Scott’s story:
After 20 years of trading currencies, T-bills and bonds, a daily crapshoot of large institutional (banks, investment dealers, money managers) traders (mostly an overly testosterone induced group of boys, who let very few women into their club, pounding their respective chests) trying to get one up on each other, I was ready for another challenge. The high stakes game that it became (that did require some of us who were less inclined to gamble, to turn to managing probabilities, risk, and spreadsheets) was no longer holding its appeal as I moved into my early forties.
So, what do you do next with a boatload of financial knowledge around managing risk? I briefly contemplated the idea of entering the long-standing family tradition of insurance brokerage (my grandfather, father, uncle, sister, cousin), but it felt too much like starting at square one. So, after some discussion with a few senior investment advisors, decided to take my hard-earned (I was never a good gambler, so I had to rely on my other resources) experience to help folks build and manage their financial futures. I was so naïve.
I was the only non-twenty something in the TD Evergreen (before Waterhouse and the rest of the various TD platforms that would follow) “developing” advisor program. What a wake-up call: “Just go gather assets” by selling TD bank product was the mantra of the time, right at the height of the dot-com bubble. What did I learn from this experience? That I could never trust anyone else, especially these folks with my or the money of anyone that I cared about. These Advisors were all (90% of them, anyway) driven by commissions.
I left TD to take on a supervisory role (Branch Manager) at a couple of other institutions while also looking after my stable of families. I thought, again naively, that I could somehow defeat the “bad” advisors in a compliance role. Turns out that while it is mandatory for the branch manager to be a compliance manager, there is more pressure and remuneration in recruiting advisors from other firms to yours, so that was supposed to be my real focus. In many instances I found that the regulatory framework was not structured to properly protect the clients, just to protect the institutions before bad advisors could do too much damage. Everyone was chasing a bigger amount of the pie. What did I learn? That what these big institutions really care about, first and foremost, is revenues and their shareholders. Do not get me wrong, not all advisors are purely chasing commissions, but a great majority are, and clients are often fooled.
What to do then? Start my own company and build it around my own principles. Sometimes, it is better to find like-minded folks with complimentary skill sets to offer a broader perspective, so that is what we did. Paul convinced me that together we could manage our own money in a disciplined manner (not chasing the narratives that might bring instant gratification and undue risk) and invite others, with like-minded goals to do the same. That was six years ago. I bought half of High Rock, which Paul had started about five years prior, with my “buy-out” money from my previous situation. My close relationships (families that I had worked successfully with and trusted me) followed me to High Rock. I had hoped for more to follow, in time, as I was the primary caregiver for most of them, but the narratives they were presented with enticed many of them to stay put. So, we grew organically and refused to compromise our principles (managing risk first and foremost and putting our clients interests ahead of our own) to get ahead. In fact, using our principles to build something unique for those who wanted wealth stewardship over gambling and bright shiny narratives.
New clients keep finding us, usually the result of an introduction from someone who knows us and trusts us. Often the question of “how long will you be around to look after us?” arises. For me, as long as I am managing my own money (because there are few who I would trust to do it for me), I will be here for my clients. So, basically, if I have my faculties or am still residing on this planet. Paul is younger, so he will add longevity and of course we continue to search for younger talent who harbour our principles. Younger folks, however, tend not to have the patience and perseverance (it is a 24/7 job) to build over longer time horizons and in many cases, their motivation may not be in line (boring vs. exciting) with what is best for our clients, so that is an ongoing challenge. We have plenty of time to look after that, but it is something that we take very seriously.
Retirement? I retired in 1999 (from the trading grind). Since then, I have been doing what I love to do: helping people and families. That is my hobby. Remote connectivity allows me to do it from pretty much anywhere (on this planet). I must take on the Goliath’s from time to time (which can be fun), because, in many cases, they are not living up to their printed words (marketing behemoths that they are) and sometimes they get a little upset with me and my blog, so be it, I will continue to call out the bad element in this business and there is no shortage of that. We will continue to grow and build on our disciplined principles and fiduciary duty to those that seek us out.
Scott Tomenson, CIM
Paul’s story:
For my part, my career very much followed Scott’s when I first met him in 1990 when I started working at Merrill Lynch Canada. As Scott moved on from trading T-Bills to Bonds, I took over his role trading T-Bills. When Scott moved on to another firm trading Bonds, I took over his job trading Bonds. From there, I started trading credit (corporate bonds with a focus on High Yield and Distressed) commencing in 1998.
From 1990-1998, there was an enormous amount of sleep deprivation as my week would start on Sunday nights around 11pm (right after I had fallen into a deep sleep) when Tokyo would call to get me to quote on 100’s of millions of dollars in one single trade. Then London might call to do the same anywhere from 3am till my alarm went off at 5:30am. Risk was managed in Toronto so the “traders” in Tokyo and London had to call us traders in Toronto to do trades. This went on 5 days per week for 8 years…rinse, repeat. The upside to these 8 years in my life was the Head of Fixed Income Trading was the best trader I have ever seen, worked with, or even heard of. The lessons I learned, and will carry with me till I die, were too numerous to mention here. The downside was…sleep deprivation. This was a young man’s (sadly, as Scott said, back in the late 80’s and early 90’s, it really was all young men) game and one that would literally kill us at our age now.
In 1998, when I began trading credit, two good things happened: 1) the corporate bond market was largely a domestic market, so I was not wakened 2-3 times per night and 2) I was able to put my CFA research/analysis skills to work. This is not to say there was not stress involved as anyone who has heard the terms “junk bonds” or “distressed debt” would know they can be very volatile but, I loved it.
Fast forward to 2010 when I started High Rock which provided the vehicle for the final chapter in my finance career. At High Rock, I have a great mix of dealing with friends, family, and new clients (most of who have become friends) in helping them achieve their long-term financial goals and the intellectual stimulation of analyzing companies and investing, not just for clients, but for my own family.
Without going into the full story of why we started our High Rock Private Client Division six years ago (but always happy to elaborate, should one wish to dig deeper), suffice to say that there are very few people I would trust managing my family’s money (full disclosure, I do have some of our family’s money (~30%) with a friend who we have had it with since 2003 and has a much different strategy than we have at High Rock and one we cannot replicate). A big part of what we are doing at High Rock is controlling our own destiny by managing our own money without the influence of anyone else (we are truly independent). Our clients get to “piggy-back” on what we are doing for ourselves (inline with their own objectives, of course). Clients own the same securities as we do (I bet there are not more than a handful of Advisors in the country that could say that?), but perhaps in different allocations, again depending on their goals.
So, when the question comes up about “succession” planning, my answer to that is twofold: 1) As per above, I am managing my family’s money and I don’t trust more than a few people to do it so I will continue to do so as long as I have my faculties about me (same as Scott) and 2) Last time I checked, Warren Buffet (coming on 91 years old) and Charlie Munger (97 years old) were still working full-time managing money at Berkshire Hathaway (not to compare Scott and I to those two but why does society assume we all need to retire at 65?). I also have several close relationships with investors who are extremely financially successful and do not “need” to work, but “want” to work and are in the office every day (I just ran into one this morning on the street in fact).
I do see how people want to retire at 65 years old. Some may want to travel, some may have health issues, some may dislike their job, and some may want to spend more time with family. These are all important reasons and, quite frankly, what we help most of our clients achieve…a financially secure retirement to do whatever it is they want to do in retirement.
For me, I love what I do (there are bad days for sure) and, God willing, plan on doing it the rest of my days.
Paul Tepsich, CFA