A little over ten years ago, June 5th 2007, I was sitting in a Best Buy parking lot having a final conversation with the head of Investments at the regional bank acquiring UFB, my employer the prior three years. I had just purchased three laptops and a printer. Earlier that day I signed a lease for office space in Broad Ripple. Brad Owens, my college roommate and longtime colleague, along with Bernadette Davidson, whom I’d worked with for ten years, had also planned on resigning. Although I had filed Articles of Incorporation two weeks prior, in my mind, LJI Wealth Management was born that day.
I was leaving a team of people and friends I truly enjoyed working with. We had spent the prior 16 months or so working thru two difficult bank mergers. I had been offered a management position at the acquiring bank, had two kids under eight years old, and we hadn’t yet told anyone we were expecting a 3rd in December. Things were good.
Backing up a bit to 2004, the primary reason I landed at Union Federal Bank after the Bank One/Chase merger, aside from the quality of the management team, was the opportunity to introduce Dimensional Fund Advisors (DFA) to my growing client base. At the time DFA was a bit of a boutique firm as they were the 38th largest mutual fund company in the US (now Top 8). No one had ever heard of them. DFA was the pioneer of ‘passive investing’ – now commonly referred to as ‘indexing’. Simplistically, indexing is a method of investing whereby you diversify across the entire stock market, don’t waste money trying to guess the direction of the markets or which stocks to own, keep costs very low, pay little in taxes and generally let the power of capitalism do what it has always done. Their track record has been phenomenal. And DFA was the one firm on the planet that ‘approved’ their advisors. In other words, they allowed only a small number of financial advisors access to their funds, for the right reasons.
Fast forward from 2004 thru the eighth inning of that second merger in May of 2007. It became very clear to me I may lose the ability to utilize DFA in client portfolios. In my mind, there is a right way and a wrong way to invest. DFA was, is, and always will be the right way. A philosophy rooted in decades of evidence and proven research isn’t a fad. As fiduciaries, Brad and I were required by law to ‘put our client’s best interests ahead of our own’. That felt very natural and it made zero sense to go backwards on behalf of our clients. We had just begun studying to attain Certified Financial Planner status and accordingly we were bound by the fiduciary standard from that standpoint as well. It was time start LJI.
Many of our friends, family, colleagues, and clients suggested we had lost our minds. The move seemed very risky, but we didn’t feel we had a choice (to stay). Again, going backwards and compromising our values and beliefs wasn’t an option. Fortunately for us, the bulk of our client base followed us to LJI. For their trust and confidence, we are eternally grateful.
What we never considered in the summer of 2007 was perhaps the world may fall apart over the next 21 months or so – at least financially-speaking. Roughly 12 people on the planet ‘knew’ of the debacle on the horizon (well documented in ‘The Big Short’ by Michael Lewis). The stock market topped in October of 2007 and proceeded to fall by over 50% for only the third time since the Great Depression. Our financial system almost stopped working. Most now refer to that period as ‘The Downturn’, or the ‘Great Recession’. There were some very dark days from Sept of 2008 thru May 2009 as life as we knew it was at risk. Fear had taken over in the financial markets and greed was literally non-existent.
Although many, many clients reached out and tried to make sense of the madness in ‘08/’09, questioning whether we should sell everything and go to cash, we didn’t advise one client to do that. There is an old John Prine song and the chorus is ‘Blow up your TV, throw away your paper, go to the country, build you a home…’. That was our message: stop watching CNBC, turn off the news, remember what matters…grandkids, being healthy, smiling, etc. We were scared too but unwinding a long-term financial plan because of a few bad years is never the right thing to do. It never will be. It’s also worth noting that CNBC hired the producer of the Jerry Springer show in 2009 to keep people glued to the madness. The financial news media is not our friend. They do not exist to help. And they most certainly are not fiduciaries.
I often tell clients ‘investing is easy – it’s our emotions that are tough’. Fear is a much, much stronger emotion than greed. Frankly, the most important role we have at LJI is to keep our clients greedy when they are fearful and vice-versa. Emotions control the markets (at extremes)…our job is to stay objective and keep you on your path to wealth.
For the record, we did lose a few battles during the downturn. Five clients chose to sell everything and convert to cash. That is very understandable. The 4th quarter of 2008 was the worst performing quarter in the history of the US Stock Market. January of 2009 was the worst performance for that month in history, as was February. Again, dark times. Those five clients sold near the market bottom. Then, as the market recovered viciously, per human nature, they didn’t blame themselves – they blamed us. That’s OK. Three left LJI and the other two are still with us. At the time, we were helping roughly 100 households. I am beyond thankful every day for each client that kept the faith, however difficult, during that period.
Over these last 10 years, we’ve managed to grow our tiny firm from three to nine team members. My brother Josh joined us in January of 2009. He primarily manages our mortgage division. (More importantly Josh & his wife, Meredith, blessed our family with my lovely niece, Layla, 8 months ago) Brad left for Schwab in July of 2009, for the right reasons. I trust him with my life and, at the time, we agreed to get him back to LJI asap. He rejoined our team early in 2012 and runs compliance & our insurance division, among other duties. Around here we call his Schwab period his ‘Lost Weekend’ (re: John Lennon). Aaron Morrow joined us from Raymond James in October of 2009, on a recommendation from two of my best friends. Mike Nichter came our way in December of 2009 and is a mortgage officer. I’ve known Mike for 37 years and he turned 40 this year (so will Josh). Jonathan Russell was a client of ours and he joined LJI in August of 2012 after surviving multiple bank mergers. Dan Lucas and I worked together at UFB and he came our way in May of 2014. In early 2015, Bruce Hubbell joined our team. Aaron, Jonathan, Dan, and Bruce are wealth managers. I’ve known these eight, great people for a collective 160+ years and feel fortunate to work with them every day.
We never set out to take over the world nor do we plan to. We want to work with those clients who want our help. We believe the term ‘wealth’ has many different meanings. Every person is on a slightly different path to attaining wealth. It’s our job to help define that path and stay committed to it. Fear, greed, and media noise are arguably our largest obstacles – that will never change.
At LJI we are extremely firm in our convictions. We’re not perfect and never will be, but we continue to get better. We continue to work hard and expand our services. I could not be prouder of our team, our ethics, our client first approach and our collective efforts to be fiduciaries all day every day. There’s a right way to invest and build a financial plan. Decades of evidence proves this to be so. Our team and our firm act accordingly.
I’ve been fortunate to experience a lot in 23+ yrs. During that first year, my Grandma told me I got into the industry at the worst time ever. The Federal Reserve raised rates seven times that year and it was the worst year in the history of the US bond market. Over the next five years the US Stock market had the best 5-year run ever. The Y2k/Tech Wreck followed and the S&P500 fell by over 50%. The Nasdaq lost over 80% during the same period. We then recovered only to have the largest real estate collapse in history a few years later. Our banking system almost failed as we had another 50%+ bear market from 2007-09. On the heels of 2009, against all odds, we’ve had one of the longest uninterrupted recoveries ever.
It’s been a bit of a wild ride. No one could have predicted all that has transpired over the last 23 years nor does anyone have a crystal ball to predict the next 23 years. That said, what is perhaps most surprising to me has been something that came to fruition just in the last few weeks or so. Maybe you have read about the new ‘DOL rule’? To summarize, over the last several years, there’s been a movement in our industry forcing advisors to essentially ‘do the right thing’. On June 10th, The Department of Labor, despite a well-funded multi-year Wall Street lobbying effort against it, recently passed the new ‘Fiduciary Rule’. This rule essentially requires any broker/adviser/etc. who handles retirement assets on behalf of a client to act as a fiduciary. This has caused incredible consternation all over Wall Street, at banks, insurance firms, mutual fund families, etc. The days of large commissions and hidden fees are quickly disappearing at those types of institutions. This is very good for investors and extremely sad for the 85% of advisers who clearly haven’t acted in their clients’ best interest for decades.
For our team at LJI, the new DOL rule has zero effect on the way we conduct our business – for over 10 years, we have been putting your interests ahead of our own.
I saw a tweet late last month that said: ”If your financial adviser uses the DOL rule as an excuse to change your account – RUN!!”. That is excellent advice. Again, there’s a right way to do things and a wrong way. There isn’t a new way.
As we begin our 11th year I’d like to thank my wife for believing in our mission ten years ago and every day since. I’d also like to thank our clients, old and new. We are proud of why we started the firm, the value we bring daily, our team, and our future. We’re passionate about our role as fiduciaries and are excited to continue helping clients reach financial peace of mind for decades to come.
We sincerely thank you for the opportunity and look forward to what the future holds. Thank you,
Layton L. John, Founder
LJI Wealth Management
6569 Carrollton Avenue
Indianapolis, IN 46220
Email: [email protected]
Toll Free: 888.466.9702 • p: 317.466.9702 • f: 317.466.9706