The Compound and Friends - On Authenticity (with Josh)

Episode Date: July 5, 2019

There are two types of authenticity and both are important to clients and potential clients of any business. Josh breaks it down, Live from the Compound Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

Good morning, everyone. It's going to be a short, slow week. A lot of people are vacationing. A lot of people are just not around, and that's perfectly okay. I've always used weeks like this to catch up on things that don't involve talking to other people, but maybe involve maintenance and looking at systems that you use, looking at whether it's Salesforce or anything else, just making sure that your ship is tight. It's a great time of year to do that kind of thing. And everyone's got things that they've had on the back burner for a long time.

And then all of a sudden, all right, this will be a quiet week. Let me get some of that stuff done. So I have some work I've got to do regarding some presentations that I'm giving in the fall. I'm going to spend the week doing that. Everyone should think of some projects they can tackle right now so that when we're back in the thick of things, they're not hanging over your head. They're not on the back burner. They're completed. So I'm sure we can all sit and think and come up with one or two things that have been nagging us that we've wanted to get to. I want to talk about what I think is the key to building a successful financial advisory firm in the next decade to come. This decade's almost

over. And I think it's something that's going to be more important than it's ever been before. And fortunately, we're in a position right now where we've already got this quality in spades. The Harvard Business Review did a study on authenticity and they looked at restaurants. They wanted to determine whether or not authenticity led to a restaurant having more success than its competitors. And what they actually discovered in the process of doing this research is that there are two types of authenticity. And interestingly, each of those types, if a restaurant, and restaurant is just standing in for any business, but if a restaurant was able to demonstrate one or the other of these types of authenticity, there was a benefit, but the

benefit was different in each case. So what are the two types of authenticity? The first is, are you exemplifying the category that you're representing as a restaurant? So the example they give is DeFarra's in Brooklyn. So DeFarra's is a pizzeria. The guy came over from Italy in the 1960s. They've been making the same exact pie ever since. People that come to New York on a pizza tour, it's uh the guy came over from italy in the 1960s they've been making the same exact pie ever since people that come to new york on a pizza tour it's always one of the stops if not the stop um it's in brooklyn and they um exemplify the category of new york city pizzeria they have an authenticity um based on how well they do what people expect them to do in that type of cuisine, right? The other type of authenticity, they look at a restaurant called Blue Hill,

which is not churning out the type of cuisine that's exemplifying any particular category, but it's got an ethos and a philosophy to it that people consider to be, quote-unquote, authentic, meaning farm-to-table. So they're literally growing their own produce and then putting it on the table. Sustainable agriculture, et cetera. So that is a different type of authenticity than DeFarra's in Brooklyn. But that authenticity gets rewarded by consumers in a different way. So here's what they discovered. A restaurant exemplifying the first type of authenticity, which is really being emblematic of a certain category, they get much

higher star ratings, but that doesn't necessarily enable them to raise prices. And in fact, it might actually work against that. So DeFarra's is not an expensive slice. I don't think it can be. It's standard. That authenticity has resulted, however, in tons of four and five star rankings on Yelp and various restaurant review sites. Blue Hill, on the other hand, could charge whatever they want. They've got a reservation list as far out as the eye can see. Tables are booked. Very expensive

because the consumer from Blue Hill that dines at Blue Hill, it's very important to them the values that that restaurant represents. And so they are willing to pay up for that form of authenticity. Now, here's the catch. You can't say you're authentic. Because in another piece of research, it turns out that when a restaurant puts something like authentic Mexican food on the menu, then you look at the reviews, people don't like that. And not only does that not result in their being able to raise prices, it also doesn't result in higher star rankings. And the way they did this review was they surveyed the entire landscape of all of these restaurants and they looked at the ones that make that claim. We are authentic

this type of cuisine. Nobody wants you to tell them how authentic you are. They want to judge for themselves. So that's the catch. Which brings me back to what we're doing as a firm and our messaging and our philosophy and the way we take care of clients and run our business. We do not run around screaming how authentic we are. We think we're authentic. It's not on the website, right? But I think people get it. I think it it shines through so i think rather than talk about it we be about it and that is is enough that is that is the way to do it um now what type of authentic are we would we be the first category of authentic where we exemplify the category i don't know if i don't know necessarily if that's what we want there there's a connotation

when people talk about RIAs. Oh, they all do the same thing. Oh, they all look the same. We get it. BlackRock iShares, blah, blah, blah, financial planning. I don't know if that's what we're striving for. I think it's good that we are traditional in some sense. But to say that we're trying to look like the emblematic RIA of all other RIAs, I would say is not accurate.

There are a lot of major differences in both the way we carry ourselves, the way we talk to the public, the way we deal with clients, the way we've built the firm, the types of people we're hiring here, the way we've expanded. I would not say that we're the first type of authentic. I would not say that we're the first type of authentic. There's probably an RIA around the corner from us somewhere here in Midtown Manhattan or down the street from you, wherever you're working, and they might be the authentic, like the batter RIA that looks the most like what an RIA authentically looks like. That's not so great, right? The second type of authenticity, though, I think we've got in spades, as I mentioned. So what that means to me is people come to us, people stay with us, people refer us, people talk about us in such a way that they understand the qualities that we talk about publicly, the philosophy, the way that we feel about markets

and investing, it's authentic. And in fact, we couldn't fake it if we tried. We're too public. We're too public facing. Everyone's got our number. Everybody's watching us, okay? All over the country. Every conference where people are talking about the future of this industry, we're in the back of everyone's heads. It's just a fact. It's great. It feels great. Sometimes it leads to criticism. Sometimes it leads to jealousy. We'll get over it. We'll deal with it. But I do think we've got that second form of authenticity. And if you think about what that means for us and for our future growth and for hopefully the loyalty that clients exhibit toward us and hopefully for the caliber of talent that we'll continue to attract, it's phenomenal.

It's a great place to be. So once again, though, that's not to say, let's go out screaming authentic, authentic. Look how authentic we are. People get it. People get it. It's evident. It's evident. Everything we write, everything we say, every conversation we have with clients, every vendor that we bring in and allow to see a little piece of what we do, they get it. We don't have to say it. We don't have to wear a t-shirt that says it, right? So I think it's really cool that we're in this place. And I think one of the things that it's my responsibility to make sure of is that we stay there and we never fall into a position where

we're being perceived as something other than the things we preach about, the things we say are important. So far, we've managed to not just talk about it but to be about it. So far, we've managed in the way we manage money to have that be wholly in sync with the things that we say and the things that we talk about with every client on every call one, every prospective client. Right? In the first conversation, this is what we're about. By the time they're with us for three years, there's complete harmony between what we told them originally and what we've done for them.

And it's got to stay that way. It's got to stay that way. That's my responsibility. God bless you. That's my responsibility is to make sure that from the top down, we recognize how important that is and we maintain it and we keep it going. So as an authentic firm, as a firm that exemplifies the qualities that we say are important and actually lives them, you guys are doing a fantastic job keeping that alive, maintaining that with all

of your actions and all of your words and deeds. And I really appreciate it. All right. Everyone have a great July 4th and we will convene after that. Thank you.