Inside Fisher's Hardball Culture

The cold calls go out, hundreds a day, from a dank basement in the redwood hills south of San Francisco.

Inside the rambling, rustic-chic house, the billionaire Kenneth Fisher has deployed a division of his mostly young, mostly male acolytes on a single, high-pressure mission: sell.

Worn carpets, musty smells, poor insulation: It's not what you might expect from a money-management empire that's been overseeing more than $100 billion. But then, this is the private kingdom of Ken Fisher, where Fisher's way is the only way.

For decades, the idiosyncratic money manager has sold himself as a brilliant stock picker with the help of almost a dozen books, torrents of direct mail, seminars, videos, ads, magazine columns and more. His happy message for investors: "We do better, when you do better."

Indeed, Fisher Investments has done very well — most of all for Ken Fisher. Over the past decade, as the firm filled mailboxes across America with tens of millions of marketing flyers, it has employed aggressive sales tactics to sell stock investments with relatively steep fees.

Fisher, meantime, has grown fabulously rich: He's now worth about $3.8 billion, according to the Bloomberg Billionaires Index.

Few who've passed through his private-residence-turned-office in Woodside, California, or headquarters on a tree-lined campus in Camas, Washington, were surprised when Fisher let loose with a string of sexist and vulgar remarks at an industry conference this month. At Fisher Investments, such language isn't unusual.

At a staff meeting in 2008, for example, as financial markets were reeling, a woman asked Fisher if he'd considered shifting into defensive holdings.

"Why would I want half a dick?," Fisher replied, according to two people who attended the meeting.

Fisher, 68, initially said he was surprised by the recent uproar because he's spoken like that plenty of times. He later apologized.

But for Fisher, the man, as well as Fisher, the firm, the fallout is piling up. Already, more than $1.8 billion in assets has drained away since his remarks on Oct. 8.

Pensions for Michigan and Iowa and for the city of Boston have fired the firm. Fidelity Investments is part of the growing exodus. Others have said they're reviewing their relationships.

Interviews with more than a dozen current and former employees paint a sobering picture of life inside Fisher Investments that began long before the recent blowup.

Some described severe pressure to reel in and keep customers. Many spoke on the condition of anonymity to avoid jeopardizing their careers or violating non-disclosure agreements.

Fisher, for its part, said it has nothing to hide and that it's proud of how employees strive to serve customers.

'Written Up'

From Camas, an old mill town that's turned into a growing suburb along the mighty Columbia River, Fisher instills a hit-the-phones-or-hit-the-bricks ethos. The area (population: 23,800) is no one's idea of a financial center, but it has one advantage over his former California headquarters: no state income tax.

Fear is ever-present, some former employees said. They said they were held to vague targets and that it was easy to get in trouble for questioning the firm's methods or objectives.

Some former employees said they or colleagues got dinged or "written up" by supervisors for what they saw as minor or surprise infractions, such as failing to respond to an email from a manager quickly enough.

Salespeople must stick to rigid schedules and make hundreds of calls a day, sifting through names of mostly unqualified or uninterested prospects. Many hires are recruited directly from college and are gone in a year or two.

"I thought Fisher was my dream job,'' said Nick Morrison, who joined the firm in nearby Vancouver in 2011, when he was fresh out of the University of Idaho. He left the following year. "From the very first day, it was just a nightmare.''

Morrison said he departed after having an anxiety attack in the parking lot.

Fisher's Performance

In response to such comments, Fisher Investments pointed to internal surveys showing 79% of its employees think that the company is a great place to work.

"For the past week, current and former Fisher Investment employees have been inundated with requests to speak to the media," the firm said in a statement to Bloomberg.

"Our message to them has been simple: speak freely and candidly. The reason is also simple: we have nothing to hide. We are proud of our 3,500 employees, the hard work that they do on a daily basis, and the unparalleled level of service that they provide to our clients," it stated.

To be sure, a strong sales culture driven by metrics is hardly unusual in financial services. But Fisher's heavy use of direct mail, call centers and stock-picking stands out in an era when many registered investment advisers are emphasizing low-cost strategies, such as funds tracking major indexes.

The firm's advertisements say it tailors portfolios to individual clients. But former employees say that most clients end up with the same stock holdings.

"It definitely has a sales orientation that most RIAs don't have," said Sheryl Garrett, founder of the Garrett Planning Network, a group that argues investors are better off paying advisers set fees, such as hourly rates. "Most RIAs don't know how to sell. Nor would they think of spending the millions a year that Fisher spends on marketing."

Inspiring Buffett

Founded in 1979, Fisher Investments manages more than $67 billion for private clients and more than $35 billion for institutions, according to data posted on its website before Fisher's remarks.

His father, the late Philip Fisher, wrote one of the first investment books to become a New York Times best-seller, "Common Stocks and Uncommon Profits," a 1958 guide that Warren Buffett has called an major influence on his career.

The reins are held tight. Investment decisions are made by Ken Fisher and four other men. While low-cost index-tracking funds have come into vogue in recent decades for their long record of beating actively managed stock funds, Fisher's pitch is that it can pick winners.

Publicly available information on Fisher's funds and strategies showed mixed performance. The Purisima Total Return Fund, for example, returned well under half of the S&P 500 Index in its final 10 years before it was liquidated in 2016, according to data compiled by Bloomberg.

There are also vehicles that have done better. The Fisher Global Return strategy for private clients generated 10.7% and 7.6% annualized returns after fees on a three- and five-year basis, respectively — about a half percentage point better than the MSCI World benchmark it uses, according to data provided by the company.

The strategy has lagged that index most years in the prolonged bull market since the financial crisis in 2009.

Fisher's Fees

One reason Fisher Investments has turned into such a bonanza for its founder is simple: fees. Depending on the account assets, fees range from 1% to 1.5% for private clients. In contrast, active U.S. stock funds typically cost about 0.7% of assets per year, according to a Morningstar report earlier this year. Index funds cost about 0.08%.

Where Fisher Investments undeniably excels is at marketing. Salespeople typically work from leads generated from responses to its online ads to ferret out affluent clients.

Kevin Jablonsky has been on the receiving end of such calls. He was set to put $150,000 into a Fisher account until the firm called to say he'd have to chip in more to meet the minimum requirement.

"They would constantly call me, lead me on, call me, lead me on, and then they would try to get more money out of me," Jablonsky said.

Once clients are signed up, investment counselors are assigned to retain them. These counselors are ranked quarterly on their performance, and former employees say that losing customers — and with them, those fees — can set off an inquisition.

Talking Points

The investment counselors sometimes work from talking points, particularly when an anxious client calls about market volatility or alarming news — including, it turns out, the recent stories about Ken Fisher.

Employees who manage relationships recently were instructed to tell customers that Fisher's remarks — which included comparing the process of gaining a client's trust to "trying to get into a girl's pants" — were taken out of context and blown out of proportion by the media, according to people familiar with the matter.

Counselors are also instructed to delve into customers' personal lives: Do you know any public figures? Journalists? Anyone in national or local politics or government? What about finance? How about lawyers? One template used by some investment counselors lists these among the "required questions" for clients.

Such questions can help avoid trouble in the event a client becomes unhappy with Fisher, some former employees said.

Clients who live in certain locations are off limits. One of them is Clark County.

That's where Camas is nestled, and where Fisher lives. Former colleagues say he wants to avoid bumping into any unhappy customers.

– Assistance from Gwen Everett, Janet Lorin, John Gittelsohn and Suzanne Woolley.