THANKS DAN.

Dan Wheeler passed away this weekend after a battle with pancreatic cancer.  I’ve mentioned several financial industry-related names in my articles over the years that are on my gratitude list, from Fama, French, Bogle, and Troutner, to Booth and Novy-Marx.  But I don’t think I’ve ever talked about Dan.  And that’s a significant oversight on my part because, in some ways, Dan was as instrumental to me and my career and our relationships together as any of these other people.

I never met Dan Wheeler.  Dan was a CPA and an independent financial advisor like Servo—a Registered Investment Advisor (RIA)—in the late 1980s before anyone had ever heard of RIAs or the fiduciary standard we follow to put clients’ best interest first.  Dan was not, however, one of the commission-based “stock jocks” that were so common back then.  Dan was different.  He was one of the early adopters of index fund investing and believed lower-cost, buy-and-hold, long-term investing was a better fit for everyday people trying to achieve their long-term retirement and income goals.  Instead of commissions, he charged a percentage fee for his advice and investment management.  He was preaching our approach before almost anyone ever thought simply trying to capture broad-market returns to satisfy a financial plan was sensible.

One day, in reviewing a prospective client’s account, Dan noticed they held a micro-cap fund managed by an unheard-of company called Dimensional Fund Advisors. He immediately saw an opportunity to diversify his large-cap heavy index fund portfolios into smaller companies, so he called Dimensional to find out how to buy in.  We take for granted today that you can set up a brokerage account at a custodian like Charles Schwab and buy multiple funds from different companies, all in the same account or across multiple accounts.   Back then, you had to have accounts at every firm you wanted to invest in; but when Dan called Dimensional, they dismissed him.

Rare is the investment management firm that turns down prospective clients, but that was Dimensional’s rule—Dan was an advisor managing individual client funds. Dimensional was an institutional manager who worked with pension funds and college endowments.  Bigger investors, Dimensional believed, were easier to consult with and explain investing theories too, and talk off the ledge when markets went haywire and bailing out seemed plausible.  Dimensional had always worried that opening its doors to individual investors would attract a lot of “hot” money. After a few years of strong small cap stock returns, they thought individual investors would pile in.  If small caps went cold, they would flee for greener pastures, forcing Dimensional to sell small cap stocks to meet redemptions at unfavorable prices, hurting the remaining shareholders who would have to absorb the transaction costs and taxable distributions of the funds.

Dimensional was decidedly institutional only. Dan changed all that.  He suggested to Dimensional co-founder David Booth that he consider opening their funds to Registered Investment Advisory firms and their clients.  Dan suggested RIAs could play a similar role as the consultants and managers at giant institutional funds and could keep clients from bailing at the wrong time.  Dan believed that if RIAs stopped trying to pick stocks and time the market, they’d have more time to provide real advice and value. Booth bought it.   

Sam Adams, former DFAer and current CEO of Vert Asset Management (where Wheeler was an advisory board member), relayed to me that at first, Dan was interviewing firms over the phone.  But as time went on, and demand for “DFA fund access” rose, Dan decided that RIA firms would have to come to Dimensional and sit through a two-day seminar from a slew of academics discussing their investing approach, on their dime.  Afterward, if the advisors were still convinced that Dimensional funds were a good fit for their clients, only they could be “approved” to invest in them.  Fortune magazine summed up this seemingly persnickety process in a 1998 article titled “The Best Fund Company You’ve Never Heard Of, and Why They Don’t Want Your Money!”  That was Dimensional.

But Dan didn’t settle for prying Dimensional’s gates open to let RIAs in.  He believed so much in this approach to investing and that other advisors deserved to hear this story and share it with their clients that Dan left his RIA firm to work for Dimensional full time.  Dan Wheeler became the first employee at Dimensional Fund Advisors to work directly with financial advisors like Servo*, who were approved to use their funds.  Dan didn’t, however, just “work” with advisors.  He was Dimensional’s resident evangelist.  He was extremely passionate, and his message resonated with a lot of people.  It resonated with my old colleague and mentor Jeff Troutner at Equius (then TAM Asset Management) in 1992. As Jeff tells it, Dan almost single-handily convinced him to join the asset class school of investing and kick “the dark side” of active management and market timing to the curb.

As I said, I never met Dan, but I knew him.  He would regularly speak to advisors, and I attended multiple conferences that he spoke at in the 2000s.  He was so direct sometimes it was a little abrasive, even for me.  I remember he would start his talk with a deceleration: “by the time you’re done listing to our speakers today, you’re either going to believe this is the best way to invest…or you’re just not very bright.”  Oof.  But these were Nobel Laureates who had spent their lifetimes on the financial theories and models we would learn.  He wasn’t wrong.

Dimensional would post his advisor-discussion videos to their website, and it was here that I got more profound respect for Dan personally.  He would share stories about his time as an advisor and his approach.  Dan wasn’t a numbers guy; he was a people person.  And plain-spoken, never scripted.  An intro meeting with Dan for an advisor or an investor consisted famously of a yellow pad and DFA’s Matrix Book.  It was all that an advisor ever needed to learn about someone, craft a plan for them, and then illustrate what an appropriate portfolio should look like and what its behavior—the ups and the downs—could be.

Dan preached to us that we needed to counsel clients about the potential bad times, even in years when stocks or small cap and value companies were shooting the lights out.  Dan believed that doing “life-boat drills,” as he called them, would help clients be better prepared when we hit rough financial waters.  Other advisors sell on short-term performance.  Dan always told us to educate clients and help them develop realistic long-term expectations.  Then they’d stick around; it would be better for our business, but most importantly, for the client.  Do well by doing good.  It was a simple message, more straightforward than the one I usually default to on my own, but it was sage advice.  Spend enough time as a financial advisor, and you learn that good clients don’t want to know how the watch works, they want to see that it will tell time.

One story I remember Dan telling sticks with me to this day.  A large new client, recently divorced, came to him to invest her money.  Her life was not in good shape; she was drinking too much and not in a place where she could make the best long-term financial decisions.  Dan could have invested the money and earned an advisory fee, but instead, he told the client that she needed to work on herself, go to alcohol rehabilitation, and when she got clean, he would be there to help her take positive steps forward.  In the meantime, Dan put the account in T-bills and never charged her for his time and advice.  That’s a bold thing to tell someone, but when you care about them, you stick your neck out like that.  There is a saying that “people don’t have money problems; money has people problems.”  That’s what personal financial advising is about, and what you need to appreciate to truly help people with their money.  Dan never failed to remind us of that simple fact.

Dan retired from Dimensional in 2011, so fortunately, he had some time off before leaving us.  But I never stopped thinking about Dan—his role in creating the industry of financial advisors that I am a part of, offering ethical and honest advice, managing practical, market-oriented investment portfolios for every-day people and sticking with them during the most challening times.  He was the conduit for us to Dimensional, too, and you know how I feel about that.  Inside Dimensional, I hear his influence in many of our conversations and their communications.  Dan left Dimensional, but I assure you Dimensional has never left Dan.

Where would we be without Dan today?  I think about him when I meet a new prospective client, usually coming to the meeting with just my yellow pad and a Matrix Book.  Doing it like Dan said.  Or when I avoid going into the weeds on some investment inquiry or topic with a client and instead keeping it practical and high-level.  I think some part of Dan would be proud, and best of all, I feel like I’m doing it right and giving people the help they need.

You helped pave the way. Thanks Dan.

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*Servo was not one of the original firms Dan recruited to adopt the Dimensional approach to investing; I founded Servo in 2012, but had attended my introductory conference in the early 2000s.