If consistent growth of asset basis and the proven ability to guide clients through the ups and downs of a volatile stock market are indications of a strong business with staying power, Moneywise will be playing a leading role in the management of Kern County residents’ wealth for years to come.
The Moneywise Guys (and some gals, too), David Anderson, Sherod Waite, Paul Anderson, Garro Ellis, Kris Pelster, Justin Leland, Dessie Wright, Candice Alfaro, Michelle Burrow, and Lynette Sweeney represent the success story of “the little brokerage firm that could,” having achieved a steady growth pattern after a less than stellar beginning in 1998. It was touch and go during those first years, but there were many small moments of joy that gave them the confidence to keep moving forward.
“We were so excited when we made our first big purchase,” Waite mused, reminiscing back on the early days. “It was an all-in-one copier, fax machine, scanner, and we were so proud of it!”
A lot of sweat equity went into this first “big” purchase, but the sweat Moneywise put into financing this purchase came not in the form of a fresh paint job or a remodeled kitchen, it came from sweating bullets over whether or not they would be able to keep the lights on.
“We took some huge risks when we first started, not just in terms of the risks that every new businesses start-up faces—capital investment—but in terms of not having any idea when we would start to turn a profit,” Waite pointed out.
And the biggest question mark at the end of the sentence, “When can we start drawing a salary,” stemmed from the fact that right from the get-go, the Moneywise brokerage business model was unique.
“We decided to adopt a fee-based service model rather than a commission-based model because we noticed that the firms operating in Kern County used two basic approaches: (1) a one person shop where the advisor was forced to be an expert in all areas of finance or (2) a corporate structure, full of conflicts of interest, that seemed to discourage objectivity and independence, which forced the advisor to lose his objectivity. When an advisor can’t be objective, he’s likely to advise clients based on what was best for the corporation and not the unique needs of the client. We decided to do things differently by instituting a fee-based model because this approach puts us on the same side of the table as our clients. If they lose money, we lose money.”
This was a relatively new idea to Bakersfield, which meant the Moneywise partners had an opportunity to get in on the ground floor of something truly unique. It also meant risks. Big risks.
“The major downside of starting this kind of business was not getting paid much, or anything, up front. Those first years were pretty tight.”
But, after all, they had their all-in-one machine, and a very reasonably priced office space ($600 per month) in downtown Bakersfield. Success was within reach.
Adhering to a “slow and steady wins the race” mentality (just like the one they advise their clients to adopt), and the Moneywise principles of being guided by a set of values that places client needs first, that two man business in its $600-a-month office, with an all-in-one machine, has grown into a 12-person enterprise in a spacious building serving over 2,000 clients.
Besides their willingness to take things slow and easy, and let their clients be their guide, a component of the Moneywise success story is the “Moneywise Guys” radio show that began in 2003 and can still be heard on KERN RADIO 1180 weekdays from 10 a.m. to 12 p.m. Waite is a co-host of the show (“Something I never imagined I would be doing”), and the purpose of the show is to keep the firm current on financial news and accountable to not only their clients but to the larger community.
“I enjoy the interaction with callers,” Waite said. “I enjoy giving information on what’s new and current, whether it’s financial reform or upcoming legislation or new planning techniques or investment strategies.”
The show gives Moneywise a unique opportunity to communicate with their clients and let give them solid advice from Moneywise advisors who are up-to-date on what’s going on in the financial world on any given day. “They want to know what we think, and because we’re talking about their financial stability, many of our clients want their hand held as they go through the ups and downs of today’s financial reality.”
Waite doesn’t mind this hand-holding. In fact, he says holding the hands of the clients is one of the most rewarding parts of his job.
“As almost any financial advisor will tell you, there’s nothing more satisfying than watching a client’s face when he realizes that his dream of retirement can become a reality. When I sit down with someone who’s been afraid to even think about retiring and show them that they have enough to retire on very comfortably, many of them break down. They just needed someone to give them the confidence it takes to make the move towards retirement, and the joy on their face is always gratifying to watch.”
Along with joy comes unhappiness, and Waite dreads the days he has to break the bad news that retirement is still a ways away.
“It’s very painful to see a client who’s been working so hard for so long be in a position when he can’t retire because he just doesn’t have the financial capability of supporting himself without a steady income. It breaks my heart, especially when the person really should retire for health reasons. But the reality is that they’ve probably been living from paycheck to paycheck and just haven’t been able to put enough away for retirement.”
Many of these sad stories are the result of what happened on December 30, 2008, when the Case-Shiller home price index reported its largest price drop in its history. The housing market, which had been on the incline, burst, triggering what the U.S. Secretary of the Treasury called “the most significant risk to our economy.” And Kern County was hit pretty hard.
“People forgot the fundamentals of investing in 2005, 2006, and started using their homes as ATM machines. A huge number of people lost their homes and saw their net worth evaporate overnight,” Waite explained, adding that this is a good example of why people need to educate themselves about what is happening in the financial world.
“We work hard to educate our clients on the Moneywise principles of diversification and allocation of assets. Educating individuals on the vast world of financial services and products has been the cornerstone of our business since we opened our doors.”
The main thing people need to know, according to Waite, is that investing should be boring. “Many investors get caught in the emotional spin cycle of investing and continue to pull in and out of the market, abandoning their long-term goals. I’m afraid that people are forgetting about what happened in 2008, and will start doing weird things with their money again. I don’t know when the next bubble is going to burst, but I know it will because it happens about every five years. We’ve been really stressing to our clients that the slow and steady investments are what’s going to win the race, and getting into ‘get rich quick’ investments will almost always eat away their assets instead of adding to them. Your portfolio could grow nowhere…fast. In volatile market environments, investors can be tempted to make abrupt decisions.”
Slow and steady isn’t just an axiom the Moneywise Guys use when talking with their clients about growing their assets, it’s a big part of the Moneywise business plan.
“Growth is a real challenge to any business, and we are no exception. We definitely don’t plan to ‘rest on our laurels’ and just keep things on cruise control, but we have no intention of merging with a big firm or moving outside of Kern County. Just like any other business, if we don’t grow as needed, we risk shrinking away. So we do have a growth plan, but we’re not in any hurry to grow and we want to keep things modest.”
Another thing Moneywise is doing to stay solid and healthy is keeping an eye on what’s happening in the techno world of investing. “One of the biggest challenges we face moving forward is keeping up with all the technological changes. Things move pretty fast, and we have to evolve and be proactive when new technology comes on the scene. Also, every aspect of the economy is under a microscope and we have to stay on top of what’s going on. These trends and changes in technology mean that we have to come up with new strategies because our clients are literally betting on the fact that we’re on top of things.”
Trends come and go, and the only constant in the investment business is its fluidity, but Waite is confident that Moneywise has what it takes to adapt with each change that comes down the road. “The one thing we won’t change, however, is our commitment to our clients and values. Our values brought our company to where it is today, and will guide us tomorrow.”
Photos by Gregory Cook