Can an investment advisor compete with a large bank?

Mark Develman, host of the “10k” podcast, spent two hours trying to understand why someone without a specialized degree or experience inside a financial institution believes he is qualified to advise people on their capital. The conversation was hardly flattering: Mark repeatedly played down my Bank of Russia license, media publications, years of experience, and investment results, while I never quite learned to defend myself with bold promises. No hard feelings — that is what interviews are for. Someone has to ask the “uncomfortable questions”; otherwise, they are simply boring to watch. Here is an abridged transcript.

Requirements alone do not make someone a guru

Mark Develman: How does someone without institutional experience or a specialized education become confident that he has the right to structure another person’s capital? There are a couple of dozen firms in the market that inspire little doubt: they have been around for a long time, and if something goes wrong, there is at least someone to hold accountable.

Vladimir Vereshchak: I am not exactly a random person off the street: I am licensed by the Bank of Russia and listed in its register.

Mark: Yes, I looked at what it takes to get that license. Generally speaking, nothing exceptional. The requirements are fairly modest.

Vladimir: They are what they are. These are the official requirements set by the regulator that oversees this activity in Russia, whether you like them or not.

Mark: Whatever the requirements may be, a certification does not automatically make its holder a guru. You cannot become a surgeon with a mining degree. Experience is gained inside an institution, where you make mistakes under the supervision of senior colleagues. But when you are self-taught, it is more like, “I performed a few operations back in my village”…

Vladimir: What do you make of the fact that many employees of licensed financial firms have never invested themselves? Either they have no money, or they have perhaps 100,000 rubles invested somewhere. Even executives at firms that encourage clients to buy financial instruments often answer, when I ask what they invest in, “real estate and bank deposits, of course.” These are private conversations, naturally, so I cannot prove it.

Mark: That is true. But when someone says, “I am not merely selling you instruments; I invest in them myself and take the same risks you do,” I can just as easily call that a sales pitch. When I placed money under management, I did not care what the employee sitting across from me bought for himself. His credibility came not from who he was personally, but from the institution behind him. When someone decides on his own that he is now an advisor, he has to reach that conclusion somehow.

Vladimir: I learned on my own, became reasonably successful, and realized I could share my experience. Someone makes sausage at home, decides it tastes good, and then turns it into a business. That is a perfectly normal path. I have always been interested in finance; I have been in the market since 2008 and began consulting in 2015.

Mark: And you began consulting before registering as a sole proprietor; you did not formally register until 2019.

Vladimir: Yes, there is a gap there. At the time, investment advisors were not yet regulated in Russia; that framework appeared in 2019. The early years were indeed something of a gray area. I later registered as a sole proprietor, joined the Bank of Russia register, and became a member of several professional associations. I do not have an undergraduate degree in finance; I understand that. But I have taken courses and even attempted the CFA exams — unsuccessfully, unfortunately.

A “company” sounds like a group of people

Mark: How many employees do you currently have?

Vladimir: Formally, none. I work with a decentralized team.

Mark: But a company implies a staff. If you are a one-man band, that is not a company; it is a private advisor. I would not hire a lawyer who worked entirely alone. One person can overlook something, fail to complete something, or simply run out of time.

Vladimir: “Company” does indeed suggest a group of people. But I have colleagues who handle related areas — taxes, insurance, and legal matters. I handle the investment side. I do not try to do everything myself: if a client asks for advice on investing in art, I will not advise him personally, but I can find a good specialist.

Price reflects all available information

Mark: A large firm is, above all, about information and access to it. How do you gather enough information on your own?

Vladimir: All of that information is ultimately reflected in the price. When you analyze price — which is what technical analysis does — you can understand a great deal.

Mark: But are prices economically justified today? Even five years ago, people were saying that a fundamental gap had opened between market prices and underlying economic value.

Vladimir: If you make money in the market, what difference does the method make? I am generally a proponent of what you might call quantum analysis — or something like that.

Mark: Let us unpack that. What exactly does “quantum” mean? It would be helpful if every impressive word that rolled off your tongue actually meant something.

Vladimir: It sounds more complicated than it really is. Quantitative analysis.

Mark: “Quantitative” is normal and clear. “Quantum” sounds more like wordplay.

Vladimir: Every market participant has expressed a view to the extent that they were able or willing to do so, and all of that is reflected either in the company’s financial indicators or in its market price. The task is to interpret those signals and build a strategy.

Mark: What gives you confidence in your own interpretation?

Vladimir: Any strategy should be tested on historical data before it is launched. A strategy is a set of rules. You write them down, go back 20 years, and apply them as though you knew nothing about what came next.

Mark: So built into the equation is the assumption that the future will unfold more or less as the past did.

Vladimir: At least for a while, yes, and after a year you run the analysis again. You can never be 100% certain. If bridges have been built successfully for 20 years using a particular technology, there is a good chance the bridge built in year 21 will stand too. But then a drone may appear — something the original model never accounted for. No one knows the future. That is the great equalizer between small specialists like me and large institutions: despite their enormous staffs, they cannot know the future any more than I can. In that sense, our odds are exactly the same.

Come back in ten years

Mark: “More than the market” — how much more, in percentage terms? Is the difference worth my nerves and the trust I place in someone who may be talented but has limited experience relative to the scale of the market?

Vladimir: Whether it is worth it is something everyone has to decide for themselves. For my equity portfolios, annual alpha of 3–5% would be a good result. That is roughly what I aim for.

Mark: And for how many consecutive years have you achieved results like that?

Vladimir: My oldest public strategy has a 3.5-year track record. That is not much, of course.

Mark: In other words, it may simply be a relatively favorable phase of the cycle.

Vladimir: One could say that. I know there are another 15 years of experience behind it. But if I were looking at myself from the outside, I might say, “The guy got lucky and caught a good trend.” A track record takes time to build. If you have doubts, come back in ten years.

Mark: I measure everything in terms of time. Yes, an investment bank with more than a century and a half of history failed in 2008, and five years earlier no one imagined it would. But I am convinced that if we speak again in 20 years and revisit this interview, your position will be radically different.

Vladimir: I doubt it. I have been in the market for a long time, and my views are already well formed.

Mark: A long time — how long, exactly? You worked in another field; you sold industrial equipment.

Vladimir: I have always been interested in financial markets. I started in the foreign exchange market — the wrong place to start, unfortunately, as it was for many people — and later moved into stocks. I am hardly the first person to realize, somewhere between 25 and 30, that he was doing the wrong kind of work.

Publications do not prove expertise

Mark: You are investing heavily in your online presence, presenting yourself as an expert who is published in the media. Yet you say that you do not look for specialists online; you ask colleagues for recommendations. Why publish anything there at all?

Vladimir: It serves as evidence of expertise. There are formal indicators: inclusion in the Bank of Russia register, additional education, and membership in professional organizations. The people involved are generally quite knowledgeable and can spot a charlatan quickly. The results of my own investments are the final piece.

Mark: A publication proves absolutely nothing about expertise. If I need people to write about me, I can make that happen; there are firms and tools designed for exactly that. To me, the real measure of success is the purchasing power created by successful work, not an article. Someone can build a perfect public profile with nothing substantial behind it.

Vladimir: Maybe, maybe not. No one can give you guarantees. You want to find the perfect person who will lead you to success with 100% certainty. Such people do not exist. You have to proceed cautiously, through trial and error.

My clients work hard

Mark: Describe the profile of your client.

Vladimir: They are definitely not the ultra-wealthy people buying villas and collectible cars. They are closer to Russia’s emerging affluent class: successful professionals and entrepreneurs, typically 40–45 years old, with investment capital ranging from half a million to one to three million dollars. They work hard, understand that their money should be working too, but do not have time to sort everything out themselves. Many have had poor investment experiences in the past.

Mark: Could one simply say that their financial literacy is relatively low? If they were more financially sophisticated, they probably would not need to work with you.

Vladimir: I do not think so. They are financially successful; they are simply not investment professionals and do not know what to do with the money next. They earn a great deal and spend a great deal, but they do not necessarily build capital. Market analysis requires time, discipline, and a systematic approach, whether the work is done by one person or 25,000.

This goes against my principles

Mark: If you are such a good specialist, why has no financial institution hired you?

Vladimir: I do not present myself as someone looking for an employee role.

Mark: But headhunters do not need you to do that; they do not recruit only from résumé websites.

Vladimir: Representatives of financial firms do contact me several times a month, offering me an agency fee for selling their products — usually a one-time payment of 3–5% for bringing in a client.

Mark: And you do not agree?

Vladimir: No. It goes against my principles, if you like. I work for the client, not for the product provider, and I am paid by the client.

Mark: Do you not think that this moral constraint is holding back your career? People at the top do not seem overly concerned about such things. Is a compromise with your conscience already appearing somewhere on the horizon?

Vladimir: Of course it holds me back: decency and very large earnings do not often go hand in hand. But no, absolutely not. I would rather change professions if things went completely wrong.

Mark: You would give it all up over a single moral choice?

Vladimir: Yes. That would be better than selling clients all kinds of nonsense. Otherwise, I would be no different from the industry as a whole. Unfortunately, there is a great deal of mis-selling, and it is no secret that sales quotas and conflicts of interest exist. My job as an advisor is to protect the client from that.

Mark: Or perhaps that is a sales pitch too? Someone with an analytical mind might ask, “What competitive advantage should I present?” How vulnerable is your conscience to corruption from within when the stakes become larger?

Vladimir: Not vulnerable at all. I am fortunate: I have enough capital to live on. It does not let me buy villas, unfortunately, but I will not go hungry. Starting from zero in this profession, without institutional experience or access to an existing client base, is practically impossible. The whisper of conscience would very quickly turn into a scream.

Success — by what measure?

Mark: What is your next milestone? Something tangible that would sound unequivocal even to people like me.

Vladimir: I am not the ruler of the world, but I do have a successful practice. It means a great deal to me when a client renews the agreement year after year and continues to pay for the service. They are under no obligation to do so; they could go to a large bank instead.

Mark: I have a client who has been with me for 15 years. I cannot call myself successful simply because he renews the contract. It is convenient, people get used to you, and you do what you are supposed to do. There is nothing particularly praiseworthy about that. If you sell sunflower seeds for 100 rubles a cup, you receive 100 rubles a cup. Where is the success — in the fact that people buy your sunflower seeds?

Vladimir: I set a price that I consider fair. If clients are willing to pay it and benefit from the service, then the business works. I compare the price with the value delivered and the time required to deliver it. Quite often, the price turns out to be unjustifiably high. Put simply, some people do not particularly want to do the work, but they do want to make money. At least, I encounter that fairly often.

Mark: Where do your clients spend time when they are not working? Clubs, associations, places one attends not because one enjoys them, but because potential clients are there. Do you move in the same circles?

Vladimir: No. Here you have to account for a particular feature of my personality: introversion. To find clients through communities, you have to know how to engage with people, win them over, and build relationships. Unfortunately, that is not something I do well. My attempts to talk about the stock market in private communities did not lead to much.

Valuations do not reflect reality

Mark: It feels as though people want to be lied to — told that they are going to become fabulously rich. When you start talking about reality instead, they assume you do not know what you are doing.

Vladimir: That does happen. I never push a client into the market. On the contrary, the purpose of the initial consultation is to walk the person through drawdowns and crises so they can decide for themselves whether the answer is yes or no. If someone is not prepared to accept risk even in theory, it is better to recommend a bank deposit and part on good terms.

Mark: The technology sector is clearly an inflated bubble. But it is still possible to make money for a client in a bubble. Does that trouble your conscience?

Vladimir: A company may be overvalued and still look better than its competitors across the full set of indicators. Risk-control and timing methods can help you exit reasonably early. We have to deal with the market as it is: it is irrational, and valuations often do not reflect reality. I once made a video arguing that a well-known technology company was trading at four times its fair value and should not be bought. I laugh at myself now — the stock has multiplied several times since then.

Mark: I tried to uncover something that may simply not be there. It is difficult to imagine ambition without a hunger for money, without greed, in a world where people are willing to sacrifice almost anything if it helps them sell. Yet however hard I tried to draw it out, either your views are genuinely sincere or you are exceptionally good at controlling yourself.

Vladimir: Personal interaction is the only way to find out. There is no other test.