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Today on The Sage Executive Podcast, join our host Fernando Corona and his guest, Stuart Kruse, as they talk about shaping the conversation as leaders and the difference between leadership and authority. Stuart runs a boutique asset management firm called Kruse Asset Management, which helps its clients make decisions based on statistics and data, removing any bias compared to what others may find when relying on human advisors. Fernando and Stuart get into the change of the definition of leadership, the purpose of hiring people, the right kind of a boss, and different ways to celebrate wins in life and business. Stay tuned!
Shaping the Conversation
Whether they like it or not, leaders are responsible for change. They can take hard conversations and challenging thoughts to the table that non-leaders would be unable to do. Leaders explore and develop ideas. For example, the concept of leadership for a long time has been framed in terms such as white, male, in their 50's, dominating, masculine, militant, and top-down. But in recent years, more people are open to leaders as being more collaborative, inspirational, rewarding, feminine, and young! A shift in mindset happened because new leaders have come up and brought the old ideas into question. As ideas on a global scale continue to progress, leaders need to understand what's going on around them. There's a reason why, in nature, adaptability is one of the crucial characteristics needed to survive! A leader recognizes these big changes and takes a stand. Whatever values they hold on to play a significant role in how their people act in society.
The Difference Between Leadership and Authority
There are distinctions between leadership and authority. When you're the boss, you have authority over some people. For the sake of keeping their job, they would follow you, even if you're not doing them any favors – other than giving them a source of living. Leadership comes in only when you do things even when they are not required. Actions that are beyond what is normally expected of you. People follow a leader when it's not in the form of dread. A person who's content with authority alone is fine with shooting fear and yelling at people because it gets the job done. If you want to be a leader, lead people without breathing on their necks! Be proactive about their welfare, and be proud when they'll move on to better opportunities outside your care. If you're in an environment where you're solely treated as a means to a goal, you're in the wrong place!
About Stuart Kruse:
Stuart Kruse designed a breakthrough model for investing, formulated to maximize the odds that a client will achieve their financial goals. Since its inception, the Kruse Quantitative Value Portfolio, or QVP, has outperformed the S&P 500 approximately 80 percent of all 90-day periods. Mr. Kruse built Kruse Asset Management in 2007, after 7 years with Bear Stearns & Co. Inc., where he originally systemized the QVP. During QVP development in 2005, Bear Stearns Asset Management audited and approved this unique model to be run on a discretionary basis for clients of Kruse and other brokers. While at Bear Stearns, Mr. Kruse managed investments, totaling over $100 million, and closely advised on an additional $800 million in assets for other groups.
Prior to his work at Bear Stearns, Mr. Kruse worked for Lehman Brothers Private Client Services, where he managed more than $30 million in client investments and attained a $1 billion endowment fund. Mr. Kruse also served as a principle in a Real Estate Investment Trust (REIT), where he helped expand business to the public markets through an Initial Public Offering (IPO) in 1997.
Mr. Kruse earned a Bachelor of Science in Chemical engineering from Northwestern University with a minor concentration in Economics. He received his MBA from Kellogg Graduate School of Management with concentrations in Finance, Decision Sciences (Game Theory), Marketing and Entrepreneurship & Innovation. Mr. Kruse is also a CFA Charterholder.
In addition to his work with Kruse Asset Management, Mr. Kruse is proud to serve on the Chicago Board of the Posse Foundation, which organizes full-scholarship avenues for inner-city high school students to attend prestigious liberal arts colleges and university in groups of ten (a Posse) per year. Mr. Kruse has served as an adjunct professor at Concordia University’s MBA program, teaching classes in Entrepreneurial Finance and Strategic & Ethical Leadership. Mr. Kruse currently serves as an advisor to YCharts.com, an innovative financial website.
Outline of the Episode:
- [00:06] What does Stuart Kruse do? Using statistics and data to help with decisions.
- [00:39] Differences with other advisors. Removing biases out of the equation.
- [02:41] The responsibility of leaders in shaping the conversation.
- [03:11] Great Sage Executive leaders. There are new leaders during this time!
- [04:53] Going off of things that we know when we seek help from others.
- [06:50] If people buy off from feelings, invest in certifications that make people feel you're the best at what you do.
- [08:07] Identifying the clients you serve and being the leader in that space, so you understand the needs of the people.
- [10:27] The difference between leadership and authority.
- [12:52] Celebrating through doing acts of kindness, virtual happy hours, drinking some wine, or just kicking your shoes off and watch TV!
Connect with The Sage Executive Podcast!
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Shaping the Business Conversation Transcription
Fernando Corona: Hey everyone, thanks again for joining us today. My name is Fernando Corona, one of the hosts of the Sage Executive Podcast with us today we got a special guest and I'm excited to present him. So without further ado, please share with us who you are and what you do.
Stuart Kruse: Hi, my name is Stuart Kruse, I run a boutique asset management firm called Kruse Asset Management, we basically make decisions based off of statistics and data. So I don't use my gut or my feelings to kind of help people with their biggest decisions of their life, their nest egg that they've built up over their entire lives.
Fernando Corona: And so, just going off of that, is that different than some other advisors out there that might be using their gut or I guess or what are the tools that you're leveraging now, where you're it's, it's easier for you guys or it's better at as a boutique type of management firm.
Stuart Kruse: So, most advisors are relationship builders, which is great, but their strength is on the relationship and not so much on the finance side. And oftentimes they will outsource a lot of their financial decisions, and they outsource it to mutual funds. But what we know about mutual funds is 60 to 80% underperform every single year. So it's not often the best option. Now, it's a better option than most do it yourselfers because do it yourselfers actually do much, much worse in general. So what I've been able to do is leverage data, because it's a lot more available to help make better decisions. So it's not based on your gut. Mutual fund managers will tend to make investments based on decisions in committee, where you get a bunch of smart people in the room, making a bunch of decisions trying to outsmart a bunch of other smart people in a different room. And so I tend to use the data that's so you remove your biases out of the whole equation.
Fernando Corona: And in your program. Are you saying that you can actually like reference and say hey, listen, okay, this is how mutual friends have been performing. And then this is how we've been performing over the past however many years is that is that something that you actually call out?
Stuart Kruse: Yeah, for sure. I mean, I definitely point to that on my website about how your people are tending to pay for under performance. And if you just where to buy an index, you tend outperform all the mutual fund managers out there. And so mostly because of the fees associated with it, but then people get antsy and you know, when things like Coronavirus come around, then they get panicky and start selling and they end up making far worse decisions than let's say if they had somebody helping out.
Fernando Corona: Yeah, exactly. All right. No, thank you. Thanks for the question. Number two, what is the best part about being a leader?
Stuart Kruse: I thought about this question for a while and I know, there's a lot in the news that I'm not gonna make necessarily a political statement, but I think leaders are very responsible for shaping the conversation. So they can bring conversations and thoughts and questions to play that maybe somebody who's not necessarily a leader would feel uncomfortable bringing to play and then they can shape those conversations, and hopefully a place that makes the world a little bit better than before.
Fernando Corona: Yeah, absolutely. Just not going off that there any, any top leaders that you'd recommend be on the podcast?
Stuart Kruse: Well, okay, you know, I know this is a biased comment, but my wife is an amazing leader. She's actually as we speak right now she's at Wrigley Field. I'm out of Chicago. She's at Wrigley Field, shooting a TEDx event that she's curated. It's our second one. And she's as 16 speakers and countless volunteers that she's mobilized and led through a pandemic and through quite frankly, some riots that were going on right around the neighborhood trying to keep people safe. And so she would be a phenomenal leader to have on your on your podcast, because she she is exploring the discussions of the new ways of leadership really which, in, in what I've been framed, as I've been told, it's been framed as, like the old way was more white male 50s dominated by way masculine, militant, top down. And the new way is much more collaborative, inspirational, rewarding, a flat organization, and then much more, you know, not to be stereotypical, stereotypical, with more female dominated characteristics. And if dinosaurs like me, don't kind of adapt, you know, we're gonna be left in the dust and so should be a great person to have on your show.
Fernando Corona: Awesome. Yeah, I was just talking to someone yesterday about servant leadership, and, you know, everything that you kind of that's that aligns with the same thing. So that's another term thrown out there. All right, Stuart. So question number three, or I guess in this case for I hear from other execs, you know, in the industry or in different industries sometimes acquiring new clients. Or in your case, I'm not sure if you're even going for clients only? Or if you're going for advisors? I'm not sure. But what's the what are some challenges that you found? And you can take that either way. But some strategies that you've implemented and that you found to be working?
Stuart Kruse: Well, on the clients and I think every business that's their number one goal is to get clients, you know, without the clients, they have no business, right? It's, you know, pretty much business one on one. But what I found, at least in my space, and then what I found also when I'm evaluating suppliers for myself is the whole reason you are hiring somebody to do something is you lack a particular area of expertise. And so in my space, it's finance. So people are hiring me to be a financial expert, but then they have to evaluate me upfront on my financial expertise, which is pretty hard to do. So if I'm hiring, pick a doctor. Let's say I have to decide which doctor is better than The other guy, and I'm not a doctor. So it's really hard for me to evaluate. So oftentimes we end up going off of things that we know, things that are easier to evaluate, which is why like, you'll see some studies that the number one reason cars are bought is because of the number of cupholders that they have. And that's because I know that if one car has eight cup holders that must be better than seven cup holders so I can evaluate that.
Fernando Corona: No way, that is not a thing. Are you serious?
Stuart Kruse: I'm not sure that it's actually in today's numbers, but it was you know, a little while ago like if a certain demographic we're trying to evaluate something that would be that one's got an extra cup holder in the back seat. Yeah, you know, is the guy wearing a tie? Is he not wearing a tie? Does he have long hair or not have long hair? I can't hire a financial advisor with long hair because that doesn't make any sense to me. Doesn't matter.
Fernando Corona: At that point. It's really that what they say right? Like people buy off of feelings and like, you know that type of behavior as opposed to logic right? So then what I was gonna say so what would you say then, you know, to somebody to a doctor or to a lawyer, whoever that is seeking a financial expert, you know, what, what are some easy, maybe not easy, but some metrics that they can actually start to measure advisors by?
Stuart Kruse: That's a really interesting question. So I have experience with people that have gotten out of let's say, my, my wife and I got married, we took dance lessons, my former dance teacher couldn't run his dance studio, it would bankrupt so he became a financial adviser. his whole career was dance studio, so he's very personable. Yeah. Now here's me. I have a MBA in finance and CFA degree in engineering background. I'm very numerical, but we hold the same title. So maybe you look at some qualifications, some educational background, not just whether you like the guy or not, but how much experience he has? What kind of clients does he serve? What are his philosophies? You know, these Some, some important questions you might want to ask when
Fernando Corona: Yeah, certifications that he holds, right.
Stuart Kruse: Yeah, exactly. Right.
Fernando Corona: And then so let's say you move past that now. Do you hold? I mean, do you take into account maybe the assets under management? Is that something that you disclose? Do they take into account what they've been able to perform at, you know, for the past five or 10 years? You know, what, how do you get a little, you know, a little more detail into that?
Stuart Kruse: Yeah, so it's a tricky question. So assets under management. I'm a small boutique firm, but I only serve as clients with, let's say, somewhere between one to $10 million. And so if you came to me and said, I've got $200,000. I might not take you as a client. And if I did, you might not actually be that important to me. This is a hypothetical. If you were too big, then maybe the guy doesn't have enough experience with all your problems. Let's say You have $50 million and you say, hey, usually run with guys that have 2 million, you're probably not as familiar with my kind of problems. So you probably want to ask what kind of clients you serve. And you want to be probably in the upper end of that range, but not too high. Right. And performance goes. That is a tough question. You all most advisors will really downplay their performance. Because my clients will come to me with a variety of different criteria. Some will say I'm super conservative, I just can't lose more than 10% of my portfolio, no matter what happens. And some will say, put the pedal to the metal as long as long term I'm outperforming I don't care how much risk we take. And to understand that kind of performance or those kinds of details. Usually, a normal retail client won't quite get that mix. They'll just say how you do or so what you really want to do is make sure the person is listening to Your goals and understands and maps out a good detailed plan and how they can help you reach your goals, which is really the most important thing that you have. Right?
Fernando Corona: And that they probably have experienced doing that. Right? So absolutely.
Stuart Kruse: All right now, I have one year and I come out you want you're gonna turn over 30 years of work to a guy who's only had one year of experience and say, Hey, help the promised land. It's gonna be a tall order for them even if they're trying their best.
Fernando Corona: So going so let's let's do let's move on right now. That was all good. The next question I got for you here is what and this is an opportunity for you to share you know, your 30 years or so right however many years with the other people that are just starting out or maybe with other execs out there. You know, what, what kind of sage advice would you pass on?
Stuart Kruse: As far as leadership goes, I don't know if it's sage, but I'll give you a one man's opinion. And so I once upon a time taught a leadership class. At a graduate school here in Chicago, and one of the, I guess, the most profound things that I could teach my students is there's a big difference between leadership and authority. Right? I can have authority over you, because I'm your boss. But that doesn't mean and you might have to follow me because there are repercussions of losing your job or basically because you're fearful. But that doesn't mean I'm leading you anywhere. And so leadership comes when you're doing things, even if it's not required, right. And you're following them, even when it's not in some sort of fearful manner. So those are two big distinctions. And so I'd asked, if you are a boss or an executive, are you leading or you do just have authority? And maybe you are fine with just having authority right now and maybe you're okay with shooting fear and yelling at people and doing that and that helps you get the job done. But probably better would be if they lead if you lead them and people followed you anyway.
Fernando Corona: Yeah, cuz and that goes into like being, you know, when you're a true leader, you're also building other leaders.
Stuart Kruse: Yeah, exactly right.
Fernando Corona: Exactly. You're not afraid to hold on to, you know, all the secret sauce or anything like that. And it's like, take credibility. Right?
Stuart Kruse: Right. So I'll tell you, whenever somebody comes and works for me, I almost always give them this kind of little spiel, I'll say, look, if you're here forever at my company, or you leave in the next quarter or six months, and you find a better job that suits you better. I'm happy for you. If I'm not happy for you that you're not growing. And you can't come to me and say, Look, I found this amazing opportunity. I really appreciate it. You are a stepping stone. It doesn't hurt my feelings. It makes me proud that you moved on and you did something better. And if you're in an environment where somebody does not feel that way about you and is hyper protective about where you're going and is not trying to advance you. You're in the wrong place.
Fernando Corona: Yeah. All right, Stuart. Thank you. The last question is a little fun question. Right is an opportunity For you to tell us either how you celebrate with your leader wife or how you celebrate with your team. You know, what do you do after a win? And you know what, how do you classify a win? And what kind of goes from there?
Stuart Kruse: Yeah. So I suck at this just right, you know, I've had celebrations. Yeah, I'm not good at celebrating if I beat you in a game of volleyball, but I'm not really good at celebrating if you know, do something good in my business. And that is a mistake. I mean, to rectify, so. I think any thought leader today would say you should celebrate your wins, celebrate with a team, you know, help them basically give praise where praise is due. And sorry, my phone is actually running. So give praise where praise is due and celebrate and I think I've been really bad at that. So I think I was gonna ask you, what are some people and what are some methods that people celebrate? What are some ways I can start today?
Fernando Corona: Let's see. I mean, I've had people say they celebrate by just picking up some wine. kicked off their shoes, put it on the TV. I've had others say that they get together with their team and and everybody has like a little party, you know, and some virtual happy hours I think I celebrated with our partners and team members, we had like a virtual happy hour. And we just chatted and had conversations about any business, but just anything and everything just really broke some business barriers, and were able just to connect on a human level. So I think I guess I would go ahead.
Stuart Kruse: I was gonna say I think I had an idea about what I could do. So when for me is getting a new client, right getting a new kind of right size client and that that's a big deal. I don't work with about 50-60 families, I don't need like hundreds of clients. So if I get one solid client every periodically, that's a pretty big deal for me. And I like it. So maybe one way you can celebrate is do some sort of random act of kindness, paying it forward somehow picking something where you can do you know, as opposed to being about me, I don't really know need to have a night watching TV or open a bottle of wine? It'd be more like, what can I do that makes me bring people in to celebrate with me. So that might be something trying to figure out a way to pay it forward or do some random act of kindness.
Fernando Corona: Yeah, no, that's nice. I think that is good.
Stuart Kruse: So I should be doing it anyway. Not just when I win.
Fernando Corona: You should and, you know, ask your team, you know, hey, how do you guys want to celebrate after I do this? That's good. I'm curious to see what they say. That's okay, Stuart. This closes up the round. Thank you so much for being on how can people get a hold of you? How can they learn more? What do you suggest they go?
Stuart Kruse: Now my LinkedIn profile and you can go to my website at www.kruseassetmanagement.com and I have a YouTube page which is YouTube.com/stukruse
Fernando Corona: What do you share on your YouTube page?
Stuart Kruse: Well, I do financial analysis. So I'll do like, not so much stock tips, but where the markets headed and what I think the what you should be doing with some of your money. There's some financial one on one pages like, what is the stock? What is a bond? Some people don't know what those things are. I've got clients that actually go on CNBC every week and I've got clients that literally don't know what a stock or bond is, and they're afraid to ask because it's too remedial. And so if I just put it out there, they can look it up.
Fernando Corona : Yeah, absolutely. All right. There you go, everybody, so you can find them on LinkedIn, get him on his website, or check them out on YouTube if you're learning some financial principles. Thanks again for tuning in to the Sage Executive Podcast. We hope you enjoyed the show. And we'll see you guys next time.
Stuart Kruse: Thanks, Fernando.
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