“You have to look at your return … but in a total return portfolio versus a yield portfolio,” Jones says. “So trying to live off a laddered bond portfolio and not touching the principal is just not realistic. So what we do is we look at what the total return is of the portfolio—whether it’s capital preservation, a dividend or a yield from a bond—and we’re going to use any one of those or all of those to help fund the client’s paycheck, depending on which asset class is performing above its kind of historical mean return.
“So if the mean return of the stock market is roughly 10%, and we’re getting, say, 13% to 14% over the last year or two, we’re going to live off more capital appreciation than we are yield. And then vice versa—the market is down and bonds have gone up and we’re still getting the yields on bonds; then we’ll harvest capital appreciation from the bonds and take the yield and fund the paycheck from that asset class. So I think that people that are planning on investing people’s money based on traditional yield portfolios to fund the paycheck, I just don’t think that works. Either that or people are going to live off a fraction of what they really could live off of.” A 10-year preservation account is part of that strategy. Then there is a core asset holding and diversification holdings as well.
Mind And Mindfulness
The firm takes the touchy-feely stuff seriously, and has programs based around concepts such as “mindfulness” (present moment awareness) and “EQ” (emotional intelligence). People’s awareness of their own feelings and their dealings with others are just as important as taxes, Jones says, and helps the firm talk with people about their life goals and happiness. Meditation, concentration exercises, even Sudoku—these are all mindfulness exercises that Jones says require a different part of the brain.
“We’re not forcing people to meditate,” Jones says, “but forcing people to at least understand what mindfulness is and what emotional intelligence is and what the benefits are.”
That’s important for staff if they want to have better client and colleague interactions, too.
Happy Staff, Career Path
The firm has even brought its “meta” approach to its own staff. The firm boasts a “chief fun officer” for extra-curricular activities, peer recognition programs and a philanthropy committee that brings in local charities. The culture of emotional honesty can make training sessions at Brighton Jones different. It’s not uncommon for tears to be shed in staff meetings (even by principals) as people tell stories about clients in trouble or dealing with death, says Brighton.
But fun aside, the emotional intelligence part of management is about something much more serious: growing advisors right on the tree.
Cory Custer, director of learning and development, came on board in 2015, charged with helping employees with career development—he and colleague Liv Freeby provide a sort of client service team to the staff. Custer, a broker-dealer vet and professional career coacher, says employees at big companies often hit a plateau, even if they are ambitious. He was brought on because Brighton Jones wants to help short-circuit that malaise.
“We figured out how to grow advisors,” where other firms acquire them, Custer says. “We have a number of great advisors who started in client service roles right out of school. Not everybody is figuring that out.”
“Most of our advisors,” Jones adds, “are home grown where they come up as an analyst and move up to senior analyst and then a manager, then a senior manager, then a lead advisor. Then we feed them clients all year every year. So they are the furthest thing from salespeople.” Clients will eventually be rolled over to younger staffers so that the average account size for an advancing advisor can rise, Jones says. Happy staff. Career path.
The emotional training with staffers—getting a type A personality to listen to somebody’s family problem—is crucial to the firm’s definition of a “mindful” employee. Crucial because a new generation of advisors is coming up in the industry who won’t remember what it was like to build a book of business at an insurance company or brokerage.
“I think the financial advisor of the future looks way more like a life coach or therapist than they do a financial planner,” Custer says. “Where they need to be able to handle that emotional-social connection to really get to what’s driving people.”
“If there’s any problem that I’ve seen in wealth management it’s this “client first” mentality taken too far,” Custer says. “We are so focused on our clients and we treat each other like s*** and employees are second-class citizens. Jon and Charles understood that it’s got to be a whole ecosystem.”
The home-grown approach also means that the firm has eschewed acquisitions so far to jealously guard its culture. Hitting 20% growth targets, then, means thinking new business lines.
The firm, says Jones, will have roughly $30 million in revenues this year ($24 million is the personal CFO business, $5 million is the tax business and $1 million is retirement). But it wants to diversify its revenue stream. The 20% asset growth target is harder when you’ve got more assets to lift off from every year. “The law of large numbers is what keeps me up at night,” Jones says.
As part of that growth strategy, the firm created a 401(k) business a couple of years ago to create a channel of growth. The firm also added legacy planning as a separate channel and a financial literacy program.
But he adds that three years out, the firm might have to think about growing inorganically (through an acquisition) if it’s going to keep that 20% growth target. He says he knows: When you adopt another culture, it changes you.
And right now, the culture is precious, summed up in the company’s mission statement: to help people live a richer life. “As we’ve matured as a company, we’re about helping them live a richer life. They can define what richer means. Whether it’s peace of mind or traveling more or buying things that they want to buy. Whatever it might be.”