We’re going to change it up a bit this month, but I’ve been thinking for a bit about where we’ve been and where we’re going as a firm, so here we go.
For those of you who don’t know me, my name is Adam Weingartner and I am co-owner of Second Level Capital along with my business partner, Brad Webb. 18 years ago, I graduated from Truman State University and immediately got a job at a local bank. At the ripe old age of 22, I vividly remember sitting at my desk at 4:45 counting the seconds until the day ended, wondering why I decided to go to college to help people open Christmas Club savings accounts.
Knowing this was unsustainable, I interviewed at a small brokerage company in Clayton, which focused on tax-advantaged alternative investments in real estate and energy outside of the traditional stock and bond world. I was only asked one question during my interview. “Why do you want a job here, if you already have a job?” I replied, “I’m bored.” My future boss replied, “Well, I can promise you will never be bored here,” and in November of 2006, I started my career in the personal finance business.
He was right. The ensuing years during the Great Financial Crisis was a baptism-by-fire education in which I learned more each week than I did during my four years of college. Regardless of what anyone says, every advisor is a by-product of the market in which they grew up. Gen X advisors today will be wary of another tech bubble. Older advisors will see the ghost of 1987 around every corner. The pain of clients during this period has been burned into my brain and has directly led to doing all we can to avoid those situations again. It is still the primary objective of our business today. Risk first.
At first, I loved the idea of doing something different. I couldn’t acquire knowledge fast enough. It was intellectually stimulating for me and seductive for clients who wanted to be involved in the ground floor of new and exciting ventures filled with profitable possibilities. For the first six years of my career, I read hundreds of books, went to dozens of conferences, spoke on panels next to billion dollar institutional money managers and reviewed more investment projects than I can remember. It felt like I was playing in the right sandbox, rubbing elbows with TV personalities and colleagues I respected immensely.
In 2012, as the stock market was approaching the all-time highs last seen in 2007, it was clear to me that the traditional stock and bond world would survive, the financial system wasn’t going to completely collapse, and the US was entering a longer period of sustained growth. As the original intent of the brokerage company for which I worked was to be a complement to high-net worth investors traditional portfolios, I hatched an idea to develop a new division of the company that focused on our deepening our existing relationships by offering traditional investment advice along with our suite of alternative options.
The most surprising aspect of those first years running a traditional money management business was how much pride I took in knowing as much as I could about each family we served. Learning communication styles. Knowing when to ask for advice, but also which parts of the plan were non-negotiable. It’s still my favorite part of the business, and it’s why we’ve deliberately turned down business to stay small and nimble. Sometimes it makes me think of the mission statement from the movie Jerry Maguire. Fewer Clients, Less Money.
For most of the next six years, I ran this division of the company on my own. My bet that the stock market would be a great place turned out to be prescient. From the start of 2012 until we left the firm in 2018, the S&P 500 returned 120% (not including dividends), while the publicly-traded real estate index returned 40% over that same time frame. Couple this with the decreasing costs of owning stocks (commissions went to zero), and the stagnant nature of commissions on the brokerage side (around 10%, up-front), it felt like the old model was already under so much regulatory and price pressure that even if it survived, it would be a shell of what it once was. Real estate firms were already redesigning products for fee-based accounts, and in the middle of 2018 it just felt like it was the right time to make the jump with both feet.
While we were certainly having second thoughts after having taken significant pay cuts to spin-off our own venture and seeing the stock market fall 20% in the fourth quarter of 2018, it’s the best decision we’ve ever made. Every choice we make today is designed to grow our business intelligently, optimize our time for those of you who have entrusted us with your financial livelihood and design portfolios that will work for you both financially and behaviorally.
If you’re someone who’s been procrastinating getting started, you’re someone who’s financial advisor only calls to remind you to contribute more money once a year, or you’re an existing client who knows someone who could use some help, we’d love it if you gave us an opportunity to see if we might be a fit.
Thank You,
Adam