Speaker 1: Welcome to Trillions. I'm Joel Webber and I'm Eric Beltonis.
Speaker 1: We talked a lot about all the variety of etf
Speaker 1: that are out there, but we haven't talked about how
Speaker 1: to put all of things together. Yeah, I mean the
Speaker 1: e t f s are like the ingredients. You throw
Speaker 1: them together and you have a dish, and that's called
Speaker 1: the portfolio. And how do you do that? That's a
Speaker 1: big open and question for a lot of people. I
Speaker 1: love that we're already talking about food because really this
Speaker 1: episode is gonna be a little bit about recipes. Oh god,
Speaker 1: all right, you can't eat yet, okay, but three hours
Speaker 1: to launche Let me have some food. But joining us
Speaker 1: today is a guy named Dan Egan who works at Betterment. Betterment, Eric,
Speaker 1: you know a lot about this is a robot advisory.
Speaker 1: So robo advisors they use ETFs to build portfolios. And
Speaker 1: what they do is they get you know, they ask
Speaker 1: you a couple of questions, you fill it out, they
Speaker 1: determine your risk tolerance, and boom, you're in a portfolio
Speaker 1: of say four to ten et fs. They charge you
Speaker 1: twenty five basis points, which is more than half as
Speaker 1: cheap as an average advisor. They do some rebalancing, some
Speaker 1: tax laws, harvesting, and there's no minimum, So robo advisors
Speaker 1: are very popular with millennials and people just getting started
Speaker 1: who don't have other sort of life things and build
Speaker 1: up of wealth that requires maybe more of a human touch,
Speaker 1: although Betterman starting to do that too. But the thing
Speaker 1: about Dan is he does that so he puts the
Speaker 1: portfolios together, but he also does a lot with behavior
Speaker 1: and Betterman exclusively uses e t F. Yes, so Dan
Speaker 1: part of his job and the and the company as
Speaker 1: a whole is to go through the e t F
Speaker 1: and decide which ones who want to use and in
Speaker 1: what percentage to make this portfolio a K the dish.
Speaker 1: By the way, this week Eric Me and our producer
Speaker 1: Jordan's went on the road down to Betterman's office, So
Speaker 1: you're gonna hear a little bit of an office vibe
Speaker 1: at this episode because of the show on the road.
Speaker 1: That's code for not great audio, so enjoy Anyway. This
Speaker 1: week con Trillions meet a master chef. So we're here
Speaker 1: at Betterment with Dannygand who are you? So? I am
Speaker 1: the director of behavioral Finance and investing in Betterment. Betterment
Speaker 1: is a what we're called a robo advisor, so we're
Speaker 1: predominantly online financial advisor and investment manager. We were the
Speaker 1: original so we started taking client money back in two
Speaker 1: thousand and ten. So yeah, we're actually getting to be
Speaker 1: old and tenured. So a lot of times people will
Speaker 1: associate robo advisors as a disruptor. What are you disrupting?
Speaker 1: We'll talk about the traditional advisor and how you're different
Speaker 1: and why this is catching on. A lot of the time,
Speaker 1: the seeds of our our own destruction in businesses are
Speaker 1: seven by choices that we make or choose to not make.
Speaker 1: And I think if you go back to when Betterment
Speaker 1: was founded, it was right after the financial crisis, and
Speaker 1: there was a lot of lack of faith about their
Speaker 1: being good financial advice being distributed. It was high cost,
Speaker 1: despite the fact that a lot of it was pretty
Speaker 1: consistent and systematizeable. People had gotten comfortable with the Internet.
Speaker 1: So I think if you if you went back in time,
Speaker 1: you could say, actually, a lot of the established players
Speaker 1: very much could have dumbness themselves, but it would have
Speaker 1: meant cannibalizing revenues um and a really big I T investment.
Speaker 1: So let's talk about that. User experience. So when someone
Speaker 1: comes to the Betterman dot com website, where do you
Speaker 1: go from that? So I think the first most important
Speaker 1: thing is that we need to make it easy for
Speaker 1: a wide variety of people to get to the point
Speaker 1: where they understand what Betterment is doing for them. And
Speaker 1: that involves allowing the client to both see how we
Speaker 1: believe we have value, so focusing them on we're going
Speaker 1: to build you a diversified portfolio. We're going to recommend
Speaker 1: risk level and allow you to have multiple portfolios depending
Speaker 1: upon the goal that you're investing for. And we're gonna
Speaker 1: talk about the value to you in terms of tax
Speaker 1: efficiency or getting your time back or get a better
Speaker 1: financial plan to set up for yourself. That experience is
Speaker 1: really dependent upon the customer and how they choose to
Speaker 1: interact with us. So we sometimes have what's interesting is
Speaker 1: um how much selling we really don't do on the website.
Speaker 1: I would say it's some very large percentage of our
Speaker 1: clients show up, spend no time on any of our
Speaker 1: marketing pages. They've heard about us through a friend or
Speaker 1: through some other um sort of medium where the site
Speaker 1: I'm in and they you know, they hit our website,
Speaker 1: they open an account and all of a sudden, there's
Speaker 1: a hundred thousand dollars coming in in the next week,
Speaker 1: So why use a robot solution out? Yeah, and let
Speaker 1: me jump in on that, because I think a real
Speaker 1: advisor at this point and say, that's great, you're doing
Speaker 1: as allocation for me, But what about some of the
Speaker 1: more human things that I provide. Yeah, it always sounds
Speaker 1: so much like somebody trying to convince themselves as much
Speaker 1: as anything, or a little bit of fear in their voice.
Speaker 1: So I worked in wealth management with high night Re
Speaker 1: financial advisors before, and the thing that kept striking me
Speaker 1: was what percentage of what they do could be done
Speaker 1: systematically by a computer? And if you think about inputs
Speaker 1: in my background and behavioral thing, I look at people
Speaker 1: and I say, we have this this brain, this little
Speaker 1: chunk of meat between our ears, and it takes inputs
Speaker 1: from our eyes and from our ears, and then it
Speaker 1: runs little algorithms, then it decides what to do, which
Speaker 1: are its outputs. You can do a lot of that
Speaker 1: kind of mimicry of saying I'm going to talk to
Speaker 1: a financial planner and I'm gonna say somebody wants to
Speaker 1: open an I RA, what do you need to know
Speaker 1: we're going to give them good advice about that? What
Speaker 1: questions do you ask? How do you use that information?
Speaker 1: And what's the output? And I would say, like version
Speaker 1: one point of rogue advising is just the picking off
Speaker 1: of whatever is the lowest hanging fruit that is easiest
Speaker 1: to do. The advisors do like say, you know, should
Speaker 1: I use a wall for a traditional ira A? How
Speaker 1: much should I contribute to my four O one kit?
Speaker 1: These are things that is very apparent how you would
Speaker 1: make this decision and how you give this advice. And
Speaker 1: I think as that people confuse the advice from the
Speaker 1: distribution mechanism. I think that take good advice and you
Speaker 1: can think about like did the advisor send it over
Speaker 1: email or did they use and excel? You know, there
Speaker 1: are these things that are like the medium through which
Speaker 1: you give the advice. We effectively just said we are
Speaker 1: going to do this through medium where we can give
Speaker 1: it to everybody through a website, and we're gonna invest
Speaker 1: heavily in writing the algorithms correctly knowing what questions we
Speaker 1: should ask, and then it's simply a matter of you know,
Speaker 1: scaling it up very quickly. So let's talk about I've
Speaker 1: just put a hundred dozen dollars because hey, let's make
Speaker 1: up a number. Right, you're gonna put me. You're gonna
Speaker 1: basically do ask that allocation for me, and you're gonna
Speaker 1: do that based on of series of questions that I
Speaker 1: basically answer, Right, are all those solutions and those portfolios
Speaker 1: straight out the shelf or are their custom options as well?
Speaker 1: So it's interesting, Uh there, I forget what the number is.
Speaker 1: There are literally thousands of different end states that you
Speaker 1: can end up in. The First thing we do is
Speaker 1: I like to think about we talk about your circumstances
Speaker 1: and your goals where you want to be in the future.
Speaker 1: So there are facts about you. Um, let's use, for
Speaker 1: example of the fact that we're in New York City. Now,
Speaker 1: if you live in New York City and you're making
Speaker 1: a pretty serious income, you're gonna pay both federal high
Speaker 1: federal tax rates and high state and limberal taxes. So
Speaker 1: there's an interesting piece of tax information in terms of
Speaker 1: how you learn and how much you learn that actually
Speaker 1: feeds through into the investment process, which is that if
Speaker 1: you're using a taxable account with us, you're probably going
Speaker 1: to push you towards using New York State municipal bonds
Speaker 1: because there's so much tax savings in it for you.
Speaker 1: So one element is who you are, your circumstances. The
Speaker 1: other element is um your future. You know, are we
Speaker 1: talking about opening up a roth IRA, a traditional ira,
Speaker 1: a taxable account? How much risk should we take? How
Speaker 1: long should we be investing for? How are you going
Speaker 1: to withdraw that money? So strangely that like the foundation
Speaker 1: on which the allocation and the advice is built isn't
Speaker 1: about investments. It's about the investor, and from there we
Speaker 1: start thinking about how we can match and tailor the
Speaker 1: investments to serve the investor. So in this case, you
Speaker 1: might say, I'm looking to put my kids through college
Speaker 1: in New York State in a few years. I've already
Speaker 1: done the five twenty nine, I want to do things.
Speaker 1: I'm want to save some more. We would put you
Speaker 1: into a portfolio that had less risk because it's a
Speaker 1: short time horizon, and also there would be a higher
Speaker 1: weighting towards New York State municipal bonds. So that's not
Speaker 1: like a very specific example, but just how do you
Speaker 1: think about asset allocation in general? On a more metal level.
Speaker 1: So we kind of simplify things down to generally speaking
Speaker 1: the stock versus bond allocation. So if you are in
Speaker 1: our bond allocation, we basically think that means a fine site,
Speaker 1: no risks. In that case, you are a hundred percent
Speaker 1: in sh V, which is a ultra short treasury. That's
Speaker 1: like putting your money magic exactly right. It is is
Speaker 1: is close as you gonna get to a money market
Speaker 1: fund in the e t F world, Which leads to
Speaker 1: another question, which is is everything you guys do E
Speaker 1: t F it is to pick up and keep talking
Speaker 1: about it with this basic poor close and how do
Speaker 1: you pay? So in every case we are looking at
Speaker 1: maximizing the customer's takeover trends. So we generally think that
Speaker 1: it is unlikely that any fund that is actively manage
Speaker 1: and that includes active in disease is going to outperform
Speaker 1: or at least there's a really significant headwind, and so
Speaker 1: we tend to look at funds that have very low
Speaker 1: expense ratios, that are large hand liquid so that we
Speaker 1: can buy them and sell them there's a lot of
Speaker 1: outstanding interest without the customer paying significant transaction costs. Also,
Speaker 1: where if there is a big move, We as a
Speaker 1: sort of trader are not going to have a lot
Speaker 1: of impact on those markets because there are so many
Speaker 1: other people trading. So all of it comes down to cost,
Speaker 1: either the expense ratio of the fund, the bid ask
Speaker 1: spread of the fund, the depth of market of the fund,
Speaker 1: just trying to keep all of those costs, both sort
Speaker 1: of ongoing and liquidity related as low as possible. And
Speaker 1: for the any international section of the portfolio, what what
Speaker 1: do you use for that view? Do you know, is
Speaker 1: it something that is uh international developed or something that's
Speaker 1: total international or do you ever do single countries? Great questions,
Speaker 1: So we do on the stock side. We use our
Speaker 1: primary ticker, and I'll get back to what I mean
Speaker 1: by that is v A, which is the Vanguard International
Speaker 1: Developed Fund. Believe it costs something like eight basis points.
Speaker 1: And then we also have the International Merchant Market Fund
Speaker 1: VWO and the key there it's really interesting in the
Speaker 1: field that it is sometimes cheaper to use more funds
Speaker 1: than to use just one fund um. So our portfolio
Speaker 1: as a whole cost I believe about nine or ten
Speaker 1: basis points once you take into account all of these
Speaker 1: fund costs. If you were to use the all Country
Speaker 1: World Index et F, which is provided by black Rock.
Speaker 1: I believe it costs thirty three basis points and they
Speaker 1: have asset allocation funds UM that can do someone I finast.
Speaker 1: Vanguard has bt BT that's the whole lenge, a lot
Speaker 1: of it, that's twelves. Yeah, it's interesting. Yes, you've got
Speaker 1: cheaper using a couple of products instead of the whole
Speaker 1: lenge a lot of one exactly, even if it's even
Speaker 1: And it's Vanguard to boot, which is interesting exactly. And
Speaker 1: it also allows us to manage risk at different levels.
Speaker 1: So imagine that you're a customer who comes in with
Speaker 1: a long time horizon. We give you a knight fetures
Speaker 1: in stock portfolio. But then as your time arts and
Speaker 1: gets shorter and shuter, you get closer and closer to
Speaker 1: needing to spend the money. We want to decrease the risk.
Speaker 1: We want to be able to change the proportion that
Speaker 1: vw A emerging markets makes odds. We don't want to
Speaker 1: be stuck into one just one allocation. So there's a
Speaker 1: level of granularity that allows us to take on more
Speaker 1: emerging market risk, more small cap value risk at the
Speaker 1: high end, and we want to be able to tourne
Speaker 1: that down at the low end. So by having these slices,
Speaker 1: we couldn't go much simpler. But by having these slices,
Speaker 1: it's actually less expensive to clients and it gives us
Speaker 1: more control. The more granular you cut something, the more
Speaker 1: you can tax lost honest and so we actually wanted
Speaker 1: to have things that were sufficiently unlike each other that
Speaker 1: we would maximize tax lost honesting opportunities. And of course
Speaker 1: this question we talked about, you know, you talked about VW.
Speaker 1: That's the being guard emerging markets. Now there is a
Speaker 1: cheaper one in schwab, you don't always go for the
Speaker 1: one that's the cheapest, because you could have a new
Speaker 1: issuer come out and be say zero fees, but you
Speaker 1: would necessarily go for that. So is there a liquidity
Speaker 1: threshold you look at like how many what's the volume
Speaker 1: have to look like for you to buy it? But
Speaker 1: so I love Mexican food, So we use a measure
Speaker 1: called the tact the total annual cost of ownership, which
Speaker 1: includes both the expense ratio that the fund charges but
Speaker 1: also the cost of getting in and out of the fund. Right,
Speaker 1: so it's a little bit like my parents live on
Speaker 1: a barren island and their house might be really cheap,
Speaker 1: but it's going to cost you a pretty big toll
Speaker 1: to get onto that island. And the toll in this
Speaker 1: case is the bitest spread, right, the okay, And that's
Speaker 1: you just put that into percentage terms and it's usually
Speaker 1: and then you put that into the taco because tacobou
Speaker 1: it's healthy and delicious. Um. So yeah, that that measure
Speaker 1: guides us. And in a lot of cases, Uh, a
Speaker 1: new fund will come out that doesn't have a lot
Speaker 1: of existing people training it. Um, it doesn't have very
Speaker 1: m good spreads, and so we'll watch it. This is
Speaker 1: actually a big part of what we do. We actually
Speaker 1: revisit what funds we purchased on behalf of clients every
Speaker 1: quarter and so every quarter we can say, oh, there's
Speaker 1: a new fund out here. Um, it has a really
Speaker 1: good sort of prospective. It's not ready for showtime yet.
Speaker 1: Is that a taco party? Yes? It is. So you
Speaker 1: also have this really unique background because you have an
Speaker 1: expert decent behavioral science. Talk about that. How did you
Speaker 1: acquire that by being decisive? So quick step back? What
Speaker 1: is behavioral science I mean? And how does it plan
Speaker 1: to investing was what is that? So a lot of
Speaker 1: the economics and finance profession, when when it was really
Speaker 1: starting out and starting to get very rigorous and empirical,
Speaker 1: you need to make assumptions about how people behave, and
Speaker 1: the math is a heck of a lot easier if
Speaker 1: you assume people are rational and make good decisions and
Speaker 1: don't have biases. So for years a lot of models
Speaker 1: were built up on the idea that on average, you know,
Speaker 1: people are kind of smart, or they figure things out
Speaker 1: and they're not making systematic mistakes. I remember, so I
Speaker 1: was a sophomore in college and underground and starting to
Speaker 1: read some papers about how people made systematic errors and
Speaker 1: probability or in investing, or how they thought about money,
Speaker 1: and thinking, you know what, this is really interesting. I
Speaker 1: think I could like have a career as an academic
Speaker 1: in it. And then I continue to read and realize
Speaker 1: that like all of my ideas had already been done
Speaker 1: in the nineteen seven years of academics. Um So I realized, actually,
Speaker 1: I'm going to have to have some kind of a
Speaker 1: different career and the idea of actually applying it in
Speaker 1: the real world and saying, okay, people think about money
Speaker 1: differently than economists. Do they make specific errors? What are that?
Speaker 1: And as there an opportunity to help people have better
Speaker 1: outcomes if we work with them as real human beings
Speaker 1: rather than is perfectly rational agents. So that's a large
Speaker 1: part of it is saying like, how do people actually
Speaker 1: make decisions if they knew better, how would they make decisions?
Speaker 1: And how do we close the gap between those? So
Speaker 1: can I go to an example of this? So and
Speaker 1: everybody's wondering about this when the next market downturn happens, right,
Speaker 1: or a correction or a bear market, talk about what
Speaker 1: you would do for clients who are scared and want
Speaker 1: to sell everything. I tend to think that a vaccine
Speaker 1: is way better than are here. Um, this is tough.
Speaker 1: So this is one of the toughest things we've strung with.
Speaker 1: Generally speaking, we are boring. We are not here to
Speaker 1: help you out perform. When we talk to you about things.
Speaker 1: We talked to you about goals and whether or not
Speaker 1: you're on track to hit goals and how are you
Speaker 1: situated today for what you need to achieve in the future.
Speaker 1: If you log onto your betterment account, we don't talk
Speaker 1: about what the market did yesterday. Or the past month,
Speaker 1: or really at all. We talked to you about are
Speaker 1: you on track to hit your goals? And where does
Speaker 1: it look like you're going to be in five years?
Speaker 1: And is your portfolio drifted and what should you do
Speaker 1: about that? So the experience of being a Betterment customer
Speaker 1: is very different than going to an online worker site.
Speaker 1: And I think that shift of focus from what happened
Speaker 1: recently to what I need to know about the future
Speaker 1: and what can I change it's a dramatic driver of
Speaker 1: differences in behavior. So when we use red and green
Speaker 1: on our site, it has nothing to do with what
Speaker 1: the market did and has to do with whether or
Speaker 1: not you're on track for the future green, or whether
Speaker 1: or not there you need to make some actions to
Speaker 1: get back on track. I think part of it is
Speaker 1: that we get very smart clients to UM. There's been
Speaker 1: a number of different pieces of research I've been involved
Speaker 1: with or other people have that clients very strongly self
Speaker 1: select to something that they that is what they want.
Speaker 1: So if you want gambling and get rich quick, you're
Speaker 1: gonna be in some kind of an easy, low cost
Speaker 1: direct brokerage where you get to come in and buy
Speaker 1: your apple and sell it and shorten and do all
Speaker 1: these cilienings. Our customers, we don't. We don't have UM.
Speaker 1: You you come in and we talked to you about
Speaker 1: goals and plans and taxes and finance, UM, and we
Speaker 1: never talked about single stocks. We don't. We don't have
Speaker 1: anything that shows you in a single stock that you're
Speaker 1: invested in. So we have customers who that works. We
Speaker 1: have people who are interested in the long run and
Speaker 1: planning and making smart decisions, not in short term market
Speaker 1: timing anything. So I actually I think there's gonna be
Speaker 1: a really interesting sort of shift for you know, people
Speaker 1: ask what's gonna happen to the instus Number one, I
Speaker 1: don't need to do too much because the customers who
Speaker 1: are our customers are already heading the game. They're already smart,
Speaker 1: they know what's going on. We're building interfaces and services
Speaker 1: in a way that helps reinforce that by helping them
Speaker 1: focus on the future and not the past. And finally,
Speaker 1: there is some elements we actually have been through. I
Speaker 1: think there was a draw down in early Every time
Speaker 1: we have these little I sort of think of them
Speaker 1: as dress rehearsals for the big thing. We run small
Speaker 1: experiments about how much do we you know, if we
Speaker 1: do this on our mobile phones, does that help? If
Speaker 1: we do this kind of intervention on the level, how
Speaker 1: effective is it? You know, like should we use people
Speaker 1: or should we make it be more anonymous. We're constantly
Speaker 1: learning and really systematically learning about what works at scale
Speaker 1: for improving behavior. UM, and it works on our client base.
Speaker 1: When you think about that proactivity from your perspective, it's
Speaker 1: also do in all disaster. I guess from a from
Speaker 1: an investining same point for an investor, what's the single
Speaker 1: biggest investment think that people meant there? Oh, it's it's saving.
Speaker 1: It is not saving enough and usually in the right way.
Speaker 1: So UM, if you're saving in a taxable cash account
Speaker 1: before you're saving in your fraual on ky where your
Speaker 1: employer notches, you're literally missing out on a hundred percent
Speaker 1: returns immediately in a tax advantage of vehicle. Again, this
Speaker 1: is where I think what we do is incredibly sexy
Speaker 1: because we help you avoid those mistakes that cost you
Speaker 1: the most money, making sure that you're hitting the company
Speaker 1: match or that you're using the tax advantage vehicle and
Speaker 1: which was et cetera. UM. On the other hand, so
Speaker 1: I think that saving and saving the right amount in
Speaker 1: the right way and for the right things, like, um,
Speaker 1: how much do I wish that five years ago the
Speaker 1: future Dan went to like pasted Dan and said, you're
Speaker 1: going to have a kid. Like you are a married,
Speaker 1: twenty nine year old guy, You're gonna have a kid.
Speaker 1: Start saving today. That kind of foresight is very valid.
Speaker 1: People people's biggest mistake is not thinking about their saving
Speaker 1: in the right way and making it effortful. People like,
Speaker 1: the more that you're not thinking about you're saving it,
Speaker 1: you're doing it any way. The more good, the better
Speaker 1: you're gonna be at it. So help me better understand
Speaker 1: my own brain. And what games do you guys play
Speaker 1: to help me help myself? Sure, I love this because
Speaker 1: there's a lot of a lot of jobs in life
Speaker 1: where like when you do good at it, people know.
Speaker 1: And actually, in my job, if I'm really good at
Speaker 1: our clients have no idea that I've kind of like
Speaker 1: Jedi mind tricked now, which is gonna say, I mean tricky,
Speaker 1: It's just that it's it's part and parcel of the experience.
Speaker 1: So a good example is the use of color. It's
Speaker 1: not that we don't use color it's that when we
Speaker 1: use color, we're gonna give you the impression of everything
Speaker 1: being okay unless it isn't. And red is going to
Speaker 1: draw your attention into something that you can fix. So
Speaker 1: if you aren't saving enough, or if your portfolio is
Speaker 1: drifted and it's something that you need to take care of,
Speaker 1: that's gonna show up red when you log in, and
Speaker 1: our eyes naturally gravitated the contrast, you're gonna be pull
Speaker 1: to that you're gonna spend time and it's like, I've
Speaker 1: seen this. It's really annoying to have a little red
Speaker 1: pop up on your thing and you want to resolve
Speaker 1: that you hit done with, And the resolution of that
Speaker 1: isn't going to be you know, body apple, it's going
Speaker 1: to be figure out how to say it. Twenty more
Speaker 1: honors a month and you'll be fine. Other elements of
Speaker 1: it is kind of making things be interesting or move
Speaker 1: or attention grabbing that again, you can control the outcome
Speaker 1: of rather than the past. So imagine if you are
Speaker 1: a weather app that kind of showed me what the
Speaker 1: weather was the past week, you look at it and go,
Speaker 1: this is the dumbest app in the world, And yeah,
Speaker 1: that's what must investing in finance apps, They're like, it
Speaker 1: used to be worth more, now it's worth less, and
Speaker 1: you're like, well thanks, that's not really useful information. So
Speaker 1: a lot of our apples focused on you know, we
Speaker 1: don't have a crystal ball, but we're pretty sure this
Speaker 1: is what the future holds, and we're going to give
Speaker 1: you the kind of guidance that you might want to
Speaker 1: change your route or aut on some more time to
Speaker 1: your journey. And do you do you have anything to
Speaker 1: appease somebody who just feels like I gotta sell something
Speaker 1: like is there I think I quality a conference one's
Speaker 1: talking about this where you get you let them do
Speaker 1: a little something to get out of their system. What's
Speaker 1: that like? Absolutely? So, the way I think about it
Speaker 1: is that you never stop a river. You can redirect it,
Speaker 1: you can use a f irrigation, you can use it
Speaker 1: to generate electricity, but you're never gonna be able to
Speaker 1: stop the river. Um, So you have to take whatever
Speaker 1: sort of momentum and real underlying emotional issue that they
Speaker 1: have and redirect or make them think about it slightly differently.
Speaker 1: So really a good example, here's an incredibly irrational thing.
Speaker 1: People market time in their taxable accounts more than they
Speaker 1: do in their tax advantage accounts. So you look at
Speaker 1: your retirement account and you're like, no, that's long term,
Speaker 1: I'm not going to touch it. But I'm worried about
Speaker 1: the election. I think the market is going to go down,
Speaker 1: so I'm going to market time in my taxible account.
Speaker 1: This is incredibly dull, you know, like the market is
Speaker 1: going to have an equal impact on both those accounts.
Speaker 1: But if you market time and you're taxable, you're definitely
Speaker 1: gonna end up owing taxes. So what we did is
Speaker 1: we bel a future called a tax Impact Preview, and
Speaker 1: what it does is just for taxable accounts, before you
Speaker 1: go through with an allocation change, it says donal. We
Speaker 1: find if you want to do this, but you're gonna
Speaker 1: owe five dollars in taxes common at um. People don't
Speaker 1: think about taxes when they're trading. It's hard for them
Speaker 1: to calculate it, and they hate them. People really hate taxes.
Speaker 1: So if you throw up a there is a sticker
Speaker 1: press of five dollars in tax if you go ahead
Speaker 1: with this um. What we have found is that if
Speaker 1: if that number is more than fifty dollars, if they're
Speaker 1: gonna have more than fifty dollars in taxes. There's less
Speaker 1: than one in ten ten chance that they're going to
Speaker 1: go ahead. So give them something else that they hate more.
Speaker 1: Where do they hate more than losing money? They hate
Speaker 1: paying it to the government apparently. So to bring this
Speaker 1: back to the ETF, I want to ask you your
Speaker 1: average customer, do they know that they're actually investing in ETS?
Speaker 1: I would this is the average one does. Yeah, I
Speaker 1: would guess that they would have a hard time explaining
Speaker 1: to you what how an ETF was different than a
Speaker 1: mutual fund and why and so on. But I think
Speaker 1: they have a general understanding that ETS so liquid and
Speaker 1: low costs and tracking disease, and that's the regular for
Speaker 1: them to be a message, damn makes your time? Can
Speaker 1: can we have a taco now? Yeah? I think it's
Speaker 1: time for a taco? Now. You're making me hungry. It
Speaker 1: was the goal. By the way, they're a taco ETS.
Speaker 1: There's a food and Beverage ETF with the ticker PBJ,
Speaker 1: which is pretty good. But I don't there's probably some
Speaker 1: taco company in their baggorite jigger I like Rhoda. I
Speaker 1: will have to do J that bias. But okay, that's
Speaker 1: bies he has to outside of that, Jay nug is
Speaker 1: another j um. That's a good question, Jay Ugg. By
Speaker 1: the way, it's probably the most volatile eca from the
Speaker 1: planet's triple ledgers junior gold miners. I think that's what
Speaker 1: you're using. You're after tax account. Yeah, exactly. Actually, is
Speaker 1: there like that? Not better than it? Portfolio? What would
Speaker 1: that's a really good what would be like the antimatter
Speaker 1: to our portfolio? Yeah, it would be like a triple
Speaker 1: leverage short bigger. Yes. Thanks for listening to Trillions. Until
Speaker 1: next time. We can find us on the Bloomberg terminal,
Speaker 1: Bloomberg dot com, Apple Podcasts, and a bunch of other
Speaker 1: places that probably haven't heard about yet. We'd love to
Speaker 1: hear from you. We're on Twitter, I'm at Joel Webber Show,
Speaker 1: He's at Eric Baltunas. Trillions is produced by Jordan Bell
Speaker 1: with help from Magnus Henrickson. Francesca Levy is the head
Speaker 1: of Bloomberg podcast Bye.