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By Sue Britt
Stuart Zimmerman, co-founder of Buckingham Asset Management, says there is a simple reason why his company has gone from $400,000 in start-up capital in 1994 to $800 million in client assets today.
“It all comes to us doing the right thing for people,” he says. “Just do the absolute best you can for people. They’ll tell their family. They’ll tell their friends.”
For Zimmerman and his three co-founders, Paul Forman, Steve Funk and Bert Schweizer, doing the right thing includes approaching investments with the conservative mind of a certified public accountant.
The Buckingham system is called “passive investing,” which is based on the modern portfolio theory of asset class selection. Essentially, by building a diversified asset-class portfolio, properly weighted for economic conditions, investors over time can expect the highest return for a chosen level of risk. Under this system, no attempt is made to time the market, find undervalued or overvalued stocks, or use any of the other investment gimmicks that some advisors pitch.
Passive investing also has the advantages of carrying lower operating costs and less tax burden, because of small turnover.
“Academic research pretty much all comes down on the side of passive investing,” Zimmerman says. “The passive investor, in the long run, wins.” Zimmerman says that even though roughly 30 percent of portfolio managers will beat the market this year, it’s unlikely they will do it next year. “It’ll be a different 30 percent next year. It’s random,” he says. “Over the 10-year period, the passive investor would win.”
Headquartered in Clayton, Buckingham invests its clients’ money—typically $1 million or more—in the global markets. Specifically, Dimensional Fund Advisors (DFA) is the firm’s major fund manager. U.S. large stocks (what people typically picture when they think of the stock market) are only one of 10 equity asset classes DFA offers. Zimmerman says most of the losses suffered after the September 11, 2001, terrorist attacks were because investors didn’t own other asset classes, such as small stocks, large-value stocks and international large and small stocks. In short, they were not as diversified as they should have been.
“When stock markets did very poorly in 2000, 2001 and 2002, the worst performers were U.S. large stocks,” Zimmerman says. “During that same period, small stocks did well.”
Although world events can often generate trading business—something a typical financial services firm is looking for—Buckingham stays consistent and protects the clients’ principal, Zimmerman says.
“It has nothing to do with last week or last month or last year or the last three years,” he says. “We’re the passive guys in town. That’s what distinguishes us.”
 Matt Hall, director of practice development. |
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Matt Hall, director of practice development, says much the same. “Part of our job here is to help people ignore that apocalypse du jour,” he says. “It’s not that sexy. There is patience required.”
Hall says the culture at Buckingham is rare among financial services firms. For instance, every day of the week is business casual. “We’ll be the only one running around in short-sleeve shirts,” Hall says, adding that once he became aware of the firm and its culture, he knew he wanted to work there. “They can make me the receptionist, the janitor, I don’t care. A lot (of employees) say we don’t want to work anywhere else.”
Two-way mentoring and a sharing
of ideas are also a part of the Buckingham culture. The younger and older employees are, in a way, dependent on one another, Hall says. The more experienced advisors give guidance, while the young up-and-comers help to create a fun atmosphere. “There’s an excellent sort of mix with seasoned people and young, energetic people,” says Hall, a member of the Regional Young Professionals Group, convened by the RCGA.
The average age at the firm continues to decline as young professionals inevitably want to join the firm. Jared Kizer, a 26-year-old research associate at Buckingham, came knocking in 2002. But with a master’s in physical therapy, he might never have gotten that chance had the decision-makers at Buckingham not been open-minded.
Kizer began studying financial planning for his own personal investments when he was finishing his graduate degree. He found it so interesting, he eventually contacted Larry Swedroe, an author whom Kizer had studied. Swedroe, a principal at Buckingham, arranged for Kizer to interview at the firm. That was the easy part. After that, it was up to Kizer to convince the other partners they should hire someone who had a background in physical therapy.
“That was the tough part,” Kizer says.
After two interviews, he was successful, and says he’s happy about his career change. He’s also delighted to work closely with the man who wrote the books leading him to that change.
“He’s helping me along and introducing me to things that he thinks I would find interesting,” Kizer says. “It goes both ways. If I find something that I thought was really interesting to read, I send it to him and get his comments.”
Zimmerman says Swedroe’s books, including, “The Only Guide to a Winning Investment Strategy You’ll Ever Need,” have also brought in investors. “They’ll track us down and say, ‘I’ve read the book, I’ve got $3 million to invest, and I want to invest it this way,’” Zimmerman says. “We classify it as a book-lead.”
The environment of the firm is focused on education and analysis, Hall says, and company meetings have been held at the St. Louis Zoo, Blueberry Hill and the Bowling Hall of Fame. In May, associates watched “Miracle,” a film about the 1980 U.S. Olympic gold medal hockey team.
“That was one example of doing something different to support the educational culture that the partners have created here,” Hall says. “It’s a creative and energetic and enthusiastic culture.”
This year the firm is celebrating its 10th anniversary and is still relatively young, but Hall sees continued growth. When he came to the firm five years ago, they had $300 million in assets under management. Now, including a spin-off firm, BAM Advisor Services (see sidebar), the number approaches $3 billion.
“All signs point to 10 more years of phenomenal growth,” Hall says. “I plan to be here to see it.”
CPA Services at BAM
In 1997, three years after Buckingham Asset Management opened shop, its affiliated firm, BAM Advisor Services, was founded to help CPAs give investment advice to their clients. At BAM Advisor, clients are offered training and assistance in five core areas: 1) A passive investment strategy and associated client relations; 2) software and software training; 3) business strategy and marketing advice; 4) technical investment analysis; 5) billing, reporting, and compliance guidance services. Many BAM Advisor clients get their continuing professional education (CPE) during the St. Louis-held training sessions. BAM Advisor Services currently has 106 clients in 43 states and holds an annual conference at the Ritz-Carlton St. Louis.
For more information about Buckingham Asset Management or BAM Advisor Services, please visit www.bamservices.com. |
Sue Britt is a freelance writer based in Belleville, Ill. |
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