Morningstar - Fall 2019 - 70

Investors

A Better Place
Fed up with corporate world, Bob Salzman
strikes out on his own as an advisor.

USER PROFILE

Charles Keenan

Don't tell Bob Salzman that embarking on a
career as a financial advisor is a young
person's game. He entered the field in his early
50s, landing his first position in 2013 with
the financial-services arm of an insurance giant.
Eighteen months later, he left to run his own
shop in the Chicago area. Now 57, Salzman has
since amassed $20 million in assets under
management, not a huge amount, but impressive
nonetheless for a solo advisor in four years.
That's in part because Salzman exhibits an
energy level of someone much younger than his
age. He often rises at 5:30 a.m. on weekdays,
walking 15 paces to his home office, firing
up his computer by 5:45 a.m., taking in what's
happening in the financial news before the
markets open. His day ends around 6 p.m.,
but he'll head back to the computer after dinner
if his wife has unfinished work to do herself.
Proof positive that passion trumps age.
"I love this business," he says. "It's fascinating,
and it's always different."
New Career

Salzman's career shift wasn't random. He had
worked three decades on the institutional
side of the business, in roles such as a portfolio
manager and relationship manager. Over time,
the money was good, so Salzman says he took the
path of least resistance, staying put, raising
his kids, and ensuring the mortgage would get
paid. Yet his work on the institutional side
told him one thing was clear: There's a wide gap
of knowledge and sophistication between

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professional and individual investors, with the
latter needing a lot more help.

cookie-cutter asset allocations, without much
customization, allowing practices to scale the
business and rake in the proceeds. While Salzman
charges slightly higher fees than the industry
average for those with assets up to $100,000, his
fee scale soon offers better economies with
more assets. By $250,000, Salzman's clients pay
less, cumulatively about 1.2%, compared with
1.25% for the industry, according to data Salzman
uses from kitces.com. At $1 million, his clients
pay a cumulative 0.675%, compared with 1% for the
industry, which adds up to a savings of $3,250.
Using Knowledge to Help Others

"On the institutional side, it was all about risk
control, process management, and minimizing
fees-all of the things that savvy, big institutional
investors take for granted," he says. "I realized
individual investors by and large don't have
the same resources, have no discipline, and are all
over the map in how they approach investments."
His financial planning emphasizes risk tolerance
and asset allocation, areas that don't get
enough attention in advisement, he says. All too
often, advisors shirk this responsibility by
relying on people to state in a questionnaire how
much risk they're comfortable with, then
invest accordingly. Salzman calls this a cop-out.
Clients are too risk-averse, especially those with
long time horizons, he says. He counsels
them on why they typically need to put more
money to work in the markets, not less.
"Individuals go to an advisor to be coached, to truly
help them understand how much risk they can
take, how their investments should be positioned,"
Salzman says. "I think clients need to know
what reasonable amounts of risk they can be
taking in a portfolio. They don't want me to advise
them based on answers to 'how they feel.'"
To focus on the financial planning, Salzman avoids
picking stocks and bonds, relying instead
on mutual funds and exchange-traded funds. "It's
tough to beat the market," he says. "That is
more than a full-time job."
He also differentiates himself with lower fees.
Generally, fees in the industry are too high,
he says. He thinks investors get wedged into

Salzman left the institutional side of asset
management in 2012. Fed up with the corporate
world, he took a year off, pondering what
to do next. A personality skills assessment told him
his main hat was "analytical" and that he
was an introvert, someone who liked working
in small, intimate group settings, solving problems,
and helping people. It also confirmed that
he didn't work well in bureaucratic environments
and that he didn't like sales.
Soon, a friend led him to a job as an advisor
for a large insurance company. Yet there he found
himself more of a salesman, expected to
peddle the firm's insurance and annuity products,
rather than what was best for the client.
"I realized this was not the way for me to execute
my vision of being an advisor and getting
into wealth management," he says. "The only way
to do that was to be fully independent."
After a year and a half, he left, taking one client
with him in 2015. "From that point, it was
building a firm from nothing," he says. "Over the
last four years, I have never worked so hard."
During the first years, he was focused on
developing processes and procedures and sourcing
the right technology. Much of Salzman's time
included building out a risk and asset allocation
framework, and working on how portfolios
would be constructed. He consulted with other
colleagues from his institutional days, including his
wife, who still works in the business. They
all formed his own personal advisory board, and
some of them ended up being some of his
early customers.
http://www.kitces.com
Morningstar - Fall 2019

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