Join the guys' as they sit down with Adam Zuercher to discuss his journey - from humble beginnings to becoming a prominent CEO in the wealth management and financial planning industry.
Adam will share his early days as a finance enthusiast, his unwavering determination to excel, and the key events that led to the beginnings of Hixon Zuercher Capital Management. Discover how Adam and his Team's steadfast commitment to serving clients' best interests set the foundation for a client-centric wealth management firm and the smooth leadership transition that came from succession planning.
For the full transcript, show notes, and resources, visit theinvesteddads.com/189
Sign up for our exclusive newsletter here!
The Invested Dads: Website | Instagram | Facebook | Spotify | Apple Podcasts
Join the guys' as they sit down with Adam Zuercher to discuss his journey - from humble beginnings to becoming a prominent CEO in the wealth management and financial planning industry.
Adam will share his early days as a finance enthusiast, his unwavering determination to excel, and the key events that led to the beginnings of Hixon Zuercher Capital Management. Discover how Adam and his Team's steadfast commitment to serving clients' best interests set the foundation for a client-centric wealth management firm and the smooth leadership transition that came from succession planning.
For the full transcript, show notes, and resources, visit theinvesteddads.com/189
Sign up for our exclusive newsletter here!
The Invested Dads: Website | Instagram | Facebook | Spotify | Apple Podcasts
Welcome to the Invested Dads podcast, simplifying financial topics so that you can take action and make your financial situation better, helping you to understand the current world of financial planning and investments. Here are your hosts, Josh Robb and Austin Wilson.
Austin Wilson:
All right. Hey. Hey. Welcome back to The Invested Dads Podcast, a podcast where we take you on a journey to better your financial future. I'm Austin Wilson, Co-Portfolio Manager at Hixon Zuercher Capital Management.
Josh Robb:
And I'm Josh Robb, Director of Wealth Management at Hixon Zuercher Capital Management. Austin, how can people help us with our podcast?
Austin Wilson:
Well, first of all, we would love it if you'd subscribe. If you're not subscribed, hit that plus follow, subscribe, or whatever button is on your podcast player. That way you get new episodes when they drop each and every Thursday directly to your device. We'd also love it if you'd leave us a review on Apple Podcasts or Spotify or wherever you're listening. That just helps us to be found by more people in the search and stuff like that. So, we'd really appreciate that. So today we are joined with a special guest, our good friend, our colleague, Adam Zuercher, the CEO, Chief Investment Officer; Everything he does here, which is a lot, at Hixon Zuercher Capital Management. So, thank you, Adam, for being here.
And I guess as a matter of background as to why you're here. First of all, we love talking to you, so we love being with you.
Adam Zuercher:
Thank you.
Austin Wilson:
Second of all, you're currently going through a bit of a transition, so we're going to be talking a little bit about that as well as the last 20 or so years as you've been the CEO of a wealth management firm that we currently work at. So, thank you for being here. We're excited. This is going to be a fun conversation. So just take a couple moments, introduce yourself, your background, and a little bit about what you've done for the last couple decades.
Adam Zuercher:
Oh, well first, thank you for having me here, Austin and Josh. It's a privilege to be a guest on your podcast. I've been following along since the very beginning. Helped you get the thing launched.
Austin Wilson:
One of our biggest supporters.
Adam Zuercher:
Yeah, I think I was on one, at least one of your prior shows. Not such a fun time in the circumstances we were going through. Yeah, I think it was during the COVID bear market.
Austin Wilson:
It was, yeah.
[2:06] - Meet Adam Zuercher: CEO & Chief Investment Officer
Adam Zuercher:
But anyhow, it's always good talking to you. Like you said, I get the privilege of meeting with both of you guys on a regular basis. Today I serve as CEO, Chief Investment Officer. I am one of the co-founders of the firm, and we launched 21 years ago, this coming August.
Austin Wilson:
21 years. Wow.
Adam Zuercher:
Started the firm in a spare bedroom of my house, in fact. So, my background is I went to school and I majored in accounting at the University of Toledo, and I started out in a local CPA firm in the audit department. Within just a few months, I realized that I was not in a position that I wanted to be in for the rest of my career. And so that was tough to navigate that.
Austin Wilson:
So, you kind of did an audit on your life. Exactly.
Josh Robb:
Self-audit.
Adam Zuercher:
A self-audit, yes.
Austin Wilson:
Internal controls were not checking all the boxes there.
Adam Zuercher:
Exactly. So, I started talking with the partners of the firm about what other opportunities are there. I was thinking, well, maybe I would enjoy the tax department more so than the audit. And Nick Pry, one of the partners of the firm at the time; it was called Pry Professional Group. And Nick mentioned to me the idea he had to start a personal financial planning department of the firm, and that would involve setting up a registered investment advisory arm of the firm where we would do financial planning and investment advice and so forth. I was very intrigued and wanted to learn more. So, Nick and his partner, Chuck Stump and I, worked together to start that department in the firm. And that was in summer of '99, late '99. When I made that transition, I immediately got excited as I dug into what financial planning was all about.
And later in life I did a strengths assessment through Gallup. We do this with all of our team members, and I found out why I did not like auditing. One of my strengths is futuristic. And what do you know about financial planning?
Josh Robb:
It's forward, all forward.
Adam Zuercher:
It's forward-looking. You are helping someone plan for a future goal that they want to achieve. And so that was more aligned with my unique ability. And as I dug into financial planning, the part that excited me the most was the investment piece of financial planning. It just fascinated me that you could invest money into a publicly traded business, and you could compound your investment over time by investing in great businesses and the stock price would grow. And so the more I learned about investing, the more excited I got about investing and really was the part about financial planning that fascinated me the most.
And so I spent three years there at the firm, and over those three years, got my Certified Financial Planner designation, already had my CPA credential, and ultimately concluded that what I wanted to do was manage money. And as I was talking with Nick and Chuck, we were outsourcing the money management and we were hiring other firms. We were giving advice, financial planning, creating the plan, and then finding a good money manager for those clients. But I wanted to bring that in-house and do more of it hands on.
Now, here's the kicker. I was 25 years old and they had quite a reputation as a solid CPA firm and being 25 and little experience and wanting to manage money, that wasn't quite the right platform for me because they had a reputation to protect and I absolutely understand that. And so they desired to continue to outsource. Ultimately, I decided to go out on my own and start a wealth management firm where we would manage money in house. And to this day, I have a good relationship with that CPA firm. They do phenomenal work and kept in touch with a lot of the people that I've worked with in the past. So I did want to mention that if it weren't for them and that opportunity, I would not be here today. There you go. Talking to you about this transition that I'm taking and the career that I've had.
Josh Robb:
So you started the firm, you and then Tony?
Adam Zuercher:
Yes.
Josh Robb:
We're a fee-only advisory firm.
Adam Zuercher:
Yes.
Josh Robb:
So we continued to do the planning aspect, but you incorporated into the wealth management piece. So not only were we creating a plan, you were implementing the plan in a managing and monitoring that plan in an ongoing basis.
Adam Zuercher:
Correct.
Josh Robb:
So you were getting both pieces of that. And as a point, like you mentioned, your dual roles kind of started from that point is once you're managing money, there needs to be somebody overseeing the decision making of those money management-
Adam Zuercher:
Absolutely.
Josh Robb:
What investments are you holding? But then as this firm grew and there were more employees just started with the two of you, but now we're a team of 12, you had to take on the role of CEO and start casting a vision and getting the firm all on board to the same direction. And so as your role grew, you started to add more and more hats and you started being stretched and pulled into more places. And I'm sure there's some that you found you liked and some that you had to do, because you had to do them.
Adam Zuercher:
Yeah.
[7:21] - The Hardships & Enjoyments of Entrepreneurship in the Financial Services Industry
Josh Robb:
What are some of the roles that showed up along the way that you enjoyed that maybe you didn't start off doing? Can you think of any?
Adam Zuercher:
Well, I really do enjoy being in that position where I get to help drive the strategy for the business and create a vision that people can get excited about. That goes back to that futuristic strength. I do have a lot of ideas and I have the ability to see the big picture.
One of the neat things about my partnership with Tony who joined me shortly after I went out, he worked one more tax season. He was at another accounting firm, and then he joined me. Over the years, we discovered we had complementary strengths and I was very much an idea person and Tony was able to execute. He was process driven and helped keep things on track with the business. Some of the things I enjoyed was really the people side of the business. Really enjoyed the people side of the business. And that's both team members and clients, getting to know clients. I've also enjoyed the marketing side, although I wouldn't want to do that full time, but I've enjoyed it along the way. I can tell you one thing I didn't enjoy, Josh.
Josh Robb:
What's that?
Adam Zuercher:
Compliance.
Josh Robb:
Compliance, oh man, that's a good one. I don't know why.
Adam Zuercher:
Who does that for the firm somehow?
Josh Robb:
Yeah, I'm the chief compliance officer.
Austin Wilson:
That's one of Josh's hats.
Josh Robb:
Some have different strengths. It's not a futuristic thing, that is not.
Adam Zuercher:
And if the other, my absolute favorite part of my weeks are the times when we sit down as an investment team and we talk about the markets and the economy and our positions and we discuss strategy with our portfolios. So Josh, at one time you were part of those conversations. As the firm evolved, you became more focused on the financial planning side. Once Austin joined the team five years ago, he became more focused on the asset management side. So getting to meet with Austin several times per week was always good as well.
But yeah, I mean I have enjoyed a lot of the roles along the way, but I am now at a season of my career where I have decided that I really just want to focus on portfolio management. That is my passion and I believe my unique ability and where I want to put all my energy going forward. So what does that mean? Well, I recently made an announcement to the team and to clients that I will be retiring from the firm. I guess retiring is the word to use.
Austin Wilson:
It's a weird thing to say at your young spry age.
Adam Zuercher:
It is weird. And I get mixed reactions when I say I'm retiring, but I'm retiring from Hixon Zuercher Capital Management, a firm I helped create. The question is, when you retire from something, what are you retiring to? And in fact, as you both know, at our firm, we've put a lot of emphasis on that through the work that Tony Hixon and Scott Miller are doing.
Austin Wilson:
We've had some podcasts on the book Tony did, and then we had Scott on.
Adam Zuercher:
Some excellent episodes. I highly recommend anyone who is facing retirement to listen to those, great podcast episodes.
So for me, I knew that after 21 years, it was time to make a change and it was time to get more focused on that portfolio management role. Initially, I didn't know what that meant. And so when I made the decision, it was initially managing money for myself and my family. Since the announcement's been made, and over the past few weeks, I have really refined what I want to do next. And that is join a family office as a portfolio manager. And so I am exploring that opportunity right now, as we speak. And so that's the direction I'm headed. And I want to say this, I would not have made this move... I would not have made this decision if I didn't believe this firm was in great shape and prepared to handle our clients. So because of you two and the rest of our team, I can confidently make this transition and know that our clients are going to be taken care of.
[11:32] - Adam & Hixon Zuercher's Investment Philosophy
Austin Wilson:
Yes. Obviously, investment, picking, stock selection, portfolio management is your passion and that's what you want to continue to do. When I talk to you, that's what you're most excited about, which is super cool because we have that in common. So, talk a little bit about the way that you think about investing. Talk about your investment philosophy and how you like to think about buying companies for the long term.
Adam Zuercher:
That's a great question and my philosophy has evolved over 21 years. Investing is a great career in that you get better with time and with experience, and you really do refine from your own experiences in terms of what works and what doesn't. But my philosophy, I have a bias towards investing in stocks for the long run. So Jeremy Siegel wrote the book Stocks For the Long Run. And if you want to beat inflation, which is one of the greatest threats to a retiree’s retirement, and the ability to successfully retire and not run out of money, keep up with that silent creep up in living expenses. You have to invest in a way that not only keeps up with inflation but exceeds it. And then you throw in healthcare costs that are rising faster than any other cost really for a retiree. And you really need to make sure you're investing well.
And I've found that equities are the way to do so. I am biased towards investing in equities. I'd like to keep things simple. So the way I think about stock investing is, think of it like this. A quote from Warren Buffett, "If you wouldn't own a business for 10 years, don't even think about owning it for 10 minutes." And so that's my mindset is long-term philosophy, primarily.
Okay, so what does that look like? If you're buying an entire business, well, number one, you're looking for a business that's profitable. Number two, you want earnings and earnings growth. It drives stock prices up. That's very important is identifying businesses that have some sort of economic advantage or a moat as we like to say, that protects them from their competition. They have superior earnings power; they have some sort of product or service that separates them and differentiates them.
And so those companies are growing and also producing a lot of cash flow, free cash flow. So, this is where my accounting background comes in and why I'm so focused on those fundamentals is we do look at the balance sheets, we look at the income statements and the statement of cash flows. Earnings can be manipulated, but cash flows show you the truth. And we want companies that have strong free cash flow and then therefore also high return on invested capital. That combination is very powerful. And so over time, we've built here at Hixon Zuercher a couple of investment strategies centered around those concepts. So that's number one is the fundamental side of the businesses we're investing in. Number two, we like to think about the future. Where is the world going? And this is where my futuristic hat comes in again, what are the innovations happening in the world today and how can we capture that?
An example I like to use is 16 years ago now, Apple launched the first iPhone. So, I remember when it was launched.
Austin Wilson:
It doesn't sell.
Adam Zuercher:
And right before the great financial crisis, good time. But when it was launched, one problem that we had here is we couldn't really buy it because they had an agreement with AT&T. And AT&T service where I lived out west of here in the middle of a cornfield at the time was just not there. So I waited and waited and waited for them to form a partnership with Verizon, but I saw the potential of that little computer in your hand. It was going to change the way you live, work, and play. And we started to get real focused with our investment philosophies and strategies on what are the companies that are innovating and embracing this mobile technology.
And then there's so many byproducts of one company launching such a great product. And so we've invested in those companies and it's been pretty powerful.
I guess the takeaway here is number one, fundamentals. Number two, find themes, look for investment themes that you want to take advantage of. What are the big forces out there that are driving stock prices? And to bring it to today, I think it was November 30th, 2022. Anybody know what happened that day?
Austin Wilson:
Was that AI?
Adam Zuercher:
That's right. ChatGPT was launched. And look at what's happened since. Yeah, it's just been exploding and artificial intelligence is now something we've been talking about for a while, but now we're seeing the power of it. Nvidia stock, for example, this year, other companies as well are benefiting from this. And so now you want to look at, okay, what companies can benefit from this theme? And is it some sort of a sustainable theme?
And then the third piece that I would say we've incorporated into our strategies here, and I also am a believer in, is concentrating your portfolio and your best ideas. Now, you want to be diversified. You don't want to take too much risk by putting all your eggs in one basket, but at the same time, you don't want to be de-worsified by owning every stock on the planet. You want to really own the cream of the crop. You want to own the best companies and have the conviction to hold those companies. And over the long run, I do believe you can outperform average returns by taking advantage of only owning the best companies. And you can immediately, for instance, exclude companies that don't meet certain criteria and throw those out. And so I'm a fan of active management, and I also believe that you can do quite well by being selective with your investments.
Austin Wilson:
I keep going back to the thinking of there's 505 companies in the S&P 500. That does not mean there's 505 good companies in the S&P 500. Just because they met the threshold to get in there.
Josh Robb:
Their requirement to get in-
Austin Wilson:
From Standard and Poor's does not mean that they're worth investing in. So yeah, that concentration instead of owning the entire world seems to make a lot of sense in a way. So thank you for explaining that.
[18:03] - Leadership Styles & Knowing Your Strengths to Run a Firm
Josh Robb:
Yeah, so like you said, there's kind of that duality of your investment side of things. And then as a financial planner and CEO, I'm going to talk a little bit and ask you questions on the other end. I've had the opportunity to be a partner with you for a little while and to learn from you managing a business. And I've really appreciated the opportunity for me to learn while I was an employee watching, but then also this last year or so where we were together as partners. And so I've learned there's a lot of responsibilities and a lot that goes on that end. But along with that, everybody has a different approach to how they manage. You want to talk a little bit about your leadership style, how you look at managing a team, both the investment world, but also just this firm overall?
Adam Zuercher:
Yeah. Well, good question. Well, Josh, you mentioned earlier that it started out it was just Tony and I, and for a few years, that's the way it was. Two years in, we hired our first assistant, administrative assistant or client service coordinator. Great people helping us in that role. But as the firm grew, as we got new clients, there was a day when we knew we needed to hire another financial advisor to help service those clients. And Josh, you were our very first financial advisor.
Austin Wilson:
The guinea pig.
Josh Robb:
That's right.
Adam Zuercher:
Now that was, I believe about 10 years ago. Am I right?
Josh Robb:
2013, yep.
Adam Zuercher:
So it took us a while to get to that point as a startup business, as two young guys out there growing a firm with a vision and just trying to earn business and some credibility with our results.
Josh Robb:
Like you said, you were 25. You were young. And so building that track record for people to say, "These guys have the ability to plan and manage my money", took some time.
Adam Zuercher:
For sure. Yes. And then throw in the great financial crisis in the middle of all that. And it took us some time to get to the point where we could hire another advisor, so once we got there, though, Josh, you were the fourth member of the team, and it was a game changer. And one thing I have learned where my perspective changed from 2002 to 2013 is the power of team. And once we brought you on board, I immediately saw the power of adding to your team and then embracing your unique abilities. And so with each new hire, that's only proved itself more and more. And so I am a big fan of teamwork. I have really never wanted this business to be about me or about Tony, or about you, Josh, or any one person. I wanted it to be about the team and what we can do collectively for our clients.
So I do believe in the power of collaboration and bringing everyone together and emphasizing each team member's strengths and unique abilities. So we talk a lot here about discovering your strengths and your unique abilities and leveraging those, embracing them and leveraging them. And it's kind of like when you were a student in school, let's say you had all A's, but you had one C on that grade card. What class did your parents want to talk about when you brought the grade card home and focus on it would be the C, right? But we all know that that class wasn't going to be the future you, what you were going to embrace. If you know struggled in math, you probably wouldn't be in finance. But my point here is that we put a lot of emphasis on weaknesses in our education system as we grow up.
But in our careers, I believe it's time to start zeroing in on where are my strengths and what can I contribute? And so we have a lot of different ways that we draw that out of people over time. We've had assessments and also just talking with each other, and we try to put each person in that unique role and we build our team around what people offer. That's something that I've learned along the way in leadership, is empowering people. And that's been my philosophy, is just build a team and empower them to use their strengths.
Josh Robb:
And the empowerment I've always appreciated, especially when we're working with clients in that one of our biggest frustrations, I know we've talked about this sometimes when we're experiencing it on the other end as customers, is when you have an issue and the person you're talking to is powerless to help you, it's so frustrating for you guys to set that kind of idea for us that we're empowered to do a job and not only do our job, but find a solution, even if it's beyond what we normally do, so that the clients can experience that. I've always appreciated that, and I've liked that mindset of saying, "Hey, there's a client issue and you can help. You're empowered to do that. Step in there and make it right and help them." So that's been great. And I've enjoyed learning strengths. You're right, you don't spend a lot of time thinking about it.
It takes a little while to be introspective and maybe get some feedback from others to find out what really are the things that I am good at. Sometimes you just take it for granted, thinking everybody can do this because it comes natural to you. And that's not always the case. And it's always good to know that, to know where you best fit, so you don't spend your whole day sucking energy out of you, but you're doing things that drive you and give you energy, which is huge for longevity of doing anything you need to do something that you enjoy and are excited to show up and do.
Adam Zuercher:
Absolutely. I would say one more thing that I have found very important as a leader is to make sure the team understands what the vision of the firm is, what your mission is and your purpose, and what your core values are. So we've spent a lot of time, Josh, once you became a partner of the firm, working together as a leadership team, refining that as our team has gotten bigger, we wanted to make sure everybody was on the same page. Defining that and knowing why you're all there. What's the common purpose and what can you unite around? And that would be your core values.
[24:05] - Dad Joke of the Week
Austin Wilson:
As an employee, I really appreciate that. Thank you for that. Adam, I think we're going to take a break because as a loyal subscriber, you're very familiar with our weekly dad joke, and I think you've come prepared with one today.
Adam Zuercher:
Not just one.
Austin Wilson:
Not just one. Yeah.
Adam Zuercher:
I thought, well, there's three of us here today and I saw a few good ones, so I've got three for you. There we go. All right. I thought Josh would like this one specifically. So Josh, what do mathematicians call retirement?
Josh Robb:
I do not know. What would they call it?
Adam Zuercher:
Aftermath.
Josh Robb:
Aftermath.
Austin Wilson:
That's a good one.
Josh Robb:
I love it.
Adam Zuercher:
All right, Austin, you like to travel and go on adventures and have some fun experiences. Have you ever been to Las Vegas?
Austin Wilson:
I have not.
Adam Zuercher:
Okay. Well picture yourself in Las Vegas. How is retirement like a long vacation in Las Vegas? It's real simple. Austin, the goal is to enjoy it to the fullest and not wake up too broke.
Austin Wilson:
Wake up too broke. I like it.
Adam Zuercher:
All right, one more. We were talking about golf at lunch today. Josh, you have a son that's playing golf and well, as a dad, you've probably started to take up golf and if you retired, maybe more golf. So why did the retired dad take up golf?
Josh Robb:
I don't know.
Adam Zuercher:
Well, because he heard it's a great way to swing into a relaxed lifestyle.
Josh Robb:
Swing into a swing a relaxed lifestyle, I like it. Those are good. All right.
[24:05] - Adam Zuercher's Market Outlook & Economic Judgement
Austin Wilson:
Those are good. Thank you for bringing those. So now we're going to talk a little bit more in depth about what we're seeing in the world today, what we're seeing in the markets and the economy today. And then we'll let Josh bring things home here in a little bit, talking about the future.
So Adam, let's talk a little bit about what we're seeing and what you're seeing specifically in the markets. So we're sitting here, it's July of 2023. Things look a lot different now than they did in January and the year before that, for sure. So what are you seeing in the markets right now?
Adam Zuercher:
Well, I think if you were to ask us in January what we expected to see, it's not what we're seeing, right? I think we have, well, we just lived through the most predicted recession. That never happened.
Austin Wilson:
Yes.
Adam Zuercher:
I mean, maybe it still could, right? But all of the economists out there that are forecasting those types of things, keep pushing and kicking the can down the road. The recession was supposed to start in Q1 and then maybe this summer, and now they're saying 2024. But last year, the aftermath of COVID and the supply chain disruptions and cheap money, we had high inflation. The Fed went on an interest rate hiking campaign like we haven't seen since the eighties. And the result was not fun, of course, as investors in the short run, but it did create some opportunities for some investors being rewarded quite well if they jumped on those opportunities.
But what we're seeing right now is that the Fed has so far seemed to navigate this quite well. I mean, I know a lot of us have questioned the Fed along the way. We hate to see the Fed go much higher with interest rates right now, especially to see the way it's affecting mortgage rates and the housing market and that sort of thing. But the job market, the job market I think has been the support of all of this.
Austin Wilson:
Oh yeah.
Adam Zuercher:
And as we've navigated this, the job market has remained strong and solid, and people are working. Incomes are solid and they're spending money, I don't know if you've traveled lately, but I don't see people holding back. And so in our economy, two thirds of our GDP is driven by consumer spending. So as long as people are working, spending money, the companies we're investing in, they're making money.
And that's a key. Corporate earnings have been solid. We thought maybe we would see some sort of an earnings recession, but we didn't. And so I think everybody has been quite surprised to see what's happened. And I mentioned AI earlier, that's been a big part of this year's rally. It's fueled by tech gains and that sort of thing. But I think what we're learning from all this is that there's always opportunities out there, even when things don't always seem great, there's places that you can invest and make money. And that's something I've learned over the past 21 years here at Hixon Zuercher and managing money for others and talking to a lot of clients over the years, you hear what they're concerned about. There's always uncertainty out there. There's been uncertainty all year, yet the market's up and we're making money.
Austin Wilson:
Absolutely. So, you talked a little bit earlier and just now about some key themes that are working right now. AI's kind of the biggest one that's going on right now, but let's just also dig in a little bit to the fact that there's a lot of geopolitical uncertainty around the world. So the Russia, Ukraine War is still going on that hasn't really had any resolution. Taiwan and China have had their own issues and continue to be butting heads on things. We've got our own geopolitical dramas going into another election year here in the United States. How should these sort of instances impact us as investors for the long term?
Adam Zuercher:
That's a great question and that's a difficult question because again, there seems to always be some sort of geopolitical risk or concern out there. And I think as investors, again, I like to keep it simple, and you have to remind yourself of what you're investing in. And you're investing in businesses that in spite of those risks, are still able to make money. People are still going to buy their products and services. In the short run their stock may take a dip because they're exposed to some sort of risk or maybe part of their revenue is derived from Russia or whatever. But in the long run, it really boils back down to the fundamentals of finding companies that are producing great products and services that are improving society and are in demand, therefore producing economic gain.
And so, in the short run, yes, there's always those risks, but we never know, for instance, when the whole Russian Ukraine conflict last year at the beginning of the year, nobody was guessing that was going to happen. I didn't hear anybody have that in their top 10 predictions for 2022. So yes, that's still out there. It's interesting how the commentary has shifted from that, and we haven't heard as much about it. Things like that are risks. And again, I think it's just to be aware of what are your risks as an investor, what are you exposed to? Make sure you understand that and make sure your portfolio isn't overexposed to any one risk. That comes back to diversification. You want this fine optimal balance of concentration and great ideas, but being diversified in a way that helps mitigate some of those risks you mentioned.
[29:06] - Business Highlights & Challenges Faced Over the Years
Austin Wilson:
Yeah. That's great. So, I guess let's take a couple moments and focus on, just describe a couple of your best and most memorable things that you've encountered in your investing experience over the last couple decades, and maybe some of the biggest challenges that you've had as well. Because obviously you've been through some bear markets, you've been through some tough times, but there was some really great things in the middle, right?
Adam Zuercher:
Yeah, I mean, I guess let's start with the challenges and get those out of the way and then we'll follow that with some of the highlight reels. But the challenges, it's always a challenge managing money in a bear market. In my career, since I started here at Hixon Zuercher in August 2002, I've been through five bear markets with our clients. The very first one, we launched the firm in the midst of a bear market. So, we had the.com bubble, the tech bubble that started in March of 2000. And that did not end, the market did not bottom until October 2022. And tech stocks took a long time to recover. But again, we started the firm in August 2002 right in that bear market. So, while that might have seemed crazy to some, I saw it as opportunistic an opportunity to, when I was working at CPA firm, I would see client tax returns and I would see losses that they were taking.
And I would see sometimes clients were selling some great investments at the wrong time. They became, I guess, behavioral investing victims to that fear when you're at Lowe's and actually pulled the trigger and sold at that moment, sometimes those sales are justified, other times they're not.
So, we started the firm then that was the first bear market and then the big one. So, as you probably have heard, if you start a business, it takes about three years to get it off the ground and about five years to really make it profitable and that sort of thing. And I can testify to that. We started in 2002, about 2007 things were really finally going quite well. And then what happened in 2008? Everything got cut in half. So that was a challenge. 2008, 2009, that was a big challenge that we navigated it and we learned a ton from it, especially as managers of a business and how to prepare for the next time, especially as we added team members, we wanted to make sure we had a solid business and we were prepared for a storm like that again.
Then in 2018, we had one of the more mild bear markets. Some don't even call it a bear market. We were down 19.8%, but I'll round up to 20 and call it a bear.
Austin Wilson:
It felt like one up end Christmas Eve, right?
Adam Zuercher:
Sure did. Yeah. And then second to the great financial crisis was the COVID bear market. Never before have we shut down the economy due to a medical emergency or a virus that's spreading like that. And it was something new that we all had to navigate. And I remember as soon as we got news that they were going to shut everything down, we got to work over the weekend and just had to make some really tough decisions. We worked all weekend analyzing what the impact would be to the economy, to the market. And we met Monday morning early and we concluded that this is going to be rough.
And it very likely could be as bad as the great financial crisis, economically speaking, you can't just shut down the economy and not expect major impacts. What we didn't know that weekend was what the government response would be just a few weeks later. And so we had to make some decisions to hedge some of our risks. As you talked about earlier, there are risks and we're managing client money, and so we navigated that well in hindsight. But what I learned from it is you have to be nimble. You have to be willing to react quickly to new news and adjust the portfolio if necessary or if not, be willing to stick with it. But that was a very tough environment, of course, and we're still living the aftermath. The Fed going to zero, and the government providing fiscal stimulus as well ultimately led to the high inflationary environment we saw, and then the Fed response now to try to slow things down.
And so it takes some time for these things to work out and all the consequences, unintended consequences of that shutdown. So all of that has been challenging, but yet a very good experience as an investor, you learn a lot.
Now, as far as some of the highlights go, I think just as a competitive person, that's one of my strengths is competition. And the way I look at that in this business is I always enjoyed playing on sports teams and I liked winning, but here we're trying to produce great results for our clients. And so I think a highlight for me is at 25, I had a vision to launch this firm to create investment strategies that would do well for clients and help clients achieve their goals. And I think that's one of my biggest achievements that we've had as a team, is that we have had a track record of doing well over various timeframes.
And we even went to the extent of having that verified by an independent CPA firm to have our track record verified to follow the global investment performance standards. We've been recognized over that tenure as a top manager in various investment databases and including, if you look at our Morningstar track record, there's been seasons where we've performed quite well against our universe. And then I think just building a team, one of my highlights over the career is just building a team around me. And my vision was always that when I did retire from this firm, the firm would continue on without me. And that's exactly what's happening now. And I'm very proud of that fact that it wasn't just dependent on me, that I was able to transfer some of my ideas and way of operating and processes to you all, and you're able to continue that and serve our clients well.
[37:42] - The Importance of Succession Planning for Smooth Partnership Transitions
Josh Robb:
And that kind of leads into that idea of succession planning, legacy on the idea as a business owner that you can't just hope that it happens. You have to be diligent and make sure that you are putting in place processes, putting in place a structure that it's not reliant on one person, that if some person steps away, what you've created can continue to operate, grow, and thrive without any one person. And talk a little bit about that. Because I'm sure at 25, you weren't thinking succession. How did that evolve over time as you started thinking about at some point, "I do want to be done and I want to make sure that this does continue on."
Adam Zuercher:
That's a good question. People are surprised to know that we did think about that in advance. I don't think that's normal. Even as I talk to people now and I talk about how this exit has gone so smoothly with my partners and how we had a plan before we even knew we needed one, and we just simply executed that plan. And yeah, I think part of that is my futuristic strength. I do see the future, and I knew that that would be something we'd face one day. I didn't know it would be today or this year, but as we've worked with clients over the years, I saw a lot of small business owners that did not have a succession plan or waited too long to even try to create one. And I did not want that to be me. I was working way too hard to see the work that we were doing and the value of the business not be worth something one day or to not be able to sustain it and leave that legacy of a business that could continue on without me.
And so I knew we had to be intentional. Tony knew we had to be intentional, and we had this vision that we would work to try to transition our ownership to team members over time. And when we hired you, Josh, we told you that one day there would be an opportunity to be a partner in the firm. And we created this partnership track for team members and the first one to achieve it, and you became a partner. But before you became a partner a couple years before that, we knew we had to get real specific on what does it mean to be a partner? How do you enter a partnership? And then how do you exit the partnership? And my advice to anyone listening who is thinking about partnering with anyone on a business venture is before you sign the documents to go into a partnership, know how you exit that partnership is for any reason whatsoever.
Things just aren't working out or you want to retire or whatever the scenario, you can dream up, you should talk about it and define it. And so Tony and I did a lot of work on that a couple years before you became a partner. And we defined it everything from how the valuation would be handled to how the payment to the partner would be handled when they could retire. All those things are laid out. And same thing with an incoming partner. So Josh, when you were presented with the opportunity to be a partner, you also know what that looks like. And so when it came time as I felt this year that it was time for me to make that transition, when I presented it to both of you, we just followed the plan. And by following that plan, it's been a pretty seamless transition.
Josh Robb:
Yeah, there's, it's been great from the standpoint of knowing, the how doesn't need to be figured out in the middle of everything else. You already have the how.
Adam Zuercher:
Exactly. And one thing I would throw out there, Josh, I know that at Hixon Zuercher, we work with a lot of clients that are small business owners and maybe they don't have a succession plan, but we do have the expertise to guide them on how to create one. And we can give guidance on what to think about and also recommendations on who to talk to that our clients can work with to actually get that plan in place.
Josh Robb:
Thank you. And then the longevity, this firm continuing beyond your involvement, that's a legacy that hopefully I know you're proud of. I know we've had this conversation, but the goal will be that you can look back 15, 20 years from now and still see this thing you created, thriving, growing, and still achieving your initial goal of helping people meet those goals, find their goals, and get a plan to get there. I think it's great to be able to see it continue beyond you. That's always your goal. When you think of families legacies, you want your kids to continue to carry on your values and you've created this entity that continue to do that too, beyond your life. So that's awesome. I'm excited to be a part of it. I know Austin is.
Austin Wilson:
Absolutely, 100%.
Josh Robb:
Adam, thanks for coming today and talking with us. As we look back on this, hopefully we will maybe have you on again and you can share your insights from your next phase in life. And
Austin Wilson:
I just want to point out that podcast probably wouldn't be here without Adam Zuercher, so we appreciate you being our number one fan for all these years that we've been doing this so far. And we hope that you'll continue to tune in every single Thursday.
Adam Zuercher:
Absolutely.
Austin Wilson:
When we dropped those new episodes, but yeah, we wish you the best. We're thankful for you. I mean, you've been more than a boss, you've been a friend, a mentor, and we wouldn't be here without you. So we appreciate it and we'll have you back soon.
Adam Zuercher:
Thank you. I do appreciate the opportunity to be here. And I just want to say to anyone listening, thank you, if you're listening to this, that means you're somehow involved with our firm or interested in our firm, and it's because of people like you that we're able to do what we do. And we are all grateful as team members, and I'm thankful for you and we look forward to helping you along the way. And it's been an exciting journey so far, and there's a lot more ahead. So looking forward to seeing what you guys do with your clients in the future.
Josh Robb:
All right. Thank you.
Austin Wilson:
All right. Well, until next Thursday, have a great week.
Josh Robb:
Bye. Talk to you later.
Thank you for listening to The Invested Dads podcast. This episode has ended, but your journey towards a better financial future doesn't have to. Head over to theinvesteddads.com to access all the links and resources mentioned in today's show. If you enjoyed this episode and we had a positive impact on your life, leave us a review, click subscribe and don't miss the next episode.
Josh Robb and Austin Wilson work for Hixon Zuercher Capital Management. All opinions expressed by Josh, Austin or any podcast guest are solely their own opinions and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that the statements, opinions, or forecast provided herein will prove to be correct.
Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk including the potential for loss of principle. There is no assurance that any investment plan or strategy will be successful.