Country club chatter, fake laughs, and phony shoulder slaps don’t matter to a new generation of investors glued to their phones. Instead, authenticity, popularity, and the ability to entertain reign supreme.
Enter Josh Brown, co-founder, CEO, and public face of New York–based investment advisory firm Ritholtz Wealth Management.
Brown, who tweets under the handle @ReformedBroker, has stormed the advisory space with his relentless and ubiquitous media — both traditional and social — presence. He recently made a splashy guest appearance on the Showtime hit Billions. And with more than a million Twitter followers, Brown also builds business through his widely read Reformed Broker blog, CNBC appearances, and The Compound channel on YouTube, where he riffs with his team about wealth management, markets, and pop culture. Brown recently gave his director of research, Michael Batnick, grief for not following Game of Thrones. “How can you say you don’t watch the show and be in touch with culture?”
In a media-drenched landscape, quality guarantees nothing. Being different, however, offers a way to blast through the clutter. And Brown, 41, stands far apart from most advisers by not being buttoned up and polished. A big part of his appeal is his no-bullshit persona with a sense of humor served up in ultracasual attire. Brown’s “let it all hang out” mien is disarming and enticing, especially in an age when every syllable is focus-grouped and spun for maximum effect. People want what’s genuine and recoil from claims of omniscience. However, should authenticity reflexively correlate with trust?
“I never really liked the people that try to pretend they know everything,” Brown tells me, mid-May, in a sunny conference room on the 15th floor of his company’s midtown headquarters. “Batnick calls his blog The Irrelevant Investor. How many people would start off by telling you how irrelevant they are?”
He continues, “Everyone knows my flaws. I’ve grown up on social media. I started Twitter in March of ’09.” Brown now has nearly 90,000 tweets and more than 12,000 blog posts to his name. “I’m a very different person than I was then in a lot of ways, but people have watched me grow up there and so it’s not like I could all of a sudden say I know everything. People know that I don’t.”
Marketers typically use flash to sell flashy products, and “Downtown Josh Brown” leads with sizzle. Yet despite a glib and freewheeling style, his advice is informed by humility, he claims, likely born of hard lessons learned over many years as a stockbroker and arguably out of necessity, given his fee-only firm’s sober-minded corporate mission.
Brown’s partner, Barry Ritholtz, 57, also works in the limelight. The co-founder, chairman, and chief investment officer writes the well-respected Big Picture blog and, for Bloomberg, hosts the influential Masters in Business podcast and writes a column. Ritholtz, who tweets under the handle @ritholtz, has nearly 140,000 followers, the second most among advisers after Brown.
In sum, a strategy based on passive investing and active evangelizing is working.
Six years ago, Brown, Ritholtz, Batnick (@michaelbatnick), and director of wealth management Kris Venne (@krisvenne) launched Ritholtz Wealth Management (@RitholtzWealth) with roughly $90 million in assets. Today the firm has about 30 employees and a stunning $1 billion in assets.
It started with doctors and nurses.
In 2008, when Brown was a stockbroker for now-defunct Westrock Advisors, he was hospitalized for a severe flare-up of Crohn’s disease, a chronic and often painful inflammatory disease that affects the gastrointestinal tract. There, he started blogging, inspired by Ritholtz. “It’s all accidental. I didn’t start the blog thinking, this is going to be great marketing. I was really in a bad place career-wise, and I just needed somewhere to vent. And it cost $13 to buy a domain name and start venting on WordPress, so it built an audience fast.”
Brown says he was a good broker and enjoyed working the phones, pitching ideas. But that year he concluded, “I’m not really helping people the way I wanted to in that business model. I wasn’t a miserable finance professional, however. I always tell people I do finance and I love finance, but I’m not meant to be a finance person.”
In Backstage Wall Street, published in 2012, Brown emphasizes that his beef with brokers isn’t personal, but is one of “architecture” given that “the compensation and incentives for brokers are set in diametric opposition to the best interests of the client.” Stockbrokers make money selling products. However, the investment advisers and financial advisers that work for Registered Investment Advisors are bound by the terms of the fiduciary standard, which legally requires that all decisions be made in the client’s best interest. The stockbroker’s suitability standard doesn’t rise to as high a level; it merely requires that a broker recommend trades suitable to an investor on a trade-by-trade basis.
Brown has also long railed against the financial services industry’s so-called precision myth, which leads consumers to believe that investing is a science. The fact that professionals are flawed and allow emotion to cloud their judgments is best left unsaid. Better to trumpet ads with blazing headlines boasting boffo (and likely ephemeral) results. When a fund’s performance collapses, assets flee and life support is withdrawn with nary a whisper. The fund is merged out of existence or buried with no headstone, epitaph, or eulogy; its performance is expunged from the books (but not your own).
With Brown and Ritholtz rewriting the rules of engagement, should advisers abandon the old playbook and follow in their footsteps? Or is Brown and Ritholtz’s success more the by-product of a unique set of circumstances that offers no larger lesson — and merely tells the story of how one firm broke out?
“The lawn is finally open after six weeks of rain,” says a beaming Ritholtz as he slides open the window in his corner office, gazing down appreciatively at the tangle of activity in Bryant Park. Ritholtz, a burly former lawyer who, like Brown, hails from Long Island, sits down across from me and begins an unprompted avuncular rap.
“You know, the plan was never ‘Okay, here’s what we’re going to do. We’ll blog for 20 years, and then we’ll open the floodgates and let people send us money.’ It has always been us talking about what’s right and wrong in the investment industry. Let’s give away a ton of free content and tell people, here’s how to do this yourself, and maybe one tenth of 1 percent of those people become clients.”
Though Ritholtz makes a quick and positive impression, he is the financial blogosphere’s OG, having started blogging in the ’90s on Yahoo GeoCities before Brown was of legal drinking age. In 2003, Ritholtz graduated to Typepad, then started his own website in 2008 on WordPress. Today his Big Picture blog attracts more than half a million readers per month.
The principle of reciprocity may play a role in the firm’s success. The idea, expanded on in Robert Cialdini’s groundbreaking 1984 book Influence: The Psychology of Persuasion, states that when people receive something of value, they feel obliged to return the favor. Ritholtz, Brown, and their team offer useful advice for free. Readers reciprocate by reading, following, engaging, and, most generously, becoming clients.
For a firm skilled at attracting pools of assets and talent, it’s fitting that its genesis was formed poolside at a conference in San Diego in 2010.
“We started chatting and I just couldn’t help but think, here’s a guy who’s really funny,” says Ritholtz. “I’ve seen his writings. He’s a really good writer. What is he doing on that side of the Street? He’s perfectly built for the RIA side. He took to it like a fish to water.” Weeks later, Brown joined Ritholtz’s quantitative research firm, FusionIQ. Three years on they left to launch Ritholtz Wealth Management.
Though today Brown is the firm’s most public face, others play a public role, too. “We kind of have divided and conquered the media world,” says Ritholtz. “Everybody writes and publishes on the research side,” including Batnick, Ben Carlson (@awealthofcs) and Blair duQuesnay (@BlairHduQuesnay), who writes The Belle Curve blog.
Ritholtz Wealth Management’s services include asset allocation, wealth management, corporate retirement plans, and institutional wealth management. Ritholtz, who chairs the firm’s investment committee, focuses on portfolio construction and risk management within a mostly low-cost index-based approach for clients. He also pays close attention to behavioral finance. “The role of behavior is more important than stock picking or even asset allocation. Everybody focuses on what’s optimal. But if you own the S&P 500, or any other broad index, we basically know what the long-term returns of equities are going to be.” The firm, which has a large client base among millennials and the mass affluent, leans on low-cost funds from firms including Vanguard, DFA, BlackRock, and WisdomTree for core offerings.
More broadly, RIAs look well positioned given where money is flowing. Actively managed funds continue to bleed cash to index funds, which offer minuscule expenses. Brokerage firms, which once generated massive profits executing trades, charge crumbs — if that. And even hedge funds are trimming their fat fees as they face fierce headwinds from computer-driven “quant shops” and underperformance.
In short, the moneymakers aren’t making money like they once did.
But what’s bad for Wall Street has been great for Main Street, which has never had it better. The biggest problem for many investors is not knowing how to make money (indexing is a strong default), but knowing how to manage it. This spells opportunity for advisers.
But let’s be honest: Brown and Ritholtz aren’t being profiled because of their investment acumen, which they, along with thousands of other RIAs, have.
It’s because they are unparalleled in the history of RIA marketing.
Brown’s predictions about social media have proved prescient. In Backstage Wall Street, which focuses on the customer-facing and marketing aspects of the financial industry, he writes: “It will be interesting to see how this old-school marketing machine will hold up in the realm of social media, where the interactions are meant to be spontaneous, two-way, and without pretension. No one pays any attention to phony, soulless corporate mouthpieces on the social Web.” Except when they screw up: Note the recent brouhaha over a tone-deaf JPMorgan Chase tweet urging people on a budget to “make coffee at home” and “eat the food that’s already in the fridge.”
In Backstage Wall Street, Brown spills Wall Street’s playbook and shares, in granular detail, virtually every known sales pitch used on unwitting investors. He does so with relish and out of a seemingly genuine pursuit of justice, perhaps partly as penance for having worked as a retail stockbroker for a decade. “Social media is just one more disruptive force that is every day upending the supremacy of the bulge bracket firms,” he writes. “It allows thousands of smaller competitors to build their own brands and to gnaw away at the once-mighty oaks that have ruled the industry for so long.”
And build they have. “Clients are still reading the posts and following us on Twitter. So it’s not just attracting, it’s retention,” Brown says. “We talk to a lot of younger wealthy people by nature of what we are and what we look like. They like that they can flip on a social media app and see what we’re saying. They value that because they don’t want to call, stop by, or have a meeting scheduled.” Brown emphasizes that if the stock market is tanking and a client’s adviser isn’t blogging or tweeting, the client won’t know what the adviser is thinking — let alone if the adviser is even aware of the news.
The company’s media blitz serves a larger purpose beyond creating free publicity to draw in clients.
“My favorite part about the firm is that everyone that works here came as a fan of what we’re saying,” says Brown. “We’ve never had a recruiter, never had a headhunter, and never ran ads for advisers. I have 30 people here, and I think 22 of them are client-facing.” Brown says those who joined were financial advisers who had been sending his material to clients. Then one day they’d call and say, ‘Why don’t I just work with you?’ And so we accidentally grew the firm from reverse inquiry.”
Brown believes that ideas should be vetted publicly and is dismissive of the prestige automatically conferred on people by dint of the company names on their business cards. He once wrote, “I don’t think I would ever invest money with someone who isn’t on Twitter.” Brown acknowledges that it “sounds ridiculous,” then explains: “If you’re just a nameless, faceless person at UBS or wherever, nobody really knows what you think. You’re living on the brand. And no one does the brand anymore. People follow people.” Brown asserts that that’s why Kim Kardashian has far more Twitter followers than the E! channel she appears on. “Nobody cares about the E! channel. They care about her. That’s happening in finance.”
Ritholtz recommends that advisers play to their strengths and specialize. “Find a way to be seen by potential clients that also helps you build your expertise and business,” he says. “For me that’s been writing. Find something that works for you. I’m always impressed when advisers describe how they carved out a specialized niche.”
But Brown insists advisers are getting social media spectacularly wrong in many senses — a charge he also levies against his past self.
“Every adviser is playing a global game when in reality they have a regional or local business. They’re trying to build YouTube channels and Twitter presences and they’re trying to get a million followers.” He considers those efforts a massive waste of time and energy. “It’s so counterproductive. They’ll never get scale. I have ten people, they’re by themselves doing this!” The words are flying fast from Brown’s mouth as he punctuates each point with rising conviction.
“If you’re a financial adviser, what the fuck are you doing if you’re in Davenport, Iowa, getting people in Hawaii to read what you’re writing? Name your blog after your town; talk about local restaurants.” Brown says he has made this point repeatedly, to no avail.
The firm gains new clients almost always owing to a major personal event — be it divorce, death, or retirement, notes Brown. “If you want to be found when those things happen to people in your area, you should be on LinkedIn and Facebook ten times as much as you’re on Twitter.” Brown says the advisers who use Twitter best are “comparing notes and sharing in-jokes” with other advisers. “I don’t think most advisers think they’re going to get a hundred clients off Twitter — because they will not.”
Though he is full of advice for others, has Brown himself misstepped?
“When I first got a following, I was very cavalier about my power,” says Brown. “Some people involved in the financial crisis were just peripheral to it, but The Wall Street Journal and The New York Times were writing articles every five minutes pointing fingers about who’s at fault.” Brown says he felt emboldened then to lash out as “hatred around finance” was ubiquitous. After reading about one particular person, “I exploded it into this rant about him personally.”
Guilt built.
“Years later I actually wrote a letter to him. I apologized and deleted it, not just because I was embarrassed at my younger self, but because I never wanted somebody to search Google and find that shit that I said about him and think that it’s fair. I didn’t get a response and I said, ‘Don’t give me a response. Don’t accept my apology. You don’t owe me that. I just want you to know how bad I feel about myself.’”
There remains a fundamental tension between how advisers feel they should act toward clients — serious, confident, and professional — and how they perhaps should act: professional, but willing to honestly discuss mistakes and show vulnerability.
Yet given social media’s ascendancy and Brown’s impact, should every adviser aim for authenticity and transparency? And what of the accomplished adviser who eschews social media because he thinks “the need to be part of the conversation” is just as disingenuous as the country club chatter, fake laughs, and phony back slaps?
Brown is undecided. “Not everyone has to be the car wash blimp, waving his arms around,” he says.
