In mid-summer of 1989, the NIKKEI 225 index was on a rapid ascent to its ultimate peak of 38,915.87 in December of that year. This was the climax of a 10-year period during which the value of the Japanese stock market increased six-fold. News publications were filled with stories praising the work ethic and genius of this prosperous, exporting nation. Japan was clearly the darling of the investment world and a country which was perceived as having unlimited potential.
During that period I was serving as branch manager of the Dean Witter office in Dearborn. One of my roles was to schedule representatives from various mutual funds to promote their offerings to our salesforce. Each of the reps had a different style and a different angle to motivate their audience, but during this particular season they all had one exhortation in common: “Buy our Japan fund!” One of the reps even came to our office dressed in a Kimono and treated the office to ice cream since sushi was hard to find at the time. The most tempting incentive to buy his fund was an oversized sales commission which blinded the salesforce to its obvious risks. Most of you know the outcome of investing in Japan during the subsequent period. Twenty-seven years later, investors who bought near its peak have yet to recoup even 50% of their original investment.
The point here is to highlight the core values which led to the formation of White Pine. One of the glaring realities of the aforementioned story was the inherent conflict between large sales commissions and doing what was in the best interest of clients. White Pine, on the other hand, is a Registered Investment Advisor (RIA) whose compensation is based on assets managed, not on a sales commission for a particular product. Our management fees are reported quarterly and are the only source of revenue for our firm. The typical broker/dealer structure allows most firms to charge an advisory fee, sales commissions, trailing fees, third party wrap fees, as well as sharing arrangements with other advisors. In such cases it is often difficult to calculate what a client is being charged and for what services. Our management fee, however, is clearly reported to you every quarter.
Recently, the Department of Labor introduced the idea that all investment advisors, including brokers, be regulated as fiduciaries. The simple definition of a fiduciary is a professional who puts a client’s interests ahead of their own. This seems like common sense to us. White Pine has been operating under these rules since our inception. An example of this principle is that our personal equity portfolios hold the same security positions held by our clients, and we are charged the same fee structure that our clients are charged. To illustrate this point in another way, our trading policy states that when a trade for our clients is only partially filled, all client orders have priority over employee orders.
The ultimate value that we strive to live by is our belief that each day is a God-given gift which should be used to serve others and to please Him. Our desire is to help clients develop detailed financial plans which will meet their current and future goals. We also do everything we can to help each person weather the inevitable storms that come with investing, which allows them to ultimately reach their financial goals. Developing the plan and keeping it current is important. . Navigating the storm, and sticking to the plan is the real challenge. Once we have experienced and overcome a difficult market together, we then have a mutual relationship that is likely to last for decades.
On My Succession.
One of the most frequently asked questions I hear is the following: “When are you going to retire?” Since I am currently past the common retirement age when Social Security begins, it is a relevant inquiry. However, a more important question to ask would be this: “How are you preparing White Pine for the future upon your succession?” Regarding the second one, the initial steps have already been taken.
Tony’s hire was critical to the portfolio management and financial plans that most of you have in place. I can say with great confidence that Tony’s skills go well beyond investment expertise, and that you are in good hands with him at the helm. And Michael Carmona, who joined us in the past year, has been a breath of fresh air. Not only is Michael polite and energetic, but he has a great appetite for learning and an eagerness to do whatever he can to help others. His current track in completing the CFP (Certified Financial Planner) courses will enhance his ability to help many of you in future years. As you know, our office manager, Debbie, is a talent whose capabilities go beyond what words can convey. She executes daily administrative functions and interacts effectively with Schwab and with other professionals. She is polite, efficient and loyal, and she cares a great deal about each one of you. She is a vital part of our company, and finding her replacement one day will not be an easy task. In addition to our current staff, we expect to add others to our team. The requirements we seek in the candidates we consider for hire are simple but in rare supply: love people, care about others, be excited about learning and act like an owner rather than an employee.
Oh, yes, back to the original question about the timing of my retirement. The simple answer is… not any time soon! I love my job and the people I work with. The plan is to continue as long as I am physically and mentally able…and as long as the job is fun. A fact which might give credence to my expectations is that both of my parents worked well into their 80s before retiring. However, the reality is clear to me that life can present unforeseen challenges that might not allow me to work forever. The bottom line is that I will stay on at White Pine for as long as I reasonably can, but expect to have the talent in place to serve you well when the time comes for me to hang it up.