Radical Transparency Is Good for Business

Celebrating Blueprint Investment Partners’ 10-year milestone late last year gave me an opportunity to reflect on two conflicting realities:

1. In 10 years, so much has changed for asset managers like Blueprint Investment Partners and the financial advisors we serve.
2. Yet, in other ways, there has been so little progress.

One of the areas I reflected on was the topic of radical transparency, something that 10 years ago was uncommon in financial services but today seems to be accepted as good for business – regardless of whether you’re an asset manager or a financial advisor.

Radical Transparency = Persistent Authenticity

Transparency, adjective:
a: free from pretense or deceit
b: easily detected or seen through
c: readily understood
d: characterized by visibility or accessibility of information especially concerning business practices

merriam-webster.com/dictionary/transparent

Transparency implies that no matter the place or time, we are sharing our true selves, the details of our lives, and allowing trust and engagement to build with everyone around us.

Radical, adjective:
3 a: very different from the usual or traditional

merriam-webster.com/dictionary/radical

Add the word radical, and you imply that you want your level of transparency to be so thorough that it is transformative in all aspects of your life.

In Business: Applying Radical Transparency

Transparency is a concept that used to be lost on many financial advisors and asset managers. It did not serve their purpose, in many respects, to provide the required level of openness and understanding. This was most often due to fear of being copied, being ridiculed, or (heaven forbid) disclosing how they get compensated.

Thanks in part to unsavory characters like Bernie Madoff, investors began demanding more transparency from their financial advisors, while regulators implemented more rigorous testing of policies and procedures to ensure clients are better protected. It is a shame that billions had to be lost, or that firms had to be regulated into better behavior, but in the less-than-transparent investing world, this is to be expected.

The desire for transparency was a driving force behind why Brandon Langley and I founded Blueprint Investment Partners. We had been collaborating since 2003, and had extensively researched and tested systematic investing strategies while operating our quantitative alternative investment firm. Our work demonstrated the efficacy of systematic investing strategies, but we became disillusioned with the “black box” that surrounded many similar models we saw available to financial advisors. He and I decided to shine a light on the black box and transform it into a simple, transparent cube when we launched Blueprint Investment Partners.

It’s not like we invented transparency in asset management. We certainly had some great role models from pioneering fellow trend followers. Even non-trend followers in the strict sense have shown the wisdom of transparency. For example, think about how much information Warren Buffet and Charlie Munger shared with the investing public related to their investments and philosophy over the years. It seems to have worked for them, right?

Still, 10 years ago, we didn’t see many asset managers being as upfront and straightforward about their investment rules as we were being at the time – and continue to be. From day 1, we talked openly with financial advisors about the not-so-secret sauce driving allocation decisions for our investment strategies. We even put the rules on our website for anyone to find. We didn’t see a harm in being this transparent because the reality is WHAT we do isn’t what makes us special (i.e., in theory, anyone can do what we do) – it’s HOW we do it that sets us apart (i.e., consistently, repeatably, and without allowing human emotion to derail us from the process).

In my view, radical transparency has been good for business at Blueprint Investment Partners. But we’ve also had a front-row seat in seeing how practicing this philosophy has been equally as good for business at many of the advisory practices we serve.

While various federal regulations – including those related to fiduciary duty – require minimum levels of transparency between advisors and their clients, we think it takes going beyond the minimum for advisors to build strong trust and rapport with their clients.

In our experience, advisors with the strongest client relationships usually demonstrate transparency at all phases of the relationship. They are upfront about advisor/client expectations and services provided. They set realistic expectations about return. They have candid conversations about fees – why, when, and how much. They openly share potential conflicts of interest. And they have detailed conversations about the pros and cons of various investing strategies and their appropriateness for each client.

In Life: Applying Radical Transparency

Much has been written about the notion of authenticity in terms of living a life that, in all respects, reflects who you are. Yet we often live in different modes of life where the “authentic” version of us is nuanced for the situation. Transparency, on the other hand, implies that no matter the place or time, we share our true selves, the details of our lives, and allow trust and engagement to build with everyone around us.

Providing a deeper look into who you are and what informs your opinions and beliefs is a wonderfully transparent way to build long-lasting and trust-filled relationships. Taking this approach in life has wide-reaching benefits, in my view, which cross lines between personal and professional.

The impact is particularly profound at boutique asset management firms (like ours) and smaller advisory practices (like many of the financial advisors we serve) because what we do and who we are become understandably enmeshed. For example, as CEO and Co-Founder of Blueprint Investment Partners, I’m not a king who is seven layers removed from the financial advisor who decides to trust our firm with managing their client’s assets. Likewise, the financial advisors we serve are not the Wizard of Oz behind a curtain when a client walks in your door. For us both, our personal and professional successes are linked.

Most of us have experienced a situation where we interact with someone who comes off fake, overly rehearsed, or phony. Those interactions don’t make us feel warm and fuzzy inside. Rather, they make us question the person’s motivations, and leave us with little incentive to interact with that person again. There’s a reason why “wholesaler” has become a bit of a dirty word in our industry.

Pardon My Bias, But…

In the 10 years since we launched Blueprint Investment Partners, Langley and I have lost quite a few hairs off the top our heads (OK, OK, we’ve both lost ALL the hairs off the top of our heads – thanks a lot, bald genes), but we’ve only added to our conviction in radical transparency.

Ten years ago, maybe transparency was a differentiator. Today, it feels more like a must, a requirement, table stakes.