 81 to the 50 billion in 2003, that growth rate would lead us to 20, 18, 15 years, and we'd be at 500 billion. Yeah, so that was kind of the first, you know, I'd say statement for the firm. And I actually have to say people were confused by that because we had never talked about goals around AUM or nna. We always just talked about doing the right thing and doing it well and so forth. And so we had to actually step back a little bit and redefine or kind of refine what that 50 to $500 billion mark was. It was really about being a steward to the assets. So the question and the challenge I'd say, that David gave to the firm, particularly all the department heads, was, look, if we're going to be 500 billion, and we think we will, given the growth rate in the past and what we're doing, how are you going to develop your department, and how are you going to have the infrastructure to be able to handle $500 billion in a high stewardship kind of capacity? So it was really our first moment of stepping back and saying, hey, we're going to become a big organization, and we need to think through what that means to the team, to the culture, to the organization, et cetera. And then on the heels of that, I'd say probably a couple weeks later, we did sit down as a group. It was probably 15 to 20 people, big conference room whiteboards. And we started talking about these guiding principles. And David was not a big fan of mission statements because he thought one statement, one line was too, too simple to really capture the essence of an entire organization. So he came up with this kind of concept of guiding principles. And really what we had was an open conversation in the room. And we had people from HR and operations and portfolio management, trading. We had Gene Faman, Ken French. We had our academics. And we sat in a room for probably a Day and a half. And what you find, I think in trying to come up with words that become guiding principles or they're will be posted on the wall. It's a very difficult process. It's not easy to come to a really succinct set of words that you think are going to be reflective of the organization. So it was an effort, it's not an easy process and most people think it's kind of easy just to throw some words on a piece of paper and you're good to go. But it's not. It's a process and it needs to be a process. It needs to be an open dialogue, it needs to be a kind of a hard pressed process to get to the right words that I think are going to be reflective of the organization.
- [07:43]
A
Well, and I think in what we've observed as well is that to your point, I actually don't care what you call it, so to speak. It can be your guideposts, it can be guiding principles, it can be full on mission, vision, values, whatever you want to call it. Put pen to paper. So get it out of your heads and get it onto paper, if you will. And really think very carefully about those three questions that I started with. Why do we exist? What do we want this business to look like? That's the difference between mission and vision. It's one of the questions we often get. And then what are the value systems that's going to drive that over time? And I will date myself by saying this, having been a part of the industry for I used to say over 20 years and now my team gently tells me to say I'm almost 30 years. But rarely do we see sort of the values change. I mean, certainly if there's something really significantly happens in the business, there might be a little bit of a shift. But mission and vision for sure can over time. And so how do you strike that balance between those things that are evergreen, that you're going to anchor to versus the things that kind of need to evolve and change? Even as you and I were talking the other day about the transition from G1 to G2 and getting that fresh set of eyes, that fresh perspective and ultimately hopefully a fresh buy in on what that looks like. So fast forward here a few years now, if you will, where we've had our guiding principles, as you said, they are literally on the wall, which we're going to talk about in a moment almost in every single dimensional office. Why has it been important to have these guiding principles? What do you think really drives the.
- [09:13]
B
Meaning behind that, when people start a company or an entity and they know what their principles are, they know what their foundational kind of views are on how to run the business. And we all assume that everybody else knows that as well.
- [09:27]
A
Right?
- [09:28]
B
And that's probably one of the biggest hurdles, I think, for early entrepreneurial stages. When you can sit in a room and you have five or 10 or 15 or even 25 people, you can sit in a room and you can talk to people directly about what those foundational principles are. And when you get to 150 or where we are now, 1700 and 15 global offices, you start to scratch your head and say, okay, how do we make sure that that new hire in Singapore or that new analyst in Australia understands what the firm's about and understands why we do what we do and how we do it? And so having something formal and formalized, I think, is really important for organizations as they grow, because people do need to hear repetition. I'm really big in summary, and I think you have to think through some simple statements that people can repetitively say and believe as the organization gets bigger. I'd also just say one other item with that. I mean, that can go the other way, too. So you can put something on the wall and people walk by it and go, oh, yeah, that's what they say on the wall, but that's not how it works here. And so that could even be more detrimental than actually not doing it at all. So, you know, part of it is actually living the principles completely. Part of that is having everybody up and down the line understand what those are. So it has to be, you know, from the CEO all the way to the person that's greeting people at the front desk. Everybody has to buy into it. The belief has to be there. And if people can't see it, it's oftentimes harder to actually try to understand and imagine it in a way that you like it to be. So that's an important part. And finally, I'll just say stories, I think, is another big example. So you want to celebrate stories from the past that actually reflect whatever the words are on the wall. And we do that quite often with videos. So we have a lot of videos, as you know, around concepts that would support the guiding principles and kind of beliefs that the founders particularly have had over the years. And that's an important part, I think, our tradition, our culture as well, and.
- [11:30]
A
Allowing a degree of autonomy that anyone in the organization, if they see anything that is counter to your mission and vision, your value system, your Guiding principles, that it's like you have a responsibility, an obligation almost to put your hand up and say, hey, can we at least talk about this? We just heard in a prior session this idea of asking the question, why? Five times. And there was a little bit of, you know, question, question the decisions that are being made and create a level of trust that people can put their hand in the air when they need to. I think.
- [12:04]
B
Yeah, I think, I think that's right. I think people sometimes think of these types of statements as being maybe restrictive.
- [12:08]
A
Yeah.
- [12:09]
B
But they're actually, in my mind, more freeing than anything else because I think it allows, you know, particularly managers, you know, this movement from, again, entrepreneur to enterprise is really difficult. And, you know, trying to figure out ways to, within an entrepreneurial environment, still have an. Or, excuse me, an enterprise environment, still have an entrepreneurial bent is really, really tough. So I love the old line, you know, Phil Knight from Shoe Dog, the Nike founder, says, you know, none of my heroes are micromanagers. Yeah, I love that line. I think, you know, macro management can happen when you have really strong cultures and, and, and principles that are in place for a firm. Yeah, but you got to be able to respect the independent ability in nature to have people like yourself. I mean, this is all brand new. I mean, we didn't do this 20 years ago, so things like that. You have a lot of really smart, creative people. You got to let them be free to do it. But within the context of a broader foundational kind of view of principles.
- [13:05]
A
Yeah. Well, if you've not had an opportunity to see the guiding principles in any of our offices, we do have them on the wall. I'll share them with everyone really quickly here. We must act in the best interest of clients. We act in a way that is ethical and legal. We compete aggressively to succeed. We base investment strategies on a scientific methodology. We emphasize financial sustainability. And we create opportunities for our people to contribute both to our success and to their own. I'd love to talk about that last one just a little bit more. This idea that we are coming back where we started a moment ago, around we are individual contributors to a larger organization. As we think about some of the young professionals that are listening here today, they might be G2, in some cases even G3, as we often are talking about now, where the RA, the advisory business, is now old enough to essentially be hitting into that third generation. What's the opportunity there, particularly for young people coming into business, asking questions, thinking about how they can contribute to, in our case, guiding principles. But Whatever that mission or vision might be.
- [14:12]
B
Yeah, no, I made that comment this morning. I think asking questions is really important. So you know, there has to be an environment where G2, G3 can ask the questions of G1 and they need to be able to push the envelope a bit. So there's a nice counterbalance between the mission statement, the values, the guiding principles versus let's try this, let's go down this path, let's give this a shot. The environment's changing. How do we react to that? So I think as long as you have both kind of in vision, I think it's really important and I think that allows for continuous success. I'm a big fan of this idea that I think it was in a Harvard business case that talked about success and that then success leads to more opportunities, more opportunities leads to diffused efforts. Diffused efforts takes away from the original success.
- [14:58]
A
Interesting.
- [14:59]
B
So I always keep that in the back of my mind. You want to celebrate and understand foundationally what got you here. But you also don't want to be a person or a leader who says well here's how we did it back in the day and it's the best way to do it because there's as you know, there's a ton of good ideas, a ton of really smart people that are coming up and have different experiences, different knowledge than the first gen and you have to respect that. And that's an important tandem I think and a toggle between the two generations. It's one that you know, I always say you got to celebrate Gen1, G1 and what they created because it's amazing. But you also have to allow for the freedom in G2 and G3 to actually create something that's going to be even better. Yeah.
- [15:43]
A
You know, I sometimes make the joke that developing your mission vision values can feel a little kumbaya. You know, we're all going to hold hands and you know, and sort of put these beautiful words as you said earlier on paper. But you know, we've seen at times where they really, they can be tested and I think none more so at times when you know, we have so much M and A activity happening, organizations getting together, long standing organizations and so this idea of how do you use this as a tool, as a resource to reset and realign what the new organization is in a post transaction environment. And that's another, as I said earlier, that's why this is not a, oh I'm a two year old firm or a five day old firm or even a five year old firm, I'm 25, 30 years old or so. But we've now got a bigger, more complex organization. We're doing more, and we now may even be hitching our wagon to each other, so to speak. And so we've got to figure out how to. So I think this is a really powerful tool, a really powerful opportunity. And we've got some worksheets and resources that we love to share with people that are interested in revisiting this. A couple final questions. So, you know, I believe, I think, and our team, when we work with advisors, when we think about mission, vision, values, when we think about our guiding principles, this is first and foremost for the organization, for the people, how you're going to make decisions, run the business. But we often are asked, okay, well, what if I want to share this with clients? Or if I want to, you know, is this a way to communicate to the kinds of clients we actually would like to work with, if you will. And as I said earlier, it's not an accident that not only are our guiding principles on the wall, they are in a space that is not only frequented by employees, but also our guests, our clients that come to our buildings. Why has that been important, to put that on the wall in a place that is highly visible by our clients?
- [17:38]
B
Well, I think it's important because you want people to know what you're about. That's one step in terms of defining what you're about. But I think the second step is what's the actual action and what's the actual outcome. So we take a lot of pride. And I know a lot of folks in this room, we've worked with clients for 10, 20, 30, 40 years and we always talk about trust. And trust, in my mind, it's built by meeting expectations or exceeding expect every single time. So I think we've built a great amount of trust. And I think it starts with obviously acting in the best interest of the clients. I think our clients feel that's dimensional's view and that's our first view on everything that we actually consider or contemplate. But I think the trust part is going to be the most important part in a relationship. You can't lose it and you have to have some defined again when the organization gets big, you can't keep your eyes on everything and there has to be a macro management aspect to it. But people all have to understand that's the jewel of the company. And you have to be able to maintain that trust and you have to be able to be a firm that actually is looked upon as a partner, as a great relationship and one that they want to stay in. So I think having these guiding principles for our clients to see I think is important. I think more importantly obviously is the actions that come from those. And I think we have to live that. And so we talk a lot about that. We use the term impeccable experience. I mean we want every advisor that comes in this door to walk out going okay, dimensional debt again. So stacking a lot of small wins and stacking a lot of small experiences I think leads to a broader connectivity. And we're speaking to the choir here because every advisor that is in the room probably has retention rates of 96 to 100%. They're very high and they're delivering the same kind of experience to clients. And, and that's really what it's all about. So what attracted me 30 years ago was just that it looked like a different model, it looked like a new model. It wasn't the old having to say you're sorry model around trying to time markets and pick stocks and hope for transactions. That was a whole different space. And it was an investment advice that was at the time was the norm. And obviously as we've seen the progression of the industry, it's not the case anymore. This redefinition of investment vices, very solid, very strong. And I think it's been the basis for what investment advice industry looks like today.
- [20:08]
A
Well, I've really appreciated the opportunity to talk with you about this. I know when we talked about our goals for this conversation, a lot of this is how do we create that call to action? Whether you're a new organization, that you're at that entrepreneurial stage or maybe even in that full on enterprise stage. And I think you made a really great point around. It's one thing to figure out what the words are, get the right people in the room and take the time a day and a half, even if that's how long or more if it takes, we're certainly sometimes more than that and then be very purposeful about what that final result is. But I think you make a really good point in terms of what are the stories around that and how are we going to bring it to life and make sure that it is not just a set of words that we sort of put up on a shelf and don't necessarily pay attention to, but find those stories to, to bring that to life in the organization.
- [20:56]
B
I think just one other add to that, I think it's a commitment and I think sometimes G1 or the chairman, CEO and so forth. They assume that. Of course, everybody knows what I know and why. Right. But I think you can find yourself almost getting bored with yourself because you say the same thing over and over and over again. But my experience is people need to hear it over. I know I do. I need to hear it over and over again before something really becomes digested.
- [21:24]
A
And me too.
- [21:25]
B
And understandable and really part of my Persona. So I think, you know, having simplicity, having summary, having repetition, again, people could get bored by that. But it actually is really reflective of the fact that there's a culture here and this is what we stand for and this is how we do business. And I think that's an important thing. And as you get bigger, you got to put it on paper.
- [21:47]
A
Yes.
- [21:48]
B
And you've got to figure out.
- [21:49]
A
But it doesn't have to be multiple paragraphs. Right. You know, even. Even as we've done with Art, with our guiding principles, I think you can achieve the same on that.
- [21:58]
B
Absolutely.
- [21:59]
A
As long as it makes sense and it's meaningful. For sure. Yeah. Thank you so much for the opportunity to talk about this with you. It's such a critical part of the work we do with advisors, and it's where we start and where we also often end, if you will, even in our conversation. So we really appreciate that.
- [22:14]
B
Yeah. Thank you.
- [22:15]
A
Thanks, everyone. We'll catch you next time.
- [22:18]
C
Thank you for joining us for Dimensional Fund Advisors Managing youg Practice podcast. For more information, please visit www.dimensional.com. dimensional Fund Advisors LP is an investment advisor registered with the securities and Exchange Commission. The views, information or opinions expressed during this podcast are solely those of the individuals involved and do not necessarily represent those of Dimensional or its affiliates. Dimensional is not responsible for and does not verify for accuracy any of the information contained in the podcast. All expressions, information and opinions are subject to change. This podcast is distributed for informational purposes and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security products or services. Please consult with qualified legal or tax professionals regarding your individual circumstances. Investing involves risk. Risks include loss of principal and fluctuating value. This podcast is available for private, non commercial use only. You may not edit, modify, or redistribute this podcast without the express written consent of Dimensional. Dimensional assumes no liability for any activities in connection with this podcast or for use in connection with any other website, computer or playing device.