Part Two of an Interview with Philip Kessler on Automated Advice

The following is another excerpt from an interview that appeared in Investments & Wealth Monitor (IWM March/April 2017 issue) and was part of an original interview at the Schwab IMPACT Conference in October 2016:

IWM: Culturally, what was the reaction from your employees (when you switch to an automated advice focus)? Did they get on board immediately or did it take a little coaxing?

Phillip Kessler: It’s a little different, obviously, because we’ve started this way. So everyone that’s at the firm grew up with it effectively. But I think it’s been great because again, if I look at it from a hiring standpoint, which is probably more appropriate, I just hired a young guy who fell out of the back of Morgan Stanley. He was like, “All I want to do is financial planning.”

Charles Schwab

“Perfect, that’s all I want you to do.” If you think about how you hire and think about how you want to construct your firm, I think it offers you the ability to be more strategic in your hiring. This guy couldn’t client-develop out of a wet paper bag, but he’s really good in front of clients. He’s really good. He’s forgotten more about estate planning/financial planning than I’ll ever know, but he was not going to be a sales guy. He’s never going to build a book of business, nor does he want to, which is fine.

I think it does give you an opportunity to be more strategic and more tactical in your hiring going forward because you can offer people a much more detailed understanding of what they‘re doing and set expectations appropriately that way.

IWM: How do you go about choosing which ETFs go into each strategy? How do you develop your asset allocation models?

Phillip Kessler: Our chief investment officer handles most of that analysis, and then we sit down and say: “Okay, what makes the most sense?” It really comes down to how you’re constructed and how you build your portfolios. I don’t know that the process would be any different.

While our roles at SWS Partners are varied as it comes to running the firm, our areas of focus with regard to client advising is as follows:

  1. Frank Parker’s focus is review and analysis of investment products. Frank can provide a forensic analysis of client’s current portfolios so they understand the true cost of what they own.
  2. Mike Parker is SWS Partner’s chief investment officer. Mike is responsible for equity research, portfolio construction and management.
  3. Mike Stafford manages our technology platforms and leads our client services efforts.
  4. My responsibility is estate and succession planning, integration of financial plans and investments with estate planning.

We think this type of structure best suits the client because we are organized as specialists, not generalists, which is what you see at most firms. The generalist model woefully fails to acknowledge the complexity of most client relationships and we want to be in lockstep with our clients through any level of complexity.

This excerpt may have been slightly edited for content, length and clarity. You may read the interview in its entirety by clicking here.