By Scott Ronalds

In the second installment of our series marking our 5th anniversary, we introduce the greatest sources of constant tension within our business. 

We go through our fair share of Advil at Steadyhand. Like any business, we’re faced with strategic decisions that involve internal discussions in which not everyone sees eye to eye. While some choices are easy – the boardroom m&m’s are for clients only – others face more rigorous debate. Below are five issues that have been constant sources of tension within the walls of 1747 West 3rd Avenue.

Advertising

As a relatively young firm, one of our biggest challenges is getting our name out there. Advertising is one way of doing this. There are two problems with advertising, however: (1) it costs a lot of money; and (2) it can send the wrong message to clients (fees are going toward marketing instead of investment management). Also, the effectiveness of traditional advertising (newspapers, magazines, TV) is questionable in an age of social media and changing consumer behavior. When we’ve experimented with online and traditional advertising, the results have been unspectacular.

The topic comes up every year at our annual strategy session, with valid arguments made for and against it. Is it a necessity or just a fallback? With good 5-year numbers now on the books, the discussion continues. The Advil is extra strength.

Website

steadyhand.com is our hub. We put a lot of resources into our site to keep it fresh and informative. To date, we’ve had four different home pages, including versions with a grizzly bear, a series of animated vignettes, and a bold leading statement. The pressure to make changes often arises when business is quiet or web traffic is stagnant. Do we need to make a change to the home page? Add more tools? Prioritize different messages? Produce more videos? How do we convert more prospects into clients?

The challenge is to balance cleanliness and simplicity with new content and ideas. The last thing we want is a generic, uninspiring or overly-busy site. Again, a headache-inducing task at times.

Minimums

Our minimum initial investment is $10,000 per fund (and $1,000 for subsequent transactions). We settled on this figure because it’s roughly the break-even point to manage and administer an account. It puts us in a tier above the banks and traditional fund companies where minimums are typically $500 to $1,000, and below the ‘managed account’ programs where minimums often range from $500,000 to $1 million.

There’s been much discussion internally that our minimums are too low for the type of service, fees and investment managers we offer. The counter-argument is that as a young firm, we want investors to try us out. Even if it involves a smaller initial investment than they are capable of making, the thinking is that the ‘Steadyhand experience’ will win them over. Five years from now, our minimum could be $5,000 or $50,000. Or it could stay where it is. The decision won’t come without tension.

Balanced Fund

We put a lot of thought into our initial fund line-up. We decided on five funds that cover the waterfront. We wanted a tight offering, as one of our goals is to keep things simple. Our early thinking was that a balanced fund was unnecessary because clients can achieve the same result using our underlying funds. Indeed, we have a series of ‘model portfolios’ whereby investors with different objectives, time horizons, and levels of risk tolerance can build a portfolio of our funds suitable for their circumstances. Further, balanced funds can be perceived as expensive, overdiversified mass-market products.

Internal discussion on a balanced fund surfaced a few years ago, however, when advocates of the firm started lobbying us for an all-in-one portfolio – one where asset mix and rebalancing decisions would be made on the clients’ behalf. A key benefit of such a fund is that it can improve returns for investors who aren’t as attentive or interested in monitoring their portfolio. We had many internal discussions on the topic, with thoughtful arguments provided on both sides. The Advil jar is sealed on this one though, as we recently launched the Founders Fund.

The Elevator Pitch

We feel we offer a great value proposition to investors: experienced managers, concentrated portfolios, low fees, transparent reporting, thoughtful & informative communications, co-investment, clear-cut advice, simplicity, a steady hand, and crisp client service. The problem is, what do we lead with? Which one or two points resonate the most with investors? What will someone remember about Steadyhand after first hearing about us?

While the tenets of the firm have remained rock solid, this has been an ongoing topic of discussion and has led to some changes and refinements in our messaging over the years. The bottom line is that we feel they’re all important underlying elements that help make our clients better investors.