PR meltdown illuminates generational split between the world where “business as usual” was born and the asset management world of tomorrow.
Ken Fisher’s regulatory record is clean. Officially, he did everything right across a career that stretches back to the mid-1980s.
But since our site traffic shows that he remains an object of intense industry debate, his problems aren’t going away.
His $100 billion firm is rolling with the punches as best it can. However, when the best defense boils down to “that’s how the boss always does it,” it’s time to think hard about the future.
The thing about the future is that it’s where change happens, whether you want it or not.
Change is coming to the way Fisher Investments and firms from that era position themselves to the public and operate behind closed doors. And with $100 billion at stake just at this firm, the rest of us have an opportunity to get ahead of the curve.
A challenge on culture
Fisher is apparently shocked at the outrage over his recent industry comments because he says that kind of thing all the time and has been doing it for years.
From his point of view, nothing has changed. The firm he runs operates like an old-school boiler room, with green trainees cold calling the thousands of prospects Fisher marketing generates.
They’re really there to qualify leads and start nurturing relationships, all the while hoping to sell a few of the off-the-shelf stock portfolios the firm has developed over the decades.
It’s a world that some people think died out in the era when Michael Douglas and Charlie Sheen were fighting it out on “Wall Street.” That’s not surprising. Fisher started the firm the year before the movie even came out.
The business model isn’t quite so transactional, but it’s close. People in the call center hope to get investors to allocate a little cash to in-house products and pay management fees. That’s really it.
Any pretense of a deeper or longer-term relationship ends with the marketing materials. You’re just selling a different flavor of mutual fund straight to the end user.
Fisher only incidentally does any kind of planning for his clients. It’s not that kind of firm.
And that’s really the cultural shift his people need to cope with. The days of simply selling portfolios are ending fast, no matter how the compensation model works.
There are too many portfolios and when there’s value in picking one over another, not enough time is spent communicating that value effectively.
Look at once-monolithic fund complexes like Janus, Dreyfus, American Funds. Fidelity, Vanguard and the ETF revolution are eating their lunch in billion-dollar buckets.
Fisher is already a scale operation so he needs those billion-dollar buckets in order to grow or even protect what he has. That means massive marketing campaigns capturing hundreds of thousands of names every year.
Call them all and you need a staff of 1,750 people, 900 of whom are officially on the books as advisors helping to allocate the money and talk to the clients.
Maybe you ultimately capture a few small accounts a day more than you lose. It barely moves the needle. You’ve got to keep selling.
And when the machine breaks down, it breaks down big.
A robot never screws up
Fisher’s son Nathan runs the higher-touch retirement plan consulting side of the firm. He took to social media last week to defend his dad for having a brain that’s “wired differently.”
According to this logic, Fisher’s off-the-cuff sexism is part of his human genius for success. He might not “interpret social cues in conventional ways” but he can definitely think outside the box and gather the assets.
But social cues are always changing. Behavior that probably got Fisher respected as a no-nonsense straight-talking guy back in the “Wall Street” days doesn’t fly so well anymore.
If you can’t change the way you read the room, you get locked out when the room changes. That’s what happened at this last conference.
The context was the same as it ever was: industry professionals gathered to share ideas and insights.
The subtext was different. More women have signed up over the years and this year one of the guys jumped in to tell the outside world how archaic the comments sounded.
He’s a much younger guy than Fisher. Odds are good he’ll be in the industry long after Fisher is gone.
And that’s the thing. The industry younger advisors inherit is their industry. They’ll set the rules and shape the conversation.
Their social cues are the ones people who want to remain relevant need to observe. It doesn’t matter what worked in the boiler room days. Evolve or retire.
Because a new generation of investors shares that culture and those cues. They’re ultimately the ones who will vote with their wallets.
They’re already tiptoeing around robot platforms that can never say anything that can be misconstrued either for better or worse.
Robots charge a lot less than the 1.25% Fisher charges most accounts. Performance is probably comparable.
There’s no relationship there. That’s for human advisors to create, one on one, in whatever format they choose.
Those advisors earn their living on their ability to read the room. If their brains are wired differently, they learn how to exploit that difference to build a bond with their target audience.
Maybe that audience is the mass market, maybe it’s the mass affluent, maybe it’s institutions that will then package the experience and sell it again to an entirely new audience. It doesn’t really matter.
Fisher took his biggest blowback from the institutions. Pension funds don’t want the headache of having to explain the relationship. His performance isn’t spectacular enough to overcome the reputation risk.
Remember, institutions are run by people who have to answer to other people, who in turn have their ears on the social chatter.
Or they’re investing with robots already, in which case they’re never going to pick up the phone anyway when Fisher’s people call.
Dinosaurs died out. I’m not saying Fisher is one, but extinction isn’t always inevitable.
The firm has $100 billion to lose. Like a shark (a prehistoric creature that didn’t die out), it needs to keep adding accounts to survive.
Fisher is by far the majority owner of the firm. His name is on the door. His face is on the ads.
If he isn’t part of the solution any more, other faces need to emerge.
Maybe you want the assets in the meantime. Now's your chance. Or maybe you don't. That's your choice.
