I want to tell you about a big idea I have…

Next weekend the cream of the crop within the financial advisory space will be touching down in Huntington Beach, California for the third annual Future Proof Festival and this year will be our biggest event yet. In year one, we had 1,700 professionals show up. Last year we were at about 2,400. According to the latest tally, we’re at around 4,000 people coming this year. The footprint of the beachside space will grow by around 30% and there are three large stages being erected right now, as we speak.

The crowd will be comprised of representatives from the most successful, vibrant and forward-thinking RIAs in America as well as all of the technology providers who serve them and their clients. It’s the industry’s biggest independent event and the energy level should be off the charts. Epic doesn’t even begin to describe my expectations for this thing. If you’ve been there, then you understand what’s coming with a crowd more than twice as large as the first iteration. And if you’re on your way out for the first time, all I can say is buckle up.

Last week over 140,000 meeting requests were sent out through the app. The amount of one-on-ones taking place in the Breakthru area will trump any networking experience ever created within the industry. My partner Matt Middleton and his team have absolutely outdone themselves.

The cool thing is that everyone is there for the same reason - to become a better advisor for their clients and a better business owner for their employees. There is no other agenda. We are the future of the wealth management industry and at Future Proof we all get to learn from each other. We’ll be among investment advisors from coast to coast and, indeed, all over the world.

I wanted to take a little time today to tell you about my vision for Ritholtz Wealth Management as we soar into our second decade of existence as one of the fastest organic growth stories in the business. This is the big idea I will be discussing while I’m out at the festival and, in my opinion, it is the right way forward for firms who want to succeed in the 2020’s.

The Vision

I’m from a middle class background and so are my founding partners Barry, Kris and Michael. I always hated the idea that financial planning and wealth management services should only be available to people with a million dollars of investable assets. In the early going, we were forced to tell people with $100,000 that we weren’t a good solution for their situation. It felt horrible and never sat right with me. “Call Fidelity, and good luck,” was a shitty way to decline someone who had come to us as a fan of our written work or television appearances. But it was essential when our resources were limited and the tools at our disposal weren’t adaptable.

We began the firm with a million-dollar minimum at first but as the technology has improved we’ve been able to broaden our focus and devote resources to investors from all walks of life and at all different stages. It’s the thing I am most excited about. Today, we serve billionaires as well as people putting their first $5,000 to work and everyone in between. We’ve been able to do this through segmentation, creating service tiers to make sure we’re offering the right value to all different kinds of people. As it currently stands, there is no one we can’t help. The technology has come a long way and so has our ability to staff up to meet this challenge.

And what we’re finding is that the tiering system we’ve created has become the lifeblood of our future growth. We’ve learned a lot about what it takes to do high quality wealth management work up and down the scale. The configuration of these tiers has enabled us to give each grouping of clients exactly what they need, in full accordance with what we call The Ritholtz Way.

Eleven

This week marks our eleventh year in business. I’ve been keeping you all apprised of our progress since we founded Ritholtz Wealth Management in September 2013 so a little updating is in order. The internal data I use here is as of 7/26/2024 unless specified otherwise.

We’ve grown the firm from January 2020 through this summer from $1.3 billion to over $5 billion with every one of the below segments contributing. We serve close to 4,000 households and our mission for every one of them is the complete and total achievement of their respective goals. We set these out through an individual investment policy statement (IPS) which is the guiding document that determines what we’re trying to do and how we’re going to do it. If you don’t start with an investment policy statement, it’s hard to make decisions. It’s even harder to gauge whether or not what you’re doing is successful while you’re in flight. This should be obvious, but you’d be amazed at what goes on out there and what passes for “advice” these days.

Now, of course, when you grow your firm’s households and assets under management at this rate, you need to grow your employee headcount so that you can keep your promises. There’s nothing worse than expending all this time, effort and energy to bring on new clients and then have them be disappointed with the level of attention they’re getting when they come aboard. Staffing a growing firm with quality people and subject matter experts has been among our biggest challenges. Anyone building an RIA who says otherwise either isn’t trying hard enough or is outright lying. It’s always going to be one of the toughest aspects of what we’re doing. We’re not willing to compromise on hires given how personal this business is. When the wrong people get in the door, it’s really hard to fix it after the fact.

Through the first half of this year, assets under management have grown by roughly $750 million. When we look at the breakdown of where this asset growth has come from, it turns out that RWM clients have received approximately $46 million in dividends - one of my favorite stats. Another of my faves - approximately $97 million has come from existing clients adding more capital to their own portfolio, whether through bonuses, business and real estate sales or inheritances. In this business, your best customer is your longest term customer, and you’d better remember that!

This is a brief overview of how we’ve segmented our client service tiers and why.

Ritholtz Grand: $1 million to $7 million

Ritholtz Grand is our flagship wealth management tier and the service we began the firm with. It’s households who have entrusted us with between $1 million and $7 million. When a potential client comes to us for our help within this tier, we outline an engagement that includes four separate conversations in order for us to build a plan and a corresponding portfolio recommendation based on this plan. It’s painstaking work on our end but from the client experience side is more akin to a journey of discovery. My Certified Financial Planners are going to tell them things they never knew about their own financial situation and help them uncover their true priorities in a way they’ve never experienced before. It’s a lot of work to do on behalf of someone who hasn’t yet committed to becoming a client, but it’s the only way to do it right. We’re very confident that the people who should become clients will become clients, so all of this work up front is a risk we’re willing to take. Starting this process with prospective clients who already feel as though they’re a part of what we’re about is the thing that makes this possible. You couldn’t do this cold.

What I’m showing you below is our own internal data depicting the average onboard size of a new client household. As you can see, it gets skewed upward from time to time as a result of some extremely large cases, but we’re somewhere between $2 and $4 million most of the time over the last few years. The majority of these onboards are coming into the Ritholtz Grand tier.

It’s important to point out that there are a lot of people who make it possible to onboard the amount of clients we’re talking about here. Too many to mention individually, but I want to call out the fact that our trading team - led by Dylan Kluender and Alex Messer, are allocating and rebalancing all day, every day, to keep up with a dizzying array of assigned tasks, client cash requests and inbound wires. We’re a high volume shop but the expectation of precision must be met. Trading rarely gets the spotlight in RIA Land, only when something goes wrong. Getting a million things right around the clock is more than just a skill, it’s a calling.

The Preserve: $7 million to $25 million

The Preserve is comprised of our client households with between $7 million and $25 million and is overseen by our in-house rock star Blair duQuesnay and our most senior client service expert Erika Mauro. Blair joined us in 2018 and quickly saw that there were many aspects of wealth management that were essential to the $7 to $25 million household that were not relevant to households at lower asset levels. She set about building these services into a specialized tier that has since become one of the fastest growing areas of our practice. There are tax reviews by the RWM Tax team and insurance consultations led by the amazing Jonathan Novy and Brian Rosen of RWM Insurance Services included in this tier.

Each of these teams is fully staffed to spring into action during the onboarding process to make sure we have a full-blown holistic view of every family and its particular situation. Our RWM Tax group is getting a headquarters of its own in Philadelphia later this year while the RWM Insurance Services people are going to serve as the nucleus within our brand new “Second HQ” now under construction in the Goose Island section of Chicago. Building physical office space in the post-pandemic period is an important signifier of how serious a company is about committing to its customers, as I said here earlier this summer. We’re extremely serious, as you’ll see when we cut the ribbons this winter.

When we launched the firm, we weren’t talking with a lot of potential investors in The Preserve category. We hadn’t built the capability to be ready to handle a lot of them because it didn’t seem like they’d be coming. Well, ready or not:

Just after our fifth anniversary we hit an inflection point and they began to arrive in force. We had no choice but to get ready and execute. I think a lot of people who were considering working with us wanted to wait and see, perhaps give us some time to level up. Not many $10 million and up households want to be the largest client of an RIA or want to go first.

Ritholtz Multi-Family Office: $25 million +

Ritholtz Multi-Family Office is the highest service tier and reserved for households above $25 million. All of our Certified Financial Planners are equipped to work with households at this level once they master the increased complexity of these cases. The Multi-Family Office tier is overseen by Taylor Hollis (Director of Family Office Services), Patrick Haley (Senior Portfolio Manager) and Cameron Rufus (financial advisor) in addition to the dedicated CFP whose client we are working for. It’s an ensemble approach in the truest sense of the word, with Ben Carlson in the mix on investing decisions and Ritholtz Tax lead advisor Bill Artzerounian involved in every facet of the engagement.

Donor-advised funds and philanthropic foundation work, asset-backed lending, multi-generational education, trust and estate work - these are aspects of family office we’re addressing for the highest tier of clients every day. As our capacity in these areas grows, you’ll be hearing me talk a lot more about it. It’s a really exciting area of growth for us.

I’m biased, of course, but I would put our family office team up against anything else that exists in the industry for the ultra-high net worth client without the slightest hesitation. I tell the prospects who come to us at this level of wealth that they have no idea how lucky they are. I truly believe that.

Liftoff: Zero to $250,000

Liftoff is our entry level tier and it’s something that is really hitting its stride right now. In this segment, we work with investors who have under $250,000 in investable assets. Helping people with smaller portfolios is something I have always been passionate about and it’s an area that many firms in our industry don’t bother with. To serve small (but growing) accounts, you must have cutting edge technology and the willingness to spend time with people who aren’t paying you a lot. There has to be a big picture in mind wherein your smallest clients could someday join the ranks of your larger clients if they’re given plenty of sunlight and water from the opening stages of the relationship. It’s a game of patience and commitment. We treat young people and the less affluent as though they’re future superstars and it’s starting to yield great results. With Liftoff, there is no minimum to become a Ritholtz Wealth Management client.

As of the full year ending July 2024, this segment has grown by $12.5 million to almost $60 million in total assets. Existing clients added $7.8 million of that with 18 separate households adding over $100,000 each to their accounts with us. Liftoff has 520 existing clients with approximately 85% of them currently keeping below $50,000. Our focus this year is to encourage these investors to contribute more of their savings to their Liftoff portfolios so that the magic of compounding brings them closer to mass affluent status. Staffing this tier with Certified Financial Planners who are ready to answer questions and educate has been one of the things we’ve become most proud of.

Good Advice: $250,000 to $1,000,000

Good Advice is our newest service tier and something we’re putting a lot of resources into right now. For years (decades?), individual investors with somewhere between $250,000 and $1,000,000 have been faced with a stark set of choices when it came to having their assets managed:

1. Work with an independent broker-dealer representative whose primary goal was to sell mutual funds.

2. Go it alone on a discount brokerage platform or (these days) a robo-advisor.

3. Turn over your investable assets to an insurance broker (brother-in-law, old college roommate or nephew) selling annuities and asset management along with the life policy you first started talking about.

The wirehouse advisors weren’t being compensated to deal with people below $1 million in assets so the clients were referred to a call center. Most RIAs were more focused on the million dollar and up client due to capacity constraints, which is understandable in a world of mom-and-pop advisory shops operating out of storefronts or home offices above a garage. There were younger, less experienced financial planners coming out of school with a willingness to take on middle class households, but working with a solo practitioner in his or her twenties and early thirties doesn’t always appeal to every client.

Good Advice is our solution to this vacuum and it came about incidentally when we were offered the opportunity to acquire BlackRock’s retail robo-advice business, a deal we closed last summer. The concept is that we can condense the onboarding and planning process into a two-meeting experience and use digital tools to do a lot of the heavy back-office lifting. Combining a modern user interface with customized portfolio and planning advice from our live, very human CFPs was a huge unlock for us. Now we don’t have to tell anyone to “call us in a few years” when they’re ready for full wealth management. We’re ready now and completely dedicated to this tier of clients.

We brought on Patrick Schwendeman from the great state of Kentucky specifically for the newly created role of Operations Advisor to make sure every client within this tier got the attention they deserved. He’s crushing it for these folks.

We also brought on Callie Cox this year as our Chief Market Strategist and one of the first things we asked her to take a look at is the communication and attention we’re giving to the Good Advice clients on a regular basis. She jumped on it like a live grenade. Good Advice represents over a thousand client households and approximately $415 million worth of assets. We estimate that, at any given time, there are between 20 and 40 on-boardings taking place.

Some of my favorite stories I hear from my advisors is when a Good Advice client is ready to make the jump up into the next tier. I want to see a lot more of these “graduations” in the coming months and years and I suspect we will. This will solidify whether or not the bet we’ve made on smaller accounts is a winning one more than any other metric.

Away from the stats

We have a slack channel called #Random and it started off as a way for employees to communicate non-essential things amongst each other. It quickly turned into a bulletin board laden with inbound signs and tokens of appreciation from the people we work for.

Last week a couple we work for sent us a picture from the summit of Mount Kilimanjaro. The week before it was a client’s grandchild wearing the official We ❤️ Small Caps onesies that all of our households get when the babies are born.

There are pictures of vacations and boats and pickup trucks and college graduations and birthdays coming in all the time. Unsolicited. People want us to know that the work we’re doing is having a significant impact in their lives and it’s enough to make me want to cry. Even when the news we’re receiving is not so good. Hospital stays and hospice visits, layoffs and divorces, accidents and regrets. It’s in those moments where the poignancy of what we do especially hits home.

I love the numbers but the stories are better. To think that we’re enabling the highlights of people’s lives to the degree that we are is truly inspiring. When I see that stuff it trumps all the tables and charts and reminds me of the power of great people giving indispensable advice.

I could do this for the rest of my life and probably will.

So that’s my big idea. Everyone deserves high quality financial advice. Everyone. Regardless of where they are today and where they want to be tomorrow.

Have you told us your story yet? We want to hear it. Talk to us now.