Give Schwab and its people credit: they continue to throw the best mutual fund party around. And the party keeps getting better. If last year's Tuesday night gala featuring the Turtles was thought to be the ultimate, it paled next to this year's outdoor, Janus-sponsored Greek festival topped off by a performance from Kool and the Gang. Here is one advisor's view of all the things good and bad from this year's Impact conference.
Impact's theme this year was change and re-invention. The focus was heavy on practice management and strategy sessions, with comparatively few investment panels. This focus is itself a reflection of Schwab's ongoing commitment to change and re-invention. Schwab has transformed itself from a discount broker/dealer offering mutual funds through its supermarket into the back office platform of choice among independent investment advisors. It has done so by listening closely to the comments it receives from its advisor clients and continually upgrading its technology, services and products to help advisor clients maintain their competitive edges.
As a result, Schwab has transformed itself into a strategic ally with many of its advisor clients. And so, rather than having the typical "Growth Investing" and "Value Investing" panels of years past, this year's Impact sessions featured topics related to the so-called "Wealth Management" field, e.g., "Elevating Your Practice with Advanced Estate Planning," "Charitable Giving and Wealth Transfer Strategies," etc., and advanced practice management, e.g., "The Future of the Financial Advisory Business," "Succession Planning for Tomorrow," etc. As usual, the speakers featured successful practitioners. In a step that again reflected Schwab's ongoing changes, many of the sessions featured speakers from U.S. Trust. (The choice raised a few eyebrows among advisor attendees, some of whom continue to view the Schwab/U.S. Trust combination as a dangerous encroachment on financial advisor turf. Disclaimer: this writer does not share that view.)
On the investment side, the conference featured two main sessions. The first was a global investing panel with Marc Gabelli of Gabelli Funds, Bill Wilby of Oppenheimer Funds and Bill Anderson of Driehaus Funds. Schwab's Mark Riepe was the moderator. Riepe did a good job, asking the usual right questions about investment processes. The best insight from the panel was that, regardless of whether they follow a value or a growth methodology, all were structuring their research efforts according to global sectors, as opposed to countries or regions, as the world has become smaller due to the Internet and various economic changes such as the creation of the EMU and the Euro.
This insight has important implications for advisor due diligence, for advisors who do not understand this will find themselves asking the wrong questions of fund managers. "Why do you hold so many Swiss companies?" is no longer as relevant as "how do you view the global automobile sector and which companies do you find to be the most attractively valued?" This type of information is terrifically useful for advisors, and the Schwab conference is the perfect forum for assembling this type of panel.
The second major investment session was the much-awaited panel of Janus fund managers on Tuesday afternoon. As one would expect, this session was extremely well attended. And it was a pleasure seeing five of the Janus managers on stage, for within the advisor community Janus is regarded as a top investment house that almost goes out of its way to never make its managers available for interviews. Janus marketing executive George Hagerman, who asked straightforward questions designed to give the managers the chance to elaborate on their investment process, moderated the session.
Indeed, the portfolio managers reinforced the impression that Janus, as advertised, "digs deeper" -- their company analysis is quite impressive. Unfortunately, after the first time around, the message became repetitive. Advisors were hoping for something more than an affirmation that Janus does more than simply talk with a company's CEO and CFO when doing its independent research. The session would have been more informative, for example, had the managers talked about their holdings in detail relative to each other.
For example, Janus Olympus (an unabashed growth fund), Janus Strategic Value (an unabashed value fund) and the Janus Fund (somewhere in between growth and value) all recently held a stock called Charter Communications. (Note: all portfolio information in this article is based on my own research using Morningstar's August 2000 release of Principia Pro.) Why did all three fund managers find the stock attractive? Claire Young of Janus Olympus had recently sold Charter out of her portfolio. The other two funds continued to hold it. Why? How do they see the stock differently?
Another example: both Strategic Value and Olympus were owners of 3Com; Janus Fund was not. What are the managers' views? Is 3Com too expensive for Blaine Rollins of Janus Fund, but not for David Decker of Strategic Value and Young? How do they assign values to the companies they own? How do they establish sell targets? These types of questions would provide advisors with the opportunity to dig deeper into Janus, which is at least part of the reason advisors attend the conference.
Some advisors and fund companies were disappointed with the Janus session for a different reason. Advisor attendees wanted to hear more than the views of one fund family, and other fund companies wanted the opportunity to let their managers speak on panels.
Schwab certainly has a tough challenge to meet in putting together a conference agenda that will appeal to its broad range of attendees. Perhaps this panel was an experiment with a new format. Or perhaps it was created based on the fact that Janus is one of the most widely held fund families in the Schwab system and, based on the ability to actually get five Denver-based managers in a room together, this panel would hold wide appeal among advisor attendees. Or, in a less robustly expressed viewpoint, perhaps this was more a reflection of Janus' place in the Schwab OneSource system and the influence it was able to exert as a major sponsor of the conference, including the Tuesday night gala. Whatever its genesis, this panel was a good idea that came up a bit short.
In a further indication of Schwab's change, this year's Impact conference featured general session speakers who were not investment professionals. In years past, the conference would typically feature at least one prominent investment professional as a keynote speaker, including such luminaries as Peter Lynch, Abby Joseph Cohen, Michael Price and Mario Gabelli, etc. This year, attendees did not hear about stocks or markets from the keynote speakers, but rather, were treated to the collective wit and wisdom of U.S. Senator John McCain, Former U.S. Secretary of Labor Robert Reich, former Apple Computer development team member Guy Kawasaki, the futurist Peter Schwartz and the former NBA basketball player Earvin "Magic" Johnson.
True to Impact's theme, each of the speakers offered their visions, analysis and/or suggestions for change. Kawasaki offered "Ten Rules for Revolutionaries," e.g., "Jump the Curve," "Don't Worry, Be Crappy," "Think Digital, Act Analog," "Don't Let the Bozos Grind You Down," etc., which are a blueprint for anyone interested in revolutionizing their industry. His best example: the Apple computer, which when first designed and shipped, had limited memory, no color, no printer and no modem. Yet, they knew they had "jumped the curve" by creating something new, so they shipped it. Kawasaki put it simply: if they had set about in the early 1980's to create a desktop computer complete with a 10 gigabyte hard drive, color, printer, modem, etc., they never would have gotten a finished product out the door.
Johnson told of his change and re-invention from a star basketball player to a successful businessman who owns a chain of movie theatres and Starbucks shops. The key to his transformation was "taking his ego out of it." Johnson continually asked questions of people in business so that he could learn, and he was not afraid to fail.
Schwartz spoke of the major political, economic and medical/scientific trends in place that will lead to major advances in the quality of life over the next twenty years. These include the mapping of the human genome system, the development of alternatives to the internal combustion engine and, of course, the continued development of the Internet. Senator McCain spoke of his desire to change many of the current practices in the political sphere. Professor Reich, too, spoke of politics and the current changes in the nature of the labor force and its effects on business going into the new century.
Overall, the substance of the Impact conference reflected the changing nature of the financial advisory business. New distribution channels, new products, new business models, new competitive challenges, etc., have made the providing of financial advice a dynamic industry. Schwab has been one of the key agents of change in the industry. They have embraced all aspects of it and are striving to continually push the envelope further out. The Impact conference has changed along with Schwab and the industry. It now appeals to a far different, and wider, group of constituents than it did even a few years ago. However, one thing remains the same: if you are in any way, shape or form associated with the fee-based investment advisory business, you should be looking to attend next year's Impact conference in Seattle.
Part 2:
The Exhibit Hall and Other Stuff
Part 3:
An Even Better Experience for Advisors
Richard Bregman, CFA is a New York-based Registered Investment Advisor and president of MJB Asset Management, LLC., currently managing over $45 million in assets. Richard is a former member of the Schwab Institutional Advisory Council. 
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