Reflections and Vision After 30 Years of Litman Gregory

More than 30 years ago when Craig Litman and I co-founded Litman Gregory, we did not foresee what it would become, nor could we imagine the events that would unfold around the world over the three decades that followed. We hoped to make a decent living and excel in a field we found both intellectually fascinating and challenging. We had a passion driven by that interest and a genuine commitment to taking care of our clients in an industry we knew often fell short of doing so. As it turned out Litman Gregory grew far beyond anything we imagined, and our business expanded beyond wealth management to also include providing investment research, portfolios, and best practice thinking to other financial advisory firms around the country.

Over the last 30 years the markets were wonderful for long stretches, but also painfully challenging at times, with cyclical bear markets, the 1987 market crash, the tech bubble, and of course, the financial crisis. When we founded Litman Gregory, the Iron Curtain still existed, there was no Internet, cell phones were not mainstream, and a gallon of gas cost less than $1. Since then, we’ve witnessed wars, natural disasters, horrific terrorism, political upheaval, the impact of social media, and technological advancements that have been beneficial and highly disruptive, introducing new risks into our lives. We managed to navigate through constant uncertainty, and while we got some things wrong (in this business, being always right is not possible), we have always valued the opportunity to learn from our mistakes. In the end, we also got many things right, and the result is a 30-year record we can be proud of, though there have been ups and downs along the way.

As we reflect on the past 30 years, it is clear to us that the core values we embraced were the drivers of all that we have accomplished. Our commitment to excellence, intellectual honesty, and treating our clients and employees the way we would want to be treated provided clear guidance that informed our decisions over the years and that continues to be the case today. Our firm’s evolution was profoundly impacted by these values—values which are not just words that we repeat because we like the sound of them. We emphasize them in our hiring and our culture, and they are enforced and reinforced by the collective Litman Gregory team. Living up to these values is not always easy. We’ve learned they can’t be taken for granted. They require regular attention.

While 30 years of history would seem to justify some reflection, our obsession with doing our job well and always trying to be better doesn’t leave much time for the feel-good type of reflection. Our reflection is mostly focused on trying to understand and learn from our mistakes and successes, with a focus on how we can be better.

We also think a lot about how the ground is shifting in the world as it relates to what we do for our clients. And if there is one thing that we have learned, it is that the world is always changing and throwing curveballs. This is certainly true in the investment world and it is true in our industry, which is experiencing dramatic change. So, we spend a lot of time thinking about the future and how to ensure that we can continue to stay true to our values and goals of delivering exceptionally high value to our clients and a   satisfying and enjoyable work experience for our people. At the most basic level, to continue to excel we know we must deliver on both objectives.

As we look forward, we do so in an ever-rapidly changing world. Recently, we spent a year putting together a detailed strategic plan that describes the firm we aspire to be in the years ahead. The plan addresses both the challenges facing our industry and the opportunities to expand what we do for our clients. Having the resources to commit to this exercise was critical, and we devoted an enormous amount of time to this essential project. Many of our clients are beginning to see the results of decisions that were driven by this process, including

• improved reporting capabilities, setting the stage for providing additional reports online;
• a more disciplined approach to providing broader financial advice and assistance;
• and an expansion of our investment services to include separate-account indexing options with more tax-management flexibility, individual bond portfolios, private equity investments, and a menu of investment portfolio strategies that provides greater ability to be fine-tuned with client needs and preferences ranging from purely active strategies to indexed-oriented options.

1. The firm must be completely committed to putting its clients’ interests first. This is obvious, but unfortunately, this has never been a given in our industry. It’s not always easy to assess but it must be non-negotiable from the client’s standpoint.
2.  The firm should bring a range of wealth management expertise that allows them to develop a living, goal-oriented plan for clients that takes into account a full range of financial needs.
3. The firm must have a high level of competence and, with that, a clear understanding of its circle of competence. This encompasses the ability to maintain a high level of intellectual honesty to understand what it can know or at least reasonably assess, as well as the ability to admit mistakes and learn from them. We would advise friends and family that competence is evidenced by the quality of the people, the ability to articulate their thinking, and a well-thought-out investment and decision-making process that resonates from a common-sense standpoint. This process must then be executed with discipline—it’s easy to articulate a good strategy but it’s much harder to stick with it through market cycles, during the rise and fall of hot investment fads, and amidst ongoing second-guessing from financial pundits. This dedication to a well-thought-out process is more important than short- or intermediate-term relative performance. A sound process executed by a quality team is likely to deliver solid results over the long run and that is what clients should be looking for and evaluating.
4. The firm should have staying power so the client can have confidence they will be taken care of for many years—hopefully for life. Selecting a wealth manager is a major process and not something that should be done every few years. Ideally, you get it right the first time and to do that you need to know that the firm will be around, will likely stay independent, is attentive to its culture and values, attracts and keeps quality people, and has a succession plan.