Charming Investors by Playing Hard to Get

When Molly Bernet Balunek expressed interest in putting money into mutual funds run by Dimensional Fund Advisors, she didn’t know how rigorous the application would be. Balunek, a financial adviser in Cleveland, had to submit to an interview, fill out a questionnaire, and pay out of her own pocket for a two-day trip to Austin, Texas, where she listened to the company’s executives explain how they do business. “It is a two-way evaluation process,” says Balunek, who was approved last year. “Dimensional wanted to understand my business structure and investment philosophy as much as I wanted to understand theirs.”

Dimensional’s arduous system breeds a high degree of loyalty among the chosen. “They’ve developed a brilliant way of locking in money, and the advisers who use them seem to love it,” says Lawrence Glazer, a managing partner at Mayflower Advisors, a consulting firm in Boston that doesn’t put clients’ money into Dimensional funds. Dave Butler, who runs Dimensional’s financial adviser business, says he could “count on one hand” the clients who have stopped using the company’s funds in his almost 20 years there. Dimensional does not sell funds directly to the public.