Welcome, Leo. It’s great to sit down with you. Let’s start at the beginning, why did you start Bridgewater?
I started the firm because it just made sense to create a firm where your compensation was not tied to the type of advice that you offered. Back in 1992, that was relatively unique, so we had a first mover advantage. Fortunately, myself and my partner, Milton Stern, both saw the benefits of this type of an approach. We independently started our practices. Then about a year later, our paths crossed and that’s really when Bridgewater took hold.
Fast-forward to today, what differentiates Bridgewater from other advisors?
Today the whole notion of independent fee-only advice isn’t new. What differentiates us is our 27 years of history as well as the deep relationship we have with all of our clients. Our first client is still with the firm. Our clients really feel connected to the firm because everything we do is on a team basis. Clients don’t just have one point of contact, at a minimum, they have three.
When your strategy and principles are clear, decisions are easier. It allows us to rise above the fray and stay focused on the ultimate goal.
The other aspect is we are true wealth managers. While most clients seek us out primarily for our investment management, there’s a whole host of other planning issues that we can help our clients address – whether it be taxes, estate planning, philanthropy, working with other family members, and/or retirement. Everybody who works with us at Bridgewater has the opportunity to avail themselves of all the resources we have in all of those areas and much more.
What were your biggest learnings from the 2008 recession or previous ones?
My big takeaway is the importance of having a clear financial strategy. When your strategy and principles are clear, decisions are easier. It allows us to rise above the fray and stay focused on the ultimate goal which is often to provide our clients with a reliable source of income that allows them to lead their life as they want. The other thing I’ve learned is the markets are always very humbling and this recent period is certainly no exception.
We can’t control what the markets do but we can control how we invest in them.
What are you hearing from your clients during times like these?
For our long-term clients, they know what we are going to say, so those that call us are really just looking for some positive reinforcement. It’s more often the newer clients that call and ask whether we should be making any changes to portfolios and whether they should be concerned about what’s going on in the markets? We always go back to the asset allocation because that is the prime determinant of how well you do. Generally, our answer to clients is “no.” The worst time to make changes is during periods of volatility, stress, market hysteria. The one activity we did ramp-up later in the year was thoughtful tax-loss harvesting. For us, tax management is something that happens throughout the year, but when you are dealt a weaker market, we try to minimize clients’ taxes through a very aggressive tax loss harvesting program.
What is the best piece of advice you share with your clients when discussing their financial future?
Stay focused on the long-term and don’t be distracted by short term market fluctuations or the media. Focus on what you can control. We can’t control what the markets do but we can control how we invest in them. Stay focused on asset allocations, watch your fees and expenses which can often be a silent killer of a portfolio, and always focus on after-tax returns. The last piece of advice is the road to financial independence is paved by saving regularly and living within your means.
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