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Speaker 1: This is Master's in Business with Barry rid Holds on

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Speaker 1: Bloomberg Radio.

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Speaker 2: This week on the podcast, I have an extra special guest.

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Speaker 2: Brian Hamburger has been one of the leading authorities in

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Speaker 2: the world of registered investment advisories, broker dealers, sec regulatory compliance.

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Speaker 2: He is the founder of Market Council, which is one

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Speaker 2: of the leading firms in that space, as well as

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Speaker 2: the Hamburger Law firm. I know Brian for a dozen years,

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Speaker 2: maybe longer, but I've really gotten to know him over

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Speaker 2: the past couple of years. Really, there are a few

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Speaker 2: people in the industry with a better perch on what's

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Speaker 2: going on, a better position to see the industry, which,

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Speaker 2: depending on which survey you read, is anywhere between thirty

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Speaker 2: eight trillion and ninety seven trillion dollars. He just knows

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Speaker 2: everything about how to stand up an ria, what's happening

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Speaker 2: in the world of mergers and acquisitions in the space

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Speaker 2: where the capital is flowing, how people change their employment

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Speaker 2: in the industry, and how various groups get carved out

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Speaker 2: or stood up or established on both the broker dealer

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Speaker 2: side and the registered investment advisory side. He is highly

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Speaker 2: sought after as a council in this space, and I'm

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Speaker 2: glad we had the opportunity to finally sit down and

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Speaker 2: talk about the industry. It's a little inside baseball if

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Speaker 2: you're an RIA, if you're an attorney working in the space,

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Speaker 2: if you're a broker dealer, if you're anybody within the

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Speaker 2: financial services industry, or if you're somebody just curious as

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Speaker 2: to how all these things actually happen. I think you're

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Speaker 2: going to find this to be an absolutely fascinating conversation

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Speaker 2: with no further ADO Market Councils. Brian Hamburger, Thanks Barry,

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Speaker 2: it's so great to be here. It's great to have

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Speaker 2: you now. Full disclosure. Ridult's Wealth Management has been around

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Speaker 2: a decade. A couple of years before we launched, we

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Speaker 2: were exploring merging with somebody. We retained your firm. You

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Speaker 2: guys did a nice job and that was I don't know,

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Speaker 2: twelve years ago. I always feel more comp more disclosures

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Speaker 2: better than less As an attorney, I assume you wouldn't

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Speaker 2: disagree with that.

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Speaker 1: Persusse I wouldn't aagree. We also co invested in an

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Speaker 1: investment recently where we should that's right, So I don't

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Speaker 1: know if that closed yet has that clised closed last week?

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Speaker 2: So there you go. So now I have to disclose

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Speaker 2: that also. So Brian is not a stranger to me,

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Speaker 2: and we have some shared financial interests. But the reason

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Speaker 2: I wanted to bring him in here is there are

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Speaker 2: a few people in the industry who have a better

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Speaker 2: perch by which to look at the world of registered

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Speaker 2: investment advisors, broker dealers, all of the changes that are

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Speaker 2: taking place in the space. And before we delve into that,

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Speaker 2: let's jump into your background. You turned out to be

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Speaker 2: the first dual economics financial management major at Quinnipiac. What

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Speaker 2: what led to the interest in finance?

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Speaker 1: Quite frankly, the interest in finance started when I was young.

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Speaker 1: My father was was an investment advisor, and he he

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Speaker 1: made his way to be an investment advisor from being

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Speaker 1: a manager with a textile factory to selling insurance to

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Speaker 1: find his way out of that business. Went from insurance

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Speaker 1: to financial planning, financial planning to the independent broker dealer

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Speaker 1: world independent broker dealer to hybrid IBD slash Ria.

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Speaker 2: And so really you're saying he couldn't keep a job,

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Speaker 2: constantly looking for a new game.

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Speaker 1: He made his way. He made his way into this space,

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Speaker 1: and I was, I was captivated. You know. Keep in

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Speaker 1: mind also that when I when I was going through

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Speaker 1: school in the you know, mid to late nineties, you know,

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Speaker 1: Wall Street was was pretty pretty appealing, bang and it

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Speaker 1: was on fire. Yeah, pretty sexy. And so so why

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Speaker 1: law school?

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Speaker 2: You go to university in Miami, why not go for

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Speaker 2: a business degree?

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Speaker 1: So I did. I mean, at first I got out

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Speaker 1: of undergrad and a degree in finance, coming out of

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Speaker 1: coming out of a small college at the time, Quinnipiac College.

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Speaker 1: The gigs I was offered were essentially customer service jobs

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Speaker 1: at mutual funds, you know call service, you know, manning

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Speaker 1: the phones, which I was no stranger to, you know,

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Speaker 1: work my way through high school and college on the phones,

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Speaker 1: but was uninspired by that work. I didn't see the

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Speaker 1: real path ahead. I saw myself, if anything, maybe maybe

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Speaker 1: doing product wholesaling, getting involved in you know, in financial

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Speaker 1: you know, product structuring. But I didn't really see a

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Speaker 1: clear path. And my grandmother sat me down and she said,

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Speaker 1: maximize the opportunity. She said, you're still in learning mode.

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Speaker 1: You're never going to go back to school if you're

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Speaker 1: gonna if you're gonna do it go to law school.

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Speaker 1: And actually, I'm going to tell you she she did

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Speaker 1: something a little interesting. She she was an investor, she

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Speaker 1: loved stocks. She had her broker at Mary lynch Uh

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Speaker 1: and and she put in front of me a stack

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Speaker 1: of annual reports. Remember these big gloss things used to

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Speaker 1: come out all.

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Speaker 2: The time with a little bit of information buried in

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Speaker 2: the back, but the front was was the narrative, story

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Speaker 2: was compelling. Yeah, and how could you not put money

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Speaker 2: into this common right?

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Speaker 1: So she she she puts these annual reports, and she said,

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Speaker 1: I want you to look at the management in the

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Speaker 1: and the board of directors, and I want you to

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Speaker 1: tell me what they have in common. So we're at

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Speaker 1: We're at dinner that night, and she said, did you

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Speaker 1: look through them? I said yeah. I said, I'm good

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Speaker 1: with my auntser, I'm ready. She goes, what are they

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Speaker 1: have in common? I said, they're all white bald men.

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Speaker 2: And one day I'll be a white bald man.

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Speaker 1: And she said, that's not that's not what I wanted

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Speaker 1: you to get out of it. But was tough.

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Speaker 2: She she wasn't falling around.

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Speaker 1: With I thought she wasn't falling around.

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Speaker 2: She was looking for the answer they all went to

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Speaker 2: law school.

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Speaker 1: They all went to law school, and they and they

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Speaker 1: didn't necessarily pursue a career purely in law, but her

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Speaker 1: her understanding of it is they must know the rules

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Speaker 1: of the game better than others. And so that really

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Speaker 1: that really stuck with me. And they know the rules of.

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Speaker 2: The road better than others. That's really insightful. What did

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Speaker 2: grandma do that she had such market savvy back in

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Speaker 2: the nineties.

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Speaker 1: So my grandma Nan and Sophie, she lost She lost

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Speaker 1: her husband at a young age before I was born,

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Speaker 1: and her husband ran an autobody shop. They were first

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Speaker 1: generation immigrants, and when faced with the typical widow dilemma,

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Speaker 1: she stepped in and said, I'm not going to sell.

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Speaker 1: I'm going to run this business. And so to this

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Speaker 1: day I continue to meet some old school mechanics who

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Speaker 1: knew my grandmother when and they said, man, she was

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Speaker 1: a tough son of a.

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Speaker 2: Really yeah, and I've been having a hard time chasing

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Speaker 2: down an old nine to eleven turbo the charger. Can

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Speaker 2: she can Grandma hook me up?

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Speaker 1: So she's unfortunately passed away for many years now. But

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Speaker 1: you know, I had some really, some really good strong

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Speaker 1: women in my life. My other grandmother was another first

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Speaker 1: generation immigrant from Germany, and she she took to selling

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Speaker 1: beauty supplies on the side, and before you knew it,

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Speaker 1: she was the number one salesperson for the uh you know,

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Speaker 1: uh selling to professional salons in the whole country. So

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Speaker 1: I learned a lot from from young ladies.

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Speaker 2: That's quite quite interesting. So one of your grandmothers steers

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Speaker 2: you towards law, when did you kind of realize, Hey,

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Speaker 2: I can make law and finance work well together, and

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Speaker 2: one plus one is three.

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Speaker 1: Yeah. So I don't think there was that necessarily eureka moment,

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Speaker 1: but I was definitely informed by my father's study groups.

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Speaker 1: You know, I knew his network of friends and colleagues,

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Speaker 1: and I would constantly hear them frustrated by the compliance department, right, right,

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Speaker 1: they were just playing compliance for everything they couldn't do.

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Speaker 2: The Bureau of Business Prevention is how the retail brokers

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Speaker 2: used to describe compliance.

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Speaker 1: I think many still do, right. They know that the

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Speaker 1: answers know, but they don't know why, right, And they

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Speaker 1: don't really don't care to know why. And it just

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Speaker 1: struck me that it can't be all that complicated. And

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Speaker 1: so when I would look into why certain of their

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Speaker 1: marketing materials would get declined or certain of their business

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Speaker 1: requests or authorizations would get declined, and I would share

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Speaker 1: it with them. We would sit down and figure out

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Speaker 1: a way around it, right, a way to deal with

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Speaker 1: those issues, and they were really grateful. And I love

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Speaker 1: solving things that other people think are unsolvable.

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Speaker 2: I love the puzzle.

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Speaker 1: Well more than the puzzle. I love coming up with

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Speaker 1: a solution when they can't even formulate the question. Huh right,

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Speaker 1: So it's like it's almost like pulling it out of

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Speaker 1: them and asking what the problem is. And I've always

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Speaker 1: been drawn to that, and so to me, you know,

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Speaker 1: that really helped. And then early in my early in

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Speaker 1: law school at a professor and adjunct professor. I think

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Speaker 1: some of the best professors in college are adjunct professors.

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Speaker 2: They're working actual career in the industry and teaching part time.

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Speaker 1: Absolutely, And I was fortunate that this professor, Chuck Senator,

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Speaker 1: was during the day the head of enforcement the in

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Speaker 1: Miami's SEC Enforcement Division, and so I started to see,

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Speaker 1: you know, what he's done with his with his law

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Speaker 1: school education. Chuck went on to be general counsel for

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Speaker 1: small firm like Fidelity Investments and Aim and I. Him

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Speaker 1: and I are still in touch to this day. But

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Speaker 1: it's people like that who who take the education and

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Speaker 1: really make it their own that that really really inspired me.

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Speaker 2: So let me throw a compliance question at you, because

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Speaker 2: you're making my.

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Speaker 1: You want free advice?

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Speaker 2: No, no, no, I want to talk about the industry.

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Speaker 2: So I always assumed the reason compliance departments always said

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Speaker 2: no was simple game theory. There's zero upside for them

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Speaker 2: saying yes. The best that can happen is nothing goes

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Speaker 2: terribly wrong. The worst that can go happen is there's

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Speaker 2: a big problem, and why did you approve this? So internally,

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Speaker 2: there's no incentive for them to do business until they

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Speaker 2: stop so much business that some senior person has to

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Speaker 2: come in and say, hey, you got to loosen the

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Speaker 2: reins a little bit. You're killing us.

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Speaker 1: You are very correct, and I'm not going to tell

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Speaker 1: you that that often. But the root of that is

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Speaker 1: this big misnomer. It's this it's this word compliance that

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Speaker 1: major firms have used because it's a good catch all. Right.

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Speaker 1: Compliance at big firms is similar to saying wait till

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Speaker 1: your mother gets home, right, Because they know that people

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Speaker 1: are fearful of the regulators far more than their colleagues

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Speaker 1: sitting at the cubicle right across the hall, and so

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Speaker 1: they call things compliance when really probably about eighty percent

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Speaker 1: of the issues are risk mitigation issues. And so as

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Speaker 1: advisors look to leave these big enterprises and go independent,

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Speaker 1: one of the biggest things that we need to train

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Speaker 1: them on is the distinction between compliance, legal and.

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Speaker 2: Risk, compliance, legal and risk. Those are three very very

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Speaker 2: distinct issues that sometimes get lumped together as a lazy

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Speaker 2: way to say no exactly really intriguing. So clearly you

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Speaker 2: see the overlap between being an attorney understanding the intricacies

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Speaker 2: of securities law. I'm going to use a dirty word now,

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Speaker 2: how did you come across the synergy of combining a

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Speaker 2: law firm with a consultancy that specialized in compliance and

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Speaker 2: regulatory supervision?

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Speaker 1: Has that become a dirty word?

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Speaker 2: Now? Oh? In the M and A world, it's the

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Speaker 2: worst word you can use, really, because it means we

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Speaker 2: don't really know why we're slamming these two companies together

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Speaker 2: other than the fees, the banking fees. So let's say

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Speaker 2: there's synergies here, and we'll all go out for beer.

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Speaker 2: I mean that's kind of how that word became a

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Speaker 2: dirty word. It was a substitute for actually thinking about

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Speaker 2: how do to disparare things? You know, how do you

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Speaker 2: get to that one plus one equals three?

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Speaker 1: So we'll just assume that that that's going to work

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Speaker 1: out instead of doing the analysis. Got it?

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Speaker 2: So yeah, I mean, I don't think that's that far

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Speaker 2: from the truth.

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Speaker 1: So what I realized is that people were intimidated by

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Speaker 1: law firms. My first job out of law school was

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Speaker 1: at a mid size law firm out of Prince in

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Speaker 1: New Jersey, and I would have clients who wouldn't call

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Speaker 1: when an issue arose.

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Speaker 2: They're afraid of getting built.

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Speaker 1: That was it, one hundred percent? That was it? Because

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Speaker 1: I would ask them after the fact and they would say,

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Speaker 1: you know, honestly, I didn't want to run the clock.

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Speaker 1: I said, that would have cost fifty dollars. We would

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Speaker 1: have been done with this.

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Speaker 2: You know. I didn't want to tell you what you

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Speaker 2: guys hit me for. Every time I met a phone call.

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Speaker 2: I thought it was no, you guys were pretty fair.

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Speaker 2: But that is a legitimate concern, especially for a small

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Speaker 2: firm that has a modest budget.

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Speaker 1: Absolutely, yeah, So in my mind, we had to do

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Speaker 1: something democratize regulatory compliance without diminishing the quality of work.

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Speaker 1: Because when I started Market Council and the Hamburger Law

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Speaker 1: from back in two thousand, the only firms that were

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Speaker 1: doing regulatory compliance work were registration services service bureaus. Right,

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Speaker 1: it was a very much a next available operator. Former

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Speaker 1: regulators were the best you would get. And a lot

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Speaker 1: of the answers were, well, this is what we do right,

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Speaker 1: this is our practice, this is what other firms do,

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Speaker 1: And they couldn't go back to the source, They couldn't

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Speaker 1: go back to the root, They couldn't rationalize why things

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Speaker 1: were being done that way. And so I wanted to

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Speaker 1: be able to bringing a higher degree of quality to

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Speaker 1: regulatory compliance. At the same time, I didn't want to

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Speaker 1: walk away from the things that we need to be

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Speaker 1: lawyers to do right. And so there are certain things

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Speaker 1: or drafting of contracts, negotiating deals, representing someone's interests right

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Speaker 1: actually you know, working on their behalf, dealing with some

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Speaker 1: complex issues where we're going beyond the law, beyond the

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Speaker 1: rules and regulations. All of those have to be done

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Speaker 1: by an attorney, and so I didn't want to skirt

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Speaker 1: that or circumvent that, and so we set up two

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Speaker 1: distinct firms.

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Speaker 2: So how many companies, and I'm actually literally researching as

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Speaker 2: we speak, how many companies do what Market Council does

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Speaker 2: or some partial approximation.

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Speaker 1: So I don't think there's anyone that has the breadth

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Speaker 1: of services that we do. Other firms have launched in

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Speaker 1: the past as affiliates or related companies to law firms,

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Speaker 1: but they really they've either sold off the compliance business

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Speaker 1: so they're no longer affiliated, or they really do they

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Speaker 1: do completely different different work. It's really just a referral relationship,

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Speaker 1: you know. With us, the law firm is basically a

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Speaker 1: customer of Market Council for a lot of our startup work.

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Speaker 2: So when you say startup, it's a new firm that's

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Speaker 2: stepping out to launch a new company, and they need

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Speaker 2: to go through the whole SEC registration process unless they're

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Speaker 2: small enough, in which case it's whatever states they're operating in.

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Speaker 2: They need to set up their policies and procedures. It's

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Speaker 2: just all those initial painful, tedious, difficult things. I mean,

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Speaker 2: we're only not even a decade out from launching hours

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Speaker 2: and I remember it was a pretty painful set of

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Speaker 2: circumstances to get up and run.

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Speaker 1: Well, yes and no, right, I mean so, so Market

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Speaker 1: Council Mark Council Consulting will work with firms on really

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Speaker 1: understanding their scope of services, taking inventory over their conflicts

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Speaker 1: of interest, drafting out fee schedules, investment strategy. A lot

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Speaker 1: of it is disclosure based, right, so we'll work on

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Speaker 1: on creating all the disclosures, obviously handling all of the registrations,

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Speaker 1: the regulatory reporting that needs to be done, drafting and

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Speaker 1: installing a drafting a compliance manual, and installing an initial

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Speaker 1: compliance program. All of that work is handled by Market

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Speaker 1: Council for most of the clients that come to us

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Speaker 1: for startup work right in that program we call it

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Speaker 1: the ra incubator, right, which is a really I think

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Speaker 1: describes you know what it does. But for almost all

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Speaker 1: the clients that come to us, they're not coming from

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Speaker 1: a very pure place where they can just engage in

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Speaker 1: that activity, right, you know.

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Speaker 2: For meaning coming from a broker dealer or another RIA.

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Speaker 2: And that raises a question as to some of the

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Speaker 2: technical legal employment issues around their exits.

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Speaker 1: So yeah, there's definitely issues with their employment and employment transition, right,

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Speaker 1: what canon they can't do while they are currently gainfully

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Speaker 1: employed elsewhere. Right, That captive employment restricts them often far

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Speaker 1: more than they know. But they can engage in an

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Speaker 1: outside business activity, right, they can engage in selling away.

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Speaker 1: The big one that they get hung up on is

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Speaker 1: they can engage in a private securities transaction without getting

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Speaker 1: the prior written consent of the firm. Now, you may say, Barry, well,

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Speaker 1: how is this a private securities transactions?

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Speaker 2: They're launching a new firm that's sec regulated.

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Speaker 1: Doesn't even matter if it's sec regulated. The fact that

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Speaker 1: they are, let's say, in preparation for launching this new firm,

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Speaker 1: they are acquiring one hundred percent of the membership interests

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Speaker 1: of an LLC or one hundred percent of the stock

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Speaker 1: of corporation.

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Speaker 2: Can't you disclose that at the last minute and.

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Speaker 1: No prior written consent of the firm you're working? Oh,

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Speaker 1: so you can.

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Speaker 2: That's technical, isn't it.

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Speaker 1: Well, and it's enforce right, and so you can decide

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Speaker 1: that you want to sever your employment and then begin

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Speaker 1: the startup work. But that's not tenable for the most.

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Speaker 2: Six months, then, so how do you never? That seems

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Speaker 2: kind of an absurd set of rules. That prevents people

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Speaker 2: from leaving a firm if or, I guess you could

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Speaker 2: always use a straw up man. You could use a

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Speaker 2: third person to set this up and then hey, I

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Speaker 2: didn't decide to do leave until the day I resigned,

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Speaker 2: and my wife did all the work. It's on hard.

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Speaker 2: Does that work?

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Speaker 1: Unfortunately? No, But there are strategies that we do deploy

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Speaker 1: in order to make that work. And it doesn't work

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Speaker 1: for a whole variety of situations, depending upon how restrictive

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Speaker 1: their current employment situation is. But when you say you know,

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Speaker 1: that seems awfully restrictive, keep in mind these are rules

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Speaker 1: written by a self regulatory organization comprised of broker dealers

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Speaker 1: or looking to create a moat.

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Speaker 2: So you launch both Hamburger Law Firm and Market Council

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Speaker 2: in two thousand, that that's some timing. Everything's going to hell.

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Speaker 2: The dot com implosion is happening, the Nasdaq falls. I

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Speaker 2: think it was eighty one percent peak to troth. What

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Speaker 2: was it like launching two firms into that mess?

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Speaker 1: I was dumb and young, right, I mean.

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Speaker 2: Well, that's the time to be dumb when you have

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Speaker 2: you know, recovery period.

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Speaker 1: Absolutely, you know I had and.

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Speaker 2: Let's talk exactly how dumb you sold your house to

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Speaker 2: fund this? Is that true?

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Speaker 1: I did, I did, and I'm to this day, I'm

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Speaker 1: grateful to my former wife for supporting that decision and

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Speaker 1: actually coming up with the idea.

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Speaker 2: It was her idea. You were both all in, let's

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Speaker 2: let's sell the house and see what sticks against the wall.

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Speaker 1: So I came up with this consulting concept, and I

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Speaker 1: pitched it to the firm's partnership and I said, I said,

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Speaker 1: I really think that we would be able to do

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Speaker 1: a great job for our ria clients, for our wealth

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Speaker 1: management clients by having this consulting firm. And they rejected

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Speaker 1: the idea. And I would come home from work and

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Speaker 1: crack open a beer, sit on the back porch, and

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Speaker 1: I don't do that every every day, but I did

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Speaker 1: it coming out of work there, and I would punch

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Speaker 1: the pillow in the morning.

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Speaker 2: I was just, why did they reject the idea? What

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Speaker 2: was the explanation?

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Speaker 1: Law firms don't do that now. Okay, two years later,

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Speaker 1: twenty two years later, we see that law firms now

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Speaker 1: do that. They just didn't do that in big numbers

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Speaker 1: back then. And so so she said to me, she said, well,

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Speaker 1: are you just going to keep doing this?

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Speaker 2: And I said, well meaning punching the pillow.

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Speaker 1: Yeah, meaning punching the pillow. And I said, it's probably

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Speaker 1: my best option right now. And you know, we looked

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Speaker 1: at our situation. She was pregnant with our first with

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Speaker 1: our first child.

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Speaker 2: And we were that's the time to quit your job

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Speaker 2: and sell your house.

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Speaker 1: That's the perfect So she said, well leave and I said,

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Speaker 1: how are we gonna do that? We just bought this

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Speaker 1: house and she said if not now, when?

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Speaker 2: So not even like a second mortgage, sell the house

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Speaker 2: and use that to fund the news.

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Speaker 1: We had to sell the house. We had to do

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Speaker 1: a for sale by owner because if we sold it

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Speaker 1: using a broker, we would have been way underwater. So

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Speaker 1: we literally printed up flyers, put them outside, put them

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Speaker 1: all over town. We sold our house we have. When

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Speaker 1: I went to launch this firm, my daughter was six

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Speaker 1: months old and my wife was pregnant with our second.

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Speaker 1: We had two large dogs. Well and behold, no one

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Speaker 1: wanted to rent to us, so we ended up we

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Speaker 1: ended up renting a log cabin on a vineyard in

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Speaker 1: central New Jersey. I thought it was charming, My wife

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Speaker 1: not so much.

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Speaker 2: Wait they're a vineyard in New Jersey. That's the news

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Speaker 2: New Jersey.

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Speaker 1: Yeah, I can't read that many.

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Speaker 2: I can't recall my last New Jersey bouchelet. When when

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Speaker 2: is that harvest?

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Speaker 1: It was it was a lovely place to live for

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Speaker 1: a short period and yeah, we uh you know, we

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Speaker 1: were all in. We literally sold the house to finance

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Speaker 1: the bill.

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Speaker 2: Wow, that's a crazy story.

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Speaker 1: Yeah.

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Speaker 2: Prior to twenty twenty two, when rates were cheap, when

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Speaker 2: rates were zero, when capital was plentiful, it seemed like

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Speaker 2: the entire industry went through this wild merger frenzy. I

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Speaker 2: thought twenty twenty two would cool it off. I mean,

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Speaker 2: it seems to have slowed a bit, but it's not

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Speaker 2: like anybody through a bucket of ice water. What's going

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Speaker 2: on in that space today?

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Speaker 1: Listen. I think it has slowed, and I think interest

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Speaker 1: rates are going to be probably the you know, the biggest,

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Speaker 1: the biggest driver there because, as you know, right, the

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Speaker 1: capitol becomes more expensive. But you know, what shocked me

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Speaker 1: more more than the slowdown, the slowdown actually makes sense.

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Speaker 1: What shocked me more than the slowdown was the intoxication

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Speaker 1: of capital, right, and the fervor in which you know

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Speaker 1: these these firms, private capital has been chasing investment advisors.

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Speaker 2: So I have a theory as to why. I'm curious

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Speaker 2: as to why you think that that fervor was there.

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Speaker 1: You know, I think that I think that there is

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Speaker 1: a strong investment thesis as to why to acquire these firms. Right,

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Speaker 1: we joked around about synergies. Before they talk about synergies,

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Speaker 1: they talk about economies of scale. There's this foregone belief

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Speaker 1: where people just like to jump to the fact that

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Speaker 1: that there is some type of scalable client experience out

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Speaker 1: there that's really special. People don't necessarily describe how to

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Speaker 1: get there, but they just say, with more resources, we

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Speaker 1: can build a better client experience. Right. You could probably

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Speaker 1: build better digital tools, you could probably build build a

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Speaker 1: better communications strategy, probably insert some AI that you could

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Speaker 1: do some sophisticated things. But I'm not quite sure it's

439
00:24:07,800 --> 00:24:12,240
Speaker 1: just quantitatively or qualitatively better, right, because how do you

440
00:24:12,359 --> 00:24:15,320
Speaker 1: how do you compete with the advisor who's got a

441
00:24:15,359 --> 00:24:17,679
Speaker 1: couple hundred million dollars, who knows the names of all

442
00:24:17,680 --> 00:24:20,880
Speaker 1: their clients and all their kids, knows all their needs,

443
00:24:20,920 --> 00:24:24,359
Speaker 1: goals and objectives. Is sitting down at the kitchen table

444
00:24:24,400 --> 00:24:26,480
Speaker 1: with them, you know, every quarter. I mean, this is

445
00:24:26,520 --> 00:24:28,919
Speaker 1: the career that we started in, right, I mean this

446
00:24:28,920 --> 00:24:32,600
Speaker 1: this was what it looked like. And and so I

447
00:24:32,920 --> 00:24:35,479
Speaker 1: always ask, you know, better from what perspective? You know,

448
00:24:35,640 --> 00:24:37,800
Speaker 1: is it going to be better from the client perspective

449
00:24:38,240 --> 00:24:41,359
Speaker 1: or better in terms of just more profitable business? And

450
00:24:41,440 --> 00:24:43,520
Speaker 1: I don't I don't quite know the answer to that.

451
00:24:43,600 --> 00:24:46,959
Speaker 2: So let's take that apart. So, so there's really two

452
00:24:47,040 --> 00:24:50,719
Speaker 2: issues there. The first is all the private money flowing in.

453
00:24:51,119 --> 00:24:55,359
Speaker 2: I always looked at the private capital rushing into the

454
00:24:55,560 --> 00:24:59,000
Speaker 2: RIA space, especially with so there are a couple of

455
00:24:59,000 --> 00:25:01,840
Speaker 2: different types of firms. A small firm that you know,

456
00:25:01,920 --> 00:25:05,560
Speaker 2: is a very nice little lifestyle practice. Then there's the

457
00:25:05,600 --> 00:25:09,439
Speaker 2: medium firm that's been a decent chunk of capital but

458
00:25:09,600 --> 00:25:12,720
Speaker 2: for forever. They've been around for twenty years. They're almost

459
00:25:12,760 --> 00:25:16,200
Speaker 2: a billion dollars in ass of pioneers. Right, they're not growing,

460
00:25:16,240 --> 00:25:19,560
Speaker 2: they're not losing clients, they're kind of holding steady. To

461
00:25:19,760 --> 00:25:22,399
Speaker 2: private equity, which is a big source of the money

462
00:25:22,440 --> 00:25:25,240
Speaker 2: that was flowing in here. Hey, this is a bond

463
00:25:25,320 --> 00:25:29,040
Speaker 2: with a seven or an eight percent coupon, and theoretically

464
00:25:30,440 --> 00:25:33,320
Speaker 2: a capital you know, an equity kicker if they're if

465
00:25:33,320 --> 00:25:37,399
Speaker 2: they're acquired down the road. So we're getting two percent

466
00:25:37,560 --> 00:25:40,040
Speaker 2: in the bond market, or at least they were before

467
00:25:40,080 --> 00:25:43,240
Speaker 2: twenty twenty two. Let's get seven eight percent and maybe

468
00:25:43,240 --> 00:25:45,879
Speaker 2: things work out and someone takes them out. That was

469
00:25:46,040 --> 00:25:49,760
Speaker 2: the at least some of the interest when things were zero.

470
00:25:50,280 --> 00:25:53,960
Speaker 1: It's better than that. Actually, oh really it's I think

471
00:25:54,000 --> 00:25:57,320
Speaker 1: that private capital likens it to an equity indexed annuity

472
00:25:57,600 --> 00:26:01,480
Speaker 1: right where there's no downside because they put in a pick,

473
00:26:01,520 --> 00:26:05,160
Speaker 1: they put in a preferred income clause that gives them

474
00:26:05,200 --> 00:26:08,680
Speaker 1: the ability to get paid first, So there's no market

475
00:26:08,920 --> 00:26:12,120
Speaker 1: downturn risk, or I should say very low market downturn risk.

476
00:26:12,480 --> 00:26:15,240
Speaker 1: When the when the minority investor or the you know,

477
00:26:15,280 --> 00:26:19,560
Speaker 1: the capital partner paid first is getting paid first, there's

478
00:26:19,600 --> 00:26:23,080
Speaker 1: a long way to go before before that investment is affected.

479
00:26:23,119 --> 00:26:25,280
Speaker 1: So I think they look at it as having us

480
00:26:25,520 --> 00:26:29,240
Speaker 1: insured upside potential with that ongoing annuity stream.

481
00:26:29,440 --> 00:26:32,280
Speaker 2: Now, now you let's talk a little bit about the

482
00:26:32,400 --> 00:26:35,000
Speaker 2: roll ups and the mergers and acquisitions that are going on.

483
00:26:35,480 --> 00:26:38,600
Speaker 2: So for there's no doubt in my mind as having

484
00:26:38,680 --> 00:26:41,480
Speaker 2: run affirm that was ninety million an assets, the one

485
00:26:41,480 --> 00:26:45,760
Speaker 2: that is coming. We're three and eventually four when the

486
00:26:45,920 --> 00:26:48,639
Speaker 2: last deal closes. Billion dollars is a lot of a

487
00:26:48,680 --> 00:26:52,320
Speaker 2: lot of assets graduation. There are well a lot of

488
00:26:52,320 --> 00:26:57,520
Speaker 2: work still to go, but there are clearly economies of

489
00:26:57,720 --> 00:27:01,359
Speaker 2: scale and ik, You'll give full credit to my partners

490
00:27:01,400 --> 00:27:04,440
Speaker 2: for seeing this before I did. And hey, we need

491
00:27:04,480 --> 00:27:09,159
Speaker 2: to hire a CFO or promote someone and say, you know,

492
00:27:09,200 --> 00:27:12,480
Speaker 2: you don't want Barry doing payroll and Josh doing the

493
00:27:12,880 --> 00:27:15,640
Speaker 2: health care plan. But that's literally what was going on. Sure,

494
00:27:15,680 --> 00:27:18,640
Speaker 2: so we promoted the CFO. Hey, we need a head

495
00:27:18,640 --> 00:27:21,760
Speaker 2: of compliance, Like, really, we're not that big, you know what.

496
00:27:21,840 --> 00:27:25,639
Speaker 2: Think of it as insurance. Okay. My best bet is

497
00:27:25,960 --> 00:27:28,800
Speaker 2: my best trait is I let smarter people than me

498
00:27:29,520 --> 00:27:32,120
Speaker 2: convince me of things that I'm hesitant about.

499
00:27:32,160 --> 00:27:32,760
Speaker 1: It's a good call.

500
00:27:32,880 --> 00:27:35,840
Speaker 2: Hey, hey, we need a head of HR because you know,

501
00:27:36,000 --> 00:27:38,640
Speaker 2: we need to hire people. We're not hiring them fast enough.

502
00:27:38,920 --> 00:27:41,240
Speaker 2: We need to make sure that nobody is saying or

503
00:27:41,240 --> 00:27:44,600
Speaker 2: doing anything that doesn't comply with the rules. We're in

504
00:27:44,640 --> 00:27:47,399
Speaker 2: twenty seven states. There's a different rule in every state.

505
00:27:47,920 --> 00:27:50,040
Speaker 2: And I'm not even talking about the crazy this will

506
00:27:50,040 --> 00:27:53,600
Speaker 2: get your canceled stuff. I mean just staying on the

507
00:27:53,680 --> 00:27:59,440
Speaker 2: right side of regulator, and on and on and so, yes,

508
00:27:59,520 --> 00:28:04,000
Speaker 2: there's no doubt scale helps, but it doesn't help you

509
00:28:04,040 --> 00:28:07,120
Speaker 2: with the client experience. It doesn't help you with client acquisition,

510
00:28:07,600 --> 00:28:12,120
Speaker 2: it doesn't help you with your investment performance. All those

511
00:28:12,160 --> 00:28:14,959
Speaker 2: things have to be right before you start scaling up,

512
00:28:15,000 --> 00:28:16,840
Speaker 2: or at least that's how I see the world.

513
00:28:16,920 --> 00:28:19,960
Speaker 1: I see. I agree that scale helps, But what does

514
00:28:19,960 --> 00:28:24,440
Speaker 1: scale help with? Scale helps with reducing the complexity that's

515
00:28:24,520 --> 00:28:28,960
Speaker 1: largely come from growth, right, right, So it's it's a drug,

516
00:28:29,040 --> 00:28:31,560
Speaker 1: right you. I mean, if you want to grow quickly,

517
00:28:32,160 --> 00:28:34,880
Speaker 1: you need to capture that scale in order to combat

518
00:28:34,880 --> 00:28:38,360
Speaker 1: the complexity that comes with that growth. But for the

519
00:28:39,720 --> 00:28:41,920
Speaker 1: for the advisor with a few hundred million of assets

520
00:28:42,000 --> 00:28:45,640
Speaker 1: under management, they don't need the scale. They're running a

521
00:28:45,640 --> 00:28:49,320
Speaker 1: profitable business as it is, right, they're delivering outstanding service

522
00:28:49,360 --> 00:28:53,040
Speaker 1: to you know, to their clients. If this is a

523
00:28:53,040 --> 00:28:54,960
Speaker 1: lifestyle business, and I know that's kind of a dirty

524
00:28:54,960 --> 00:28:56,600
Speaker 1: word because people want to say, oh, I'm not in

525
00:28:56,600 --> 00:28:59,680
Speaker 1: a lifestyle business. Right, It's okay, Like you know, just

526
00:29:00,920 --> 00:29:02,960
Speaker 1: where we always encourage people to do is start with

527
00:29:03,000 --> 00:29:05,080
Speaker 1: their why. I know that sounds kind of corny, but.

528
00:29:05,280 --> 00:29:07,800
Speaker 2: No, But it's a fair question, right, But why do

529
00:29:07,840 --> 00:29:10,160
Speaker 2: you want to grow? If you're running a nice business,

530
00:29:10,160 --> 00:29:11,560
Speaker 2: you're happy, your clients are happy.

531
00:29:11,760 --> 00:29:14,520
Speaker 1: If you're happy, if your partner in life is happy

532
00:29:14,520 --> 00:29:16,680
Speaker 1: with you, and you've got time to spend with the

533
00:29:16,720 --> 00:29:19,520
Speaker 1: people you love, If your clients love what's going on,

534
00:29:19,600 --> 00:29:21,960
Speaker 1: if your employees are well cared for and they love

535
00:29:22,080 --> 00:29:25,160
Speaker 1: working there, you know is growth and imperative. And if

536
00:29:25,200 --> 00:29:29,000
Speaker 1: you read the trades, you would think everyone has to grow. Right,

537
00:29:29,000 --> 00:29:30,360
Speaker 1: You're gonna grow or you're gonna die.

538
00:29:30,440 --> 00:29:33,640
Speaker 2: Right, And now there are literally roll up shops that

539
00:29:33,760 --> 00:29:36,680
Speaker 2: have I've sat in the I never sit in the audience.

540
00:29:36,720 --> 00:29:38,880
Speaker 2: I'm usually in the green room. But if I'm sitting

541
00:29:38,920 --> 00:29:42,040
Speaker 2: in the audience and someone comes out and says, grow

542
00:29:42,120 --> 00:29:44,479
Speaker 2: or die, we're a roll up. And if you're not

543
00:29:44,640 --> 00:29:46,440
Speaker 2: going to be part of the roll up strategy, you're

544
00:29:46,440 --> 00:29:49,440
Speaker 2: gonna get steamrolled. How much of that is just self

545
00:29:49,440 --> 00:29:50,520
Speaker 2: interest talking.

546
00:29:51,000 --> 00:29:53,880
Speaker 1: My opinion is all self interest? Right? If someone listen,

547
00:29:53,920 --> 00:29:55,960
Speaker 1: you always start I always start at bottom of the article.

548
00:29:55,960 --> 00:29:58,160
Speaker 1: I always look at the italicized print, right, just like

549
00:29:58,200 --> 00:29:59,840
Speaker 1: you started with the disclosures at the top of the

550
00:29:59,840 --> 00:30:02,840
Speaker 1: sh show right, start with the atala sized print. If

551
00:30:02,880 --> 00:30:06,080
Speaker 1: I'm here from a roll up or an aggregator, and

552
00:30:06,160 --> 00:30:08,520
Speaker 1: I tell you, now's the time for you to sell

553
00:30:08,560 --> 00:30:12,280
Speaker 1: to me because prices are at all time record highs. Right,

554
00:30:13,080 --> 00:30:16,640
Speaker 1: I gotta like, you know, raise my eyebrows say well,

555
00:30:16,640 --> 00:30:19,720
Speaker 1: why do you then want to buy my practice if

556
00:30:19,720 --> 00:30:22,280
Speaker 1: you believe that this is an all time high? Right?

557
00:30:22,360 --> 00:30:26,000
Speaker 1: So to me, you know, the truth is in the action,

558
00:30:26,920 --> 00:30:27,880
Speaker 1: not the words. Right.

559
00:30:28,240 --> 00:30:30,080
Speaker 2: I can't hear what you're saying because what you're doing

560
00:30:30,120 --> 00:30:31,160
Speaker 2: is speaking so loudly.

561
00:30:31,400 --> 00:30:32,640
Speaker 1: You are so much more eloquent.

562
00:30:32,800 --> 00:30:35,840
Speaker 2: That's not me. I stole that. That's a Longfellow or

563
00:30:35,840 --> 00:30:36,880
Speaker 2: Wadsworth or somebody.

564
00:30:37,000 --> 00:30:37,200
Speaker 1: I know.

565
00:30:37,280 --> 00:30:39,680
Speaker 2: I know I'm stealing that. My dad used to say

566
00:30:39,680 --> 00:30:41,480
Speaker 2: that to me all the time. It's a great one,

567
00:30:41,640 --> 00:30:46,240
Speaker 2: but really it's true, which raises the question how big

568
00:30:46,320 --> 00:30:49,040
Speaker 2: is that? M and a market for ri as? Shoot,

569
00:30:49,480 --> 00:30:53,120
Speaker 2: nobody has. Here's the crazy thing. So you take the

570
00:30:53,160 --> 00:30:56,680
Speaker 2: five biggest rias you can think of, they're all two

571
00:30:56,760 --> 00:31:02,440
Speaker 2: hundred billion Creative Planning, Edelman, ken Fisher. They're all giants.

572
00:31:02,560 --> 00:31:05,280
Speaker 2: I'm sure there's a couple more there. Two hundred billion

573
00:31:05,320 --> 00:31:09,800
Speaker 2: dollars is nothing in a thirty forty by some measures,

574
00:31:09,880 --> 00:31:15,000
Speaker 2: ninety seven trillion dollar space. Is anyone ever going to

575
00:31:15,080 --> 00:31:16,040
Speaker 2: have market share here?

576
00:31:18,080 --> 00:31:20,040
Speaker 1: So you have you have a few questions, Yeah, you

577
00:31:20,040 --> 00:31:22,280
Speaker 1: have two questions there. The first one is we're in

578
00:31:22,280 --> 00:31:25,760
Speaker 1: the early innings, right, because even the giants of independent

579
00:31:25,800 --> 00:31:31,560
Speaker 1: wealth management are small in comparison to the entire securities industry. Right,

580
00:31:31,560 --> 00:31:34,080
Speaker 1: it's not. It wouldn't take much for one of these

581
00:31:34,080 --> 00:31:37,400
Speaker 1: financial behemoths to become an aggregator themselves, and they've got

582
00:31:37,480 --> 00:31:40,200
Speaker 1: far more financial might than any of these private capital

583
00:31:40,240 --> 00:31:41,120
Speaker 1: providers out there.

584
00:31:41,320 --> 00:31:44,080
Speaker 2: Note have gone public yet, right, they're all still mostly private,

585
00:31:44,120 --> 00:31:44,680
Speaker 2: Is that right?

586
00:31:44,800 --> 00:31:48,520
Speaker 1: Well, I mean you had focus financial, right, so you know,

587
00:31:48,600 --> 00:31:49,680
Speaker 1: go public and.

588
00:31:50,160 --> 00:31:52,360
Speaker 2: They're clearly a roll up there. How big are they

589
00:31:52,440 --> 00:31:54,760
Speaker 2: They're like three four hundred five hundred billions?

590
00:31:54,920 --> 00:31:57,560
Speaker 1: Yeah, I think, but they're they're actually going they're leaving

591
00:31:57,600 --> 00:31:59,680
Speaker 1: the public markets, and you know, it looks like they're

592
00:31:59,760 --> 00:32:04,400
Speaker 1: you know, they're heading back to private. So that's an

593
00:32:04,400 --> 00:32:07,560
Speaker 1: interesting transaction, right. One of the few firms to make

594
00:32:07,600 --> 00:32:10,520
Speaker 1: their way into the public markets is actually you know,

595
00:32:10,600 --> 00:32:13,240
Speaker 1: some would say retreating, you know, others would say, you know,

596
00:32:13,320 --> 00:32:17,920
Speaker 1: recapitalizing within the you know, the private markets, but you know,

597
00:32:17,960 --> 00:32:21,120
Speaker 1: they're the ones that have made their way over. Arguably,

598
00:32:21,200 --> 00:32:23,640
Speaker 1: other firms like NFP have gone public, but that's not

599
00:32:23,680 --> 00:32:29,200
Speaker 1: really a pure national financial partners right, more in insurance focus.

600
00:32:29,480 --> 00:32:31,480
Speaker 1: But I think we're in the early innings. I really do.

601
00:32:31,600 --> 00:32:35,680
Speaker 1: I think that there is a whole world that you

602
00:32:35,720 --> 00:32:38,640
Speaker 1: and I can't even sit here in fathom knowing where

603
00:32:38,680 --> 00:32:41,720
Speaker 1: we've come from to imagine what this is going to

604
00:32:42,000 --> 00:32:44,600
Speaker 1: become in the next ten or twenty years. I really,

605
00:32:44,720 --> 00:32:46,240
Speaker 1: I really think we're in the early innings.

606
00:32:46,360 --> 00:32:50,720
Speaker 2: Really, so let's let's that's surprising because when we launched

607
00:32:50,720 --> 00:32:54,040
Speaker 2: our firm in twenty thirteen, I felt like we were

608
00:32:54,040 --> 00:32:59,920
Speaker 2: a decade past the real launch of registered investment advisories.

609
00:33:00,240 --> 00:33:01,840
Speaker 2: We were on the right side of pass if, we

610
00:33:01,840 --> 00:33:05,040
Speaker 2: were the right side of fiduciary. It felt like, all right,

611
00:33:05,120 --> 00:33:07,760
Speaker 2: this is the future. And that's why I was surprised

612
00:33:08,320 --> 00:33:12,840
Speaker 2: the big shops hadn't bought on yet. But you're saying,

613
00:33:13,280 --> 00:33:15,600
Speaker 2: and here it is almost a decade later, you're saying,

614
00:33:16,040 --> 00:33:22,000
Speaker 2: this is still early days. The transition from transactional non

615
00:33:22,120 --> 00:33:24,480
Speaker 2: fiduciary business is going to continue to ramp.

616
00:33:24,600 --> 00:33:26,520
Speaker 1: I believe that's the case. Yeah, and then you said,

617
00:33:26,560 --> 00:33:28,720
Speaker 1: you know, are there going to be dominant you know

618
00:33:28,760 --> 00:33:30,840
Speaker 1: players in the space, And I don't believe there ever

619
00:33:30,880 --> 00:33:34,040
Speaker 1: will be, really And the reason for that is because

620
00:33:34,040 --> 00:33:38,000
Speaker 1: there's such a low barrier to entry. Right. Anyone you

621
00:33:38,040 --> 00:33:40,400
Speaker 1: know who takes a nice, hot, long shower, you know,

622
00:33:40,520 --> 00:33:43,800
Speaker 1: has an idea, right, and most of those people have

623
00:33:43,920 --> 00:33:45,080
Speaker 1: the wherewithal the pull off.

624
00:33:45,200 --> 00:33:48,240
Speaker 2: I told you that in confidence, most people.

625
00:33:48,000 --> 00:33:49,640
Speaker 1: Have the where with all the pull it off. Within

626
00:33:49,680 --> 00:33:52,200
Speaker 1: the independent wealth management space, right, there's not a high

627
00:33:52,240 --> 00:33:55,600
Speaker 1: barrier to entry. There's not significant licensing, you know that

628
00:33:56,080 --> 00:33:59,640
Speaker 1: that takes place and with the help of an objective advisor.

629
00:33:59,680 --> 00:34:03,640
Speaker 1: I mean, this is not a very complex endeavor.

630
00:34:04,080 --> 00:34:08,480
Speaker 2: So you mentioned Focus Financial. Let's talk about the platforms

631
00:34:09,160 --> 00:34:13,200
Speaker 2: like Focus, like Dynasty. Schopenny was a guest of the

632
00:34:13,239 --> 00:34:16,720
Speaker 2: show a couple of years ago, has a fascinating personal story.

633
00:34:17,360 --> 00:34:21,840
Speaker 2: I think they're down in Saint Petersburg or Tampa. These

634
00:34:21,880 --> 00:34:26,640
Speaker 2: platforms have developed. High Tower is another one that essentially

635
00:34:26,960 --> 00:34:31,359
Speaker 2: exists to pull out these billion dollar teams from big

636
00:34:31,400 --> 00:34:36,160
Speaker 2: firms and have been doing so very successfully. What is

637
00:34:36,200 --> 00:34:40,640
Speaker 2: that sort of transaction like and how challenging is it

638
00:34:40,719 --> 00:34:43,799
Speaker 2: for you as the attorney to deal with. I mean,

639
00:34:44,120 --> 00:34:46,840
Speaker 2: nobody at a big firm is happy when a billion

640
00:34:46,880 --> 00:34:48,480
Speaker 2: and a half dollars walks out the door.

641
00:34:49,120 --> 00:34:51,240
Speaker 1: Well, the billion and a half walking out is happy,

642
00:34:52,200 --> 00:34:53,120
Speaker 1: just to be clear.

643
00:34:53,840 --> 00:34:55,520
Speaker 2: Nobody who's left behind is happy.

644
00:34:55,680 --> 00:34:58,040
Speaker 1: So I think the three examples you gave are three

645
00:34:58,280 --> 00:35:02,520
Speaker 1: really different examples that probably satisfy a similar utility, a

646
00:35:02,560 --> 00:35:05,680
Speaker 1: similar need or demand in the marketplace. When you look

647
00:35:05,719 --> 00:35:08,879
Speaker 1: at at firms like you know, like Dynasty, right, they're

648
00:35:09,239 --> 00:35:13,640
Speaker 1: a single vendor platform provider, right. So for that entrepreneur

649
00:35:14,160 --> 00:35:18,160
Speaker 1: who doesn't want to make so many of the decisions

650
00:35:18,200 --> 00:35:22,239
Speaker 1: that go that naturally go with entrepreneurship, but they want

651
00:35:22,280 --> 00:35:25,600
Speaker 1: all the features and the independence and autonomy of running

652
00:35:25,640 --> 00:35:29,200
Speaker 1: their own business, right, those firms are a great option

653
00:35:29,320 --> 00:35:32,319
Speaker 1: for them. Right. Suddenly within the independent space, you know,

654
00:35:32,840 --> 00:35:36,080
Speaker 1: going out and being independent doesn't mean that you have

655
00:35:36,160 --> 00:35:40,000
Speaker 1: to go it alone, right, Whereas there are other firms

656
00:35:40,080 --> 00:35:43,279
Speaker 1: are joint opportunities where you're not going to have the

657
00:35:43,320 --> 00:35:45,719
Speaker 1: autonomy of running your own firm. You're going to go

658
00:35:45,880 --> 00:35:47,960
Speaker 1: and you're going to join these firms. You're going to

659
00:35:47,960 --> 00:35:50,560
Speaker 1: be a quote unquote partner in the firm, or you're

660
00:35:50,600 --> 00:35:53,840
Speaker 1: going to you know, run one of these satellite affiliates

661
00:35:53,840 --> 00:35:56,359
Speaker 1: within the firm. But make no mistake about it, right,

662
00:35:56,440 --> 00:36:00,000
Speaker 1: This is all about this concept of control, right, And

663
00:36:00,200 --> 00:36:02,920
Speaker 1: I think entrepreneurs really want to hone in on this.

664
00:36:03,000 --> 00:36:04,360
Speaker 1: I think that's going to be a theme over the

665
00:36:04,360 --> 00:36:07,120
Speaker 1: next few years, is control because we have so many

666
00:36:07,160 --> 00:36:10,759
Speaker 1: minority investments happening within the space. But even with a

667
00:36:10,760 --> 00:36:17,120
Speaker 1: minority investment, these minority investors are demanding control provisions. Right.

668
00:36:17,200 --> 00:36:20,720
Speaker 1: Control is like the big tug of war that's happening nowadays.

669
00:36:20,800 --> 00:36:22,839
Speaker 1: And when you look at a and when you look

670
00:36:22,880 --> 00:36:27,160
Speaker 1: at a firm like Charles from at Dynasty, you see

671
00:36:27,160 --> 00:36:31,440
Speaker 1: a firm that helps enable folks to run their own independent,

672
00:36:31,480 --> 00:36:36,480
Speaker 1: autonomous practice without having to give up that degree of control.

673
00:36:36,840 --> 00:36:39,040
Speaker 2: I want to ask you about some of the deals

674
00:36:39,120 --> 00:36:43,279
Speaker 2: you look at and review sometimes after the fact. One

675
00:36:43,320 --> 00:36:47,640
Speaker 2: of the risks of being an attorney is people will

676
00:36:47,680 --> 00:36:50,319
Speaker 2: always come up to you and ask you about a problem,

677
00:36:50,760 --> 00:36:53,080
Speaker 2: and then two thirds of the way through the conversation

678
00:36:53,200 --> 00:36:56,720
Speaker 2: you find they already signed that document. Oh I'm sorry,

679
00:36:56,800 --> 00:36:59,359
Speaker 2: but I can't help you. You have a contractor how

680
00:36:59,440 --> 00:37:01,560
Speaker 2: often do people will come to you and say, hey,

681
00:37:02,440 --> 00:37:04,520
Speaker 2: what can you tell me about this deal and your

682
00:37:04,520 --> 00:37:07,200
Speaker 2: answer is, oh, that's a terrible deal, don't sign that.

683
00:37:07,280 --> 00:37:09,920
Speaker 2: And they say, well, I already did a letter of intent.

684
00:37:10,040 --> 00:37:14,320
Speaker 2: What do I do now? Is this a legitimate issue

685
00:37:14,400 --> 00:37:15,600
Speaker 2: that happens time and again.

686
00:37:16,960 --> 00:37:19,880
Speaker 1: So you asked me before about the different practice areas

687
00:37:19,880 --> 00:37:22,719
Speaker 1: we have, and that happens all the time within our

688
00:37:22,719 --> 00:37:26,480
Speaker 1: Business Transactions group. Really personally, like, where I spend my

689
00:37:26,560 --> 00:37:31,320
Speaker 1: time is really in two primary areas, and in my practice,

690
00:37:31,360 --> 00:37:37,239
Speaker 1: one is having that ongoing relationship with CEOs within this

691
00:37:37,320 --> 00:37:40,200
Speaker 1: wealth management space and talking to them about their objectives

692
00:37:40,239 --> 00:37:43,560
Speaker 1: and helping them navigate a path so it doesn't happen

693
00:37:44,120 --> 00:37:47,439
Speaker 1: in those circumstances. The other part of where I spend

694
00:37:47,480 --> 00:37:49,640
Speaker 1: my time is fixing problems. Right, you know this is.

695
00:37:49,600 --> 00:37:51,719
Speaker 2: A problem someone says, hey, I signed this, what do

696
00:37:51,760 --> 00:37:51,960
Speaker 2: I do?

697
00:37:52,200 --> 00:37:56,560
Speaker 1: This becomes a problem, right, And it's actually typically it's

698
00:37:56,600 --> 00:37:59,600
Speaker 1: like an LOI, right, So it's not a legally binding document,

699
00:37:59,640 --> 00:38:02,319
Speaker 1: but it's a good will problem, right because we worked

700
00:38:02,320 --> 00:38:05,719
Speaker 1: with so many other of these firms within the space. Bye,

701
00:38:05,960 --> 00:38:09,359
Speaker 1: by the advisor signing that l o I, it's it's

702
00:38:09,360 --> 00:38:12,040
Speaker 1: really the equivalent of a handshake, right, right, And if

703
00:38:12,040 --> 00:38:14,960
Speaker 1: you're going to be in business with this firm for

704
00:38:15,000 --> 00:38:17,440
Speaker 1: the next few decades at least. You don't want to

705
00:38:17,440 --> 00:38:19,759
Speaker 1: start off by your attorney calling saying, hey, I know

706
00:38:19,800 --> 00:38:23,000
Speaker 1: they signed this, but what there really meant was that? Right?

707
00:38:23,280 --> 00:38:25,879
Speaker 1: So I could tell you it just it limits the

708
00:38:25,920 --> 00:38:31,799
Speaker 1: ability for us to meaningfully affect the deal. We of

709
00:38:31,840 --> 00:38:34,239
Speaker 1: course can continue to negotiate around the fringes and help

710
00:38:34,320 --> 00:38:38,000
Speaker 1: mitigate risk and optimize the transaction to you know, to fit.

711
00:38:38,480 --> 00:38:43,239
Speaker 1: They can. Yeah, no, it can. And I mean, that's

712
00:38:43,280 --> 00:38:45,279
Speaker 1: that's the typical right, blame the attorneys right right.

713
00:38:45,840 --> 00:38:46,520
Speaker 2: Right under the bus.

714
00:38:46,800 --> 00:38:47,480
Speaker 1: We get that all the time.

715
00:38:47,520 --> 00:38:49,919
Speaker 2: And that's fine, Hamburger. It's his fault. We had a deal,

716
00:38:50,000 --> 00:38:53,200
Speaker 2: we had a handshake until Brian came along and saved

717
00:38:53,239 --> 00:38:54,279
Speaker 2: me from myself.

718
00:38:54,440 --> 00:38:57,839
Speaker 1: Perfectly, perfectly fine. But usually my job is to call

719
00:38:57,920 --> 00:39:00,280
Speaker 1: up the CEO with the counter with the contra firm

720
00:39:00,400 --> 00:39:02,399
Speaker 1: and to say, hey, I know, you guys slipped one,

721
00:39:02,800 --> 00:39:05,200
Speaker 1: you know, by the goalie on this one by Yeah,

722
00:39:05,320 --> 00:39:08,359
Speaker 1: I said, you know. And and it's almost always met Barry,

723
00:39:08,400 --> 00:39:11,080
Speaker 1: We laughed, they know, it's almost always met with Oh,

724
00:39:11,120 --> 00:39:13,439
Speaker 1: we had no idea that you were working with them.

725
00:39:13,600 --> 00:39:15,600
Speaker 1: Of course, it's not a problem.

726
00:39:15,920 --> 00:39:21,480
Speaker 2: So that's hilarious. Yeah, because I can't tell you how

727
00:39:21,560 --> 00:39:27,279
Speaker 2: often somebody will mention something and it's like, oh, I'm

728
00:39:27,320 --> 00:39:29,279
Speaker 2: a car guy, Hey what do you think of this?

729
00:39:29,719 --> 00:39:29,879
Speaker 1: Oh?

730
00:39:29,960 --> 00:39:32,040
Speaker 2: You don't want I've learned not to say you don't

731
00:39:32,040 --> 00:39:32,839
Speaker 2: want to buy that.

732
00:39:33,040 --> 00:39:33,960
Speaker 1: You don't want to touch that.

733
00:39:33,960 --> 00:39:37,040
Speaker 2: That's a poss bought it last week, right, and that's

734
00:39:37,040 --> 00:39:39,920
Speaker 2: always the answer. Oh it was just delivered. Well, you know,

735
00:39:40,320 --> 00:39:43,440
Speaker 2: send your mechanic a Christmas card because you're going to

736
00:39:43,480 --> 00:39:45,680
Speaker 2: be spending a lot of time with him, you don't.

737
00:39:45,760 --> 00:39:47,880
Speaker 2: I've learned not to stick my foot in my mouth

738
00:39:48,040 --> 00:39:52,240
Speaker 2: after having done it a dozen times, so you can.

739
00:39:52,480 --> 00:39:56,680
Speaker 2: You can work with people to erase a bad LOOI

740
00:39:56,800 --> 00:39:59,120
Speaker 2: what happens if someone comes to you and said, hey,

741
00:39:59,160 --> 00:40:01,040
Speaker 2: I got a phone call. All these people offered me

742
00:40:01,080 --> 00:40:02,960
Speaker 2: a ton of money. All I had to do is

743
00:40:03,040 --> 00:40:05,839
Speaker 2: sign this assigning all my aum to them, and they

744
00:40:05,840 --> 00:40:07,760
Speaker 2: gave me ten percent of the value of the firm

745
00:40:08,000 --> 00:40:10,000
Speaker 2: and I'll work out the rest. What do you do

746
00:40:10,080 --> 00:40:10,560
Speaker 2: with that? That?

747
00:40:10,600 --> 00:40:13,000
Speaker 1: Listen? That doesn't always, That doesn't often happen. You know

748
00:40:13,000 --> 00:40:15,359
Speaker 1: what what often happens is they come to us with

749
00:40:15,400 --> 00:40:18,640
Speaker 1: this deal, and my first call to them was I

750
00:40:18,640 --> 00:40:21,319
Speaker 1: didn't even know you were in the market to sell, right, right,

751
00:40:21,360 --> 00:40:24,239
Speaker 1: like we and and and by the way, the one

752
00:40:24,280 --> 00:40:26,520
Speaker 1: firm that you're talking to seems to have none of

753
00:40:26,560 --> 00:40:30,320
Speaker 1: the qualities that were important to you when you left

754
00:40:30,360 --> 00:40:33,880
Speaker 1: your firm five years ago. Right, So you know, I'm

755
00:40:34,000 --> 00:40:36,520
Speaker 1: I'm a big fan of really understanding what the objectives

756
00:40:36,560 --> 00:40:37,960
Speaker 1: are before we set out to do anything.

757
00:40:38,040 --> 00:40:41,080
Speaker 2: It's more than just dollars. There's there's a lot of

758
00:40:41,120 --> 00:40:43,360
Speaker 2: other factors that make a big difference.

759
00:40:42,960 --> 00:40:46,320
Speaker 1: Because most advisors don't think of the fact that they're

760
00:40:46,560 --> 00:40:50,040
Speaker 1: going to have to be employed by this firm right afterwards,

761
00:40:50,120 --> 00:40:52,319
Speaker 1: like this is not a one time transaction. I think

762
00:40:52,360 --> 00:40:55,880
Speaker 1: the other big misnomer that's out there is people are

763
00:40:55,880 --> 00:40:58,880
Speaker 1: fueled by these headline numbers, right They're they're looking at

764
00:40:58,880 --> 00:41:01,840
Speaker 1: these headlines. This firm sold for you know, eighteen x.

765
00:41:01,920 --> 00:41:05,000
Speaker 1: This firm just sold for twenty x, and they don't

766
00:41:05,080 --> 00:41:08,680
Speaker 1: understand that deals are far more complicated than that. That

767
00:41:08,800 --> 00:41:13,960
Speaker 1: there's there's a cash component, right, there are contingencies, there

768
00:41:14,000 --> 00:41:18,920
Speaker 1: are retention components to any deal. And so when we

769
00:41:18,960 --> 00:41:21,439
Speaker 1: look at those headline numbers, we're all we're often looking

770
00:41:21,480 --> 00:41:24,960
Speaker 1: at the total cost of ownership. Right you going back

771
00:41:24,960 --> 00:41:26,799
Speaker 1: to your you know, your your car model, like what

772
00:41:26,840 --> 00:41:30,360
Speaker 1: did the what did the firm pay to successfully acquire

773
00:41:30,360 --> 00:41:33,840
Speaker 1: and integrate this this firm, It's not how much of

774
00:41:33,880 --> 00:41:36,799
Speaker 1: the original owner or founder put in their pocket, right, right,

775
00:41:36,960 --> 00:41:39,359
Speaker 1: And then they don't look at the tax structure, right

776
00:41:39,400 --> 00:41:43,600
Speaker 1: And for many of these transactions, the tax structure is

777
00:41:44,280 --> 00:41:47,120
Speaker 1: the one thing that can dictate the success or failure

778
00:41:47,239 --> 00:41:51,600
Speaker 1: of these deals right right, because it really makes it

779
00:41:51,640 --> 00:41:55,160
Speaker 1: can make a thin deal work really well if structured

780
00:41:55,160 --> 00:41:55,640
Speaker 1: in the right way.

781
00:41:55,719 --> 00:41:58,040
Speaker 2: Right, If the LLC passed through, especially if you're in

782
00:41:58,080 --> 00:42:02,640
Speaker 2: New York, a California based is a big advantage versus

783
00:42:03,040 --> 00:42:06,080
Speaker 2: you know, traditional C corps or whoever else people are

784
00:42:06,080 --> 00:42:10,640
Speaker 2: doing it in other states. I love hearing people say

785
00:42:10,960 --> 00:42:15,440
Speaker 2: we are absolutely not for sale twenty x really, let

786
00:42:15,520 --> 00:42:17,320
Speaker 2: me get back to you on that. It's It's funny

787
00:42:17,320 --> 00:42:21,400
Speaker 2: how money is an issue until suddenly it becomes becomes

788
00:42:21,480 --> 00:42:21,880
Speaker 2: an issue.

789
00:42:22,000 --> 00:42:23,920
Speaker 1: See old Robert Redford quote. Right, everything's for.

790
00:42:23,920 --> 00:42:28,680
Speaker 2: Sale at a indecent proposal. Very good, Demi Moore, I

791
00:42:28,680 --> 00:42:31,120
Speaker 2: don't remember who her husband was, what Harrol's that's right,

792
00:42:31,160 --> 00:42:35,320
Speaker 2: that's right. So let's let's talk a little bit about

793
00:42:35,880 --> 00:42:42,120
Speaker 2: some of the fun terminology here. Teams, new launches carveouts

794
00:42:42,239 --> 00:42:44,239
Speaker 2: what's going on in those spaces.

795
00:42:44,600 --> 00:42:48,960
Speaker 1: So you know, the interesting thing with with teams these

796
00:42:49,000 --> 00:42:51,640
Speaker 1: are these are people who are typically employed by a

797
00:42:51,680 --> 00:42:55,040
Speaker 1: brokerage firm. They have worked together for many, many years.

798
00:42:55,520 --> 00:42:58,879
Speaker 1: They are under this false belief that they're partners, right,

799
00:43:00,400 --> 00:43:03,279
Speaker 1: they're co employees, they're coworker. Yeah, they're colleagues that are

800
00:43:03,280 --> 00:43:05,800
Speaker 1: often seated with, you know, next to one another. Often

801
00:43:05,840 --> 00:43:11,239
Speaker 1: they have like some type of fee sharing arrangement among them, right,

802
00:43:11,640 --> 00:43:14,160
Speaker 1: But there's this misnomer among them. They think they're partners.

803
00:43:14,480 --> 00:43:18,000
Speaker 1: And I'm not here to burst anyone's bubble, but it

804
00:43:18,080 --> 00:43:20,799
Speaker 1: comes out, you know. I force it out when we

805
00:43:20,880 --> 00:43:24,080
Speaker 1: have some of our initial consults on the business startup,

806
00:43:24,680 --> 00:43:28,600
Speaker 1: because I'll ask them, I'll say, you know, hey, Barry,

807
00:43:28,800 --> 00:43:32,120
Speaker 1: do you know do you know John's you know, time

808
00:43:32,160 --> 00:43:34,960
Speaker 1: horizon until he wants to retire. No clue, no, no

809
00:43:34,960 --> 00:43:35,560
Speaker 1: no idea.

810
00:43:35,600 --> 00:43:38,960
Speaker 2: So, in other words, until there's a partnership agreement, nobody's

811
00:43:38,960 --> 00:43:39,440
Speaker 2: a partner.

812
00:43:39,520 --> 00:43:41,960
Speaker 1: No one's really a partner, right, right, And so what

813
00:43:41,960 --> 00:43:43,640
Speaker 1: we try to force them to do is really get

814
00:43:43,680 --> 00:43:47,759
Speaker 1: to know one another because within this team are a

815
00:43:47,800 --> 00:43:50,399
Speaker 1: whole bunch of different dynamics. Right. Someone needs to come

816
00:43:50,440 --> 00:43:53,759
Speaker 1: clean that they're on the precipice of getting a divorce. Right.

817
00:43:53,840 --> 00:43:56,399
Speaker 1: Someone needs to come clean that their financial affairs are

818
00:43:56,440 --> 00:43:59,560
Speaker 1: just in complete disarray, right, Which when your colleagues in

819
00:43:59,600 --> 00:44:02,440
Speaker 1: an office doesn't really matter, right. But if that's your

820
00:44:02,520 --> 00:44:05,600
Speaker 1: business partners, damn well better know that they're going to

821
00:44:05,680 --> 00:44:07,840
Speaker 1: be declaring bankruptcy within the next few you know, a

822
00:44:07,840 --> 00:44:11,000
Speaker 1: few months, right. And so these are the surprises that

823
00:44:11,120 --> 00:44:13,239
Speaker 1: legitimately there's legitimately launch.

824
00:44:13,000 --> 00:44:15,800
Speaker 2: A business and there's a oh, I got this back depending,

825
00:44:15,840 --> 00:44:17,759
Speaker 2: but don't worry, it won't affect what we do.

826
00:44:17,920 --> 00:44:19,480
Speaker 1: What makes the hair go up on the in the

827
00:44:19,480 --> 00:44:21,839
Speaker 1: back of my neck is when we get off we're

828
00:44:21,840 --> 00:44:24,239
Speaker 1: about to close a call like that and one of

829
00:44:24,280 --> 00:44:26,800
Speaker 1: the people that are on the call will say, hey, Brian,

830
00:44:26,800 --> 00:44:28,480
Speaker 1: can you hang on the line for a minute. Uh uh,

831
00:44:29,080 --> 00:44:33,600
Speaker 1: I know what's coming. Every single time it's a it's

832
00:44:33,600 --> 00:44:38,719
Speaker 1: a prior felony conviction that they haven't disclosed, or sometimes.

833
00:44:38,680 --> 00:44:40,680
Speaker 2: Matter if it's out of the United States, like a

834
00:44:40,680 --> 00:44:43,879
Speaker 2: felony in South America asking for a friend, Yeah, yeah,

835
00:44:44,040 --> 00:44:45,200
Speaker 2: just asking for a friend.

836
00:44:45,320 --> 00:44:48,320
Speaker 1: The Uh, you know they want to talk about marital

837
00:44:48,400 --> 00:44:51,200
Speaker 1: issues and uh, is that any way one? But yeah, yeah,

838
00:44:51,239 --> 00:44:53,239
Speaker 1: is there any way to own this without you know,

839
00:44:53,280 --> 00:44:55,400
Speaker 1: while protecting it? Uh? They want to talk about the

840
00:44:55,440 --> 00:44:59,120
Speaker 1: state issues. So anytime that there's that type of divide

841
00:44:59,239 --> 00:45:01,520
Speaker 1: between would be partners, big red flag. We have a

842
00:45:01,520 --> 00:45:04,160
Speaker 1: whole service protocol to try and make sure that we

843
00:45:04,200 --> 00:45:07,040
Speaker 1: can diffuse that. And you know that's not our information

844
00:45:07,080 --> 00:45:08,640
Speaker 1: to share, but it needs to be shared.

845
00:45:09,160 --> 00:45:12,399
Speaker 2: How often did someone come to you with a proposal

846
00:45:13,120 --> 00:45:15,239
Speaker 2: and you look at it and say, I just can't

847
00:45:15,280 --> 00:45:17,160
Speaker 2: let you sign this. This is not this is not

848
00:45:17,239 --> 00:45:17,759
Speaker 2: a good deal.

849
00:45:18,440 --> 00:45:21,280
Speaker 1: You know, I'm from Jersey, right, so we we can't

850
00:45:21,320 --> 00:45:25,319
Speaker 1: not share our opinion. It's part of our it's part

851
00:45:25,360 --> 00:45:27,160
Speaker 1: of who we are, It's how we're brought up. But

852
00:45:27,200 --> 00:45:29,000
Speaker 1: I won't say that. What I'm going to say is

853
00:45:30,400 --> 00:45:32,120
Speaker 1: I'll say, in a polite way, I'll say what are

854
00:45:32,160 --> 00:45:34,920
Speaker 1: you thinking? Right, because I'll say, like, what were your objectives?

855
00:45:34,960 --> 00:45:36,640
Speaker 1: You know, what do you think that this are?

856
00:45:36,640 --> 00:45:39,080
Speaker 2: You're going to finest your way around getting to this

857
00:45:39,160 --> 00:45:39,879
Speaker 2: is a bad deal?

858
00:45:39,960 --> 00:45:42,520
Speaker 1: I mean, come on, you know our colleagues in this industry, right,

859
00:45:42,520 --> 00:45:44,919
Speaker 1: they're very prideful group. Right. Some may say that there's

860
00:45:44,960 --> 00:45:47,960
Speaker 1: a big ego about them, and they're you know, they're

861
00:45:48,040 --> 00:45:50,600
Speaker 1: used to being the smartest folks in the room. And

862
00:45:51,040 --> 00:45:54,239
Speaker 1: what shocks me more than anything else that we've talked

863
00:45:54,239 --> 00:45:58,080
Speaker 1: about today, what shocks me is how great investment advisors

864
00:45:58,680 --> 00:46:01,440
Speaker 1: lose their when it comes to the securities analysis of

865
00:46:01,480 --> 00:46:02,719
Speaker 1: their own security, right.

866
00:46:02,719 --> 00:46:06,160
Speaker 2: Because there's no objectivity, they can't separate themselves.

867
00:46:05,680 --> 00:46:08,160
Speaker 1: Right, So you know this, I mean, really, at the

868
00:46:08,239 --> 00:46:09,840
Speaker 1: end of the day, what do you own? You have

869
00:46:09,880 --> 00:46:13,600
Speaker 1: a concentrated securities position, right, right, You better than me

870
00:46:13,840 --> 00:46:17,160
Speaker 1: as the investment advisor, can analyze the value of that security, right.

871
00:46:17,160 --> 00:46:19,879
Speaker 1: You have all sorts of methods for doing that, and

872
00:46:19,960 --> 00:46:23,560
Speaker 1: so my job is to is to redirect your skills

873
00:46:24,120 --> 00:46:26,080
Speaker 1: to be able to do that. And most of the

874
00:46:26,160 --> 00:46:27,040
Speaker 1: time they see that.

875
00:46:28,000 --> 00:46:30,120
Speaker 2: So so let me ask you this question because I'm

876
00:46:30,280 --> 00:46:34,759
Speaker 2: genuinely aghast. We talked earlier about people not making the

877
00:46:34,800 --> 00:46:36,400
Speaker 2: phone call because they don't want to run up the

878
00:46:36,440 --> 00:46:39,640
Speaker 2: legal bill every now and then. I'm horrified to see

879
00:46:39,640 --> 00:46:45,000
Speaker 2: people not have attorneys, not have accountants sign documents like

880
00:46:45,160 --> 00:46:48,560
Speaker 2: how much are you saving? You're talking about millions of

881
00:46:48,640 --> 00:46:52,280
Speaker 2: dollars in revenue, tens of millions of dollars in revenue,

882
00:46:52,320 --> 00:46:55,560
Speaker 2: millions of dollars in salary. How can you sign a

883
00:46:55,640 --> 00:47:00,759
Speaker 2: document without having a lawyer review it? Oh, save ten

884
00:47:00,880 --> 00:47:04,279
Speaker 2: thousand dollars. It's gonna cost you three million dollars over

885
00:47:04,320 --> 00:47:09,640
Speaker 2: the next decade. I'm apoplectic here. I see this all

886
00:47:09,680 --> 00:47:11,960
Speaker 2: the time. I'm genuinely aghast.

887
00:47:12,880 --> 00:47:16,040
Speaker 1: I too share your sentiments. I mean, you know, of

888
00:47:16,120 --> 00:47:19,359
Speaker 1: course I'm biased. I think that I think you should

889
00:47:19,440 --> 00:47:24,520
Speaker 1: never go into a novel financial transaction, particularly one that

890
00:47:24,640 --> 00:47:27,680
Speaker 1: capitalizes the decades of goodwill and trust that you have

891
00:47:27,760 --> 00:47:31,920
Speaker 1: developed throughout the course of your career without number one,

892
00:47:32,280 --> 00:47:36,040
Speaker 1: an objective party, right, even if that's a knowledgeable friend

893
00:47:36,040 --> 00:47:37,760
Speaker 1: of yours to say, what the heck are you thinking?

894
00:47:38,920 --> 00:47:42,120
Speaker 1: And an experienced party, right, someone who's been there before

895
00:47:42,320 --> 00:47:45,640
Speaker 1: and knows what's important. You know what needs to be

896
00:47:45,680 --> 00:47:48,640
Speaker 1: handled urgently, and what's everything else? Right? You know, what's

897
00:47:48,680 --> 00:47:50,600
Speaker 1: the noise that we can kind of set to the side.

898
00:47:50,840 --> 00:47:54,840
Speaker 1: But it amazes me the transactions that people enter into

899
00:47:55,360 --> 00:48:01,080
Speaker 1: without the benefit of objective, experienced counsel. It really does.

900
00:48:01,200 --> 00:48:05,920
Speaker 2: And you know, and this isn't just self interest speaking

901
00:48:06,600 --> 00:48:09,000
Speaker 2: because the odds are they going to go to a

902
00:48:09,040 --> 00:48:12,839
Speaker 2: different attorney than you. Sure, just statistically, But if you're

903
00:48:13,000 --> 00:48:16,120
Speaker 2: signing a contract that's worth millions and millions of dollars,

904
00:48:17,040 --> 00:48:19,200
Speaker 2: isn't it just common sense to have an attorney look

905
00:48:19,239 --> 00:48:24,600
Speaker 2: it over. I mean, I'm genuinely aghast when I see

906
00:48:24,719 --> 00:48:27,520
Speaker 2: and hear about these things, and it happens more often

907
00:48:28,000 --> 00:48:30,920
Speaker 2: than one would imagine. And it's not like you're a minor.

908
00:48:30,960 --> 00:48:32,520
Speaker 2: It's not like you're going to be able to get

909
00:48:32,520 --> 00:48:34,520
Speaker 2: that you know. Oh no, they didn't know what they

910
00:48:34,560 --> 00:48:36,040
Speaker 2: were doing. Let's just decay that.

911
00:48:36,440 --> 00:48:38,799
Speaker 1: So here, here's the distinction that I've been able to

912
00:48:38,840 --> 00:48:41,040
Speaker 1: call together over the years is that people that think

913
00:48:41,040 --> 00:48:43,880
Speaker 1: of this as an investment, people that think of this

914
00:48:43,960 --> 00:48:47,279
Speaker 1: as a business, are apt to spend that money. Sure right,

915
00:48:47,280 --> 00:48:50,000
Speaker 1: they say, Hey, there's a transaction cost, and it's making

916
00:48:50,040 --> 00:48:52,920
Speaker 1: sure I have good counsel to help optimize the transaction,

917
00:48:53,360 --> 00:48:57,040
Speaker 1: mitigate risk, et cetera, et cetera. Think about brokers, even

918
00:48:57,040 --> 00:48:59,400
Speaker 1: the most successful among them, who have been sitting in

919
00:48:59,440 --> 00:49:02,520
Speaker 1: a wire house throughout, you know, for decades, throughout their

920
00:49:02,520 --> 00:49:07,319
Speaker 1: whole career, they've never written a check for any business endeavor. Right, right.

921
00:49:07,400 --> 00:49:10,759
Speaker 1: The only attorneys they've ever hired is, you know, is

922
00:49:10,800 --> 00:49:14,240
Speaker 1: probably to buy a house and maybe get divorced.

923
00:49:14,320 --> 00:49:17,279
Speaker 2: But but you would hire an attorney to buy a house, right,

924
00:49:17,280 --> 00:49:19,359
Speaker 2: You wouldn't just go in and do the closing. Yeah,

925
00:49:19,400 --> 00:49:20,520
Speaker 2: I could figure it out.

926
00:49:20,719 --> 00:49:23,040
Speaker 1: But that's only because your realtor sent you to someone

927
00:49:23,080 --> 00:49:26,080
Speaker 1: who's charging one thousand dollars to do the closing for you, right,

928
00:49:26,320 --> 00:49:28,359
Speaker 1: It's not really because you would have found them on

929
00:49:28,400 --> 00:49:31,920
Speaker 1: your own. Here right, when you're saying this is what

930
00:49:32,000 --> 00:49:35,520
Speaker 1: objective counsel is going to cost, that's a tough check

931
00:49:35,600 --> 00:49:39,839
Speaker 1: to stroke, so less you're thinking about the brighter right right.

932
00:49:39,960 --> 00:49:41,879
Speaker 2: I guess if you're sitting in a place where you're

933
00:49:41,880 --> 00:49:44,080
Speaker 2: not paying for legal, you're not paying for compliance, you're

934
00:49:44,120 --> 00:49:47,600
Speaker 2: not playing for marketing, you're not paying for trading, you're

935
00:49:47,600 --> 00:49:49,799
Speaker 2: not trade execution, you're not paying for any of that.

936
00:49:50,239 --> 00:49:54,120
Speaker 2: It comes out of out of your gross revenue on

937
00:49:54,160 --> 00:49:57,359
Speaker 2: a grid, So you don't really recognize that these are

938
00:49:57,400 --> 00:50:01,200
Speaker 2: actual costs. I mean, giving up half of your comp

939
00:50:01,320 --> 00:50:05,560
Speaker 2: or more to pay for that. I would think that's intuitive,

940
00:50:05,920 --> 00:50:09,480
Speaker 2: but I guess not so. The last question about M

941
00:50:09,520 --> 00:50:12,239
Speaker 2: and A that that I have to ask is I

942
00:50:13,000 --> 00:50:16,080
Speaker 2: keep seeing these headlines? Is this the end of the

943
00:50:16,120 --> 00:50:20,640
Speaker 2: small ria again? It seems a little you know, self interested,

944
00:50:20,800 --> 00:50:23,759
Speaker 2: But what do we think about whether you want to

945
00:50:23,800 --> 00:50:26,880
Speaker 2: call it a lifestyle practice or a small local practice.

946
00:50:28,320 --> 00:50:32,000
Speaker 2: These are people everybody in the town knows and when

947
00:50:32,040 --> 00:50:35,319
Speaker 2: they have a financial question go to Am I wrong

948
00:50:35,360 --> 00:50:37,440
Speaker 2: in thinking those aren't going away? They're going to be

949
00:50:37,440 --> 00:50:38,080
Speaker 2: here for a while.

950
00:50:39,680 --> 00:50:42,719
Speaker 1: Those small RaaS will be here throughout the duration of

951
00:50:42,760 --> 00:50:46,640
Speaker 1: our lives. And the reason for that is probably not

952
00:50:46,719 --> 00:50:50,200
Speaker 1: what you think. The reason for that is technology. Is technology, okay, yeah,

953
00:50:50,200 --> 00:50:52,640
Speaker 1: because what you could do as a as a solo

954
00:50:52,719 --> 00:50:55,680
Speaker 1: practitioner or two or three people working in an office

955
00:50:55,719 --> 00:50:59,319
Speaker 1: today is just so much more expansive than what you

956
00:50:59,360 --> 00:51:02,840
Speaker 1: could do to years ago. That but I think even

957
00:51:02,880 --> 00:51:06,520
Speaker 1: more compelling is the scalability of that technology, right, the

958
00:51:06,600 --> 00:51:09,640
Speaker 1: fact that everything is a cloud based application and you

959
00:51:09,680 --> 00:51:12,440
Speaker 1: can scale it down to a single user license. Think

960
00:51:12,480 --> 00:51:15,200
Speaker 1: of the CRMs, right, I mean everyone knows the CRM.

961
00:51:14,960 --> 00:51:18,040
Speaker 2: Salesforce is a big giant company. There's a dozen of

962
00:51:18,040 --> 00:51:19,640
Speaker 2: them for rias.

963
00:51:19,920 --> 00:51:22,920
Speaker 1: But to stand up a CRM twenty years ago, to

964
00:51:22,920 --> 00:51:26,000
Speaker 1: stand up a CRM like a salesforce, right, you would

965
00:51:26,080 --> 00:51:28,840
Speaker 1: have to buy a dedicated server, right posted in a

966
00:51:28,920 --> 00:51:30,960
Speaker 1: cooled office, right.

967
00:51:31,480 --> 00:51:34,080
Speaker 2: Have have replicate the data, manage it.

968
00:51:34,160 --> 00:51:36,279
Speaker 1: Right. Yeah, you have backups all over the place, right,

969
00:51:36,320 --> 00:51:38,920
Speaker 1: you know, backup tapes and all this, you know, crazy stuff.

970
00:51:39,080 --> 00:51:41,480
Speaker 1: Now you buy a license and that's it. You buy

971
00:51:41,480 --> 00:51:43,439
Speaker 1: a single license and you log in and you start

972
00:51:43,480 --> 00:51:46,960
Speaker 1: to configure it. And so the scalability of technology, the

973
00:51:46,960 --> 00:51:53,040
Speaker 1: scalability of telecommunications is the game changer, right. And I

974
00:51:53,040 --> 00:51:56,440
Speaker 1: don't think too many people plot out the acceleration of

975
00:51:56,520 --> 00:52:02,640
Speaker 1: the independent, fragmented wealth management business with the prominence of

976
00:52:02,840 --> 00:52:06,400
Speaker 1: scalable technology solutions in the place, in the space. But

977
00:52:06,440 --> 00:52:08,720
Speaker 1: I would say that they've developed in lockstep with one another.

978
00:52:08,840 --> 00:52:14,040
Speaker 2: Huh really quite fascinating. Tell us about your practice. What

979
00:52:14,239 --> 00:52:16,520
Speaker 2: is the thing that keeps you most busy? What are

980
00:52:16,560 --> 00:52:20,719
Speaker 2: what are the other areas of practice that someone who says, hey,

981
00:52:20,760 --> 00:52:24,080
Speaker 2: I want to set up a registered investment advisory, I

982
00:52:24,160 --> 00:52:27,840
Speaker 2: have half a billion dollars in assets. What what is

983
00:52:27,920 --> 00:52:30,240
Speaker 2: the thing that keeps you most active?

984
00:52:30,719 --> 00:52:33,080
Speaker 1: So you know, we talked earlier about the work we

985
00:52:33,160 --> 00:52:37,640
Speaker 1: do within Market Council Consulting, our consulting firm, But most

986
00:52:37,640 --> 00:52:40,920
Speaker 1: of the time I'm spending is personally is Within our

987
00:52:41,000 --> 00:52:44,120
Speaker 1: law firm we have we have three distinct practice areas.

988
00:52:44,120 --> 00:52:47,000
Speaker 1: One is regulatory, where not only do we uh do

989
00:52:47,080 --> 00:52:51,000
Speaker 1: we work a lot with with advisors on various legal matters,

990
00:52:51,000 --> 00:52:54,680
Speaker 1: but also regulatory interactions right working with state and federal

991
00:52:54,719 --> 00:53:01,080
Speaker 1: regulators on anything that rises beyond a simple examination. The

992
00:53:01,160 --> 00:53:04,560
Speaker 1: second is business transactions. Right in our business transactions practice

993
00:53:04,960 --> 00:53:11,640
Speaker 1: spans from startup all the way to interesting permutations of

994
00:53:11,719 --> 00:53:16,440
Speaker 1: the business, whether it's business compliance, it's succession planning or implementation,

995
00:53:18,520 --> 00:53:21,800
Speaker 1: it's selling off equity, M and A and everything in between.

996
00:53:22,080 --> 00:53:24,160
Speaker 1: And then the third area, and probably the area that

997
00:53:24,200 --> 00:53:28,359
Speaker 1: people know us most for, is employment transition work, where

998
00:53:28,400 --> 00:53:31,920
Speaker 1: we help folks go from wherever they are to wherever

999
00:53:31,960 --> 00:53:35,440
Speaker 1: they want to be and everywhere and help them navigate

1000
00:53:35,920 --> 00:53:36,880
Speaker 1: everything in between.

1001
00:53:37,000 --> 00:53:40,000
Speaker 2: So, if I'm in a right to work state, how

1002
00:53:40,120 --> 00:53:44,200
Speaker 2: challenging is it for me in the finance industry, either

1003
00:53:44,239 --> 00:53:47,440
Speaker 2: as a broker or a trader or a fund manager

1004
00:53:47,600 --> 00:53:49,960
Speaker 2: or an RIA to say, Hey, I want to switch

1005
00:53:50,000 --> 00:53:50,879
Speaker 2: and go somewhere else.

1006
00:53:51,040 --> 00:53:55,319
Speaker 1: You know, it's funny when I describe the employment arrangements

1007
00:53:55,400 --> 00:53:58,520
Speaker 1: or restrictions to people outside of this industry shocked. They

1008
00:53:58,520 --> 00:54:01,880
Speaker 1: think I'm making it up. They think it's a story,

1009
00:54:01,880 --> 00:54:04,880
Speaker 1: and I don't know. I think there's more interesting stories

1010
00:54:04,880 --> 00:54:08,759
Speaker 1: to tell than that. But it is beyond comprehension for

1011
00:54:08,840 --> 00:54:12,280
Speaker 1: those that don't spend time in this space. Right, everything

1012
00:54:12,360 --> 00:54:16,799
Speaker 1: from restrictive covenants such as the inability to solicit uh,

1013
00:54:16,960 --> 00:54:20,320
Speaker 1: you know, former customers, to no higher provisions, the inability

1014
00:54:20,320 --> 00:54:24,680
Speaker 1: to you know, to hire former colleagues, to non competes

1015
00:54:25,080 --> 00:54:28,280
Speaker 1: which everyone knows about, to garden leave provisions which require

1016
00:54:28,280 --> 00:54:31,400
Speaker 1: people to maybe provide some type of extended notice or

1017
00:54:31,440 --> 00:54:32,839
Speaker 1: to sit out for a period of time.

1018
00:54:33,040 --> 00:54:33,120
Speaker 2: Right.

1019
00:54:33,520 --> 00:54:34,680
Speaker 1: These restrictions are.

1020
00:54:34,600 --> 00:54:37,759
Speaker 2: Real, right, and they're being found to be legal.

1021
00:54:37,600 --> 00:54:41,040
Speaker 1: And they're found in varying degrees found to be enforceable, right,

1022
00:54:41,040 --> 00:54:45,200
Speaker 1: depending upon the reasonableness of the restrictions, the states that

1023
00:54:45,239 --> 00:54:48,560
Speaker 1: we're going to be dealing with these restrictions in and

1024
00:54:49,280 --> 00:54:51,640
Speaker 1: you know, and that's how enforceable they are. But we

1025
00:54:51,680 --> 00:54:53,440
Speaker 1: also have to look at the firms that they're leaving.

1026
00:54:53,480 --> 00:54:55,960
Speaker 1: You know, what's the reputation of the firm for actually

1027
00:54:56,040 --> 00:54:58,360
Speaker 1: enforcing the terms of those of those contracts.

1028
00:54:58,800 --> 00:55:02,719
Speaker 2: So we hired some ones from a major wirehouse and

1029
00:55:02,760 --> 00:55:07,960
Speaker 2: I got this like sieving email from general counsel. I

1030
00:55:07,960 --> 00:55:10,320
Speaker 2: picked the phone and go, dude, what's up. We're a

1031
00:55:10,480 --> 00:55:12,600
Speaker 2: member of protocol. He's like, oh, sorry, I don't worry

1032
00:55:12,640 --> 00:55:14,960
Speaker 2: about it, just deleted. Can you send me an email

1033
00:55:15,000 --> 00:55:18,480
Speaker 2: confirming here? Yeah, yeah, no problem. I mean, it was

1034
00:55:18,680 --> 00:55:22,440
Speaker 2: savage to h no worries mod It was just like

1035
00:55:22,480 --> 00:55:26,279
Speaker 2: a crazy transition. Explain to people who are not in

1036
00:55:26,320 --> 00:55:30,120
Speaker 2: the industry what protocol is and how that works and

1037
00:55:30,480 --> 00:55:34,600
Speaker 2: why people are just so, you know, Jacqueline Hyde, if

1038
00:55:34,640 --> 00:55:35,759
Speaker 2: you're not a member.

1039
00:55:35,719 --> 00:55:40,800
Speaker 1: So the Broker Protocol, I mean we should first probably

1040
00:55:40,800 --> 00:55:44,600
Speaker 1: say that before the Broker Protocol, the industry was a

1041
00:55:44,600 --> 00:55:46,920
Speaker 1: bit of a Wild West, right, free for all. It

1042
00:55:47,120 --> 00:55:49,080
Speaker 1: was a bit of the free for all, right. People

1043
00:55:49,120 --> 00:55:52,680
Speaker 1: were leaving to go to firms. In fact, I was

1044
00:55:52,719 --> 00:55:54,960
Speaker 1: in I was in court in the Southern District of

1045
00:55:55,040 --> 00:55:56,920
Speaker 1: New York, federal court, right because all these are handled

1046
00:55:56,960 --> 00:56:02,080
Speaker 1: in federal court. And I watched a firm go in

1047
00:56:02,080 --> 00:56:04,480
Speaker 1: front of a judge and say this broker should not

1048
00:56:04,520 --> 00:56:07,840
Speaker 1: be able to leave and solicit its clients, and here's

1049
00:56:07,880 --> 00:56:11,040
Speaker 1: our trade secrets and all of these things. And the

1050
00:56:11,080 --> 00:56:14,120
Speaker 1: next case that was called, this attorney was on the

1051
00:56:14,160 --> 00:56:17,960
Speaker 1: other side explaining why they had a right to recruit

1052
00:56:18,120 --> 00:56:21,920
Speaker 1: this broker. So the hypocrisy was not lost on federal judges,

1053
00:56:21,920 --> 00:56:23,640
Speaker 1: who quite frankly, have better things to do.

1054
00:56:23,840 --> 00:56:27,239
Speaker 2: Right. My partner Josh calls this a prisoner exchange, like

1055
00:56:27,440 --> 00:56:30,240
Speaker 2: guys from UBS go to Morgan, from Morgan to Merrill,

1056
00:56:30,320 --> 00:56:33,640
Speaker 2: from Meryll to JPM Chase and then and then back

1057
00:56:33,680 --> 00:56:39,360
Speaker 2: to UBS. It's literally everybody is chasing a signing bonus, which,

1058
00:56:39,560 --> 00:56:42,120
Speaker 2: if you have a decent amount of assets under management,

1059
00:56:42,440 --> 00:56:43,880
Speaker 2: can be millions of dollars.

1060
00:56:43,960 --> 00:56:46,640
Speaker 1: Right. And so from a distance, right, this looks like

1061
00:56:46,719 --> 00:56:49,600
Speaker 1: indentured servitude, right, or this looks like that we're trading

1062
00:56:49,680 --> 00:56:52,719
Speaker 1: human chattel. Right. Both things that are you know, completely

1063
00:56:52,760 --> 00:56:55,680
Speaker 1: illegal and way outdated. You know, not only in this

1064
00:56:55,760 --> 00:56:58,680
Speaker 1: country but in the world, but in the securities industry.

1065
00:56:59,080 --> 00:57:01,120
Speaker 1: There were still shades of that up until the Broker

1066
00:57:01,160 --> 00:57:04,399
Speaker 1: Protocol and maybe still in some pockets.

1067
00:57:04,280 --> 00:57:05,839
Speaker 2: When did the protocol first come out?

1068
00:57:06,040 --> 00:57:10,879
Speaker 1: So protocol has been existing since the mid two thousands, right,

1069
00:57:10,960 --> 00:57:16,880
Speaker 1: And it's a limited forbearance agreement that that effectively says

1070
00:57:17,120 --> 00:57:19,640
Speaker 1: if if a firm is a member of the protocol,

1071
00:57:21,200 --> 00:57:26,160
Speaker 1: they agree not to enforce certain terms restrictive covenants that

1072
00:57:26,240 --> 00:57:30,240
Speaker 1: might be contained in an employment agreement. If the broker

1073
00:57:30,440 --> 00:57:34,280
Speaker 1: that's leaving goes to another protocol firm and agrees to

1074
00:57:34,320 --> 00:57:37,920
Speaker 1: abide by the quote unquote protocol right taking of limited information,

1075
00:57:38,600 --> 00:57:42,640
Speaker 1: furnishing certain notice, and you know, there's a few other provisions.

1076
00:57:42,600 --> 00:57:46,640
Speaker 2: And somehow this escapes anty trust provisions somehow. I mean,

1077
00:57:46,680 --> 00:57:48,960
Speaker 2: shouldn't it be like, hey, you guys are creating a

1078
00:57:48,960 --> 00:57:50,360
Speaker 2: little oligopoly here.

1079
00:57:50,680 --> 00:57:52,880
Speaker 1: Somehow this deal that was concocted, you know, on the

1080
00:57:52,880 --> 00:57:57,400
Speaker 1: back of a cocktail napkin, you know, seemingly amongst four

1081
00:57:58,120 --> 00:58:00,440
Speaker 1: global titans you know of there's.

1082
00:58:00,240 --> 00:58:03,440
Speaker 2: No price fixing, So I guess it it escapes that way.

1083
00:58:03,320 --> 00:58:06,640
Speaker 1: The so so it was actually our first argument. So

1084
00:58:06,680 --> 00:58:10,200
Speaker 1: we were the first firm to add an r I

1085
00:58:10,360 --> 00:58:13,800
Speaker 1: A to the broker protocol. Oh really, And the administrator

1086
00:58:13,840 --> 00:58:16,120
Speaker 1: at the time said, uh, he called me up, sir Brian,

1087
00:58:16,160 --> 00:58:18,040
Speaker 1: you can't do this. It is not is not for RA.

1088
00:58:18,160 --> 00:58:22,840
Speaker 2: As which administrator it was of which the which government agency?

1089
00:58:22,920 --> 00:58:26,280
Speaker 1: No, No, no government agency. They just appointed a voluntary

1090
00:58:26,320 --> 00:58:34,400
Speaker 1: administrator within Yeah, there's no FINRA, there's no sec oversight this.

1091
00:58:32,840 --> 00:58:35,200
Speaker 2: This well, let's see what the judge has to say

1092
00:58:35,320 --> 00:58:36,400
Speaker 2: speaking of anti trust.

1093
00:58:36,560 --> 00:58:39,440
Speaker 1: So these four founders, right that you know that concocted this,

1094
00:58:39,640 --> 00:58:42,680
Speaker 1: uh you know, this this three page agreement. They say,

1095
00:58:42,720 --> 00:58:44,640
Speaker 1: this is not this was not meant for arias. And

1096
00:58:44,720 --> 00:58:47,360
Speaker 1: I say, well, you know, then it seems like we

1097
00:58:47,440 --> 00:58:49,720
Speaker 1: have a legal problem because it seems like you guys

1098
00:58:49,720 --> 00:58:53,080
Speaker 1: are creating a moat and this seems to be an agreement.

1099
00:58:53,160 --> 00:58:57,560
Speaker 2: To restrict competition in the space of providing financially.

1100
00:58:57,680 --> 00:59:00,000
Speaker 1: Absolutely, and so I said, so, I guess we're gonna

1101
00:59:00,080 --> 00:59:01,680
Speaker 1: have to you know, we're gonna have to then deal

1102
00:59:01,840 --> 00:59:05,360
Speaker 1: deal with that. They thought again about it, and they said,

1103
00:59:05,360 --> 00:59:09,000
Speaker 1: you know, on second thought, we're okay with the RAA joints.

1104
00:59:08,680 --> 00:59:10,640
Speaker 2: As opposed to a judge thrown the whole.

1105
00:59:10,480 --> 00:59:15,800
Speaker 1: Thing out right because they never they never defined the term, right, broker, right, like,

1106
00:59:15,920 --> 00:59:17,400
Speaker 1: I mean, we know what a broker is, but they

1107
00:59:17,440 --> 00:59:19,680
Speaker 1: never defined the term. I mean, arguably a car wash

1108
00:59:19,720 --> 00:59:22,000
Speaker 1: can join the broker protocol, right because it is like

1109
00:59:22,040 --> 00:59:25,840
Speaker 1: a prisoner exchange, right, It's it is, you know, it's

1110
00:59:26,000 --> 00:59:29,280
Speaker 1: it's very much a protocol. And so coming off of that,

1111
00:59:29,320 --> 00:59:32,280
Speaker 1: you know, thousands of RaaS have joined the broker protocol,

1112
00:59:32,680 --> 00:59:38,080
Speaker 1: and they are beneficiaries. Since they're often the RaaS often

1113
00:59:38,120 --> 00:59:41,760
Speaker 1: have a less restrictive environment. Their beneficiaries of this broker protocol,

1114
00:59:41,800 --> 00:59:48,160
Speaker 1: they're able to freely extrapolate talent from these otherwise restrictive

1115
00:59:48,200 --> 00:59:51,120
Speaker 1: scenarios and bring them to their firm.

1116
00:59:51,320 --> 00:59:57,040
Speaker 2: And I suspect capitalism supports that that you want competition

1117
00:59:57,080 --> 00:59:59,960
Speaker 2: in the marketplace for talent, you want the ability to

1118
01:00:00,160 --> 01:00:03,720
Speaker 2: become more efficient, more productive, move around, go where there's

1119
01:00:03,760 --> 01:00:08,800
Speaker 2: the best deal. It's almost you know, any other industry,

1120
01:00:09,120 --> 01:00:10,320
Speaker 2: it wouldn't even be a question.

1121
01:00:11,000 --> 01:00:14,520
Speaker 1: It wouldn't be a question. And I'm smirking here. I

1122
01:00:14,560 --> 01:00:17,280
Speaker 1: can't see that on radio. But because there's a running

1123
01:00:17,360 --> 01:00:21,920
Speaker 1: joke within the space, there's a gathering each year that

1124
01:00:22,120 --> 01:00:26,000
Speaker 1: is assembled by a leading labor employment firm in the space,

1125
01:00:26,360 --> 01:00:29,640
Speaker 1: and they bring together probably about one hundred practitioners who

1126
01:00:29,680 --> 01:00:32,840
Speaker 1: focus on employment law within the securities industry. And for

1127
01:00:32,880 --> 01:00:38,120
Speaker 1: many years, I was the only independent representative that was

1128
01:00:38,280 --> 01:00:41,560
Speaker 1: coming that worked with RaaS that would come to these meetings.

1129
01:00:42,040 --> 01:00:46,480
Speaker 1: And and it's a big Q and a session, right.

1130
01:00:46,480 --> 01:00:50,200
Speaker 1: We work on case studies, and there wasn't a case

1131
01:00:50,200 --> 01:00:53,160
Speaker 1: study that passed where I wasn't the butt of one

1132
01:00:53,160 --> 01:00:55,280
Speaker 1: of the jokes, you know, and like unless Brian decides

1133
01:00:55,320 --> 01:00:58,000
Speaker 1: to unravel this, you know. And so you know, for

1134
01:00:58,120 --> 01:01:01,520
Speaker 1: many years we were the troublemakers, and you know with

1135
01:01:01,600 --> 01:01:07,120
Speaker 1: the Broker Protocol. When the Broker Protocol UH experienced what

1136
01:01:07,160 --> 01:01:11,080
Speaker 1: we alleged was was some gamesmanship when Morgan Stanley about

1137
01:01:11,120 --> 01:01:15,280
Speaker 1: out of the protocol. UH, we actually forced a change

1138
01:01:15,320 --> 01:01:18,760
Speaker 1: in the administrator because lo and behold, the law firm

1139
01:01:19,320 --> 01:01:23,280
Speaker 1: that was representing Morgan Stanley UH forgot to send a

1140
01:01:23,320 --> 01:01:27,560
Speaker 1: timely notification of Morgan Stanley's withdrawal, and.

1141
01:01:27,800 --> 01:01:29,560
Speaker 2: So there was still members by accident.

1142
01:01:29,760 --> 01:01:34,080
Speaker 1: Well, the the the they announced, oh, you know, our

1143
01:01:34,120 --> 01:01:37,160
Speaker 1: o mission. But they're suddenly, you know, withdrawing from the

1144
01:01:37,160 --> 01:01:41,280
Speaker 1: protocol without the requisite notice. And so yeah, you know,

1145
01:01:41,320 --> 01:01:45,440
Speaker 1: we've been we've been advocates of of not only having

1146
01:01:45,440 --> 01:01:48,280
Speaker 1: the protocol UH, but making sure that the terms of

1147
01:01:48,280 --> 01:01:51,440
Speaker 1: the protocol are enforced, that there's no gamesmanship within the protocol.

1148
01:01:51,960 --> 01:01:56,080
Speaker 2: And what's the what's the game theory for one big

1149
01:01:56,120 --> 01:02:02,080
Speaker 2: firm with drawing from protocol? They that confident that because

1150
01:02:02,120 --> 01:02:04,640
Speaker 2: I know one of the provisions is no rating. You

1151
01:02:04,680 --> 01:02:07,520
Speaker 2: could take a couple of people, But you can't decimate

1152
01:02:07,560 --> 01:02:10,560
Speaker 2: an office. Sure, now that they're no longer involved, Hey,

1153
01:02:10,560 --> 01:02:14,120
Speaker 2: you're back to the wild West, let's go, you know,

1154
01:02:14,440 --> 01:02:15,640
Speaker 2: pillage Morgan Stanley.

1155
01:02:15,720 --> 01:02:18,400
Speaker 1: Well, there's still no rating, right, So the limitation on

1156
01:02:18,520 --> 01:02:21,240
Speaker 1: rating doesn't em any from the protocol. The protocol just

1157
01:02:21,280 --> 01:02:23,280
Speaker 1: doesn't protect you from rating.

1158
01:02:23,400 --> 01:02:24,120
Speaker 2: Oh okay.

1159
01:02:24,240 --> 01:02:28,360
Speaker 1: So I honestly think that some of the larger firms

1160
01:02:28,360 --> 01:02:30,600
Speaker 1: that are in the protocol are there as a matter

1161
01:02:30,640 --> 01:02:33,720
Speaker 1: of pride. I think that if they were to withdraw,

1162
01:02:34,800 --> 01:02:38,480
Speaker 1: I think that their advisors would see that as a

1163
01:02:38,520 --> 01:02:42,600
Speaker 1: sign of defeat. Really, I do believe that. I think

1164
01:02:42,640 --> 01:02:44,880
Speaker 1: that's one of you know, that's one of the theories.

1165
01:02:44,920 --> 01:02:46,959
Speaker 1: And I've spoken to executives at some of these large

1166
01:02:47,000 --> 01:02:49,480
Speaker 1: firms and they said that the optics around withdrawing would

1167
01:02:49,520 --> 01:02:52,120
Speaker 1: be would be terrible. They also believe that there's a

1168
01:02:52,120 --> 01:02:54,920
Speaker 1: brighter future for them. They believe that they can innovate

1169
01:02:54,960 --> 01:02:59,320
Speaker 1: their way out of this and have have brokers stay

1170
01:02:59,360 --> 01:03:04,600
Speaker 1: at these firms for all the right reasons. History indicates otherwise,

1171
01:03:04,640 --> 01:03:08,480
Speaker 1: because by all measures, they're losing the game to independent

1172
01:03:08,480 --> 01:03:11,960
Speaker 1: wealth management. But there's still a lot of really smart,

1173
01:03:12,000 --> 01:03:14,040
Speaker 1: talented people there. As we talked about the sport.

1174
01:03:14,160 --> 01:03:16,360
Speaker 2: So let's stay with this. I'll circle back to m

1175
01:03:16,400 --> 01:03:20,000
Speaker 2: and A later. So first, full disclosure, I've been wrong

1176
01:03:20,160 --> 01:03:23,760
Speaker 2: about the brokers industry for thirty years. I've been saying

1177
01:03:23,800 --> 01:03:25,840
Speaker 2: I don't see how they don't collapse under the weight

1178
01:03:26,000 --> 01:03:31,560
Speaker 2: of their own fees, churning underperformance, and the lack of

1179
01:03:31,560 --> 01:03:34,760
Speaker 2: a fiduciary standard. To me, it just makes more sense

1180
01:03:34,800 --> 01:03:38,400
Speaker 2: that your financial planner should be more like your attorney

1181
01:03:38,480 --> 01:03:42,040
Speaker 2: than a used car salesman. But that's starting to change.

1182
01:03:42,040 --> 01:03:45,040
Speaker 2: So I've been wrong for twenty five years and it's

1183
01:03:45,080 --> 01:03:45,880
Speaker 2: beginning to change.

1184
01:03:46,000 --> 01:03:49,080
Speaker 1: What's changing, So what is changing.

1185
01:03:48,840 --> 01:03:53,439
Speaker 2: Is the big broker dealers kind of figured out that

1186
01:03:54,400 --> 01:04:00,520
Speaker 2: the compliance nightmare and the legal nightmare of transactional business

1187
01:04:01,200 --> 01:04:05,360
Speaker 2: is so much harder than Wait, we could just charge

1188
01:04:05,400 --> 01:04:09,760
Speaker 2: a fee for managing their money, not sell them bs

1189
01:04:09,800 --> 01:04:13,280
Speaker 2: syndicate or not sell them IPOs that maybe they work,

1190
01:04:13,400 --> 01:04:15,880
Speaker 2: maybe they don't. The good ones all get sucked up

1191
01:04:15,920 --> 01:04:19,040
Speaker 2: by the institution, so the junk that's left will stick

1192
01:04:19,040 --> 01:04:22,320
Speaker 2: in MoMA. Those are all ticking time bombs. Let's just

1193
01:04:22,520 --> 01:04:26,480
Speaker 2: kind of go semi passive, keep it low key, and

1194
01:04:27,080 --> 01:04:30,640
Speaker 2: eliminate ninety nine percent of our compliance headaches. Like some

1195
01:04:30,720 --> 01:04:34,160
Speaker 2: of the bigger firms have gotten that message and either

1196
01:04:34,160 --> 01:04:38,280
Speaker 2: their hybrid you know, half RIA half bds or really

1197
01:04:38,320 --> 01:04:43,680
Speaker 2: have aggressively moved into VRIA space. So whereas I thought

1198
01:04:44,160 --> 01:04:47,840
Speaker 2: they would collapse under their own weight, they kind of said, oh,

1199
01:04:48,160 --> 01:04:50,640
Speaker 2: we want to eat from both sides of the table.

1200
01:04:50,640 --> 01:04:52,640
Speaker 1: So now that you're dealing with the reverse churn, right,

1201
01:04:52,640 --> 01:04:54,919
Speaker 1: you're dealing with you're dealing with clients who are paying

1202
01:04:54,920 --> 01:04:55,440
Speaker 1: a fee.

1203
01:04:55,720 --> 01:04:58,560
Speaker 2: Went from churn and burn to net and forget it.

1204
01:04:58,640 --> 01:05:00,400
Speaker 2: That's a good way to keep it, keep it running.

1205
01:05:00,480 --> 01:05:03,960
Speaker 2: Although that really to be fair, That really isn't isn't

1206
01:05:04,440 --> 01:05:06,480
Speaker 2: isn't fair because I know plenty of guys that are

1207
01:05:07,200 --> 01:05:10,600
Speaker 2: and men and women that are arias at big So

1208
01:05:10,720 --> 01:05:14,200
Speaker 2: I've been slagging everybody, so let me, you know, throw

1209
01:05:14,240 --> 01:05:17,720
Speaker 2: a compliment. Plenty of people at big farms do really

1210
01:05:17,840 --> 01:05:22,360
Speaker 2: nice work on behalf of their clients, mostly operating as arias.

1211
01:05:22,480 --> 01:05:25,160
Speaker 2: Every now and then they take off their RIA hat,

1212
01:05:25,200 --> 01:05:28,240
Speaker 2: they put on their broker dealer hat. Here's a secondary,

1213
01:05:28,320 --> 01:05:32,200
Speaker 2: here's some insurance product, here's this. So it's not really

1214
01:05:32,400 --> 01:05:35,880
Speaker 2: one hundred percent true fiduciary, but it looks so much

1215
01:05:35,920 --> 01:05:38,400
Speaker 2: more like it than it did in the nineteen nineties

1216
01:05:38,720 --> 01:05:40,280
Speaker 2: when it really was the wild West.

1217
01:05:40,400 --> 01:05:42,600
Speaker 1: So a couple of things on that. First of all,

1218
01:05:43,480 --> 01:05:48,040
Speaker 1: the way these sophisticated organizations do is they win a

1219
01:05:48,120 --> 01:05:51,440
Speaker 1: multiple fronts, right, because along with what you're saying here right,

1220
01:05:51,440 --> 01:05:55,040
Speaker 1: as they've evolved their product, they've they've mitigated risk, they've

1221
01:05:55,080 --> 01:05:58,240
Speaker 1: also engaged in some sleight of hint. Right. So where

1222
01:05:58,480 --> 01:06:02,320
Speaker 1: advisors are subject to a foot utree obligation, would you know, right,

1223
01:06:02,440 --> 01:06:04,720
Speaker 1: that means they have to act in the best interests

1224
01:06:04,720 --> 01:06:05,960
Speaker 1: of their clients.

1225
01:06:05,720 --> 01:06:10,320
Speaker 2: Which seems pretty instinctially how you want your financial advisors.

1226
01:06:09,920 --> 01:06:13,040
Speaker 1: You would think, right, But then then they get blessed

1227
01:06:13,040 --> 01:06:16,200
Speaker 1: and they get they get blessed by the SEC on

1228
01:06:16,280 --> 01:06:20,080
Speaker 1: this notion of a best interest standard, right, which is

1229
01:06:20,480 --> 01:06:22,400
Speaker 1: not a fiduciary not a fiduciary standard.

1230
01:06:22,480 --> 01:06:24,400
Speaker 2: You can call it what you want. It's it's black

1231
01:06:24,480 --> 01:06:28,120
Speaker 2: or white, either you're a fiduciary or you're something else entirely.

1232
01:06:27,880 --> 01:06:30,720
Speaker 1: But it just coincidentally has the two core words that

1233
01:06:30,760 --> 01:06:32,400
Speaker 1: define the fiduciarye standard. Right.

1234
01:06:32,440 --> 01:06:34,320
Speaker 2: I mean, this is where I go on a tirade

1235
01:06:34,320 --> 01:06:36,840
Speaker 2: as to hey, liars are going to lie and there

1236
01:06:36,840 --> 01:06:38,840
Speaker 2: ain't nothing you're going to do to change it. Like

1237
01:06:38,920 --> 01:06:40,720
Speaker 2: I want to give them the benefit of the data.

1238
01:06:40,840 --> 01:06:43,880
Speaker 2: I know you do, but I they just keep disappointing.

1239
01:06:43,960 --> 01:06:45,880
Speaker 1: But here's the distinction that I think will and it'll

1240
01:06:45,880 --> 01:06:48,400
Speaker 1: help you with your segue over to M and A

1241
01:06:48,400 --> 01:06:52,720
Speaker 1: as well, is that I think I think financial advisors,

1242
01:06:52,760 --> 01:06:56,200
Speaker 1: whether they are brokers or advisors, are largely an amazing

1243
01:06:56,280 --> 01:06:58,800
Speaker 1: crop of people. I think almost all of them are

1244
01:06:58,840 --> 01:07:03,160
Speaker 1: in it for the best of reasons. I think we

1245
01:07:03,280 --> 01:07:06,600
Speaker 1: have a high degree of success in the industry. People

1246
01:07:06,640 --> 01:07:11,320
Speaker 1: make a really fine living and they're doing good work.

1247
01:07:11,320 --> 01:07:16,080
Speaker 1: You can they're very well intentioned people. I think where

1248
01:07:16,120 --> 01:07:19,800
Speaker 1: you face this dichotomy is with the firms, right, because

1249
01:07:19,840 --> 01:07:23,600
Speaker 1: the firms, even if they push out a fee based.

1250
01:07:23,400 --> 01:07:25,200
Speaker 2: Program, they won't have it both ways.

1251
01:07:25,240 --> 01:07:27,360
Speaker 1: The question is the legal standard of care. The question

1252
01:07:27,480 --> 01:07:30,120
Speaker 1: is are the products and they're pure? Is there a

1253
01:07:30,200 --> 01:07:33,640
Speaker 1: cash threshold in there where they're scraping money off the top? Right,

1254
01:07:33,920 --> 01:07:37,440
Speaker 1: Because at the end of the day, this firm's management

1255
01:07:37,560 --> 01:07:40,320
Speaker 1: and their board have a fiduciary obligation to who the

1256
01:07:40,360 --> 01:07:43,800
Speaker 1: shareholder that's right, right, And that's the biggest distinction that

1257
01:07:43,840 --> 01:07:49,640
Speaker 1: we have between traditional brokerage industry and the wealth management industry,

1258
01:07:50,400 --> 01:07:52,120
Speaker 1: and that's changing.

1259
01:07:52,760 --> 01:07:53,640
Speaker 2: How is that changing?

1260
01:07:53,800 --> 01:07:56,480
Speaker 1: Well, I mean M and A has come upon the

1261
01:07:56,480 --> 01:08:01,600
Speaker 1: wealth management space. You know, there's there's hysteria right when

1262
01:08:01,640 --> 01:08:03,960
Speaker 1: when it comes to M and A, there's there's a

1263
01:08:04,000 --> 01:08:06,640
Speaker 1: real lack of logic that's out there in.

1264
01:08:06,640 --> 01:08:09,440
Speaker 2: Terms in terms of who's getting put together or the

1265
01:08:09,480 --> 01:08:11,880
Speaker 2: price is paid or what's the hysteria?

1266
01:08:12,040 --> 01:08:15,160
Speaker 1: Yes, all of it. Yes, I think that I think

1267
01:08:15,200 --> 01:08:19,000
Speaker 1: there's been an influxing capital into the space. Investors see

1268
01:08:19,040 --> 01:08:23,840
Speaker 1: this as a as a safe investment, right, but one

1269
01:08:24,080 --> 01:08:28,080
Speaker 1: with with significant upside, right like any other self regulatory.

1270
01:08:28,160 --> 01:08:30,920
Speaker 2: Oh so when you say these are these are finner rules,

1271
01:08:30,960 --> 01:08:33,360
Speaker 2: these are my attitude has always been they could go

1272
01:08:33,439 --> 01:08:36,600
Speaker 2: leap in a lake. They have no regulatory authority over me.

1273
01:08:36,760 --> 01:08:39,400
Speaker 2: Who gave up my seven? And every now and then

1274
01:08:39,520 --> 01:08:42,760
Speaker 2: I get a request from FINRA and I pick up

1275
01:08:42,760 --> 01:08:46,760
Speaker 2: the phone and my compliance people aren't happy, but I

1276
01:08:46,880 --> 01:08:48,800
Speaker 2: let them know what I really think. I've written what

1277
01:08:48,920 --> 01:08:52,840
Speaker 2: I really think. A whole decide that they were probably

1278
01:08:52,880 --> 01:08:57,040
Speaker 2: the single most corrupt organization in finance when it came

1279
01:08:57,120 --> 01:09:00,320
Speaker 2: to their arbitrations. It was just theft out and I

1280
01:09:00,400 --> 01:09:02,439
Speaker 2: will defend that in court if I have to. So,

1281
01:09:02,640 --> 01:09:08,240
Speaker 2: I am, but this is a nineties era perspective. I'm biased,

1282
01:09:08,600 --> 01:09:10,920
Speaker 2: And back then they weren't called Finnra. Back then they

1283
01:09:10,920 --> 01:09:14,400
Speaker 2: were called any SDR, which had such a harbor reputation

1284
01:09:14,439 --> 01:09:16,960
Speaker 2: they had to change their name. Tell me, am, I

1285
01:09:17,360 --> 01:09:24,120
Speaker 2: overstating a nineties era distaste for that self regulatory organization?

1286
01:09:24,520 --> 01:09:27,679
Speaker 2: Or is that you know how a lot of people felt.

1287
01:09:28,439 --> 01:09:30,559
Speaker 1: You are not overstating it. It is how a lot

1288
01:09:30,560 --> 01:09:35,160
Speaker 1: of people felt. The organization has evolved a little better,

1289
01:09:35,200 --> 01:09:37,519
Speaker 1: haven't that? But it hasn't gotten better on the whole.

1290
01:09:37,600 --> 01:09:39,880
Speaker 1: I mean there are areas where they have improved. The

1291
01:09:39,960 --> 01:09:42,680
Speaker 1: arbitration process has gotten better.

1292
01:09:42,600 --> 01:09:46,439
Speaker 2: By judicial decree because it was found to be third

1293
01:09:46,479 --> 01:09:48,800
Speaker 2: world corrupt. Again, am I exaggerating?

1294
01:09:48,960 --> 01:09:50,839
Speaker 1: You are not exaggerated, just like, oh.

1295
01:09:50,720 --> 01:09:53,400
Speaker 2: This is legalized theft and we're not going to allow

1296
01:09:53,439 --> 01:09:56,360
Speaker 2: this nonsense to go on. You can't do this anymore.

1297
01:09:56,400 --> 01:10:00,799
Speaker 2: You can't own the arbitration companies and mandai an arbitration

1298
01:10:00,920 --> 01:10:01,360
Speaker 2: go there.

1299
01:10:01,439 --> 01:10:04,040
Speaker 1: So you're absolutely correct with regards to the arbitration. But

1300
01:10:04,120 --> 01:10:06,479
Speaker 1: keep in mind you said, well, if I if I

1301
01:10:06,560 --> 01:10:08,920
Speaker 1: leave FINRA, right, if I no longer am a broker,

1302
01:10:09,000 --> 01:10:11,040
Speaker 1: and I decide to go fee only, they can go

1303
01:10:11,080 --> 01:10:12,080
Speaker 1: pound sand.

1304
01:10:12,200 --> 01:10:14,240
Speaker 2: But they're trying desperately to get in there.

1305
01:10:14,280 --> 01:10:17,400
Speaker 1: Well, but when you sign that U four, right, you

1306
01:10:17,479 --> 01:10:20,520
Speaker 1: gave them jurisdiction over you for two years.

1307
01:10:20,240 --> 01:10:22,840
Speaker 2: After I never signed the U four, I just walked back.

1308
01:10:23,439 --> 01:10:26,200
Speaker 1: No, no, not to you five. When you sign your registration,

1309
01:10:26,400 --> 01:10:30,960
Speaker 1: oh the original use, they have jurisdiction over you. That's so. Yeah.

1310
01:10:31,040 --> 01:10:33,439
Speaker 1: So so there's a two year period of time after

1311
01:10:33,600 --> 01:10:36,240
Speaker 1: you resign where they continue to retain.

1312
01:10:36,520 --> 01:10:38,960
Speaker 2: Oh no, I dropped the seven two years before I

1313
01:10:39,040 --> 01:10:41,640
Speaker 2: resigned because I didn't I wasn't doing any brokers.

1314
01:10:41,320 --> 01:10:43,439
Speaker 1: Work well and so and so a lot of these

1315
01:10:43,479 --> 01:10:46,040
Speaker 1: restrictions are tied to the fact that these folks are

1316
01:10:46,080 --> 01:10:49,120
Speaker 1: leaving broker dealers, right, and so, yeah, these are fin rules.

1317
01:10:49,160 --> 01:10:51,719
Speaker 2: Now listen that that seems like that is a class

1318
01:10:51,800 --> 01:10:55,800
Speaker 2: action lawsuit waiting to happen. Close. That whole setup is

1319
01:10:56,240 --> 01:11:00,559
Speaker 2: borderline employment restriction. You would think like a state like

1320
01:11:00,640 --> 01:11:03,519
Speaker 2: California would slam that stuff from going.

1321
01:11:03,320 --> 01:11:08,320
Speaker 1: On, except that states like California like the fact that

1322
01:11:08,600 --> 01:11:12,639
Speaker 1: broker dealers have that level of supervision and control. Right

1323
01:11:13,280 --> 01:11:15,720
Speaker 1: when it comes to protecting investors.

1324
01:11:15,320 --> 01:11:19,360
Speaker 2: Because again, the nasd R did such a great job

1325
01:11:19,920 --> 01:11:25,479
Speaker 2: protecting people from the worst brokers. Sarcasm alert. They you know,

1326
01:11:25,880 --> 01:11:30,519
Speaker 2: the voiceover is narrator. They didn't, right, I mean, they

1327
01:11:30,560 --> 01:11:33,880
Speaker 2: did a horrible job. What they did was protect And

1328
01:11:33,880 --> 01:11:36,240
Speaker 2: I don't want to make this a I have a

1329
01:11:36,280 --> 01:11:39,920
Speaker 2: lot of respect for shops like Morgan Stanley and Merrill

1330
01:11:40,000 --> 01:11:44,439
Speaker 2: Lynch that have been around for forever and help democratize investing,

1331
01:11:44,520 --> 01:11:47,959
Speaker 2: So I don't want to paint with too broad to brush. However,

1332
01:11:48,240 --> 01:11:52,920
Speaker 2: it seemed like the bigger member firms had, like Michael Jordan,

1333
01:11:53,000 --> 01:11:56,760
Speaker 2: a very different set of rules than what applied to

1334
01:11:56,800 --> 01:12:00,720
Speaker 2: the smaller firms. And meanwhile, the tiniest buck shops got

1335
01:12:00,720 --> 01:12:03,600
Speaker 2: away with murder for years and years and years. It

1336
01:12:04,160 --> 01:12:05,640
Speaker 2: seemed like a no win situation.

1337
01:12:05,840 --> 01:12:09,240
Speaker 1: Well, but that that's why, right, That's why they were

1338
01:12:09,280 --> 01:12:12,439
Speaker 1: able to justify a lot of these restrictive rules over

1339
01:12:12,479 --> 01:12:15,120
Speaker 1: the years, Right, because there were people out there doing

1340
01:12:15,160 --> 01:12:16,439
Speaker 1: bad things and.

1341
01:12:16,320 --> 01:12:18,240
Speaker 2: So that they failed to regulate.

1342
01:12:18,439 --> 01:12:21,559
Speaker 1: Right, And so when larger firms would push would advocate

1343
01:12:21,640 --> 01:12:24,960
Speaker 1: for these rules, right, no one thought about the law

1344
01:12:25,000 --> 01:12:28,559
Speaker 1: of unintended consequences. The big firms did right, there's really

1345
01:12:28,600 --> 01:12:31,599
Speaker 1: smart people at More Stanley and Merrilnch and Goldman Sachs.

1346
01:12:31,640 --> 01:12:31,760
Speaker 2: Right.

1347
01:12:31,800 --> 01:12:33,920
Speaker 1: I mean, these people are really smart and they have

1348
01:12:34,040 --> 01:12:36,920
Speaker 1: time to think about this stuff, right, whereas small firms,

1349
01:12:36,920 --> 01:12:39,800
Speaker 1: as you know, are just reacting to these rules on

1350
01:12:39,840 --> 01:12:42,479
Speaker 1: the most part right there, they don't have as many

1351
01:12:42,520 --> 01:12:46,960
Speaker 1: resources to participate in these meetings and the rulemaking and

1352
01:12:46,960 --> 01:12:50,360
Speaker 1: writing comment letters, and so as a result, large firms

1353
01:12:50,439 --> 01:12:54,439
Speaker 1: have an outsized influence over the rule making process. That's

1354
01:12:54,479 --> 01:12:55,160
Speaker 1: just the way it is.

1355
01:12:56,120 --> 01:13:00,920
Speaker 2: Really interesting. So let's talk about this space that I

1356
01:13:01,000 --> 01:13:04,040
Speaker 2: think has really gained traction in the past couple of years,

1357
01:13:04,400 --> 01:13:08,200
Speaker 2: the idea of the outsourced chief compliance officer. Tell us

1358
01:13:08,240 --> 01:13:09,200
Speaker 2: a little bit about that.

1359
01:13:09,800 --> 01:13:14,040
Speaker 1: You know, back in two thousand, we had two services

1360
01:13:14,040 --> 01:13:17,559
Speaker 1: at Market Council. One was the RAA Incubator, which we

1361
01:13:17,640 --> 01:13:19,880
Speaker 1: still have to this day. The other was called your

1362
01:13:19,880 --> 01:13:23,040
Speaker 1: Compliance Officer, and it was kind of a cheeky name.

1363
01:13:23,360 --> 01:13:26,040
Speaker 1: But keep in mind, this was like Windows two thousand era, right,

1364
01:13:26,080 --> 01:13:28,360
Speaker 1: where like everything was like my files and all that

1365
01:13:28,400 --> 01:13:33,800
Speaker 1: kind of stuff. The SEC promulgated compliance program role in

1366
01:13:33,840 --> 01:13:39,200
Speaker 1: the two thousands that, among other things, really clarified the

1367
01:13:39,320 --> 01:13:44,560
Speaker 1: role of a chief compliance officer, including what quality is

1368
01:13:44,600 --> 01:13:49,040
Speaker 1: a chief compliance officer need to have their autonomy, the

1369
01:13:49,120 --> 01:13:51,960
Speaker 1: level of control and authority that they had to have,

1370
01:13:52,280 --> 01:13:55,400
Speaker 1: and it made it clear to us that you cannot

1371
01:13:55,600 --> 01:14:00,920
Speaker 1: outsource the role of a C suite executive, specifically a

1372
01:14:00,960 --> 01:14:06,120
Speaker 1: chief compliance officer within an RAA. So for all the

1373
01:14:06,120 --> 01:14:10,320
Speaker 1: firms that we work with, their chief compliance officer is

1374
01:14:10,360 --> 01:14:15,160
Speaker 1: an employee of the firm, because that employee needs to

1375
01:14:15,200 --> 01:14:19,760
Speaker 1: have authority to manage and control other employees and monitor them.

1376
01:14:20,560 --> 01:14:23,240
Speaker 1: Tough to argue that that's possible when you have an

1377
01:14:23,280 --> 01:14:25,519
Speaker 1: outsourced vendor, that you could just sever their contract at

1378
01:14:25,560 --> 01:14:31,840
Speaker 1: any time. And so we built our services to help

1379
01:14:31,920 --> 01:14:35,560
Speaker 1: lead and direct the activities of the CEO, right to

1380
01:14:35,600 --> 01:14:39,080
Speaker 1: give them kind of an editorial calendar and an agenda,

1381
01:14:39,840 --> 01:14:43,760
Speaker 1: to give them information for which to do their job effectively,

1382
01:14:44,160 --> 01:14:47,160
Speaker 1: and then to layer on underneath them and help administer

1383
01:14:47,479 --> 01:14:50,000
Speaker 1: their work and you know, and do and carry out

1384
01:14:50,720 --> 01:14:54,479
Speaker 1: help carry out their responsibilities. So the chief compliance officer

1385
01:14:54,720 --> 01:14:56,519
Speaker 1: always has their finger on the trigger.

1386
01:14:57,000 --> 01:15:01,920
Speaker 2: So how many firms can out source chief compliance officer

1387
01:15:02,479 --> 01:15:06,559
Speaker 2: be an employee of and still stay true to that mandate?

1388
01:15:06,720 --> 01:15:07,160
Speaker 1: I don't know.

1389
01:15:07,320 --> 01:15:09,600
Speaker 2: You can't do ten thousand, but you could probably do

1390
01:15:09,720 --> 01:15:10,639
Speaker 2: twenty or forty.

1391
01:15:10,920 --> 01:15:12,920
Speaker 1: I don't know. I mean, the SEC hasn't been clear

1392
01:15:12,960 --> 01:15:14,640
Speaker 1: on it. We don't think it's possible at all. Like

1393
01:15:14,680 --> 01:15:17,439
Speaker 1: we don't really yeah, I mean, you know, our reading

1394
01:15:17,479 --> 01:15:21,200
Speaker 1: of the rule indicates that, you know, someone who is

1395
01:15:21,280 --> 01:15:24,479
Speaker 1: an outsourced service provider cannot serve in the role as

1396
01:15:24,600 --> 01:15:28,720
Speaker 1: chief compliance officer. But I know other firms do it right,

1397
01:15:28,720 --> 01:15:33,360
Speaker 1: They've made a business out of it. But before we

1398
01:15:33,439 --> 01:15:37,360
Speaker 1: hired a chief compliance officer, we were working with a

1399
01:15:37,400 --> 01:15:40,080
Speaker 1: regulatory compliance firm out in LA.

1400
01:15:40,560 --> 01:15:43,960
Speaker 2: They were very helpful. It wasn't that they were a

1401
01:15:44,080 --> 01:15:49,360
Speaker 2: chief compliance officer. But let's be honest, effectively when you're

1402
01:15:49,439 --> 01:15:51,559
Speaker 2: hiring a third party, and I got to think this

1403
01:15:51,640 --> 01:15:55,320
Speaker 2: is true for Market Council also, when you're saying to somebody, hey,

1404
01:15:55,439 --> 01:15:57,680
Speaker 2: we don't know what the policies and procedures should be.

1405
01:15:57,720 --> 01:15:59,400
Speaker 2: We don't know what we What do we need to

1406
01:15:59,400 --> 01:16:01,759
Speaker 2: do to make sure? Will we pass our next audit?

1407
01:16:01,800 --> 01:16:04,120
Speaker 2: What do we do to make sure? Like you want

1408
01:16:04,120 --> 01:16:07,040
Speaker 2: to be on the right side of the compliance rules,

1409
01:16:07,320 --> 01:16:09,280
Speaker 2: tell us what we can and can't do us give

1410
01:16:09,360 --> 01:16:11,760
Speaker 2: us a black line and we'll stay on the right side.

1411
01:16:11,800 --> 01:16:12,080
Speaker 1: Of it.

1412
01:16:12,600 --> 01:16:15,240
Speaker 2: Whether that person is a full time employee or an

1413
01:16:15,240 --> 01:16:19,519
Speaker 2: outside attorney that's giving you advice, how big a difference

1414
01:16:19,560 --> 01:16:19,920
Speaker 2: is there?

1415
01:16:20,800 --> 01:16:23,920
Speaker 1: To me, the distinction here is that we're helping run

1416
01:16:23,960 --> 01:16:26,920
Speaker 1: an outsource compliance department. Right, we should be all of

1417
01:16:26,920 --> 01:16:30,679
Speaker 1: the resources that a fully functional outsource compliance or compliance

1418
01:16:30,680 --> 01:16:33,160
Speaker 1: department should be on the other end of an email

1419
01:16:33,200 --> 01:16:35,000
Speaker 1: and the other end of a phone call, any type

1420
01:16:35,439 --> 01:16:40,680
Speaker 1: of communication. But to me, it's critical that that chief executive,

1421
01:16:40,720 --> 01:16:44,240
Speaker 1: the chief compliance officer, the c suite individual sits as

1422
01:16:44,280 --> 01:16:46,040
Speaker 1: an employee of the firm so that they have the

1423
01:16:46,040 --> 01:16:49,839
Speaker 1: proper authority. They're granted the proper authority within the corporate documents,

1424
01:16:49,840 --> 01:16:52,400
Speaker 1: that they have the authority to carry out their responsibilities,

1425
01:16:52,600 --> 01:16:56,799
Speaker 1: including the ability to hire and fire personnel. The SEC

1426
01:16:56,840 --> 01:17:00,439
Speaker 1: says that person needs that authority, And I've never seen

1427
01:17:02,040 --> 01:17:04,599
Speaker 1: in all my years of practicing law, I've never seen

1428
01:17:05,200 --> 01:17:08,719
Speaker 1: a vendor relationship where you give the vendor the authority

1429
01:17:08,800 --> 01:17:12,400
Speaker 1: to hire or fire an employee. It just doesn't happen. Right,

1430
01:17:12,520 --> 01:17:16,960
Speaker 1: So our reading of it doesn't allow a third party

1431
01:17:16,960 --> 01:17:19,960
Speaker 1: a vendor to actually serve as a CCO. We think

1432
01:17:20,000 --> 01:17:23,439
Speaker 1: we can as an outside provider, we can layer on

1433
01:17:23,520 --> 01:17:25,880
Speaker 1: the top end underneath the CECO and we can provide

1434
01:17:25,920 --> 01:17:28,080
Speaker 1: them with all of the support and guidance that they need.

1435
01:17:28,439 --> 01:17:32,360
Speaker 1: But it's really critical to me that someone within that

1436
01:17:32,479 --> 01:17:36,640
Speaker 1: management with a management role takes on the role of it.

1437
01:17:36,800 --> 01:17:39,559
Speaker 2: And it doesn't necessarily have to be a single, dedicated person.

1438
01:17:39,600 --> 01:17:43,160
Speaker 2: It could be someone wearing multiple hats and when they say, okay,

1439
01:17:43,160 --> 01:17:46,599
Speaker 2: now I'm chief compliance officer, you're working directly with them.

1440
01:17:46,680 --> 01:17:49,280
Speaker 1: Yeah. A lot of people have noted recently. You know

1441
01:17:49,600 --> 01:17:51,320
Speaker 1: what I think has been a longtime trend, which is

1442
01:17:51,360 --> 01:17:55,519
Speaker 1: that the chief operating officer often also serves as chief

1443
01:17:55,520 --> 01:17:58,880
Speaker 1: compliance officer. I don't think that's the wrong call, right

1444
01:17:58,880 --> 01:18:01,559
Speaker 1: when someone needs to wear more hats, because to me,

1445
01:18:02,640 --> 01:18:07,320
Speaker 1: regulatory compliance is simply an operational baseline standard. Right, that's

1446
01:18:07,360 --> 01:18:10,360
Speaker 1: your non negotiable line, right. It's like, we never dip

1447
01:18:10,439 --> 01:18:14,080
Speaker 1: below that standard. Right. Maybe we're striving for excellence, you know,

1448
01:18:14,120 --> 01:18:15,880
Speaker 1: we're trying to get you know, nine out of ten

1449
01:18:15,960 --> 01:18:19,800
Speaker 1: on these but regulatory compliance is that non negotiable line, right,

1450
01:18:19,840 --> 01:18:22,120
Speaker 1: And so it makes sense that if someone's going to

1451
01:18:22,160 --> 01:18:25,040
Speaker 1: serve dual role, that the chief operating officer steps in.

1452
01:18:25,520 --> 01:18:28,200
Speaker 2: Assuming you have a chief operator were especially you know,

1453
01:18:28,360 --> 01:18:31,120
Speaker 2: smaller firm five ten people, they may not have an

1454
01:18:31,160 --> 01:18:31,800
Speaker 2: operating offer.

1455
01:18:31,840 --> 01:18:35,200
Speaker 1: Then it's you know, who's signed the operating agreement last right.

1456
01:18:35,200 --> 01:18:40,519
Speaker 2: Right, or whoever's overseeing the advisors they're cfps, and it's

1457
01:18:40,560 --> 01:18:44,400
Speaker 2: not you know, on a broker side, that person is

1458
01:18:44,439 --> 01:18:50,040
Speaker 2: trying to encourage transactions with which generate revenue on the

1459
01:18:50,120 --> 01:18:53,519
Speaker 2: fiduciary side. On the ra side, hey, the revenue takes

1460
01:18:53,520 --> 01:18:56,000
Speaker 2: care of itself. Is a fee agreement. You just want

1461
01:18:56,000 --> 01:18:58,599
Speaker 2: to make sure the advisor's doing with what they're supposed

1462
01:18:58,640 --> 01:19:02,519
Speaker 2: to be doing and staying compliant. It shouldn't shouldn't be

1463
01:19:02,640 --> 01:19:06,680
Speaker 2: an interference in the actual business. But I'm really down

1464
01:19:07,000 --> 01:19:09,559
Speaker 2: down a rabbit hole and I'm projecting my own experience.

1465
01:19:09,840 --> 01:19:13,200
Speaker 1: Well, but within that experience, don't you think that it's

1466
01:19:13,240 --> 01:19:15,439
Speaker 1: as much a quality of service issue as anything else?

1467
01:19:15,520 --> 01:19:15,600
Speaker 2: Right?

1468
01:19:15,680 --> 01:19:19,920
Speaker 1: We talked earlier about the distinction between compliance, legal and risk.

1469
01:19:20,280 --> 01:19:23,719
Speaker 1: But much of what you know regulatory compliance is something

1470
01:19:23,760 --> 01:19:27,040
Speaker 1: that we can handle, right. We know it's a finite

1471
01:19:27,080 --> 01:19:30,200
Speaker 1: you know, set of rules, right, But what you're getting

1472
01:19:30,240 --> 01:19:34,240
Speaker 1: into is is moderating oversight, right, making sure that people

1473
01:19:34,280 --> 01:19:36,720
Speaker 1: are doing the right thing. And quite often when you

1474
01:19:36,760 --> 01:19:38,639
Speaker 1: when you find a dispute with a client, it comes

1475
01:19:38,680 --> 01:19:41,320
Speaker 1: down to poor communications.

1476
01:19:40,880 --> 01:19:45,320
Speaker 2: Almost almost always. So. So you mentioned earlier the SEC,

1477
01:19:46,040 --> 01:19:50,479
Speaker 2: and I think I brought up audits pre pandemic. The

1478
01:19:50,600 --> 01:19:53,679
Speaker 2: rule of thumb was, hey, expect an audit every three years,

1479
01:19:53,680 --> 01:19:57,400
Speaker 2: and then the pandemic happened and for three years, you know,

1480
01:19:57,439 --> 01:20:00,240
Speaker 2: everybody was sort of frozen. What do you I think

1481
01:20:00,320 --> 01:20:04,240
Speaker 2: is going to happen going forward in terms of what

1482
01:20:05,120 --> 01:20:08,080
Speaker 2: the audit procedures going to look like, what the frequency is,

1483
01:20:08,520 --> 01:20:11,840
Speaker 2: because I have to imagine the SEC is getting to

1484
01:20:11,880 --> 01:20:14,680
Speaker 2: the point where hey, let's go back to if not

1485
01:20:15,040 --> 01:20:18,040
Speaker 2: the old regime, well something that looks like it, and

1486
01:20:18,479 --> 01:20:20,040
Speaker 2: the world is normalizing again.

1487
01:20:20,720 --> 01:20:22,880
Speaker 1: I just don't think it matters really.

1488
01:20:23,000 --> 01:20:26,360
Speaker 2: Yeah, you know, I remember prepping for i know, first

1489
01:20:26,800 --> 01:20:30,120
Speaker 2: audit and it was like, you know, it was like

1490
01:20:30,240 --> 01:20:35,080
Speaker 2: the bar exam, going to the prom and the SATs

1491
01:20:35,160 --> 01:20:36,160
Speaker 2: all rolled into one.

1492
01:20:36,640 --> 01:20:39,920
Speaker 1: I think your perception is shaped by when you entered

1493
01:20:39,920 --> 01:20:43,040
Speaker 1: into this industry. Right, People used to market all the time,

1494
01:20:43,439 --> 01:20:48,360
Speaker 1: death taxes, regulatory exams. Right. The thing I can share

1495
01:20:48,520 --> 01:20:51,240
Speaker 1: is that there's a zero mortality rate, you know, attached

1496
01:20:51,240 --> 01:20:52,560
Speaker 1: to regulatory.

1497
01:20:52,400 --> 01:20:55,439
Speaker 2: But there are fines there are like, hey, you guys suck,

1498
01:20:55,479 --> 01:20:58,240
Speaker 2: You better get your act together. Just as a matter

1499
01:20:58,280 --> 01:21:01,120
Speaker 2: of pride, you never want to have something like that happened.

1500
01:21:01,520 --> 01:21:06,120
Speaker 1: There's there's no question that the SEC's regulatory exams have

1501
01:21:06,200 --> 01:21:10,880
Speaker 1: gotten better, and they've gotten better primarily because the SEC

1502
01:21:10,960 --> 01:21:13,680
Speaker 1: has more data and they're using that data. Right, So

1503
01:21:13,760 --> 01:21:17,080
Speaker 1: before the SEC even walks into an advisor's office, they

1504
01:21:17,120 --> 01:21:20,240
Speaker 1: often have a short list of deficiencies and I can

1505
01:21:20,280 --> 01:21:23,120
Speaker 1: find those that they're looking for or they already know about,

1506
01:21:23,600 --> 01:21:26,800
Speaker 1: really absolutely, because because it's as simple as this, they're

1507
01:21:26,840 --> 01:21:30,880
Speaker 1: pulling your your form adv disclosure statement, right, They're pulling

1508
01:21:30,920 --> 01:21:34,519
Speaker 1: your marketing collateral, they're pulling your client agreements right, and

1509
01:21:34,560 --> 01:21:36,600
Speaker 1: sometimes they're asking you for this in advance of the

1510
01:21:36,680 --> 01:21:41,280
Speaker 1: visitors just for this. Most of the time, for advisors

1511
01:21:41,320 --> 01:21:44,479
Speaker 1: that existing advisors that are on board with US, there

1512
01:21:44,520 --> 01:21:47,200
Speaker 1: are conflicts just within those agreements.

1513
01:21:46,600 --> 01:21:49,240
Speaker 2: Meaning that they they're in opposite each other and you

1514
01:21:49,280 --> 01:21:51,960
Speaker 2: can't actually fulfill all those.

1515
01:21:51,800 --> 01:21:55,320
Speaker 1: Obligations either that or one is so vague that it

1516
01:21:55,360 --> 01:21:58,559
Speaker 1: could be argued that it's misleading, right. I mean, when

1517
01:21:58,600 --> 01:22:01,479
Speaker 1: advisors talk about their fees, this is a really big

1518
01:22:01,520 --> 01:22:02,440
Speaker 1: area because.

1519
01:22:02,200 --> 01:22:05,160
Speaker 2: Isn't that on a form adv disclosure? Isn't that all man?

1520
01:22:05,160 --> 01:22:08,160
Speaker 2: We're really inside baseball today, I mean, isn't that all

1521
01:22:08,200 --> 01:22:10,040
Speaker 2: out there? How do you mess that up?

1522
01:22:10,720 --> 01:22:13,000
Speaker 1: It's so easy to mess that up. Really absolutely, I'd

1523
01:22:13,040 --> 01:22:15,360
Speaker 1: say more advisors mess up their fees and their conflicts

1524
01:22:15,360 --> 01:22:18,280
Speaker 1: of interest than anything else, right, because with their fees,

1525
01:22:18,760 --> 01:22:22,040
Speaker 1: advisors want to be aspirational in their disclosure. They want

1526
01:22:22,040 --> 01:22:24,280
Speaker 1: to say, our fee is one percent right. They don't

1527
01:22:24,280 --> 01:22:26,400
Speaker 1: want to get into all of the qualities they look

1528
01:22:26,400 --> 01:22:29,400
Speaker 1: at when they discount that fee. They don't want to

1529
01:22:30,120 --> 01:22:33,200
Speaker 1: disclose conflicts of interests that come along with the way

1530
01:22:33,200 --> 01:22:35,599
Speaker 1: in which they structured that fee. And we are definitely

1531
01:22:35,640 --> 01:22:39,280
Speaker 1: getting into inside baseball. But conflicts of interest are by

1532
01:22:39,320 --> 01:22:41,880
Speaker 1: and large the biggest area that the SEC can find

1533
01:22:42,680 --> 01:22:45,440
Speaker 1: without even stepping into the office or talking to an individual.

1534
01:22:45,600 --> 01:22:49,160
Speaker 1: And it's because they can see your business practices and

1535
01:22:49,200 --> 01:22:51,240
Speaker 1: they can see what you've disclosed. And most of the

1536
01:22:51,280 --> 01:22:53,920
Speaker 1: time when you talk to advisors, they say, well, that's

1537
01:22:53,920 --> 01:22:56,559
Speaker 1: not a conflict because we would never do that right.

1538
01:22:57,360 --> 01:23:01,120
Speaker 1: And that's just a real significant misunderstanding what a conflict is.

1539
01:23:01,640 --> 01:23:06,439
Speaker 1: And you need an objective party to step in and say, hey,

1540
01:23:06,800 --> 01:23:09,880
Speaker 1: I know you you know you guys are good people, right,

1541
01:23:09,960 --> 01:23:12,880
Speaker 1: but this is a conflict of interest. What we do

1542
01:23:12,960 --> 01:23:16,280
Speaker 1: to mitigate that conflict or eliminate that conflict is another issue.

1543
01:23:16,280 --> 01:23:18,240
Speaker 1: But we have to call out the conflict and disclosure.

1544
01:23:18,280 --> 01:23:22,519
Speaker 2: So I started out with a disclosure. Let's wrap up

1545
01:23:22,840 --> 01:23:27,439
Speaker 2: the last segment with a disclosure. Which is my rule

1546
01:23:27,439 --> 01:23:30,720
Speaker 2: of thumb is always even if there is a conflict,

1547
01:23:30,840 --> 01:23:34,040
Speaker 2: and we really work hard on the fiduciary side of

1548
01:23:34,080 --> 01:23:36,280
Speaker 2: the street. I don't mean just our WM, but the

1549
01:23:36,320 --> 01:23:42,719
Speaker 2: whole Ria industry tries to not have a conflict. Isn't

1550
01:23:42,880 --> 01:23:46,400
Speaker 2: all of this stuff satisfied by just disclosed? Disclosed? Disclose

1551
01:23:46,760 --> 01:23:49,840
Speaker 2: if you let the clients know, Hey, we set up

1552
01:23:50,080 --> 01:23:54,719
Speaker 2: a fintech venture fund because we feel we can push

1553
01:23:54,800 --> 01:23:58,920
Speaker 2: those companies out there and do really a benefit for them,

1554
01:23:59,000 --> 01:24:01,639
Speaker 2: and we want a PARTI in the upside. By the way,

1555
01:24:01,640 --> 01:24:04,280
Speaker 2: if you're interested in it, we we have upside. And

1556
01:24:04,320 --> 01:24:08,800
Speaker 2: here's the disclosure. If I disclose everything, how do you

1557
01:24:08,960 --> 01:24:11,479
Speaker 2: how do you get into trouble? Does that resolve? Does

1558
01:24:11,560 --> 01:24:14,920
Speaker 2: disclosure resolve all of And I'm not looking for free

1559
01:24:15,000 --> 01:24:20,520
Speaker 2: legal advice here, it's a legit question. Does disclosure resolve

1560
01:24:20,800 --> 01:24:22,000
Speaker 2: the conflict.

1561
01:24:21,479 --> 01:24:26,400
Speaker 1: Issue mostly mostly? So going back to mostly but I

1562
01:24:26,439 --> 01:24:27,759
Speaker 1: just want to I don't want to just have mostly

1563
01:24:27,800 --> 01:24:32,599
Speaker 1: hanging out there mostly, but it doesn't resolve at all. Right,

1564
01:24:32,640 --> 01:24:37,160
Speaker 1: And some conflicts are are simply improper, right, you simply

1565
01:24:37,200 --> 01:24:39,120
Speaker 1: can't can't disclose them away.

1566
01:24:39,120 --> 01:24:40,759
Speaker 2: Like like what sort of conflict?

1567
01:24:40,840 --> 01:24:43,840
Speaker 1: Well, so so use that example right where you disclose

1568
01:24:44,240 --> 01:24:47,120
Speaker 1: that you have this venture fund, right is your own fund.

1569
01:24:47,240 --> 01:24:48,479
Speaker 1: And as by.

1570
01:24:48,360 --> 01:24:50,920
Speaker 2: The way, one of the things we will not put

1571
01:24:50,960 --> 01:24:55,320
Speaker 2: into the venture funds is an ETF or or anything

1572
01:24:55,400 --> 01:24:57,920
Speaker 2: investing that then we're going to buy for the client

1573
01:24:57,920 --> 01:25:00,960
Speaker 2: because clearly you're on both sides the trade. There, that's

1574
01:25:00,960 --> 01:25:01,360
Speaker 2: a no no.

1575
01:25:01,600 --> 01:25:03,840
Speaker 1: So there you go, right, there's one of them. How

1576
01:25:03,840 --> 01:25:06,040
Speaker 1: about the other one being if these are if these

1577
01:25:06,080 --> 01:25:09,920
Speaker 1: are funds that you are recommending an allocation, you're not

1578
01:25:09,960 --> 01:25:12,559
Speaker 1: going to recommend your own fund get paid for the

1579
01:25:12,600 --> 01:25:15,200
Speaker 1: investment advice and that get paid out of fund express, right,

1580
01:25:15,360 --> 01:25:18,160
Speaker 1: that's right. So there are some conflicts that are just

1581
01:25:18,160 --> 01:25:19,960
Speaker 1: just too far. Right, the SEC is going to say

1582
01:25:19,960 --> 01:25:21,960
Speaker 1: you could disclose what you want. But in my second

1583
01:25:22,000 --> 01:25:25,160
Speaker 1: week working at the at the SEC and the Enforcement Division,

1584
01:25:25,840 --> 01:25:29,080
Speaker 1: after I took Chuck Senator's class that we talked about earlier.

1585
01:25:29,840 --> 01:25:35,000
Speaker 1: He assigned me to work for this powerhouse of a litigator,

1586
01:25:35,240 --> 01:25:37,800
Speaker 1: Sue Curtain. I don't know how I just remembered her name.

1587
01:25:37,960 --> 01:25:39,840
Speaker 1: I couldn't tell you what I had for breakfast, right,

1588
01:25:39,880 --> 01:25:44,840
Speaker 1: But I said to Sue my friends, clearly, my sense

1589
01:25:45,000 --> 01:25:48,679
Speaker 1: of like this raa thing is crazy. Like my sense

1590
01:25:48,760 --> 01:25:52,080
Speaker 1: is that so long as you disclose, that you are

1591
01:25:52,160 --> 01:25:55,439
Speaker 1: stealing ten thousand dollars a day from the client, right,

1592
01:25:55,520 --> 01:25:59,880
Speaker 1: that that so much of the recourse is precluded. Right.

1593
01:26:00,400 --> 01:26:03,000
Speaker 1: She just laughed at me and she said, you're a

1594
01:26:03,040 --> 01:26:07,520
Speaker 1: quick study. Right. And so clearly there are anti fraud provisions,

1595
01:26:08,240 --> 01:26:14,160
Speaker 1: but disclosure is a key component to the advisor's act

1596
01:26:14,200 --> 01:26:16,840
Speaker 1: and one that so many advisors have trouble with. They

1597
01:26:16,880 --> 01:26:19,720
Speaker 1: have a trouble really yeah, because I mean think of it, right,

1598
01:26:19,760 --> 01:26:22,240
Speaker 1: the last time, the last time you went to your doctor,

1599
01:26:22,240 --> 01:26:25,800
Speaker 1: would he say how you feeling? Right? I feel great? Really?

1600
01:26:25,840 --> 01:26:27,800
Speaker 1: Because I'm looking at your blood sugars, I'm looking at

1601
01:26:27,800 --> 01:26:32,080
Speaker 1: your weight, and the numbers are telling me a different story. Right.

1602
01:26:32,120 --> 01:26:35,040
Speaker 1: And so that's what happens with advisors. They are so

1603
01:26:35,320 --> 01:26:38,800
Speaker 1: blinded by their own good intentions and their purpose that

1604
01:26:38,840 --> 01:26:42,240
Speaker 1: they don't see the harm that they could do if

1605
01:26:42,240 --> 01:26:44,360
Speaker 1: they set out to do it. Got and so as

1606
01:26:44,400 --> 01:26:46,679
Speaker 1: an objective advisor, your job is to shine a mirror

1607
01:26:46,680 --> 01:26:48,760
Speaker 1: and say, just imagine for a moment there was a

1608
01:26:48,800 --> 01:26:51,840
Speaker 1: bad actor, right, could we do this? Which is listen,

1609
01:26:51,880 --> 01:26:53,519
Speaker 1: I don't want to get off on another tangent on

1610
01:26:53,600 --> 01:26:57,320
Speaker 1: your ear. But that's why cybersecurity and fraud. Cyber fraud

1611
01:26:57,560 --> 01:27:00,640
Speaker 1: is such a problem for advisors because they're running a

1612
01:27:00,680 --> 01:27:05,519
Speaker 1: business that's that has a foundation in familiarity. Right, they

1613
01:27:05,600 --> 01:27:07,679
Speaker 1: can't have you call and just say, what's your social

1614
01:27:07,680 --> 01:27:09,320
Speaker 1: Security number? Right? What's your what's your mother?

1615
01:27:09,400 --> 01:27:12,200
Speaker 2: And we've heard we've heard people, we've heard horrible stories

1616
01:27:12,240 --> 01:27:16,679
Speaker 2: about AI, especially somebody like you who's in the public

1617
01:27:17,640 --> 01:27:20,160
Speaker 2: or me in the public domain. You could use AI,

1618
01:27:20,400 --> 01:27:23,280
Speaker 2: pull a bunch of language out and create a phone

1619
01:27:23,320 --> 01:27:28,720
Speaker 2: call that sounds like a person you were telling a

1620
01:27:28,760 --> 01:27:34,120
Speaker 2: story about that. How dangerous is cybersecurity and this sort

1621
01:27:34,160 --> 01:27:38,960
Speaker 2: of AI generated impersonation to fraud protection?

1622
01:27:39,040 --> 01:27:42,600
Speaker 1: Yeah, I mean, let's let's just touch on cybersecurity. Cybersecurity

1623
01:27:42,640 --> 01:27:45,120
Speaker 1: is a people problem, right, It's just that the root

1624
01:27:45,160 --> 01:27:47,559
Speaker 1: of where they're getting the data is technology, and.

1625
01:27:47,520 --> 01:27:51,519
Speaker 2: The social engineer acting is is is the data.

1626
01:27:51,560 --> 01:27:54,200
Speaker 1: But it's almost all coming from people. Right. It's it's

1627
01:27:54,240 --> 01:27:56,160
Speaker 1: your unroot to a conference or I'm unrout to a

1628
01:27:56,200 --> 01:28:00,720
Speaker 1: conference and someone is specifically targeting your colleagues, right, I

1629
01:28:00,760 --> 01:28:04,840
Speaker 1: got I got an email from from one of my

1630
01:28:04,920 --> 01:28:08,479
Speaker 1: colleagues years ago. Uh, and he received an email before

1631
01:28:08,520 --> 01:28:10,880
Speaker 1: that that said, Hey, as you know, I'm flying out

1632
01:28:10,920 --> 01:28:13,720
Speaker 1: to this conference is a well known conference in our interspace.

1633
01:28:14,080 --> 01:28:15,640
Speaker 1: I'm not going to be available, but I need you

1634
01:28:15,680 --> 01:28:18,439
Speaker 1: to send me the following financial reports, to which he

1635
01:28:19,080 --> 01:28:22,200
Speaker 1: replied to me and he said, I don't have access

1636
01:28:22,200 --> 01:28:25,800
Speaker 1: to those financial reports. I replied to him, Well, that's

1637
01:28:25,840 --> 01:28:28,679
Speaker 1: exactly why you don't have access to these financial reports.

1638
01:28:29,720 --> 01:28:33,559
Speaker 1: They're you know, these cyber criminals are getting and I

1639
01:28:33,600 --> 01:28:36,839
Speaker 1: hate to call them that because people they're getting clever. Fantasy,

1640
01:28:37,080 --> 01:28:39,960
Speaker 1: they're getting clever, they're getting a depth, they're getting more nimble.

1641
01:28:40,280 --> 01:28:45,000
Speaker 1: You know, they're small advisors are not the primary subjects

1642
01:28:45,040 --> 01:28:47,160
Speaker 1: of a denial of service attack, right, I mean that's

1643
01:28:47,160 --> 01:28:51,599
Speaker 1: what big financial institutions are. After what they're they're going

1644
01:28:51,680 --> 01:28:55,880
Speaker 1: to get duped because of the feigned familiarity that they

1645
01:28:55,920 --> 01:28:58,599
Speaker 1: have to have with their clients. It's you know, it's

1646
01:28:58,720 --> 01:29:02,439
Speaker 1: it's the you know, South calling saying or emailing saying,

1647
01:29:02,479 --> 01:29:04,880
Speaker 1: as you know, I'm going on a cruise. How did

1648
01:29:04,880 --> 01:29:07,120
Speaker 1: the criminal know this because they went through Sally's emails

1649
01:29:07,160 --> 01:29:09,599
Speaker 1: and she's they see she's booked on a cruise, as

1650
01:29:09,600 --> 01:29:12,720
Speaker 1: you know, I'm on a cruise, put on Instagram or

1651
01:29:12,760 --> 01:29:16,000
Speaker 1: it's on on social media, right, And so these criminals

1652
01:29:16,040 --> 01:29:19,400
Speaker 1: are scaling down. It's a scalability issue. They're scaling down

1653
01:29:19,400 --> 01:29:21,560
Speaker 1: to the point that they can go after these individual

1654
01:29:22,120 --> 01:29:25,400
Speaker 1: crimes and they're succeeding unbelievable.

1655
01:29:25,520 --> 01:29:29,080
Speaker 2: Unbelievable. All right, So I have two curveball questions I

1656
01:29:29,120 --> 01:29:32,120
Speaker 2: got to ask you before we get to our favorite

1657
01:29:32,200 --> 01:29:34,960
Speaker 2: questions in our last five minutes. The first is you

1658
01:29:35,000 --> 01:29:38,680
Speaker 2: were a chef in the US Coast Guard Auxiliary. How

1659
01:29:38,720 --> 01:29:39,679
Speaker 2: the hell did that happen?

1660
01:29:40,120 --> 01:29:46,640
Speaker 1: You know? I uh, I'm an incredibly curious person. Some

1661
01:29:46,680 --> 01:29:52,280
Speaker 1: would say just you know, I'm just jumping. And anytime

1662
01:29:52,360 --> 01:29:55,479
Speaker 1: I'm interested in something, I want to know. I want

1663
01:29:55,520 --> 01:29:56,760
Speaker 1: to know how people do it, I want to know

1664
01:29:56,760 --> 01:30:00,000
Speaker 1: how things work. And so I joined the Coast Guard

1665
01:30:00,000 --> 01:30:02,599
Speaker 1: Auxiliary when I bought a boat back in two thousand.

1666
01:30:02,680 --> 01:30:05,959
Speaker 2: So we're not talking about JAG. We're talking about literally

1667
01:30:06,080 --> 01:30:07,320
Speaker 2: the Coast Guard Auxiliary.

1668
01:30:07,360 --> 01:30:10,519
Speaker 1: Yeah, the Coast Guard Auxiliary. Now it's you know, it's

1669
01:30:10,600 --> 01:30:15,559
Speaker 1: a group of largely retired servicemen and women who get

1670
01:30:15,600 --> 01:30:19,040
Speaker 1: together to help support the US Coast Guard. Right they

1671
01:30:19,080 --> 01:30:20,519
Speaker 1: call it, you know, they call the US Coast Guard

1672
01:30:20,560 --> 01:30:23,160
Speaker 1: the gold Side, And we were the silver Side. And

1673
01:30:23,200 --> 01:30:27,040
Speaker 1: so I joined to get free boating education. I joined

1674
01:30:27,040 --> 01:30:30,200
Speaker 1: to learn navigation, joined joined to learn weather.

1675
01:30:30,360 --> 01:30:33,599
Speaker 2: And they give a lot as a fellow voter, they

1676
01:30:33,640 --> 01:30:36,160
Speaker 2: give courses. Yeah, you could sign up. You can learn

1677
01:30:36,200 --> 01:30:38,360
Speaker 2: to sail, you can learn to navigate by the stars.

1678
01:30:38,400 --> 01:30:40,040
Speaker 2: You can do all of it with them.

1679
01:30:40,120 --> 01:30:42,960
Speaker 1: Yeah and so, and I love the camaraderie of the group.

1680
01:30:42,960 --> 01:30:45,160
Speaker 1: And one of the programs they had, they used to

1681
01:30:45,200 --> 01:30:48,720
Speaker 1: call the Chef program the Auxiliary Chef program. Now they

1682
01:30:48,720 --> 01:30:51,840
Speaker 1: call it Auxiliary Food Service. But the program is about

1683
01:30:51,920 --> 01:30:55,160
Speaker 1: augmenting the capabilities of the gold Side so that someone

1684
01:30:55,160 --> 01:30:57,240
Speaker 1: can take a few days leave or that's or that

1685
01:30:57,880 --> 01:30:59,639
Speaker 1: or when they run you know, when they run low,

1686
01:30:59,720 --> 01:31:03,160
Speaker 1: or when they're having a special event. And taught me

1687
01:31:03,200 --> 01:31:06,720
Speaker 1: about food safety, taught me about a food quantity, and

1688
01:31:06,800 --> 01:31:10,120
Speaker 1: I just I've always loved the I've always loved the

1689
01:31:10,120 --> 01:31:12,640
Speaker 1: gratitude of pulling off what people don't know. Right, you

1690
01:31:12,760 --> 01:31:14,800
Speaker 1: did it, and it's kind of an extension of what

1691
01:31:14,840 --> 01:31:15,000
Speaker 1: I do.

1692
01:31:15,320 --> 01:31:18,320
Speaker 2: That sounds fun. And then you almost had a career

1693
01:31:18,360 --> 01:31:22,519
Speaker 2: in radio. Tell us how you sidestep that and went

1694
01:31:22,560 --> 01:31:23,719
Speaker 2: into legal practice.

1695
01:31:23,720 --> 01:31:24,840
Speaker 1: I think what you meant to say is have a

1696
01:31:24,880 --> 01:31:25,559
Speaker 1: face for radio.

1697
01:31:25,600 --> 01:31:28,800
Speaker 2: I definitely same. Same. So you you were in your

1698
01:31:28,800 --> 01:31:31,000
Speaker 2: college radio station. Tell us a little bit about that.

1699
01:31:31,080 --> 01:31:37,600
Speaker 1: So I was convinced to do college radio early on

1700
01:31:37,880 --> 01:31:40,080
Speaker 1: our freshman year and we got a show. It was

1701
01:31:40,120 --> 01:31:42,120
Speaker 1: the worst time. It was during Monday night football, right.

1702
01:31:42,240 --> 01:31:45,000
Speaker 1: Who listens to radio during Monday night football at college? Nobody?

1703
01:31:45,960 --> 01:31:48,280
Speaker 1: But that was freeing, right, because we can kind of

1704
01:31:48,280 --> 01:31:51,400
Speaker 1: do whatever we wanted on the air and make mistakes

1705
01:31:51,400 --> 01:31:54,280
Speaker 1: and no one really noticed. And so over the years

1706
01:31:54,560 --> 01:31:56,680
Speaker 1: we got bumped up to the point that we got

1707
01:31:56,720 --> 01:32:00,000
Speaker 1: our slot Thursday night eight to eleven, which was like prime.

1708
01:32:00,920 --> 01:32:02,160
Speaker 1: Everyone listened to the radio.

1709
01:32:02,280 --> 01:32:04,320
Speaker 2: Sure, you're getting ready to go out for a Satursday

1710
01:32:04,400 --> 01:32:05,000
Speaker 2: night in college?

1711
01:32:05,400 --> 01:32:10,080
Speaker 1: Pree gaming? Right? And so we, uh, we were doing

1712
01:32:10,120 --> 01:32:13,040
Speaker 1: our thing. Unbeknownst to us, there were ratings. I didn't

1713
01:32:13,080 --> 01:32:14,519
Speaker 1: know anything about ratings. I knew you had to get

1714
01:32:14,520 --> 01:32:17,160
Speaker 1: an FCC license, but I didn't know anything about ratings.

1715
01:32:17,240 --> 01:32:21,720
Speaker 1: And unbeknownst to us, we hit the UH, you know

1716
01:32:22,080 --> 01:32:24,800
Speaker 1: as like the top program in that time slot in

1717
01:32:24,880 --> 01:32:27,919
Speaker 1: New Haven and got all all sorts of crazy recognition.

1718
01:32:27,960 --> 01:32:30,080
Speaker 1: But we were just you know, two roommates getting on

1719
01:32:30,160 --> 01:32:32,479
Speaker 1: and UH and doing an old school rap show.

1720
01:32:33,040 --> 01:32:35,599
Speaker 2: That's a let wait, old school rap show.

1721
01:32:35,640 --> 01:32:36,880
Speaker 1: Old school rap wait.

1722
01:32:36,960 --> 01:32:38,880
Speaker 2: So the two of you would drop and beats and

1723
01:32:39,000 --> 01:32:42,120
Speaker 2: lyrics on the radio. That sounds really embarrassed.

1724
01:32:42,200 --> 01:32:46,280
Speaker 1: I wasn't rapping, okay, but and I call it old school.

1725
01:32:46,280 --> 01:32:49,320
Speaker 1: It's only old school sitting here today, right, it wasn't

1726
01:32:49,400 --> 01:32:50,599
Speaker 1: old school back then.

1727
01:32:51,120 --> 01:32:54,120
Speaker 2: We've talked about this before. To me, old school is

1728
01:32:54,479 --> 01:32:57,760
Speaker 2: is Pol's boutique and Beastie Boys. That's about as far

1729
01:32:57,760 --> 01:32:59,200
Speaker 2: as my hip hop progressed.

1730
01:32:59,240 --> 01:33:01,160
Speaker 1: That's pretty good, Yeah, not too bad.

1731
01:33:01,439 --> 01:33:04,000
Speaker 2: So in the last few minutes I have you, let's

1732
01:33:04,160 --> 01:33:08,160
Speaker 2: jump to our favorite questions that we ask all our guests,

1733
01:33:08,200 --> 01:33:11,200
Speaker 2: starting with what have you been watching? What have you

1734
01:33:11,240 --> 01:33:15,920
Speaker 2: been streaming? And what's kept you entertained in the pandemic

1735
01:33:15,960 --> 01:33:17,360
Speaker 2: and post pandemic era.

1736
01:33:17,880 --> 01:33:20,880
Speaker 1: So I will tell you that I am. I am

1737
01:33:20,920 --> 01:33:21,959
Speaker 1: not a good streamer.

1738
01:33:22,160 --> 01:33:24,720
Speaker 2: Okay, it's not hard.

1739
01:33:24,800 --> 01:33:27,719
Speaker 1: I know it's not hard. But I'm one of these

1740
01:33:27,840 --> 01:33:31,639
Speaker 1: people that almost prefers there to be crap on TV right,

1741
01:33:31,720 --> 01:33:33,760
Speaker 1: so that I can do other stuff and have that

1742
01:33:33,800 --> 01:33:36,080
Speaker 1: on in the back. Okay, So I love I love

1743
01:33:36,120 --> 01:33:39,439
Speaker 1: putting on sports in the background that I'm marginally interested in. Right,

1744
01:33:39,560 --> 01:33:41,439
Speaker 1: Throw on a Yankee game. I could hear the announcer

1745
01:33:41,400 --> 01:33:44,080
Speaker 1: of the inflection and the voice. Throw on a soccer game.

1746
01:33:44,200 --> 01:33:46,799
Speaker 1: I love watching soccer, or actually I love having soccer

1747
01:33:46,920 --> 01:33:47,839
Speaker 1: on right.

1748
01:33:48,040 --> 01:33:51,880
Speaker 2: And there is a certain energy to World Cup, the

1749
01:33:51,960 --> 01:33:55,720
Speaker 2: back and forth. It's like waves and you can kind

1750
01:33:55,720 --> 01:33:57,240
Speaker 2: of half pay attention to it.

1751
01:33:57,240 --> 01:34:01,120
Speaker 1: It's awesome and and you know, undeniably anytime you get

1752
01:34:01,120 --> 01:34:03,280
Speaker 1: into March madness, it's one of the best times of year.

1753
01:34:04,400 --> 01:34:07,320
Speaker 1: So I don't really obsess over over much on TV.

1754
01:34:07,439 --> 01:34:10,040
Speaker 1: I will put on any anything on that Geo or

1755
01:34:10,439 --> 01:34:12,839
Speaker 1: History channel and kind of geek out over that stuff.

1756
01:34:13,320 --> 01:34:17,120
Speaker 1: But my deal is I use like one of these

1757
01:34:17,920 --> 01:34:20,400
Speaker 1: services where anything I find interesting, I just tag it

1758
01:34:20,439 --> 01:34:22,840
Speaker 1: as like a to watch watch it later, Yeah, like

1759
01:34:22,880 --> 01:34:25,680
Speaker 1: something like that, right, and then and then I have

1760
01:34:25,840 --> 01:34:28,040
Speaker 1: that on my TV. So if I'm watching with any

1761
01:34:28,040 --> 01:34:30,519
Speaker 1: of my kids or my girlfriend, they they can go

1762
01:34:30,560 --> 01:34:33,840
Speaker 1: into that treasure trove and be ensured that it's something

1763
01:34:33,880 --> 01:34:36,000
Speaker 1: I wanted to watch at some point in time. And

1764
01:34:36,040 --> 01:34:37,160
Speaker 1: so that's usually our deal.

1765
01:34:37,600 --> 01:34:41,000
Speaker 2: Let's let's talk about mentors who helped shape your career.

1766
01:34:41,960 --> 01:34:46,400
Speaker 1: You know, I think I think everyone that I came

1767
01:34:46,439 --> 01:34:48,080
Speaker 1: across did in some way, shape or form.

1768
01:34:48,120 --> 01:34:48,240
Speaker 2: You know.

1769
01:34:48,280 --> 01:34:51,559
Speaker 1: I used to I used to hate this question about

1770
01:34:51,560 --> 01:34:53,800
Speaker 1: like who's your idol, because I never I never thought

1771
01:34:53,800 --> 01:34:57,559
Speaker 1: that that was a fair assessment of anyone. But but

1772
01:34:57,640 --> 01:35:01,840
Speaker 1: in terms of mentors, you know, I had so many

1773
01:35:01,880 --> 01:35:05,120
Speaker 1: and continue to have so many that that came before

1774
01:35:05,160 --> 01:35:08,439
Speaker 1: me that I learned from. Some I strangely learned what

1775
01:35:08,560 --> 01:35:10,599
Speaker 1: I didn't want to be and the road I didn't

1776
01:35:10,600 --> 01:35:12,479
Speaker 1: want to take right. It was a lot of a

1777
01:35:12,479 --> 01:35:15,720
Speaker 1: lot of other people's mistakes that I would that I

1778
01:35:15,720 --> 01:35:18,720
Speaker 1: would learn from. But I mean, the list is just

1779
01:35:19,800 --> 01:35:23,360
Speaker 1: so plentiful of people that that literally would just give

1780
01:35:23,400 --> 01:35:26,400
Speaker 1: me a hand up. I had a very a very

1781
01:35:27,160 --> 01:35:33,599
Speaker 1: unique and special type of relationship with with the gentleman

1782
01:35:33,680 --> 01:35:37,800
Speaker 1: who was my boss as I interned at merri Lynch.

1783
01:35:37,840 --> 01:35:40,120
Speaker 1: One of my first jobs in the securities industry in

1784
01:35:40,280 --> 01:35:45,280
Speaker 1: undergrad many many years later, I had we continue to

1785
01:35:45,280 --> 01:35:48,160
Speaker 1: stay in touch and I had the uh, the privilege

1786
01:35:48,200 --> 01:35:53,040
Speaker 1: of helping him and his team leave merri Lynch. Oh yeah,

1787
01:35:53,120 --> 01:35:55,439
Speaker 1: and it was and it was fascinating. And then many

1788
01:35:55,479 --> 01:35:58,719
Speaker 1: years after that, when he went to exit his his firm,

1789
01:35:59,360 --> 01:36:01,760
Speaker 1: A had the privilege of helping him again. And so like,

1790
01:36:01,800 --> 01:36:04,160
Speaker 1: that's you know, to me, those are the relationships that

1791
01:36:05,479 --> 01:36:08,680
Speaker 1: that just make make this all worthwhile, right, continuing to

1792
01:36:08,800 --> 01:36:11,880
Speaker 1: not be involved in the individual transaction, but rather being

1793
01:36:11,920 --> 01:36:13,840
Speaker 1: a part of of someone's life.

1794
01:36:14,040 --> 01:36:17,719
Speaker 2: And that's interesting that that's a full arc from from

1795
01:36:17,800 --> 01:36:23,599
Speaker 2: employer to team leaving to retirement. That that's not usual.

1796
01:36:23,600 --> 01:36:25,280
Speaker 2: You don't usually get to see something like that.

1797
01:36:25,400 --> 01:36:27,680
Speaker 1: It's not usual. But I'm really really grateful for those

1798
01:36:27,720 --> 01:36:28,640
Speaker 1: types of experiences.

1799
01:36:28,800 --> 01:36:30,759
Speaker 2: Let's talk about books. What are some of your favorites?

1800
01:36:30,760 --> 01:36:31,959
Speaker 2: What are you reading currently?

1801
01:36:32,760 --> 01:36:36,880
Speaker 1: So you and I went to a conference and we.

1802
01:36:36,880 --> 01:36:43,920
Speaker 2: S Darren's Individual Advisor Conference in Independent, Independent, and we

1803
01:36:44,000 --> 01:36:47,280
Speaker 2: got to live through a tornado that turned the sky

1804
01:36:47,400 --> 01:36:50,439
Speaker 2: black and people standing in front of these giant plates

1805
01:36:50,439 --> 01:36:53,799
Speaker 2: of glass and hey, I'm not from Texas, but maybe

1806
01:36:53,840 --> 01:36:55,680
Speaker 2: those big windows are not where you want to be.

1807
01:36:55,800 --> 01:36:58,120
Speaker 2: Is this funnel comes ripping towards the hotel?

1808
01:36:58,400 --> 01:37:01,640
Speaker 1: Probably not, but that's where that's where I pulled my

1809
01:37:01,720 --> 01:37:04,479
Speaker 1: latest book from the speaker they had that night was

1810
01:37:04,920 --> 01:37:05,920
Speaker 1: Jeremy Siegel.

1811
01:37:05,680 --> 01:37:07,639
Speaker 2: The professor always great.

1812
01:37:07,880 --> 01:37:10,080
Speaker 1: It is always great, and so I jumped into his

1813
01:37:10,120 --> 01:37:11,400
Speaker 1: book stocks for the long run.

1814
01:37:12,240 --> 01:37:15,400
Speaker 2: Now in like the eighth edition or something six right now,

1815
01:37:15,439 --> 01:37:18,679
Speaker 2: sixth edition. But yeah, that sold a couple of million copies.

1816
01:37:18,720 --> 01:37:21,200
Speaker 2: It's one of the best sellers in the space.

1817
01:37:22,000 --> 01:37:24,400
Speaker 1: I found it. So here's my disclosure about books. Right.

1818
01:37:24,400 --> 01:37:26,719
Speaker 1: There are certain books I read when I was young

1819
01:37:27,160 --> 01:37:32,160
Speaker 1: that had such an impression on me, and nowadays, anytime

1820
01:37:32,200 --> 01:37:35,120
Speaker 1: someone tells me about an interesting book, I buy it

1821
01:37:35,240 --> 01:37:38,479
Speaker 1: first and I start reading it. So I've begun reading.

1822
01:37:38,920 --> 01:37:41,880
Speaker 1: I looked knowing that you're gonna ask me this question.

1823
01:37:42,200 --> 01:37:43,960
Speaker 1: I have one hundred and forty four books that I've

1824
01:37:44,000 --> 01:37:46,200
Speaker 1: started reading and I'm in progress as some.

1825
01:37:46,560 --> 01:37:47,559
Speaker 2: Are you going to read them?

1826
01:37:47,560 --> 01:37:48,160
Speaker 1: Because I will.

1827
01:37:48,200 --> 01:37:52,519
Speaker 2: By the way, some people seem to feel that books

1828
01:37:52,560 --> 01:37:55,240
Speaker 2: are like homework and once you start, you have to finish.

1829
01:37:55,240 --> 01:37:58,160
Speaker 2: There's nothing wrong with picking up a book and saying, oh,

1830
01:37:58,160 --> 01:38:00,559
Speaker 2: I'm not enjoying this and moving to a book that

1831
01:38:00,960 --> 01:38:02,000
Speaker 2: you'll actually like.

1832
01:38:02,080 --> 01:38:03,640
Speaker 1: I totally agree with you. I mean, there's too many

1833
01:38:03,680 --> 01:38:05,840
Speaker 1: books that I read the first chapter like nine times

1834
01:38:06,120 --> 01:38:07,680
Speaker 1: because I keep picking up and I'm like, all right,

1835
01:38:07,680 --> 01:38:10,120
Speaker 1: if I'm not into this, it's okay, Like just you know,

1836
01:38:10,400 --> 01:38:14,559
Speaker 1: toss it to the side. I also started reading book

1837
01:38:14,720 --> 01:38:18,439
Speaker 1: The Hard Thing About Hard Things. You know, it's a

1838
01:38:18,479 --> 01:38:19,160
Speaker 1: fascinating book.

1839
01:38:19,640 --> 01:38:22,880
Speaker 2: Who authored that? By Ben Horowitz of Andresen Harrowez. He's

1840
01:38:23,040 --> 01:38:26,040
Speaker 2: also a prior guest. He's a fascinating guy.

1841
01:38:26,120 --> 01:38:31,920
Speaker 1: Yeah, and I love his take on we're not talking

1842
01:38:31,960 --> 01:38:35,479
Speaker 1: about the herd issues, right, Like, I think through things

1843
01:38:35,560 --> 01:38:38,120
Speaker 1: that people call luck or things that people call happenstance,

1844
01:38:38,160 --> 01:38:40,600
Speaker 1: and I think I love to think through all of

1845
01:38:40,640 --> 01:38:44,920
Speaker 1: the permutations that led to that point in time, right,

1846
01:38:44,960 --> 01:38:49,280
Speaker 1: all the decision points and even lack thereof. And you know,

1847
01:38:49,320 --> 01:38:51,920
Speaker 1: he kind of starts to get to to some of

1848
01:38:51,960 --> 01:38:52,720
Speaker 1: that things.

1849
01:38:52,800 --> 01:38:56,080
Speaker 2: Just because somebody's lucky doesn't mean they weren't good or

1850
01:38:56,760 --> 01:38:59,720
Speaker 2: putting themselves in a position where a little luck and

1851
01:38:59,760 --> 01:39:00,360
Speaker 2: shoe on that.

1852
01:39:01,160 --> 01:39:02,280
Speaker 1: But where's that right balance?

1853
01:39:02,360 --> 01:39:02,479
Speaker 2: Right?

1854
01:39:02,479 --> 01:39:04,160
Speaker 1: Do you want to be you know, you don't want

1855
01:39:04,160 --> 01:39:06,880
Speaker 1: to be so pompous to say that there is no luck, right, right,

1856
01:39:07,040 --> 01:39:11,000
Speaker 1: But you also don't want to, you know, be you know,

1857
01:39:11,200 --> 01:39:13,840
Speaker 1: so soft as to say like, oh, it's all luck, right,

1858
01:39:13,880 --> 01:39:16,679
Speaker 1: It's it's not it's you know, it's some it's some logica.

1859
01:39:17,120 --> 01:39:20,320
Speaker 1: It's some logical confluence there, right, and setting yourself for luck.

1860
01:39:22,080 --> 01:39:24,600
Speaker 1: You know. I'm getting to to that point that you know,

1861
01:39:24,600 --> 01:39:27,920
Speaker 1: people recommend books about about how much time we have left.

1862
01:39:28,640 --> 01:39:31,439
Speaker 1: So someone recommended this book four thousand weeks.

1863
01:39:31,720 --> 01:39:35,440
Speaker 2: I love that title, by the way, it's awesome genius. Yeah, yeah,

1864
01:39:35,479 --> 01:39:39,080
Speaker 2: I started that, but I need better time management skills

1865
01:39:39,080 --> 01:39:41,519
Speaker 2: in order to finish it. But it's it's you know,

1866
01:39:41,560 --> 01:39:43,439
Speaker 2: it's one of those things you could just pick up

1867
01:39:43,479 --> 01:39:44,840
Speaker 2: a chapter at a time, so.

1868
01:39:45,320 --> 01:39:47,479
Speaker 1: You can, and and it's a I'd say it's a

1869
01:39:47,520 --> 01:39:49,000
Speaker 1: light read. It's probably not a light read, but it

1870
01:39:49,040 --> 01:39:51,320
Speaker 1: is more of a time management book, right than a

1871
01:39:51,320 --> 01:39:52,800
Speaker 1: book about our own mortality.

1872
01:39:53,240 --> 01:39:54,920
Speaker 2: Explain what four thousand weeks are?

1873
01:39:55,000 --> 01:39:56,479
Speaker 1: Yeah, it's it's how much time you have in your

1874
01:39:56,479 --> 01:39:57,400
Speaker 1: lifetime if.

1875
01:39:57,280 --> 01:39:59,559
Speaker 2: You're if you're lucky, you know, you and I have

1876
01:39:59,560 --> 01:40:01,360
Speaker 2: a thousand weeks left, yeah, and.

1877
01:40:01,280 --> 01:40:03,800
Speaker 1: So and so it it it puts some degree of

1878
01:40:03,800 --> 01:40:06,160
Speaker 1: impetus to get to the things that you're just saying,

1879
01:40:06,280 --> 01:40:07,200
Speaker 1: we'll do it later.

1880
01:40:07,320 --> 01:40:10,520
Speaker 2: Your bucket list, which most people don't don't tag.

1881
01:40:10,720 --> 01:40:13,200
Speaker 1: So so, like I I always love having a variety

1882
01:40:13,240 --> 01:40:16,240
Speaker 1: of books that that I'm reading that kind of checked

1883
01:40:16,240 --> 01:40:19,000
Speaker 1: the box. Whether it's it's hard finance books, or it's

1884
01:40:19,040 --> 01:40:22,679
Speaker 1: strategy books, or it's uh, it's it's empathy and uh,

1885
01:40:22,800 --> 01:40:26,760
Speaker 1: you know, emotional books. But the stuff that I read

1886
01:40:26,800 --> 01:40:29,040
Speaker 1: when I was younger kind of in my you know,

1887
01:40:29,840 --> 01:40:31,920
Speaker 1: I guess, early late teens, early twenties.

1888
01:40:32,040 --> 01:40:32,960
Speaker 2: Give us an example.

1889
01:40:34,479 --> 01:40:38,080
Speaker 1: I read The Millionaire next Door right when I was young, Yeah, right,

1890
01:40:38,360 --> 01:40:41,559
Speaker 1: and like I just it just stuck with me.

1891
01:40:41,840 --> 01:40:44,840
Speaker 2: Really. Yeah, there's just there's certain books that just sit

1892
01:40:45,040 --> 01:40:47,600
Speaker 2: with me aspects of that that are very valid. I

1893
01:40:47,600 --> 01:40:50,719
Speaker 2: shouldn't just have like an automatic Yeah. And I can't

1894
01:40:50,840 --> 01:40:51,639
Speaker 2: respond well.

1895
01:40:51,800 --> 01:40:54,839
Speaker 1: And I can't tell you anything about the book itself,

1896
01:40:55,080 --> 01:40:56,639
Speaker 1: but what I can tell you it left me with

1897
01:40:56,760 --> 01:41:00,000
Speaker 1: is that you always have control over what you spend, right,

1898
01:41:00,479 --> 01:41:02,920
Speaker 1: and less over what you what you make.

1899
01:41:03,000 --> 01:41:07,320
Speaker 2: Now, by the way, I'm gonna withdraw my I'm gonna

1900
01:41:07,320 --> 01:41:10,000
Speaker 2: I'm gonna say that respond to that again because I'm

1901
01:41:10,040 --> 01:41:12,799
Speaker 2: thinking of a different book, and it's not this one.

1902
01:41:13,320 --> 01:41:22,519
Speaker 2: So raspberry with Raspberry withdrawing, I'm thinking of, well, I

1903
01:41:22,520 --> 01:41:25,559
Speaker 2: didn't say that, but yeah, that's what I was. What

1904
01:41:25,680 --> 01:41:30,760
Speaker 2: makes Millionaire next Door so fascinating is that we tend

1905
01:41:30,800 --> 01:41:34,920
Speaker 2: to think, well, you you read it more recently than

1906
01:41:34,920 --> 01:41:40,840
Speaker 2: I probably did. No read so what I remember that is, Hey,

1907
01:41:41,000 --> 01:41:45,920
Speaker 2: the fancy car, the big house. That's not the average millionaire.

1908
01:41:46,280 --> 01:41:49,120
Speaker 2: The typical person who's accumulated a net worth north of

1909
01:41:49,120 --> 01:41:54,160
Speaker 2: a million dollars is living a fairly sedate life there.

1910
01:41:54,280 --> 01:41:57,599
Speaker 2: They they have a modest home, not a big, fancy home.

1911
01:41:57,920 --> 01:42:00,320
Speaker 2: They have a five year old car, They're not having

1912
01:42:00,320 --> 01:42:04,799
Speaker 2: a ferrari or a porch. They basically are are living

1913
01:42:04,960 --> 01:42:09,360
Speaker 2: lives of quiet success without that of feeling the need

1914
01:42:09,439 --> 01:42:13,720
Speaker 2: to show off. You see the indicitia of wealth. You

1915
01:42:13,760 --> 01:42:16,160
Speaker 2: don't see the liabilities on the other side of it.

1916
01:42:16,720 --> 01:42:19,280
Speaker 1: There's there's no doubt that if I could sum the

1917
01:42:19,320 --> 01:42:21,920
Speaker 1: book up in one word, it was moderation, right, is

1918
01:42:21,920 --> 01:42:24,600
Speaker 1: it enjoy just and don't enjoy the success? Right? And

1919
01:42:24,640 --> 01:42:27,760
Speaker 1: it was such an offset to popular culture at that time,

1920
01:42:28,040 --> 01:42:31,880
Speaker 1: which was celebrating excess. Right. It was athletes and entertainers

1921
01:42:31,920 --> 01:42:34,360
Speaker 1: just like that was the look of millionaires until I

1922
01:42:34,400 --> 01:42:38,599
Speaker 1: read that book also a little later on read where

1923
01:42:38,600 --> 01:42:39,759
Speaker 1: are all the customers Yachts?

1924
01:42:42,080 --> 01:42:45,400
Speaker 2: Not been a good speed? What's his name? I read

1925
01:42:45,439 --> 01:42:47,200
Speaker 2: that book a long time ago, and it's hilarious.

1926
01:42:47,240 --> 01:42:49,759
Speaker 1: It's hilarious, right, I mean, it's about this guy walking

1927
01:42:49,760 --> 01:42:52,920
Speaker 1: through Wall Street basically saying, hey, wait, I see I

1928
01:42:52,920 --> 01:42:55,479
Speaker 1: see all the yachts from the people who work here,

1929
01:42:55,479 --> 01:42:59,559
Speaker 1: But where where are all the customers yachts? And and

1930
01:42:59,600 --> 01:43:01,320
Speaker 1: I thought that was just a really good take.

1931
01:43:01,479 --> 01:43:03,960
Speaker 2: Fred Schwead, Yeah, I had a search for that because

1932
01:43:04,000 --> 01:43:05,080
Speaker 2: I couldn't access his.

1933
01:43:05,120 --> 01:43:08,040
Speaker 1: Name, and it's just, you know, it just it's very poignant.

1934
01:43:08,080 --> 01:43:10,960
Speaker 1: And to this day I think about that when we

1935
01:43:11,000 --> 01:43:14,360
Speaker 1: think about the inequity that exists between financial institutions and

1936
01:43:14,479 --> 01:43:19,559
Speaker 1: retail customers, right, and the good work that since that

1937
01:43:19,600 --> 01:43:25,040
Speaker 1: book was written, that advisors have really done to democratize investing.

1938
01:43:25,120 --> 01:43:28,240
Speaker 2: And that book was written seventy five years maybe even longer.

1939
01:43:28,280 --> 01:43:29,640
Speaker 1: I want to say it was in the forties if

1940
01:43:29,640 --> 01:43:35,960
Speaker 1: I recall like postwar period, yeah, forties, fifties, I'm thinking fifties,

1941
01:43:36,400 --> 01:43:38,200
Speaker 1: nineteen forty very good.

1942
01:43:38,880 --> 01:43:40,439
Speaker 2: I thought it was a little I thought it was

1943
01:43:40,439 --> 01:43:43,559
Speaker 2: a little later. So any other books before we get

1944
01:43:43,600 --> 01:43:45,080
Speaker 2: to our last two questions?

1945
01:43:45,240 --> 01:43:49,280
Speaker 1: You know there's other books that that stuck with me.

1946
01:43:49,720 --> 01:43:53,160
Speaker 1: Freakonomics is one. You know, how to make economics interesting

1947
01:43:53,240 --> 01:43:57,000
Speaker 1: to the masses. I just love the approach that those

1948
01:43:57,000 --> 01:44:00,280
Speaker 1: guys took. And I'm just a I'm just a heard

1949
01:44:00,320 --> 01:44:03,360
Speaker 1: when it comes to economics to technology and all that

1950
01:44:03,400 --> 01:44:06,639
Speaker 1: sort of thing and building a business. In two thousand,

1951
01:44:06,720 --> 01:44:09,040
Speaker 1: it was tough to avoid books like the e Myth

1952
01:44:09,600 --> 01:44:15,559
Speaker 1: write this concept that business process drives consistent results? Which did?

1953
01:44:15,600 --> 01:44:18,920
Speaker 1: It wasn't necessarily a foregone conclusion back in two thousand

1954
01:44:19,640 --> 01:44:21,040
Speaker 1: and so I thought it was really compelling.

1955
01:44:21,560 --> 01:44:24,519
Speaker 2: All right, And our final two questions, what sort of

1956
01:44:24,560 --> 01:44:28,280
Speaker 2: advice would you give to a recent college grad interested

1957
01:44:28,479 --> 01:44:33,360
Speaker 2: in a career similar to yours? Regulatory compliance, legal finance?

1958
01:44:33,920 --> 01:44:35,080
Speaker 2: How would you advise them?

1959
01:44:35,640 --> 01:44:38,000
Speaker 1: So, my oldest daughter just graduated from pitt last year.

1960
01:44:38,920 --> 01:44:43,479
Speaker 1: My middle that was Ella, my middle one, Jake, is

1961
01:44:43,560 --> 01:44:48,760
Speaker 1: graduating from Georgetown next month. And my youngest, Sidney, is

1962
01:44:48,800 --> 01:44:52,200
Speaker 1: a freshman at University of Miami. Both Jacob and Sidney

1963
01:44:52,240 --> 01:44:56,080
Speaker 1: are in our finance majors. And so I've had some

1964
01:44:56,240 --> 01:44:58,800
Speaker 1: I've had these are been real talks. These aren't just theoretical.

1965
01:44:59,280 --> 01:45:02,240
Speaker 1: What I would tell them that the finance industry can

1966
01:45:02,280 --> 01:45:03,719
Speaker 1: be a lot of things to a lot of people.

1967
01:45:04,240 --> 01:45:07,240
Speaker 1: That there's not a single career within the finance industry.

1968
01:45:07,240 --> 01:45:10,720
Speaker 1: There's there's an entire world. It's great to work for

1969
01:45:10,760 --> 01:45:13,080
Speaker 1: a sector that's on top, but remember that our entire

1970
01:45:13,080 --> 01:45:16,280
Speaker 1: economy is cyclical. Right, If you're picking a job today,

1971
01:45:16,320 --> 01:45:19,280
Speaker 1: I understand the hot jobs are in finance and pharmaceuticals,

1972
01:45:20,400 --> 01:45:22,599
Speaker 1: but you know, you have to think through the duration

1973
01:45:22,720 --> 01:45:23,840
Speaker 1: of your career, right, and.

1974
01:45:24,240 --> 01:45:26,759
Speaker 2: Was job five years ago, ten years ago?

1975
01:45:27,080 --> 01:45:29,160
Speaker 1: Exactly? So do you only want a job that exists

1976
01:45:29,200 --> 01:45:31,760
Speaker 1: in the finance sector or do you want to find

1977
01:45:31,760 --> 01:45:36,280
Speaker 1: a job that's transportable elsewhere? And so so, speaking to

1978
01:45:36,360 --> 01:45:40,120
Speaker 1: Jake about that, right, he had experience working working for US,

1979
01:45:40,600 --> 01:45:45,120
Speaker 1: he had experienced working within on the investment banking side,

1980
01:45:45,560 --> 01:45:50,840
Speaker 1: working for David Devaux, he had experienced working within with

1981
01:45:50,920 --> 01:45:54,240
Speaker 1: a venture capital firm. And when it came time to

1982
01:45:54,280 --> 01:45:56,680
Speaker 1: find a full time job, you know, my advice to

1983
01:45:56,760 --> 01:45:59,920
Speaker 1: him was, you want a flight to quality that's not

1984
01:46:00,320 --> 01:46:03,400
Speaker 1: in the finance space, but hones your skills in finance.

1985
01:46:03,400 --> 01:46:06,599
Speaker 1: So he he's going to do a CFO rotation at

1986
01:46:06,920 --> 01:46:10,479
Speaker 1: one of large pharmaceutical companies like that to me is

1987
01:46:10,520 --> 01:46:13,240
Speaker 1: a good, you know, first step out of college, right,

1988
01:46:13,280 --> 01:46:15,920
Speaker 1: fine stability. I know that all the hype is around

1989
01:46:16,000 --> 01:46:20,440
Speaker 1: startup and is around fundraising and private and public investors.

1990
01:46:21,080 --> 01:46:24,080
Speaker 1: I just don't think that that's where I don't think

1991
01:46:24,080 --> 01:46:29,360
Speaker 1: that's where you really make your your your foundation of knowledge.

1992
01:46:29,960 --> 01:46:30,759
Speaker 1: At those places.

1993
01:46:30,920 --> 01:46:32,800
Speaker 2: None of the kids want to go work for the

1994
01:46:32,840 --> 01:46:34,599
Speaker 2: old man in his business take it over.

1995
01:46:34,840 --> 01:46:37,719
Speaker 1: It's it's never it's we've never discussed it as an option.

1996
01:46:38,520 --> 01:46:41,800
Speaker 2: They've all worked with me. But I think and that

1997
01:46:41,920 --> 01:46:42,560
Speaker 2: was plenty.

1998
01:46:42,760 --> 01:46:47,200
Speaker 1: Well, no, it wasn't plenty. Actually, I still I still

1999
01:46:47,280 --> 01:46:50,360
Speaker 1: love my daughter and I still work together all the time.

2000
01:46:50,479 --> 01:46:55,519
Speaker 1: She's a salesforce consultant and she is one of the

2001
01:46:55,520 --> 01:46:57,200
Speaker 1: easiest people in the world that I can talk to

2002
01:46:57,240 --> 01:47:00,360
Speaker 1: because she knows where I'm going with things before is

2003
01:47:00,360 --> 01:47:04,320
Speaker 1: a shorthand that it's amazing and so I would never

2004
01:47:04,560 --> 01:47:08,639
Speaker 1: preclude that. But you know, part of what we do

2005
01:47:08,840 --> 01:47:12,160
Speaker 1: stems from a degree of confidence in your skills and capabilities.

2006
01:47:12,680 --> 01:47:15,320
Speaker 1: And in order for I think in order for any

2007
01:47:15,640 --> 01:47:18,479
Speaker 1: child to get that, they have to prove themselves in

2008
01:47:18,640 --> 01:47:20,840
Speaker 1: the in the open market. They have to go out

2009
01:47:20,880 --> 01:47:22,960
Speaker 1: there and do it for themselves so that when they

2010
01:47:22,960 --> 01:47:26,280
Speaker 1: come back, you know, their soul is fulfilled. Right then,

2011
01:47:26,360 --> 01:47:29,080
Speaker 1: I feel like they've worked for Dad their whole life. Right.

2012
01:47:29,160 --> 01:47:30,800
Speaker 2: No, that makes a whole lot of sense. And our

2013
01:47:30,880 --> 01:47:36,240
Speaker 2: final question, what do you know about the world of finance, investing,

2014
01:47:36,479 --> 01:47:41,200
Speaker 2: regulation compliance? Today? You wish you knew twenty five or

2015
01:47:41,240 --> 01:47:43,479
Speaker 2: so years ago when you were first getting started.

2016
01:47:44,040 --> 01:47:48,599
Speaker 1: That's so easy. I wish I knew not to listen

2017
01:47:49,200 --> 01:47:53,400
Speaker 1: to financial media when they would say markets are up

2018
01:47:53,439 --> 01:47:57,920
Speaker 1: today because or markets are down on fears of blank.

2019
01:47:58,479 --> 01:48:01,439
Speaker 1: I used to think, Barry, that I was missing something.

2020
01:48:01,880 --> 01:48:03,840
Speaker 1: I used to think that I was just you know, like,

2021
01:48:04,240 --> 01:48:08,040
Speaker 1: how do they know that all of the millions, billions

2022
01:48:07,560 --> 01:48:10,760
Speaker 1: of inputs and outputs in the market all came down

2023
01:48:10,800 --> 01:48:12,439
Speaker 1: to that. And the fact is they don't, Right, They're

2024
01:48:12,479 --> 01:48:15,880
Speaker 1: oversimplifying a very complex problem. And I wish I knew

2025
01:48:15,960 --> 01:48:16,599
Speaker 1: that back then.

2026
01:48:17,000 --> 01:48:19,040
Speaker 2: I also wish that's fascinating.

2027
01:48:19,120 --> 01:48:23,960
Speaker 1: Yeah, I also wish I knew that that I know

2028
01:48:24,160 --> 01:48:27,439
Speaker 1: more than I thought I knew. I wish I had

2029
01:48:27,479 --> 01:48:31,759
Speaker 1: a little more confidence. And you know now I'm confident,

2030
01:48:31,800 --> 01:48:33,559
Speaker 1: not because I know a lot. I'm confident in my

2031
01:48:33,600 --> 01:48:36,400
Speaker 1: ability to recover from failures quickly and to change course.

2032
01:48:36,640 --> 01:48:40,080
Speaker 1: And I think most business owners we find ourselves like

2033
01:48:40,120 --> 01:48:42,479
Speaker 1: fish in a tank. Right, you hit the glass, you

2034
01:48:42,560 --> 01:48:46,120
Speaker 1: just change direction, Whereas when you're earlier, you don't want

2035
01:48:46,120 --> 01:48:47,920
Speaker 1: to touch the glass. You know, you don't want to.

2036
01:48:47,960 --> 01:48:50,640
Speaker 1: You don't want to hit that glass. And so and

2037
01:48:50,680 --> 01:48:52,720
Speaker 1: probably the last thing I would I would wish I

2038
01:48:52,760 --> 01:48:55,320
Speaker 1: knew back then was just to start with the objectives

2039
01:48:55,320 --> 01:48:58,679
Speaker 1: in mind, because even with investing and work backwards, start

2040
01:48:58,680 --> 01:49:00,719
Speaker 1: with the why, what's my thesis? What am I trying

2041
01:49:00,760 --> 01:49:04,880
Speaker 1: to go after? I just want to tell you my

2042
01:49:05,040 --> 01:49:07,639
Speaker 1: best investing skills came out of a really bad habit,

2043
01:49:08,360 --> 01:49:12,280
Speaker 1: which is I would get the newspaper, typically the Sunday paper,

2044
01:49:12,320 --> 01:49:15,240
Speaker 1: but you know on Wednesdays there were a certain section Thursday,

2045
01:49:15,479 --> 01:49:17,160
Speaker 1: and I would grab them and I would pile them

2046
01:49:17,200 --> 01:49:19,040
Speaker 1: up in my office, right. And I used to have

2047
01:49:19,080 --> 01:49:23,360
Speaker 1: piles of newspapers everywhere, and I would read certain people's

2048
01:49:23,360 --> 01:49:28,080
Speaker 1: columns pretty religiously, but late, right, so I would only

2049
01:49:28,160 --> 01:49:30,719
Speaker 1: typically read them after they've been out for a month,

2050
01:49:30,720 --> 01:49:35,280
Speaker 1: two months, sometimes six or twelve months. Right. And the

2051
01:49:35,479 --> 01:49:39,720
Speaker 1: knowledge that I gained by how wrong people are with

2052
01:49:39,800 --> 01:49:44,720
Speaker 1: twenty twenty hindsight was absolutely amazing. So what started out

2053
01:49:44,760 --> 01:49:47,960
Speaker 1: as a really bad habit was so helpful to me

2054
01:49:48,680 --> 01:49:51,840
Speaker 1: in putting things in context because now naturally, when I

2055
01:49:51,880 --> 01:49:56,559
Speaker 1: read something every day, I say, well, they don't know that, right,

2056
01:49:56,920 --> 01:49:59,680
Speaker 1: they're asserting that, but they don't know that. And it's

2057
01:49:59,720 --> 01:50:00,920
Speaker 1: really so.

2058
01:50:00,920 --> 01:50:05,120
Speaker 2: One of my old time favorite publications, laslo Berni, puts

2059
01:50:05,120 --> 01:50:11,120
Speaker 2: out an annual media round up and it's presented without commentary,

2060
01:50:11,560 --> 01:50:15,840
Speaker 2: and it's just the most important media stories from the

2061
01:50:15,880 --> 01:50:18,200
Speaker 2: Wall Street Journal, the New York Times, the Washington Post,

2062
01:50:18,240 --> 01:50:22,920
Speaker 2: the La Times, and it's just xerox and bound, and

2063
01:50:23,240 --> 01:50:25,720
Speaker 2: it's by the time you get it, everything's a year

2064
01:50:25,760 --> 01:50:29,800
Speaker 2: old and exactly what you're describing as you go through it,

2065
01:50:30,320 --> 01:50:33,519
Speaker 2: the things that are the big scary headlines, they just

2066
01:50:33,560 --> 01:50:37,280
Speaker 2: look horrific a year later, like that's wrong, Oh my god,

2067
01:50:37,320 --> 01:50:39,080
Speaker 2: how did anybody think this guy knew what he's doing.

2068
01:50:39,240 --> 01:50:41,880
Speaker 2: You just go through page after page after page, and

2069
01:50:41,960 --> 01:50:46,040
Speaker 2: you realize nobody knows anything, and they're just faking it

2070
01:50:46,080 --> 01:50:48,759
Speaker 2: till they make it. When you have a little time

2071
01:50:48,840 --> 01:50:53,639
Speaker 2: and distance, it's just clear that, hey, people have there

2072
01:50:53,640 --> 01:50:56,320
Speaker 2: are hours of TV that need to be filled. There

2073
01:50:56,320 --> 01:50:59,240
Speaker 2: are pages of newspaper that need to be filled. There

2074
01:50:59,240 --> 01:51:02,880
Speaker 2: are just you know, pixels and pixels online that need

2075
01:51:02,960 --> 01:51:06,479
Speaker 2: to be filled, most of which doesn't stand the test

2076
01:51:06,520 --> 01:51:06,840
Speaker 2: of time.

2077
01:51:07,040 --> 01:51:11,640
Speaker 1: So when the day after Silicon Valley Bank blew up, right,

2078
01:51:12,439 --> 01:51:15,360
Speaker 1: I got a call from a reporter and they use

2079
01:51:15,400 --> 01:51:19,559
Speaker 1: the words in these unprecedented times, right, And I had

2080
01:51:19,560 --> 01:51:21,360
Speaker 1: to stop for a moment and I said, how old

2081
01:51:21,400 --> 01:51:25,439
Speaker 1: are you? Because these are precedented times? Like we know

2082
01:51:25,560 --> 01:51:28,720
Speaker 1: exactly you know what we're dealing with, and hopefully we

2083
01:51:28,760 --> 01:51:31,439
Speaker 1: don't go back to, you know, to to that again.

2084
01:51:31,520 --> 01:51:34,639
Speaker 1: But I think it just gives you a sense of place, right,

2085
01:51:34,680 --> 01:51:37,160
Speaker 1: And at the end of the day, isn't that what

2086
01:51:37,200 --> 01:51:39,960
Speaker 1: we all yearn for? You know, even as as a

2087
01:51:39,960 --> 01:51:42,280
Speaker 1: young person starting out their career, you want to find

2088
01:51:42,320 --> 01:51:43,920
Speaker 1: your tribe, You want a sense of place, and you

2089
01:51:43,960 --> 01:51:44,559
Speaker 1: want a purpose.

2090
01:51:45,120 --> 01:51:46,720
Speaker 2: I like that that that you could do a lot

2091
01:51:46,760 --> 01:51:50,560
Speaker 2: worse than that. We have been speaking with Brian Hamburger.

2092
01:51:50,600 --> 01:51:53,639
Speaker 2: He is the founder of the Hamburger Law Firm, as

2093
01:51:53,680 --> 01:52:00,400
Speaker 2: well as the leading regulatory compliance and consulting firm, Market Council.

2094
01:52:00,520 --> 01:52:03,360
Speaker 2: If you enjoy this conversation, well, feel free to check

2095
01:52:03,400 --> 01:52:08,320
Speaker 2: out any of our previous nearly five hundred discussions we've had.

2096
01:52:08,720 --> 01:52:13,640
Speaker 2: You can find those at YouTube, iTunes, Spotify, or wherever

2097
01:52:13,720 --> 01:52:17,320
Speaker 2: you find your favorite podcasts. Feel free to sign up

2098
01:52:17,400 --> 01:52:21,000
Speaker 2: to my daily reading list at Ridolts dot com, Follow

2099
01:52:21,080 --> 01:52:24,160
Speaker 2: me on Twitter at rid Holts, follow all of the

2100
01:52:24,160 --> 01:52:28,960
Speaker 2: Bloomberg Family of podcasts at podcast I would be remiss

2101
01:52:29,080 --> 01:52:31,639
Speaker 2: if I did not thank the crack team that helps

2102
01:52:31,640 --> 01:52:36,920
Speaker 2: put these conversations together each week. Paris Wald is my producer.

2103
01:52:37,080 --> 01:52:41,920
Speaker 2: Sean Russo is my head of research. Samantha Danzinger is

2104
01:52:41,960 --> 01:52:46,200
Speaker 2: my audio engineer. Attika of Albron is our project manager.

2105
01:52:46,800 --> 01:52:50,480
Speaker 2: I'm Barry Ridolts. You've been listening to Masters in Business

2106
01:52:50,760 --> 01:53:05,200
Speaker 2: on Bloomberg Radio.