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Rich Steinberg: “You Have to Reward the People That Are Investing in You.”

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As part of looking at Schwab’s Consulting Services, we got a chance to have a call with Rich Steinberg, President and Chief Investment Officer at Steinberg Global Asset Management in Boca Raton. We found Rich’s enthusiasm contagious and his views on Schwab’s program quite enlightening.

Douglas Heikkinen: Rich you have such a well-known firm, I’m curious as to in building such a great firm, why you felt a need to reach out to Schwab to participate in some of these programs?

Rich Steinberg: When you really think about it, our industry for the most part is small businesses. Like a lot of us who came out of large institutions and left large institutions for many reasons. Then as the firms get bigger you start looking like the large institutions that you left.

There’s a balance that everybody’s trying to create of driving revenues and driving the right deliverables to clients but not fall back into the stage of being a big company again. I’m thinking most of us are struggling with succession, running the business, personnel, that include group hiring and development and certain strategic development.

We all have kind of concerns about the tools that we go into the business with. A lot of those questions are starting to come up at firms.  We’re part of my advisor group called the Advisor Forum — which is probably forty billion collectively and we are all struggling with these things so what makes it interesting is Schwab is creating a toolbox that I think a lot of leadership firms can use. It’s really applicable across the spectrum of this RIA space because nobody is interested or used to running businesses.

Doug: You have heard about some of these tools first from that group, from others who had experiences?

Rich: Yes, I mean so what kind of happened with our group is like the Moss Adams study we heard about years ago, but our group decided to follow the matrix when you guys started to follow the industry comp study, and particularly we had to do it for you anyway so we might as well do it as a more ‘reach to all’ group, so it kind of swapped partnership within kind of driving thought process. It’s really been adopted at many levels within the study groups.

The problem is, that there are not many firms that are with study groups, so resources like this jump out.

Doug: Schwab’s strategy is to go very deep and so that’s why they created an Executive Leadership Program that one of your people went through. Can you talk a little bit about what they got out of that?

Rich: It has far exceeded any of my expectations, I thought he was going to come back with some tools, so really everything from like counseling me on strategy to personal compensation … kind of what we do well, what we’ve done too well, positioning ourselves within our market.

Also a lot of succession planning’s issues that we are going through as we have two older partners so all of a sudden it was really me driving these conversations and as the firm gets bigger it’s harder and harder to have one person who’s like pulling the trigger on all of these things. Like many firms we have a lot of Gen-X in our firm.

They are not really ready to grab the reigns and really make some of the bigger decisions. They haven’t had the training yet. It gave Ken — who went through the program — two things next in particular; the ability to address with them with me in a bigger way or forceful way, it gave him the confidence to make decisions.

Doug: What did Ken came back with that helped you do more evaluation around your strategic plan and some other things as well, as a result of this program?

Rich: Yes, so within Nick’s (Nick Georgis) group there’s a strategic route. A few years ago we developed a strategic plan from Nicks group and we have changed how quickly we grew.  So four years ago, we were probably a 400 million … 450 firm, we are now 750.

A lot of it was executing to a one, three, or five-year plan. Once you start getting above four or five million in revenue it starts to get very hard to move the needle because you need larger accounts and you need to make sure of your margin. The training that Ken got of client segmentation, pricing, formulas of pricing, what we should be our savings, our resources in marketing, so we’ve created two new initiatives after that program.

One was outside my comfort zone and one was inside my comfort zone. It’s really starting to work, we never would have been able to drop this if we weren’t working in the Schwab program.

Doug: That’s great. When we started talking to Nick about exploring this area we had no idea — we knew how many programs there were — but we had no idea how much depth they went to, and has that surprised you that Schwab offers this kind of stuff?

Rich: It doesn’t surprise us that they are offer it, I think the big challenge is how do you scale it. It’s a great secret and as people find out about it … in small groups it’s going to be harder and harder to keep pushing groups through there.

Why we’re a partner with Schwab to begin with, it doesn’t matter whether it was John Coghlan, or if it’s Bernie and Nick’s group. Nick worked through all of those leaders. There’s always been a need for one to grow the industry, grow it with ethics and have discipline about the growth. The amount of resources that they put into these types of programs has really been kind of consistent with what we consider to be the leader of custodians.

We don’t see it with the other custodians and we work with other custodian.

We’re in the process of firing Pershing and all of our money is coming over and a lot of that really was because of this program. You have to kind of reward the people that are investing in you.

Doug: That’s a great statement.

Rich: We really believe in what Nick is doing.

Doug: From our other interviews you’re not alone.

Rich: I don’t like to give Nick compliments a lot, but this been an unbelievable experience for us. If I had another person through the program which I don’t right now, I would try to jump at it. It’s really time for other firms to be able to get the boost on this.

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