Great Relationships, Advice and Wine

To strive to provide better guidance and service to our clients, both Brad and Keith have participated in “study groups” for many years. Since 2005, Brad has participated with approximately 25 advisors in the BAM Masters Forum, meeting at least twice a year with advisors nationally affiliated with The BAMAlliance.

Brad’s Masters Forum group met in Napa, CA last week. A highlight of this meeting was spending Monday afternoon and Tuesday morning with David Booth, CEO of Dimensional Fund Advisors (DFA).  David very openly shared his views with us on a wide range of topics and we had an excellent Q and A session with him.

David provided perspective on being in the financial business since 1981, the market downturn in 2008-09 and the increases in the financial markets since then. He stressed the importance of investor behavior. A key to investor behavior is a client’s relationship with a good financial advisor, as the advisor can assist the client to adhere to their financial plan and stay in the market.

David made complex topics simple. Structure a globally diversified portfolio. Rebalance it. Have a long term perspective. Do not be jumping in and out of the stock market. DFA’s strategy of stock investing should outperform most “active” money managers due to less frequent trading and lower fees charged to clients

To reap the rewards of the long term upward trend of the stock market, one must remain invested. Booth noted that only DFA and Vanguard, of all major mutual fund companies, had positive stock market fund inflows during the downturn in the financial markets. These investors who added to their portfolios, or stayed the course and did not sell, have been rewarded for doing so. The lesson is that while the stock market has risks, which often appear, the stock market provides rewards to those who are able to be patient enough to reap these rewards.

With this consistent philosophy and methodology, DFA has grown to become the 9th largest mutual fund company in the country, managing $290 billion.

Monday evening, Booth then hosted us on a visit to his Booth Bella-Oaks vineyard and the neighboring Staglin Family Vineyards. We met with the two vineyards’ winemaker. The winemaker, a former hedge fund manager, explained how technology is used to monitor the development of the grapes. With computer networks and current technology, he can now monitor the vines and grapes continuously. The improved technology allows him to have more information and improved decision making as the grapes develop. Even with this technology, there are still many factors beyond his control which affect how successful the wine will eventually become. As we cannot control or forecast the financial markets, they cannot control the weather or other important factors which are key to producing great wine.

David explained some of the structural changes he has made to his vineyard since purchasing it in 2010. He has uprooted and will replace many acres of vines to grow better quality grapes. This means that no grapes will be harvested from these acres for at least a few years. He is investing for the long term, with the expectation of a greater return per acre in the future.

Booth is changing the direction of the new vines, from vertical to diagonal, so the grapes will get more balanced exposure to the sun. The vineyard used to be planted with only one type of grape. He is planting numerous varieties of Cabernet Sauvignon grapes. The winemaker will then combine these grapes in various combinations after the harvest to optimize the taste of the resulting wine. Like a financial portfolio, he is restructuring his investment to give it the best chance to produce a good outcome, but the actual result is not guaranteed.

David has a vineyard, but his property lacks equipment to actually make wine. However, he has developed a close relationship with his neighbors, Shari and Garen Staglin of the Staglin Family Vineyards. After seeing David’s vineyard, we went to the Staglin’s winery. We entered into their vast, spotlessly clean caves built into a mountain where hundreds of barrels of Chardonnay and Cabernet Sauvignon are stored. They will produce thousands of cases annually. As the Staglin’s had excess space and production capability, as well as a winemaker who could efficiently share his services between the two vineyards, Booth’s grapes will be made into wine at the Staglin facility.

This neighborly relationship (and good friendship) will benefit both Booth and the Staglin’s, just as our clients benefit from the close relationship we have with DFA and my fellow advisors in the BAM community. As we had dinner at the Steckter House on the Staglin property, we learned more. Shari and Garen Staglin explained how they renovated the house, built in the late 1800s. They added solar panels on the grounds, which now produces power for the house and its executive kitchen. We toasted a family ancestor, who provided the inspiration for one of their wines. The Staglin’s talked passionately about their charitable values and efforts. The family has raised and donated nearly $725 million, primarily to mental health research. All the proceeds of their Salus Chardonnay and Cabernet Sauvignon brands are donated to this cause.

Shari Staglin talked to me about the houses and properties near their winery, all dating back over 100 years. Like their neighbors, the Staglin’s view themselves as stewards of this land, which they will maintain and improve, then pass on. Their vineyard is now certified organic, as Booth’s is planning to become. The Staglins were gracious and warm as they educated us about wine, their property and their personal values.

Opposite from the entry to the Staglin caves, was a large bench. On the bench’s huge backing, is the following inscription:

Staglin Family Vineyards: where shared values are the keystone of relationships.

The meetings I had with my fellow advisors and the time spent at the two vineyards shared a common message. Having shared values with our clients will produce great client relationships. Having great business partners that we can trust and interact with, like the BAMAlliance and DFA, will benefit our clients. It will enable us to provide our clients with a successful lifetime of integrated financial experiences, so our clients can be comfortable and secure.

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