WEBVTT - Brian Hamburger on Surging Merger Business in RIAs 0:00:02.040 --> 0:00:06.000 This is Master's in Business with Barry rid Holds on 0:00:06.240 --> 0:00:08.240 Bloomberg Radio. 0:00:09.160 --> 0:00:12.319 This week on the podcast, I have an extra special guest. 0:00:13.240 --> 0:00:16.720 Brian Hamburger has been one of the leading authorities in 0:00:16.760 --> 0:00:24.360 the world of registered investment advisories, broker dealers, sec regulatory compliance. 0:00:25.360 --> 0:00:29.800 He is the founder of Market Council, which is one 0:00:29.880 --> 0:00:32.560 of the leading firms in that space, as well as 0:00:33.000 --> 0:00:37.080 the Hamburger Law firm. I know Brian for a dozen years, 0:00:37.120 --> 0:00:39.839 maybe longer, but I've really gotten to know him over 0:00:39.840 --> 0:00:42.560 the past couple of years. Really, there are a few 0:00:42.600 --> 0:00:47.400 people in the industry with a better perch on what's 0:00:47.479 --> 0:00:51.240 going on, a better position to see the industry, which, 0:00:51.640 --> 0:00:54.960 depending on which survey you read, is anywhere between thirty 0:00:55.000 --> 0:01:00.160 eight trillion and ninety seven trillion dollars. He just knows 0:01:00.200 --> 0:01:04.160 everything about how to stand up an ria, what's happening 0:01:04.200 --> 0:01:07.040 in the world of mergers and acquisitions in the space 0:01:07.480 --> 0:01:12.920 where the capital is flowing, how people change their employment 0:01:13.360 --> 0:01:17.839 in the industry, and how various groups get carved out 0:01:18.040 --> 0:01:22.880 or stood up or established on both the broker dealer 0:01:23.000 --> 0:01:27.480 side and the registered investment advisory side. He is highly 0:01:27.560 --> 0:01:30.959 sought after as a council in this space, and I'm 0:01:30.959 --> 0:01:33.880 glad we had the opportunity to finally sit down and 0:01:34.040 --> 0:01:38.039 talk about the industry. It's a little inside baseball if 0:01:38.080 --> 0:01:41.959 you're an RIA, if you're an attorney working in the space, 0:01:42.000 --> 0:01:45.039 if you're a broker dealer, if you're anybody within the 0:01:45.120 --> 0:01:49.360 financial services industry, or if you're somebody just curious as 0:01:49.360 --> 0:01:52.320 to how all these things actually happen. I think you're 0:01:52.360 --> 0:01:55.560 going to find this to be an absolutely fascinating conversation 0:01:55.880 --> 0:02:00.720 with no further ADO Market Councils. Brian Hamburger, Thanks Barry, 0:02:00.720 --> 0:02:02.520 it's so great to be here. It's great to have 0:02:02.560 --> 0:02:06.000 you now. Full disclosure. Ridult's Wealth Management has been around 0:02:06.000 --> 0:02:09.240 a decade. A couple of years before we launched, we 0:02:09.240 --> 0:02:14.480 were exploring merging with somebody. We retained your firm. You 0:02:14.520 --> 0:02:16.560 guys did a nice job and that was I don't know, 0:02:16.680 --> 0:02:20.880 twelve years ago. I always feel more comp more disclosures 0:02:20.919 --> 0:02:24.160 better than less As an attorney, I assume you wouldn't 0:02:24.160 --> 0:02:24.760 disagree with that. 0:02:24.720 --> 0:02:27.600 Persusse I wouldn't aagree. We also co invested in an 0:02:27.639 --> 0:02:30.919 investment recently where we should that's right, So I don't 0:02:30.919 --> 0:02:33.160 know if that closed yet has that clised closed last week? 0:02:33.240 --> 0:02:35.359 So there you go. So now I have to disclose 0:02:35.400 --> 0:02:37.560 that also. So Brian is not a stranger to me, 0:02:37.960 --> 0:02:41.240 and we have some shared financial interests. But the reason 0:02:41.320 --> 0:02:44.240 I wanted to bring him in here is there are 0:02:44.240 --> 0:02:47.079 a few people in the industry who have a better 0:02:47.160 --> 0:02:51.000 perch by which to look at the world of registered 0:02:51.040 --> 0:02:54.680 investment advisors, broker dealers, all of the changes that are 0:02:54.680 --> 0:02:57.920 taking place in the space. And before we delve into that, 0:02:58.320 --> 0:03:02.040 let's jump into your background. You turned out to be 0:03:02.120 --> 0:03:08.440 the first dual economics financial management major at Quinnipiac. What 0:03:08.440 --> 0:03:10.440 what led to the interest in finance? 0:03:11.360 --> 0:03:14.280 Quite frankly, the interest in finance started when I was young. 0:03:14.320 --> 0:03:17.880 My father was was an investment advisor, and he he 0:03:18.000 --> 0:03:21.480 made his way to be an investment advisor from being 0:03:22.040 --> 0:03:26.640 a manager with a textile factory to selling insurance to 0:03:26.680 --> 0:03:30.359 find his way out of that business. Went from insurance 0:03:30.400 --> 0:03:33.960 to financial planning, financial planning to the independent broker dealer 0:03:34.000 --> 0:03:39.880 world independent broker dealer to hybrid IBD slash Ria. 0:03:39.760 --> 0:03:41.680 And so really you're saying he couldn't keep a job, 0:03:42.080 --> 0:03:43.600 constantly looking for a new game. 0:03:44.040 --> 0:03:46.200 He made his way. He made his way into this space, 0:03:46.200 --> 0:03:49.040 and I was, I was captivated. You know. Keep in 0:03:49.040 --> 0:03:51.720 mind also that when I when I was going through 0:03:51.760 --> 0:03:56.120 school in the you know, mid to late nineties, you know, 0:03:56.160 --> 0:03:58.880 Wall Street was was pretty pretty appealing, bang and it 0:03:58.920 --> 0:04:02.280 was on fire. Yeah, pretty sexy. And so so why 0:04:02.360 --> 0:04:02.840 law school? 0:04:02.840 --> 0:04:04.760 You go to university in Miami, why not go for 0:04:04.800 --> 0:04:05.720 a business degree? 0:04:05.760 --> 0:04:08.280 So I did. I mean, at first I got out 0:04:08.280 --> 0:04:13.120 of undergrad and a degree in finance, coming out of 0:04:14.160 --> 0:04:17.120 coming out of a small college at the time, Quinnipiac College. 0:04:18.240 --> 0:04:22.679 The gigs I was offered were essentially customer service jobs 0:04:22.800 --> 0:04:26.760 at mutual funds, you know call service, you know, manning 0:04:26.760 --> 0:04:29.640 the phones, which I was no stranger to, you know, 0:04:29.880 --> 0:04:32.520 work my way through high school and college on the phones, 0:04:32.560 --> 0:04:37.400 but was uninspired by that work. I didn't see the 0:04:37.920 --> 0:04:42.600 real path ahead. I saw myself, if anything, maybe maybe 0:04:42.640 --> 0:04:47.080 doing product wholesaling, getting involved in you know, in financial 0:04:47.680 --> 0:04:50.719 you know, product structuring. But I didn't really see a 0:04:50.760 --> 0:04:55.159 clear path. And my grandmother sat me down and she said, 0:04:56.240 --> 0:04:59.159 maximize the opportunity. She said, you're still in learning mode. 0:05:00.160 --> 0:05:02.480 You're never going to go back to school if you're 0:05:02.520 --> 0:05:04.680 gonna if you're gonna do it go to law school. 0:05:05.080 --> 0:05:07.960 And actually, I'm going to tell you she she did 0:05:08.000 --> 0:05:11.640 something a little interesting. She she was an investor, she 0:05:12.080 --> 0:05:15.480 loved stocks. She had her broker at Mary lynch Uh 0:05:15.520 --> 0:05:18.560 and and she put in front of me a stack 0:05:18.680 --> 0:05:21.279 of annual reports. Remember these big gloss things used to 0:05:21.279 --> 0:05:21.760 come out all. 0:05:21.680 --> 0:05:24.760 The time with a little bit of information buried in 0:05:24.800 --> 0:05:27.800 the back, but the front was was the narrative, story 0:05:28.440 --> 0:05:30.720 was compelling. Yeah, and how could you not put money 0:05:30.720 --> 0:05:31.520 into this common right? 0:05:31.640 --> 0:05:34.479 So she she she puts these annual reports, and she said, 0:05:34.800 --> 0:05:36.600 I want you to look at the management in the 0:05:36.800 --> 0:05:38.960 and the board of directors, and I want you to 0:05:38.960 --> 0:05:42.159 tell me what they have in common. So we're at 0:05:42.680 --> 0:05:44.760 We're at dinner that night, and she said, did you 0:05:44.800 --> 0:05:46.600 look through them? I said yeah. I said, I'm good 0:05:46.640 --> 0:05:48.120 with my auntser, I'm ready. She goes, what are they 0:05:48.120 --> 0:05:50.400 have in common? I said, they're all white bald men. 0:05:51.600 --> 0:05:53.480 And one day I'll be a white bald man. 0:05:54.279 --> 0:05:57.320 And she said, that's not that's not what I wanted 0:05:57.320 --> 0:05:59.720 you to get out of it. But was tough. 0:05:59.800 --> 0:06:01.080 She she wasn't falling around. 0:06:00.880 --> 0:06:02.039 With I thought she wasn't falling around. 0:06:02.080 --> 0:06:03.680 She was looking for the answer they all went to 0:06:03.720 --> 0:06:04.160 law school. 0:06:04.800 --> 0:06:06.360 They all went to law school, and they and they 0:06:06.360 --> 0:06:10.839 didn't necessarily pursue a career purely in law, but her 0:06:11.279 --> 0:06:14.479 her understanding of it is they must know the rules 0:06:14.520 --> 0:06:18.840 of the game better than others. And so that really 0:06:18.960 --> 0:06:21.680 that really stuck with me. And they know the rules of. 0:06:21.640 --> 0:06:25.000 The road better than others. That's really insightful. What did 0:06:25.000 --> 0:06:28.200 grandma do that she had such market savvy back in 0:06:28.240 --> 0:06:28.919 the nineties. 0:06:29.160 --> 0:06:34.720 So my grandma Nan and Sophie, she lost She lost 0:06:34.720 --> 0:06:36.960 her husband at a young age before I was born, 0:06:37.640 --> 0:06:41.080 and her husband ran an autobody shop. They were first 0:06:41.080 --> 0:06:45.920 generation immigrants, and when faced with the typical widow dilemma, 0:06:46.880 --> 0:06:49.520 she stepped in and said, I'm not going to sell. 0:06:49.560 --> 0:06:52.320 I'm going to run this business. And so to this 0:06:52.480 --> 0:06:55.960 day I continue to meet some old school mechanics who 0:06:56.400 --> 0:06:59.039 knew my grandmother when and they said, man, she was 0:06:59.080 --> 0:07:00.240 a tough son of a. 0:07:00.560 --> 0:07:03.400 Really yeah, and I've been having a hard time chasing 0:07:03.440 --> 0:07:07.080 down an old nine to eleven turbo the charger. Can 0:07:07.080 --> 0:07:08.320 she can Grandma hook me up? 0:07:08.320 --> 0:07:11.120 So she's unfortunately passed away for many years now. But 0:07:11.520 --> 0:07:15.360 you know, I had some really, some really good strong 0:07:15.520 --> 0:07:19.000 women in my life. My other grandmother was another first 0:07:19.000 --> 0:07:23.360 generation immigrant from Germany, and she she took to selling 0:07:23.400 --> 0:07:25.480 beauty supplies on the side, and before you knew it, 0:07:25.960 --> 0:07:28.800 she was the number one salesperson for the uh you know, 0:07:29.040 --> 0:07:32.680 uh selling to professional salons in the whole country. So 0:07:33.840 --> 0:07:35.800 I learned a lot from from young ladies. 0:07:36.240 --> 0:07:40.080 That's quite quite interesting. So one of your grandmothers steers 0:07:40.120 --> 0:07:44.320 you towards law, when did you kind of realize, Hey, 0:07:44.320 --> 0:07:46.920 I can make law and finance work well together, and 0:07:47.320 --> 0:07:48.360 one plus one is three. 0:07:48.720 --> 0:07:52.600 Yeah. So I don't think there was that necessarily eureka moment, 0:07:53.080 --> 0:07:56.960 but I was definitely informed by my father's study groups. 0:07:57.000 --> 0:07:59.840 You know, I knew his network of friends and colleagues, 0:08:00.320 --> 0:08:04.560 and I would constantly hear them frustrated by the compliance department, right, right, 0:08:04.560 --> 0:08:06.960 they were just playing compliance for everything they couldn't do. 0:08:07.240 --> 0:08:10.960 The Bureau of Business Prevention is how the retail brokers 0:08:11.040 --> 0:08:12.280 used to describe compliance. 0:08:12.440 --> 0:08:15.800 I think many still do, right. They know that the 0:08:15.800 --> 0:08:18.480 answers know, but they don't know why, right, And they 0:08:18.480 --> 0:08:20.720 don't really don't care to know why. And it just 0:08:20.760 --> 0:08:23.640 struck me that it can't be all that complicated. And 0:08:23.720 --> 0:08:27.560 so when I would look into why certain of their 0:08:27.560 --> 0:08:30.760 marketing materials would get declined or certain of their business 0:08:30.760 --> 0:08:33.480 requests or authorizations would get declined, and I would share 0:08:33.480 --> 0:08:36.000 it with them. We would sit down and figure out 0:08:36.000 --> 0:08:38.840 a way around it, right, a way to deal with 0:08:38.880 --> 0:08:43.960 those issues, and they were really grateful. And I love 0:08:44.040 --> 0:08:47.120 solving things that other people think are unsolvable. 0:08:47.200 --> 0:08:48.480 I love the puzzle. 0:08:49.080 --> 0:08:52.160 Well more than the puzzle. I love coming up with 0:08:52.200 --> 0:08:55.640 a solution when they can't even formulate the question. Huh right, 0:08:55.679 --> 0:08:57.840 So it's like it's almost like pulling it out of 0:08:57.880 --> 0:09:01.280 them and asking what the problem is. And I've always 0:09:01.280 --> 0:09:04.720 been drawn to that, and so to me, you know, 0:09:04.800 --> 0:09:07.959 that really helped. And then early in my early in 0:09:08.040 --> 0:09:11.040 law school at a professor and adjunct professor. I think 0:09:11.080 --> 0:09:14.040 some of the best professors in college are adjunct professors. 0:09:14.080 --> 0:09:18.880 They're working actual career in the industry and teaching part time. 0:09:19.000 --> 0:09:23.360 Absolutely, And I was fortunate that this professor, Chuck Senator, 0:09:24.480 --> 0:09:29.440 was during the day the head of enforcement the in 0:09:29.559 --> 0:09:35.280 Miami's SEC Enforcement Division, and so I started to see, 0:09:35.559 --> 0:09:38.120 you know, what he's done with his with his law 0:09:38.120 --> 0:09:42.440 school education. Chuck went on to be general counsel for 0:09:42.520 --> 0:09:45.880 small firm like Fidelity Investments and Aim and I. Him 0:09:45.880 --> 0:09:47.840 and I are still in touch to this day. But 0:09:47.880 --> 0:09:52.400 it's people like that who who take the education and 0:09:52.720 --> 0:09:57.560 really make it their own that that really really inspired me. 0:09:57.840 --> 0:10:01.679 So let me throw a compliance question at you, because 0:10:01.720 --> 0:10:02.959 you're making my. 0:10:03.120 --> 0:10:03.960 You want free advice? 0:10:04.080 --> 0:10:06.640 No, no, no, I want to talk about the industry. 0:10:06.960 --> 0:10:12.000 So I always assumed the reason compliance departments always said 0:10:12.040 --> 0:10:16.319 no was simple game theory. There's zero upside for them 0:10:16.360 --> 0:10:19.960 saying yes. The best that can happen is nothing goes 0:10:20.040 --> 0:10:22.920 terribly wrong. The worst that can go happen is there's 0:10:22.960 --> 0:10:27.160 a big problem, and why did you approve this? So internally, 0:10:27.760 --> 0:10:31.480 there's no incentive for them to do business until they 0:10:31.840 --> 0:10:35.080 stop so much business that some senior person has to 0:10:35.080 --> 0:10:36.400 come in and say, hey, you got to loosen the 0:10:36.400 --> 0:10:38.080 reins a little bit. You're killing us. 0:10:38.160 --> 0:10:40.839 You are very correct, and I'm not going to tell 0:10:40.840 --> 0:10:44.920 you that that often. But the root of that is 0:10:44.960 --> 0:10:49.000 this big misnomer. It's this it's this word compliance that 0:10:49.440 --> 0:10:53.319 major firms have used because it's a good catch all. Right. 0:10:53.440 --> 0:10:57.160 Compliance at big firms is similar to saying wait till 0:10:57.200 --> 0:11:01.760 your mother gets home, right, Because they know that people 0:11:01.840 --> 0:11:05.439 are fearful of the regulators far more than their colleagues 0:11:05.480 --> 0:11:08.040 sitting at the cubicle right across the hall, and so 0:11:08.480 --> 0:11:12.200 they call things compliance when really probably about eighty percent 0:11:12.240 --> 0:11:17.360 of the issues are risk mitigation issues. And so as 0:11:17.520 --> 0:11:21.199 advisors look to leave these big enterprises and go independent, 0:11:21.640 --> 0:11:23.480 one of the biggest things that we need to train 0:11:23.559 --> 0:11:28.240 them on is the distinction between compliance, legal and. 0:11:28.280 --> 0:11:32.160 Risk, compliance, legal and risk. Those are three very very 0:11:32.200 --> 0:11:36.480 distinct issues that sometimes get lumped together as a lazy 0:11:36.480 --> 0:11:42.040 way to say no exactly really intriguing. So clearly you 0:11:42.160 --> 0:11:47.319 see the overlap between being an attorney understanding the intricacies 0:11:47.360 --> 0:11:52.520 of securities law. I'm going to use a dirty word now, 0:11:53.160 --> 0:11:56.640 how did you come across the synergy of combining a 0:11:56.720 --> 0:12:01.439 law firm with a consultancy that specialized in compliance and 0:12:01.880 --> 0:12:03.400 regulatory supervision? 0:12:03.480 --> 0:12:04.480 Has that become a dirty word? 0:12:04.559 --> 0:12:07.360 Now? Oh? In the M and A world, it's the 0:12:07.400 --> 0:12:10.640 worst word you can use, really, because it means we 0:12:10.720 --> 0:12:13.400 don't really know why we're slamming these two companies together 0:12:13.800 --> 0:12:16.560 other than the fees, the banking fees. So let's say 0:12:16.559 --> 0:12:19.120 there's synergies here, and we'll all go out for beer. 0:12:19.280 --> 0:12:21.760 I mean that's kind of how that word became a 0:12:21.800 --> 0:12:24.400 dirty word. It was a substitute for actually thinking about 0:12:25.000 --> 0:12:27.880 how do to disparare things? You know, how do you 0:12:27.920 --> 0:12:29.960 get to that one plus one equals three? 0:12:30.080 --> 0:12:32.160 So we'll just assume that that that's going to work 0:12:32.160 --> 0:12:33.880 out instead of doing the analysis. Got it? 0:12:34.120 --> 0:12:36.800 So yeah, I mean, I don't think that's that far 0:12:36.880 --> 0:12:37.480 from the truth. 0:12:37.679 --> 0:12:41.400 So what I realized is that people were intimidated by 0:12:41.480 --> 0:12:43.400 law firms. My first job out of law school was 0:12:43.440 --> 0:12:45.400 at a mid size law firm out of Prince in 0:12:45.480 --> 0:12:50.320 New Jersey, and I would have clients who wouldn't call 0:12:50.480 --> 0:12:51.480 when an issue arose. 0:12:51.679 --> 0:12:52.760 They're afraid of getting built. 0:12:53.000 --> 0:12:55.440 That was it, one hundred percent? That was it? Because 0:12:55.440 --> 0:12:57.400 I would ask them after the fact and they would say, 0:12:57.559 --> 0:12:59.160 you know, honestly, I didn't want to run the clock. 0:12:59.200 --> 0:13:01.080 I said, that would have cost fifty dollars. We would 0:13:01.080 --> 0:13:01.680 have been done with this. 0:13:02.000 --> 0:13:03.360 You know. I didn't want to tell you what you 0:13:03.400 --> 0:13:05.760 guys hit me for. Every time I met a phone call. 0:13:05.840 --> 0:13:08.760 I thought it was no, you guys were pretty fair. 0:13:10.040 --> 0:13:14.560 But that is a legitimate concern, especially for a small 0:13:14.600 --> 0:13:16.679 firm that has a modest budget. 0:13:16.840 --> 0:13:20.800 Absolutely, yeah, So in my mind, we had to do 0:13:20.880 --> 0:13:26.559 something democratize regulatory compliance without diminishing the quality of work. 0:13:26.920 --> 0:13:29.720 Because when I started Market Council and the Hamburger Law 0:13:29.720 --> 0:13:33.079 from back in two thousand, the only firms that were 0:13:33.080 --> 0:13:37.719 doing regulatory compliance work were registration services service bureaus. Right, 0:13:37.760 --> 0:13:41.000 it was a very much a next available operator. Former 0:13:41.080 --> 0:13:44.560 regulators were the best you would get. And a lot 0:13:44.600 --> 0:13:47.400 of the answers were, well, this is what we do right, 0:13:47.440 --> 0:13:50.040 this is our practice, this is what other firms do, 0:13:50.640 --> 0:13:52.520 And they couldn't go back to the source, They couldn't 0:13:52.520 --> 0:13:55.760 go back to the root, They couldn't rationalize why things 0:13:55.800 --> 0:13:59.319 were being done that way. And so I wanted to 0:13:59.360 --> 0:14:02.160 be able to bringing a higher degree of quality to 0:14:02.360 --> 0:14:05.319 regulatory compliance. At the same time, I didn't want to 0:14:05.360 --> 0:14:07.960 walk away from the things that we need to be 0:14:08.080 --> 0:14:10.280 lawyers to do right. And so there are certain things 0:14:10.440 --> 0:14:16.079 or drafting of contracts, negotiating deals, representing someone's interests right 0:14:16.080 --> 0:14:19.440 actually you know, working on their behalf, dealing with some 0:14:19.520 --> 0:14:22.920 complex issues where we're going beyond the law, beyond the 0:14:22.960 --> 0:14:26.320 rules and regulations. All of those have to be done 0:14:26.320 --> 0:14:28.000 by an attorney, and so I didn't want to skirt 0:14:28.000 --> 0:14:30.760 that or circumvent that, and so we set up two 0:14:31.160 --> 0:14:33.040 distinct firms. 0:14:32.760 --> 0:14:36.640 So how many companies, and I'm actually literally researching as 0:14:36.640 --> 0:14:40.840 we speak, how many companies do what Market Council does 0:14:40.960 --> 0:14:43.840 or some partial approximation. 0:14:44.760 --> 0:14:48.760 So I don't think there's anyone that has the breadth 0:14:48.960 --> 0:14:53.920 of services that we do. Other firms have launched in 0:14:54.000 --> 0:15:00.720 the past as affiliates or related companies to law firms, 0:15:01.280 --> 0:15:06.000 but they really they've either sold off the compliance business 0:15:06.480 --> 0:15:11.560 so they're no longer affiliated, or they really do they 0:15:11.560 --> 0:15:14.960 do completely different different work. It's really just a referral relationship, 0:15:15.200 --> 0:15:22.239 you know. With us, the law firm is basically a 0:15:22.280 --> 0:15:25.960 customer of Market Council for a lot of our startup work. 0:15:27.080 --> 0:15:29.680 So when you say startup, it's a new firm that's 0:15:29.720 --> 0:15:34.360 stepping out to launch a new company, and they need 0:15:34.400 --> 0:15:37.840 to go through the whole SEC registration process unless they're 0:15:37.880 --> 0:15:40.600 small enough, in which case it's whatever states they're operating in. 0:15:40.960 --> 0:15:43.320 They need to set up their policies and procedures. It's 0:15:43.480 --> 0:15:49.600 just all those initial painful, tedious, difficult things. I mean, 0:15:49.800 --> 0:15:53.160 we're only not even a decade out from launching hours 0:15:53.640 --> 0:15:58.600 and I remember it was a pretty painful set of 0:15:58.600 --> 0:16:00.000 circumstances to get up and run. 0:16:00.400 --> 0:16:04.640 Well, yes and no, right, I mean so, so Market 0:16:04.680 --> 0:16:10.480 Council Mark Council Consulting will work with firms on really 0:16:10.560 --> 0:16:13.880 understanding their scope of services, taking inventory over their conflicts 0:16:13.880 --> 0:16:18.200 of interest, drafting out fee schedules, investment strategy. A lot 0:16:18.200 --> 0:16:22.160 of it is disclosure based, right, so we'll work on 0:16:22.160 --> 0:16:27.400 on creating all the disclosures, obviously handling all of the registrations, 0:16:27.640 --> 0:16:30.640 the regulatory reporting that needs to be done, drafting and 0:16:30.720 --> 0:16:34.040 installing a drafting a compliance manual, and installing an initial 0:16:34.040 --> 0:16:37.280 compliance program. All of that work is handled by Market 0:16:37.280 --> 0:16:40.360 Council for most of the clients that come to us 0:16:40.360 --> 0:16:42.200 for startup work right in that program we call it 0:16:42.200 --> 0:16:44.680 the ra incubator, right, which is a really I think 0:16:44.840 --> 0:16:48.160 describes you know what it does. But for almost all 0:16:48.160 --> 0:16:52.320 the clients that come to us, they're not coming from 0:16:52.880 --> 0:16:57.200 a very pure place where they can just engage in 0:16:57.200 --> 0:16:59.400 that activity, right, you know. 0:16:59.400 --> 0:17:02.520 For meaning coming from a broker dealer or another RIA. 0:17:02.600 --> 0:17:06.640 And that raises a question as to some of the 0:17:06.680 --> 0:17:10.240 technical legal employment issues around their exits. 0:17:10.359 --> 0:17:15.040 So yeah, there's definitely issues with their employment and employment transition, right, 0:17:15.200 --> 0:17:19.800 what canon they can't do while they are currently gainfully 0:17:19.840 --> 0:17:25.200 employed elsewhere. Right, That captive employment restricts them often far 0:17:25.240 --> 0:17:26.919 more than they know. But they can engage in an 0:17:26.920 --> 0:17:30.520 outside business activity, right, they can engage in selling away. 0:17:30.960 --> 0:17:33.280 The big one that they get hung up on is 0:17:33.320 --> 0:17:37.520 they can engage in a private securities transaction without getting 0:17:37.520 --> 0:17:41.080 the prior written consent of the firm. Now, you may say, Barry, well, 0:17:41.119 --> 0:17:43.119 how is this a private securities transactions? 0:17:43.119 --> 0:17:46.600 They're launching a new firm that's sec regulated. 0:17:46.800 --> 0:17:49.240 Doesn't even matter if it's sec regulated. The fact that 0:17:49.280 --> 0:17:52.920 they are, let's say, in preparation for launching this new firm, 0:17:53.400 --> 0:17:57.040 they are acquiring one hundred percent of the membership interests 0:17:57.040 --> 0:17:59.800 of an LLC or one hundred percent of the stock 0:17:59.840 --> 0:18:00.720 of corporation. 0:18:00.840 --> 0:18:03.640 Can't you disclose that at the last minute and. 0:18:03.880 --> 0:18:07.120 No prior written consent of the firm you're working? Oh, 0:18:07.640 --> 0:18:09.280 so you can. 0:18:09.600 --> 0:18:11.040 That's technical, isn't it. 0:18:11.200 --> 0:18:14.920 Well, and it's enforce right, and so you can decide 0:18:14.960 --> 0:18:17.320 that you want to sever your employment and then begin 0:18:17.400 --> 0:18:20.159 the startup work. But that's not tenable for the most. 0:18:20.280 --> 0:18:23.520 Six months, then, so how do you never? That seems 0:18:23.600 --> 0:18:28.119 kind of an absurd set of rules. That prevents people 0:18:28.160 --> 0:18:32.280 from leaving a firm if or, I guess you could 0:18:32.280 --> 0:18:34.679 always use a straw up man. You could use a 0:18:34.720 --> 0:18:37.600 third person to set this up and then hey, I 0:18:37.640 --> 0:18:40.920 didn't decide to do leave until the day I resigned, 0:18:40.960 --> 0:18:43.640 and my wife did all the work. It's on hard. 0:18:44.160 --> 0:18:44.840 Does that work? 0:18:45.640 --> 0:18:50.680 Unfortunately? No, But there are strategies that we do deploy 0:18:51.000 --> 0:18:53.560 in order to make that work. And it doesn't work 0:18:53.600 --> 0:18:57.639 for a whole variety of situations, depending upon how restrictive 0:18:57.720 --> 0:19:02.439 their current employment situation is. But when you say you know, 0:19:02.520 --> 0:19:06.520 that seems awfully restrictive, keep in mind these are rules 0:19:06.560 --> 0:19:10.080 written by a self regulatory organization comprised of broker dealers 0:19:10.640 --> 0:19:11.760 or looking to create a moat. 0:19:12.080 --> 0:19:15.920 So you launch both Hamburger Law Firm and Market Council 0:19:16.160 --> 0:19:19.720 in two thousand, that that's some timing. Everything's going to hell. 0:19:20.160 --> 0:19:23.679 The dot com implosion is happening, the Nasdaq falls. I 0:19:23.680 --> 0:19:27.120 think it was eighty one percent peak to troth. What 0:19:27.280 --> 0:19:31.400 was it like launching two firms into that mess? 0:19:32.359 --> 0:19:34.080 I was dumb and young, right, I mean. 0:19:34.440 --> 0:19:36.119 Well, that's the time to be dumb when you have 0:19:36.480 --> 0:19:37.680 you know, recovery period. 0:19:37.880 --> 0:19:40.160 Absolutely, you know I had and. 0:19:40.160 --> 0:19:43.520 Let's talk exactly how dumb you sold your house to 0:19:43.600 --> 0:19:45.040 fund this? Is that true? 0:19:45.680 --> 0:19:48.360 I did, I did, and I'm to this day, I'm 0:19:48.440 --> 0:19:51.560 grateful to my former wife for supporting that decision and 0:19:51.600 --> 0:19:52.760 actually coming up with the idea. 0:19:53.200 --> 0:19:55.800 It was her idea. You were both all in, let's 0:19:55.880 --> 0:19:59.240 let's sell the house and see what sticks against the wall. 0:19:59.359 --> 0:20:03.080 So I came up with this consulting concept, and I 0:20:03.160 --> 0:20:08.440 pitched it to the firm's partnership and I said, I said, 0:20:08.440 --> 0:20:10.879 I really think that we would be able to do 0:20:10.920 --> 0:20:13.800 a great job for our ria clients, for our wealth 0:20:13.840 --> 0:20:17.800 management clients by having this consulting firm. And they rejected 0:20:17.800 --> 0:20:21.919 the idea. And I would come home from work and 0:20:23.160 --> 0:20:25.240 crack open a beer, sit on the back porch, and 0:20:25.240 --> 0:20:28.000 I don't do that every every day, but I did 0:20:28.000 --> 0:20:30.520 it coming out of work there, and I would punch 0:20:30.560 --> 0:20:31.919 the pillow in the morning. 0:20:31.960 --> 0:20:34.399 I was just, why did they reject the idea? What 0:20:34.480 --> 0:20:35.320 was the explanation? 0:20:35.560 --> 0:20:39.920 Law firms don't do that now. Okay, two years later, 0:20:40.040 --> 0:20:42.800 twenty two years later, we see that law firms now 0:20:42.840 --> 0:20:44.959 do that. They just didn't do that in big numbers 0:20:44.960 --> 0:20:49.640 back then. And so so she said to me, she said, well, 0:20:49.680 --> 0:20:50.800 are you just going to keep doing this? 0:20:51.440 --> 0:20:54.680 And I said, well meaning punching the pillow. 0:20:54.800 --> 0:20:57.280 Yeah, meaning punching the pillow. And I said, it's probably 0:20:57.320 --> 0:21:00.160 my best option right now. And you know, we looked 0:21:00.160 --> 0:21:03.560 at our situation. She was pregnant with our first with 0:21:03.640 --> 0:21:04.440 our first child. 0:21:04.320 --> 0:21:06.480 And we were that's the time to quit your job 0:21:06.520 --> 0:21:07.240 and sell your house. 0:21:07.320 --> 0:21:10.720 That's the perfect So she said, well leave and I said, 0:21:10.720 --> 0:21:12.400 how are we gonna do that? We just bought this 0:21:12.440 --> 0:21:15.920 house and she said if not now, when? 0:21:16.520 --> 0:21:20.080 So not even like a second mortgage, sell the house 0:21:20.200 --> 0:21:21.400 and use that to fund the news. 0:21:21.400 --> 0:21:22.840 We had to sell the house. We had to do 0:21:22.880 --> 0:21:25.159 a for sale by owner because if we sold it 0:21:25.359 --> 0:21:28.280 using a broker, we would have been way underwater. So 0:21:28.920 --> 0:21:32.359 we literally printed up flyers, put them outside, put them 0:21:32.400 --> 0:21:37.080 all over town. We sold our house we have. When 0:21:37.080 --> 0:21:39.240 I went to launch this firm, my daughter was six 0:21:39.280 --> 0:21:42.800 months old and my wife was pregnant with our second. 0:21:43.840 --> 0:21:47.240 We had two large dogs. Well and behold, no one 0:21:47.280 --> 0:21:49.760 wanted to rent to us, so we ended up we 0:21:49.840 --> 0:21:54.600 ended up renting a log cabin on a vineyard in 0:21:54.680 --> 0:21:58.080 central New Jersey. I thought it was charming, My wife 0:21:58.160 --> 0:21:58.760 not so much. 0:21:58.960 --> 0:22:01.440 Wait they're a vineyard in New Jersey. That's the news 0:22:01.480 --> 0:22:01.960 New Jersey. 0:22:02.080 --> 0:22:04.399 Yeah, I can't read that many. 0:22:04.560 --> 0:22:09.320 I can't recall my last New Jersey bouchelet. When when 0:22:09.400 --> 0:22:10.080 is that harvest? 0:22:10.160 --> 0:22:12.280 It was it was a lovely place to live for 0:22:12.320 --> 0:22:16.399 a short period and yeah, we uh you know, we 0:22:16.400 --> 0:22:20.280 were all in. We literally sold the house to finance 0:22:20.280 --> 0:22:20.520 the bill. 0:22:20.560 --> 0:22:22.040 Wow, that's a crazy story. 0:22:22.200 --> 0:22:22.400 Yeah. 0:22:22.760 --> 0:22:26.800 Prior to twenty twenty two, when rates were cheap, when 0:22:26.880 --> 0:22:31.000 rates were zero, when capital was plentiful, it seemed like 0:22:31.080 --> 0:22:37.080 the entire industry went through this wild merger frenzy. I 0:22:37.119 --> 0:22:41.440 thought twenty twenty two would cool it off. I mean, 0:22:41.520 --> 0:22:44.400 it seems to have slowed a bit, but it's not 0:22:44.480 --> 0:22:47.040 like anybody through a bucket of ice water. What's going 0:22:47.080 --> 0:22:48.080 on in that space today? 0:22:48.400 --> 0:22:50.320 Listen. I think it has slowed, and I think interest 0:22:50.400 --> 0:22:52.520 rates are going to be probably the you know, the biggest, 0:22:52.760 --> 0:22:55.639 the biggest driver there because, as you know, right, the 0:22:55.680 --> 0:22:59.080 capitol becomes more expensive. But you know, what shocked me 0:22:59.840 --> 0:23:02.160 more more than the slowdown, the slowdown actually makes sense. 0:23:02.400 --> 0:23:06.240 What shocked me more than the slowdown was the intoxication 0:23:06.440 --> 0:23:10.040 of capital, right, and the fervor in which you know 0:23:10.480 --> 0:23:15.240 these these firms, private capital has been chasing investment advisors. 0:23:15.280 --> 0:23:17.359 So I have a theory as to why. I'm curious 0:23:17.359 --> 0:23:20.399 as to why you think that that fervor was there. 0:23:20.680 --> 0:23:24.240 You know, I think that I think that there is 0:23:24.720 --> 0:23:29.919 a strong investment thesis as to why to acquire these firms. Right, 0:23:29.960 --> 0:23:33.480 we joked around about synergies. Before they talk about synergies, 0:23:34.000 --> 0:23:39.800 they talk about economies of scale. There's this foregone belief 0:23:40.000 --> 0:23:43.320 where people just like to jump to the fact that 0:23:43.320 --> 0:23:46.639 that there is some type of scalable client experience out 0:23:46.680 --> 0:23:50.240 there that's really special. People don't necessarily describe how to 0:23:50.359 --> 0:23:53.919 get there, but they just say, with more resources, we 0:23:54.000 --> 0:23:56.800 can build a better client experience. Right. You could probably 0:23:56.840 --> 0:23:59.720 build better digital tools, you could probably build build a 0:23:59.720 --> 0:24:04.640 better communications strategy, probably insert some AI that you could 0:24:04.640 --> 0:24:07.760 do some sophisticated things. But I'm not quite sure it's 0:24:07.800 --> 0:24:12.240 just quantitatively or qualitatively better, right, because how do you 0:24:12.359 --> 0:24:15.320 how do you compete with the advisor who's got a 0:24:15.359 --> 0:24:17.679 couple hundred million dollars, who knows the names of all 0:24:17.680 --> 0:24:20.880 their clients and all their kids, knows all their needs, 0:24:20.920 --> 0:24:24.359 goals and objectives. Is sitting down at the kitchen table 0:24:24.400 --> 0:24:26.480 with them, you know, every quarter. I mean, this is 0:24:26.520 --> 0:24:28.919 the career that we started in, right, I mean this 0:24:28.920 --> 0:24:32.600 this was what it looked like. And and so I 0:24:32.920 --> 0:24:35.479 always ask, you know, better from what perspective? You know, 0:24:35.640 --> 0:24:37.800 is it going to be better from the client perspective 0:24:38.240 --> 0:24:41.359 or better in terms of just more profitable business? And 0:24:41.440 --> 0:24:43.520 I don't I don't quite know the answer to that. 0:24:43.600 --> 0:24:46.959 So let's take that apart. So, so there's really two 0:24:47.040 --> 0:24:50.719 issues there. The first is all the private money flowing in. 0:24:51.119 --> 0:24:55.359 I always looked at the private capital rushing into the 0:24:55.560 --> 0:24:59.000 RIA space, especially with so there are a couple of 0:24:59.000 --> 0:25:01.840 different types of firms. A small firm that you know, 0:25:01.920 --> 0:25:05.560 is a very nice little lifestyle practice. Then there's the 0:25:05.600 --> 0:25:09.439 medium firm that's been a decent chunk of capital but 0:25:09.600 --> 0:25:12.720 for forever. They've been around for twenty years. They're almost 0:25:12.760 --> 0:25:16.200 a billion dollars in ass of pioneers. Right, they're not growing, 0:25:16.240 --> 0:25:19.560 they're not losing clients, they're kind of holding steady. To 0:25:19.760 --> 0:25:22.399 private equity, which is a big source of the money 0:25:22.440 --> 0:25:25.240 that was flowing in here. Hey, this is a bond 0:25:25.320 --> 0:25:29.040 with a seven or an eight percent coupon, and theoretically 0:25:30.440 --> 0:25:33.320 a capital you know, an equity kicker if they're if 0:25:33.320 --> 0:25:37.399 they're acquired down the road. So we're getting two percent 0:25:37.560 --> 0:25:40.040 in the bond market, or at least they were before 0:25:40.080 --> 0:25:43.240 twenty twenty two. Let's get seven eight percent and maybe 0:25:43.240 --> 0:25:45.879 things work out and someone takes them out. That was 0:25:46.040 --> 0:25:49.760 the at least some of the interest when things were zero. 0:25:50.280 --> 0:25:53.960 It's better than that. Actually, oh really it's I think 0:25:54.000 --> 0:25:57.320 that private capital likens it to an equity indexed annuity 0:25:57.600 --> 0:26:01.480 right where there's no downside because they put in a pick, 0:26:01.520 --> 0:26:05.160 they put in a preferred income clause that gives them 0:26:05.200 --> 0:26:08.680 the ability to get paid first, So there's no market 0:26:08.920 --> 0:26:12.120 downturn risk, or I should say very low market downturn risk. 0:26:12.480 --> 0:26:15.240 When the when the minority investor or the you know, 0:26:15.280 --> 0:26:19.560 the capital partner paid first is getting paid first, there's 0:26:19.600 --> 0:26:23.080 a long way to go before before that investment is affected. 0:26:23.119 --> 0:26:25.280 So I think they look at it as having us 0:26:25.520 --> 0:26:29.240 insured upside potential with that ongoing annuity stream. 0:26:29.440 --> 0:26:32.280 Now, now you let's talk a little bit about the 0:26:32.400 --> 0:26:35.000 roll ups and the mergers and acquisitions that are going on. 0:26:35.480 --> 0:26:38.600 So for there's no doubt in my mind as having 0:26:38.680 --> 0:26:41.480 run affirm that was ninety million an assets, the one 0:26:41.480 --> 0:26:45.760 that is coming. We're three and eventually four when the 0:26:45.920 --> 0:26:48.639 last deal closes. Billion dollars is a lot of a 0:26:48.680 --> 0:26:52.320 lot of assets graduation. There are well a lot of 0:26:52.320 --> 0:26:57.520 work still to go, but there are clearly economies of 0:26:57.720 --> 0:27:01.359 scale and ik, You'll give full credit to my partners 0:27:01.400 --> 0:27:04.440 for seeing this before I did. And hey, we need 0:27:04.480 --> 0:27:09.159 to hire a CFO or promote someone and say, you know, 0:27:09.200 --> 0:27:12.480 you don't want Barry doing payroll and Josh doing the 0:27:12.880 --> 0:27:15.640 health care plan. But that's literally what was going on. Sure, 0:27:15.680 --> 0:27:18.640 so we promoted the CFO. Hey, we need a head 0:27:18.640 --> 0:27:21.760 of compliance, Like, really, we're not that big, you know what. 0:27:21.840 --> 0:27:25.639 Think of it as insurance. Okay. My best bet is 0:27:25.960 --> 0:27:28.800 my best trait is I let smarter people than me 0:27:29.520 --> 0:27:32.120 convince me of things that I'm hesitant about. 0:27:32.160 --> 0:27:32.760 It's a good call. 0:27:32.880 --> 0:27:35.840 Hey, hey, we need a head of HR because you know, 0:27:36.000 --> 0:27:38.640 we need to hire people. We're not hiring them fast enough. 0:27:38.920 --> 0:27:41.240 We need to make sure that nobody is saying or 0:27:41.240 --> 0:27:44.600 doing anything that doesn't comply with the rules. We're in 0:27:44.640 --> 0:27:47.399 twenty seven states. There's a different rule in every state. 0:27:47.920 --> 0:27:50.040 And I'm not even talking about the crazy this will 0:27:50.040 --> 0:27:53.600 get your canceled stuff. I mean just staying on the 0:27:53.680 --> 0:27:59.440 right side of regulator, and on and on and so, yes, 0:27:59.520 --> 0:28:04.000 there's no doubt scale helps, but it doesn't help you 0:28:04.040 --> 0:28:07.120 with the client experience. It doesn't help you with client acquisition, 0:28:07.600 --> 0:28:12.120 it doesn't help you with your investment performance. All those 0:28:12.160 --> 0:28:14.959 things have to be right before you start scaling up, 0:28:15.000 --> 0:28:16.840 or at least that's how I see the world. 0:28:16.920 --> 0:28:19.960 I see. I agree that scale helps, But what does 0:28:19.960 --> 0:28:24.440 scale help with? Scale helps with reducing the complexity that's 0:28:24.520 --> 0:28:28.960 largely come from growth, right, right, So it's it's a drug, 0:28:29.040 --> 0:28:31.560 right you. I mean, if you want to grow quickly, 0:28:32.160 --> 0:28:34.880 you need to capture that scale in order to combat 0:28:34.880 --> 0:28:38.360 the complexity that comes with that growth. But for the 0:28:39.720 --> 0:28:41.920 for the advisor with a few hundred million of assets 0:28:42.000 --> 0:28:45.640 under management, they don't need the scale. They're running a 0:28:45.640 --> 0:28:49.320 profitable business as it is, right, they're delivering outstanding service 0:28:49.360 --> 0:28:53.040 to you know, to their clients. If this is a 0:28:53.040 --> 0:28:54.960 lifestyle business, and I know that's kind of a dirty 0:28:54.960 --> 0:28:56.600 word because people want to say, oh, I'm not in 0:28:56.600 --> 0:28:59.680 a lifestyle business. Right, It's okay, Like you know, just 0:29:00.920 --> 0:29:02.960 where we always encourage people to do is start with 0:29:03.000 --> 0:29:05.080 their why. I know that sounds kind of corny, but. 0:29:05.280 --> 0:29:07.800 No, But it's a fair question, right, But why do 0:29:07.840 --> 0:29:10.160 you want to grow? If you're running a nice business, 0:29:10.160 --> 0:29:11.560 you're happy, your clients are happy. 0:29:11.760 --> 0:29:14.520 If you're happy, if your partner in life is happy 0:29:14.520 --> 0:29:16.680 with you, and you've got time to spend with the 0:29:16.720 --> 0:29:19.520 people you love, If your clients love what's going on, 0:29:19.600 --> 0:29:21.960 if your employees are well cared for and they love 0:29:22.080 --> 0:29:25.160 working there, you know is growth and imperative. And if 0:29:25.200 --> 0:29:29.000 you read the trades, you would think everyone has to grow. Right, 0:29:29.000 --> 0:29:30.360 You're gonna grow or you're gonna die. 0:29:30.440 --> 0:29:33.640 Right, And now there are literally roll up shops that 0:29:33.760 --> 0:29:36.680 have I've sat in the I never sit in the audience. 0:29:36.720 --> 0:29:38.880 I'm usually in the green room. But if I'm sitting 0:29:38.920 --> 0:29:42.040 in the audience and someone comes out and says, grow 0:29:42.120 --> 0:29:44.479 or die, we're a roll up. And if you're not 0:29:44.640 --> 0:29:46.440 going to be part of the roll up strategy, you're 0:29:46.440 --> 0:29:49.440 gonna get steamrolled. How much of that is just self 0:29:49.440 --> 0:29:50.520 interest talking. 0:29:51.000 --> 0:29:53.880 My opinion is all self interest? Right? If someone listen, 0:29:53.920 --> 0:29:55.960 you always start I always start at bottom of the article. 0:29:55.960 --> 0:29:58.160 I always look at the italicized print, right, just like 0:29:58.200 --> 0:29:59.840 you started with the disclosures at the top of the 0:29:59.840 --> 0:30:02.840 sh show right, start with the atala sized print. If 0:30:02.880 --> 0:30:06.080 I'm here from a roll up or an aggregator, and 0:30:06.160 --> 0:30:08.520 I tell you, now's the time for you to sell 0:30:08.560 --> 0:30:12.280 to me because prices are at all time record highs. Right, 0:30:13.080 --> 0:30:16.640 I gotta like, you know, raise my eyebrows say well, 0:30:16.640 --> 0:30:19.720 why do you then want to buy my practice if 0:30:19.720 --> 0:30:22.280 you believe that this is an all time high? Right? 0:30:22.360 --> 0:30:26.000 So to me, you know, the truth is in the action, 0:30:26.920 --> 0:30:27.880 not the words. Right. 0:30:28.240 --> 0:30:30.080 I can't hear what you're saying because what you're doing 0:30:30.120 --> 0:30:31.160 is speaking so loudly. 0:30:31.400 --> 0:30:32.640 You are so much more eloquent. 0:30:32.800 --> 0:30:35.840 That's not me. I stole that. That's a Longfellow or 0:30:35.840 --> 0:30:36.880 Wadsworth or somebody. 0:30:37.000 --> 0:30:37.200 I know. 0:30:37.280 --> 0:30:39.680 I know I'm stealing that. My dad used to say 0:30:39.680 --> 0:30:41.480 that to me all the time. It's a great one, 0:30:41.640 --> 0:30:46.240 but really it's true, which raises the question how big 0:30:46.320 --> 0:30:49.040 is that? M and a market for ri as? Shoot, 0:30:49.480 --> 0:30:53.120 nobody has. Here's the crazy thing. So you take the 0:30:53.160 --> 0:30:56.680 five biggest rias you can think of, they're all two 0:30:56.760 --> 0:31:02.440 hundred billion Creative Planning, Edelman, ken Fisher. They're all giants. 0:31:02.560 --> 0:31:05.280 I'm sure there's a couple more there. Two hundred billion 0:31:05.320 --> 0:31:09.800 dollars is nothing in a thirty forty by some measures, 0:31:09.880 --> 0:31:15.000 ninety seven trillion dollar space. Is anyone ever going to 0:31:15.080 --> 0:31:16.040 have market share here? 0:31:18.080 --> 0:31:20.040 So you have you have a few questions, Yeah, you 0:31:20.040 --> 0:31:22.280 have two questions there. The first one is we're in 0:31:22.280 --> 0:31:25.760 the early innings, right, because even the giants of independent 0:31:25.800 --> 0:31:31.560 wealth management are small in comparison to the entire securities industry. Right, 0:31:31.560 --> 0:31:34.080 it's not. It wouldn't take much for one of these 0:31:34.080 --> 0:31:37.400 financial behemoths to become an aggregator themselves, and they've got 0:31:37.480 --> 0:31:40.200 far more financial might than any of these private capital 0:31:40.240 --> 0:31:41.120 providers out there. 0:31:41.320 --> 0:31:44.080 Note have gone public yet, right, they're all still mostly private, 0:31:44.120 --> 0:31:44.680 Is that right? 0:31:44.800 --> 0:31:48.520 Well, I mean you had focus financial, right, so you know, 0:31:48.600 --> 0:31:49.680 go public and. 0:31:50.160 --> 0:31:52.360 They're clearly a roll up there. How big are they 0:31:52.440 --> 0:31:54.760 They're like three four hundred five hundred billions? 0:31:54.920 --> 0:31:57.560 Yeah, I think, but they're they're actually going they're leaving 0:31:57.600 --> 0:31:59.680 the public markets, and you know, it looks like they're 0:31:59.760 --> 0:32:04.400 you know, they're heading back to private. So that's an 0:32:04.400 --> 0:32:07.560 interesting transaction, right. One of the few firms to make 0:32:07.600 --> 0:32:10.520 their way into the public markets is actually you know, 0:32:10.600 --> 0:32:13.240 some would say retreating, you know, others would say, you know, 0:32:13.320 --> 0:32:17.920 recapitalizing within the you know, the private markets, but you know, 0:32:17.960 --> 0:32:21.120 they're the ones that have made their way over. Arguably, 0:32:21.200 --> 0:32:23.640 other firms like NFP have gone public, but that's not 0:32:23.680 --> 0:32:29.200 really a pure national financial partners right, more in insurance focus. 0:32:29.480 --> 0:32:31.480 But I think we're in the early innings. I really do. 0:32:31.600 --> 0:32:35.680 I think that there is a whole world that you 0:32:35.720 --> 0:32:38.640 and I can't even sit here in fathom knowing where 0:32:38.680 --> 0:32:41.720 we've come from to imagine what this is going to 0:32:42.000 --> 0:32:44.600 become in the next ten or twenty years. I really, 0:32:44.720 --> 0:32:46.240 I really think we're in the early innings. 0:32:46.360 --> 0:32:50.720 Really, so let's let's that's surprising because when we launched 0:32:50.720 --> 0:32:54.040 our firm in twenty thirteen, I felt like we were 0:32:54.040 --> 0:32:59.920 a decade past the real launch of registered investment advisories. 0:33:00.240 --> 0:33:01.840 We were on the right side of pass if, we 0:33:01.840 --> 0:33:05.040 were the right side of fiduciary. It felt like, all right, 0:33:05.120 --> 0:33:07.760 this is the future. And that's why I was surprised 0:33:08.320 --> 0:33:12.840 the big shops hadn't bought on yet. But you're saying, 0:33:13.280 --> 0:33:15.600 and here it is almost a decade later, you're saying, 0:33:16.040 --> 0:33:22.000 this is still early days. The transition from transactional non 0:33:22.120 --> 0:33:24.480 fiduciary business is going to continue to ramp. 0:33:24.600 --> 0:33:26.520 I believe that's the case. Yeah, and then you said, 0:33:26.560 --> 0:33:28.720 you know, are there going to be dominant you know 0:33:28.760 --> 0:33:30.840 players in the space, And I don't believe there ever 0:33:30.880 --> 0:33:34.040 will be, really And the reason for that is because 0:33:34.040 --> 0:33:38.000 there's such a low barrier to entry. Right. Anyone you 0:33:38.040 --> 0:33:40.400 know who takes a nice, hot, long shower, you know, 0:33:40.520 --> 0:33:43.800 has an idea, right, and most of those people have 0:33:43.920 --> 0:33:45.080 the wherewithal the pull off. 0:33:45.200 --> 0:33:48.240 I told you that in confidence, most people. 0:33:48.000 --> 0:33:49.640 Have the where with all the pull it off. Within 0:33:49.680 --> 0:33:52.200 the independent wealth management space, right, there's not a high 0:33:52.240 --> 0:33:55.600 barrier to entry. There's not significant licensing, you know that 0:33:56.080 --> 0:33:59.640 that takes place and with the help of an objective advisor. 0:33:59.680 --> 0:34:03.640 I mean, this is not a very complex endeavor. 0:34:04.080 --> 0:34:08.480 So you mentioned Focus Financial. Let's talk about the platforms 0:34:09.160 --> 0:34:13.200 like Focus, like Dynasty. Schopenny was a guest of the 0:34:13.239 --> 0:34:16.720 show a couple of years ago, has a fascinating personal story. 0:34:17.360 --> 0:34:21.840 I think they're down in Saint Petersburg or Tampa. These 0:34:21.880 --> 0:34:26.640 platforms have developed. High Tower is another one that essentially 0:34:26.960 --> 0:34:31.359 exists to pull out these billion dollar teams from big 0:34:31.400 --> 0:34:36.160 firms and have been doing so very successfully. What is 0:34:36.200 --> 0:34:40.640 that sort of transaction like and how challenging is it 0:34:40.719 --> 0:34:43.799 for you as the attorney to deal with. I mean, 0:34:44.120 --> 0:34:46.840 nobody at a big firm is happy when a billion 0:34:46.880 --> 0:34:48.480 and a half dollars walks out the door. 0:34:49.120 --> 0:34:51.240 Well, the billion and a half walking out is happy, 0:34:52.200 --> 0:34:53.120 just to be clear. 0:34:53.840 --> 0:34:55.520 Nobody who's left behind is happy. 0:34:55.680 --> 0:34:58.040 So I think the three examples you gave are three 0:34:58.280 --> 0:35:02.520 really different examples that probably satisfy a similar utility, a 0:35:02.560 --> 0:35:05.680 similar need or demand in the marketplace. When you look 0:35:05.719 --> 0:35:08.879 at at firms like you know, like Dynasty, right, they're 0:35:09.239 --> 0:35:13.640 a single vendor platform provider, right. So for that entrepreneur 0:35:14.160 --> 0:35:18.160 who doesn't want to make so many of the decisions 0:35:18.200 --> 0:35:22.239 that go that naturally go with entrepreneurship, but they want 0:35:22.280 --> 0:35:25.600 all the features and the independence and autonomy of running 0:35:25.640 --> 0:35:29.200 their own business, right, those firms are a great option 0:35:29.320 --> 0:35:32.319 for them. Right. Suddenly within the independent space, you know, 0:35:32.840 --> 0:35:36.080 going out and being independent doesn't mean that you have 0:35:36.160 --> 0:35:40.000 to go it alone, right, Whereas there are other firms 0:35:40.080 --> 0:35:43.279 are joint opportunities where you're not going to have the 0:35:43.320 --> 0:35:45.719 autonomy of running your own firm. You're going to go 0:35:45.880 --> 0:35:47.960 and you're going to join these firms. You're going to 0:35:47.960 --> 0:35:50.560 be a quote unquote partner in the firm, or you're 0:35:50.600 --> 0:35:53.840 going to you know, run one of these satellite affiliates 0:35:53.840 --> 0:35:56.359 within the firm. But make no mistake about it, right, 0:35:56.440 --> 0:36:00.000 This is all about this concept of control, right, And 0:36:00.200 --> 0:36:02.920 I think entrepreneurs really want to hone in on this. 0:36:03.000 --> 0:36:04.360 I think that's going to be a theme over the 0:36:04.360 --> 0:36:07.120 next few years, is control because we have so many 0:36:07.160 --> 0:36:10.759 minority investments happening within the space. But even with a 0:36:10.760 --> 0:36:17.120 minority investment, these minority investors are demanding control provisions. Right. 0:36:17.200 --> 0:36:20.720 Control is like the big tug of war that's happening nowadays. 0:36:20.800 --> 0:36:22.839 And when you look at a and when you look 0:36:22.880 --> 0:36:27.160 at a firm like Charles from at Dynasty, you see 0:36:27.160 --> 0:36:31.440 a firm that helps enable folks to run their own independent, 0:36:31.480 --> 0:36:36.480 autonomous practice without having to give up that degree of control. 0:36:36.840 --> 0:36:39.040 I want to ask you about some of the deals 0:36:39.120 --> 0:36:43.279 you look at and review sometimes after the fact. One 0:36:43.320 --> 0:36:47.640 of the risks of being an attorney is people will 0:36:47.680 --> 0:36:50.319 always come up to you and ask you about a problem, 0:36:50.760 --> 0:36:53.080 and then two thirds of the way through the conversation 0:36:53.200 --> 0:36:56.720 you find they already signed that document. Oh I'm sorry, 0:36:56.800 --> 0:36:59.359 but I can't help you. You have a contractor how 0:36:59.440 --> 0:37:01.560 often do people will come to you and say, hey, 0:37:02.440 --> 0:37:04.520 what can you tell me about this deal and your 0:37:04.520 --> 0:37:07.200 answer is, oh, that's a terrible deal, don't sign that. 0:37:07.280 --> 0:37:09.920 And they say, well, I already did a letter of intent. 0:37:10.040 --> 0:37:14.320 What do I do now? Is this a legitimate issue 0:37:14.400 --> 0:37:15.600 that happens time and again. 0:37:16.960 --> 0:37:19.880 So you asked me before about the different practice areas 0:37:19.880 --> 0:37:22.719 we have, and that happens all the time within our 0:37:22.719 --> 0:37:26.480 Business Transactions group. Really personally, like, where I spend my 0:37:26.560 --> 0:37:31.320 time is really in two primary areas, and in my practice, 0:37:31.360 --> 0:37:37.239 one is having that ongoing relationship with CEOs within this 0:37:37.320 --> 0:37:40.200 wealth management space and talking to them about their objectives 0:37:40.239 --> 0:37:43.560 and helping them navigate a path so it doesn't happen 0:37:44.120 --> 0:37:47.439 in those circumstances. The other part of where I spend 0:37:47.480 --> 0:37:49.640 my time is fixing problems. Right, you know this is. 0:37:49.600 --> 0:37:51.719 A problem someone says, hey, I signed this, what do 0:37:51.760 --> 0:37:51.960 I do? 0:37:52.200 --> 0:37:56.560 This becomes a problem, right, And it's actually typically it's 0:37:56.600 --> 0:37:59.600 like an LOI, right, So it's not a legally binding document, 0:37:59.640 --> 0:38:02.319 but it's a good will problem, right because we worked 0:38:02.320 --> 0:38:05.719 with so many other of these firms within the space. Bye, 0:38:05.960 --> 0:38:09.359 by the advisor signing that l o I, it's it's 0:38:09.360 --> 0:38:12.040 really the equivalent of a handshake, right, right, And if 0:38:12.040 --> 0:38:14.960 you're going to be in business with this firm for 0:38:15.000 --> 0:38:17.440 the next few decades at least. You don't want to 0:38:17.440 --> 0:38:19.759 start off by your attorney calling saying, hey, I know 0:38:19.800 --> 0:38:23.000 they signed this, but what there really meant was that? Right? 0:38:23.280 --> 0:38:25.879 So I could tell you it just it limits the 0:38:25.920 --> 0:38:31.799 ability for us to meaningfully affect the deal. We of 0:38:31.840 --> 0:38:34.239 course can continue to negotiate around the fringes and help 0:38:34.320 --> 0:38:38.000 mitigate risk and optimize the transaction to you know, to fit. 0:38:38.480 --> 0:38:43.239 They can. Yeah, no, it can. And I mean, that's 0:38:43.280 --> 0:38:45.279 that's the typical right, blame the attorneys right right. 0:38:45.840 --> 0:38:46.520 Right under the bus. 0:38:46.800 --> 0:38:47.480 We get that all the time. 0:38:47.520 --> 0:38:49.919 And that's fine, Hamburger. It's his fault. We had a deal, 0:38:50.000 --> 0:38:53.200 we had a handshake until Brian came along and saved 0:38:53.239 --> 0:38:54.279 me from myself. 0:38:54.440 --> 0:38:57.839 Perfectly, perfectly fine. But usually my job is to call 0:38:57.920 --> 0:39:00.280 up the CEO with the counter with the contra firm 0:39:00.400 --> 0:39:02.399 and to say, hey, I know, you guys slipped one, 0:39:02.800 --> 0:39:05.200 you know, by the goalie on this one by Yeah, 0:39:05.320 --> 0:39:08.359 I said, you know. And and it's almost always met Barry, 0:39:08.400 --> 0:39:11.080 We laughed, they know, it's almost always met with Oh, 0:39:11.120 --> 0:39:13.439 we had no idea that you were working with them. 0:39:13.600 --> 0:39:15.600 Of course, it's not a problem. 0:39:15.920 --> 0:39:21.480 So that's hilarious. Yeah, because I can't tell you how 0:39:21.560 --> 0:39:27.279 often somebody will mention something and it's like, oh, I'm 0:39:27.320 --> 0:39:29.279 a car guy, Hey what do you think of this? 0:39:29.719 --> 0:39:29.879 Oh? 0:39:29.960 --> 0:39:32.040 You don't want I've learned not to say you don't 0:39:32.040 --> 0:39:32.839 want to buy that. 0:39:33.040 --> 0:39:33.960 You don't want to touch that. 0:39:33.960 --> 0:39:37.040 That's a poss bought it last week, right, and that's 0:39:37.040 --> 0:39:39.920 always the answer. Oh it was just delivered. Well, you know, 0:39:40.320 --> 0:39:43.440 send your mechanic a Christmas card because you're going to 0:39:43.480 --> 0:39:45.680 be spending a lot of time with him, you don't. 0:39:45.760 --> 0:39:47.880 I've learned not to stick my foot in my mouth 0:39:48.040 --> 0:39:52.240 after having done it a dozen times, so you can. 0:39:52.480 --> 0:39:56.680 You can work with people to erase a bad LOOI 0:39:56.800 --> 0:39:59.120 what happens if someone comes to you and said, hey, 0:39:59.160 --> 0:40:01.040 I got a phone call. All these people offered me 0:40:01.080 --> 0:40:02.960 a ton of money. All I had to do is 0:40:03.040 --> 0:40:05.839 sign this assigning all my aum to them, and they 0:40:05.840 --> 0:40:07.760 gave me ten percent of the value of the firm 0:40:08.000 --> 0:40:10.000 and I'll work out the rest. What do you do 0:40:10.080 --> 0:40:10.560 with that? That? 0:40:10.600 --> 0:40:13.000 Listen? That doesn't always, That doesn't often happen. You know 0:40:13.000 --> 0:40:15.359 what what often happens is they come to us with 0:40:15.400 --> 0:40:18.640 this deal, and my first call to them was I 0:40:18.640 --> 0:40:21.319 didn't even know you were in the market to sell, right, right, 0:40:21.360 --> 0:40:24.239 like we and and and by the way, the one 0:40:24.280 --> 0:40:26.520 firm that you're talking to seems to have none of 0:40:26.560 --> 0:40:30.320 the qualities that were important to you when you left 0:40:30.360 --> 0:40:33.880 your firm five years ago. Right, So you know, I'm 0:40:34.000 --> 0:40:36.520 I'm a big fan of really understanding what the objectives 0:40:36.560 --> 0:40:37.960 are before we set out to do anything. 0:40:38.040 --> 0:40:41.080 It's more than just dollars. There's there's a lot of 0:40:41.120 --> 0:40:43.360 other factors that make a big difference. 0:40:42.960 --> 0:40:46.320 Because most advisors don't think of the fact that they're 0:40:46.560 --> 0:40:50.040 going to have to be employed by this firm right afterwards, 0:40:50.120 --> 0:40:52.319 like this is not a one time transaction. I think 0:40:52.360 --> 0:40:55.880 the other big misnomer that's out there is people are 0:40:55.880 --> 0:40:58.880 fueled by these headline numbers, right They're they're looking at 0:40:58.880 --> 0:41:01.840 these headlines. This firm sold for you know, eighteen x. 0:41:01.920 --> 0:41:05.000 This firm just sold for twenty x, and they don't 0:41:05.080 --> 0:41:08.680 understand that deals are far more complicated than that. That 0:41:08.800 --> 0:41:13.960 there's there's a cash component, right, there are contingencies, there 0:41:14.000 --> 0:41:18.920 are retention components to any deal. And so when we 0:41:18.960 --> 0:41:21.439 look at those headline numbers, we're all we're often looking 0:41:21.480 --> 0:41:24.960 at the total cost of ownership. Right you going back 0:41:24.960 --> 0:41:26.799 to your you know, your your car model, like what 0:41:26.840 --> 0:41:30.360 did the what did the firm pay to successfully acquire 0:41:30.360 --> 0:41:33.840 and integrate this this firm, It's not how much of 0:41:33.880 --> 0:41:36.799 the original owner or founder put in their pocket, right, right, 0:41:36.960 --> 0:41:39.359 And then they don't look at the tax structure, right 0:41:39.400 --> 0:41:43.600 And for many of these transactions, the tax structure is 0:41:44.280 --> 0:41:47.120 the one thing that can dictate the success or failure 0:41:47.239 --> 0:41:51.600 of these deals right right, because it really makes it 0:41:51.640 --> 0:41:55.160 can make a thin deal work really well if structured 0:41:55.160 --> 0:41:55.640 in the right way. 0:41:55.719 --> 0:41:58.040 Right, If the LLC passed through, especially if you're in 0:41:58.080 --> 0:42:02.640 New York, a California based is a big advantage versus 0:42:03.040 --> 0:42:06.080 you know, traditional C corps or whoever else people are 0:42:06.080 --> 0:42:10.640 doing it in other states. I love hearing people say 0:42:10.960 --> 0:42:15.440 we are absolutely not for sale twenty x really, let 0:42:15.520 --> 0:42:17.320 me get back to you on that. It's It's funny 0:42:17.320 --> 0:42:21.400 how money is an issue until suddenly it becomes becomes 0:42:21.480 --> 0:42:21.880 an issue. 0:42:22.000 --> 0:42:23.920 See old Robert Redford quote. Right, everything's for. 0:42:23.920 --> 0:42:28.680 Sale at a indecent proposal. Very good, Demi Moore, I 0:42:28.680 --> 0:42:31.120 don't remember who her husband was, what Harrol's that's right, 0:42:31.160 --> 0:42:35.320 that's right. So let's let's talk a little bit about 0:42:35.880 --> 0:42:42.120 some of the fun terminology here. Teams, new launches carveouts 0:42:42.239 --> 0:42:44.239 what's going on in those spaces. 0:42:44.600 --> 0:42:48.960 So you know, the interesting thing with with teams these 0:42:49.000 --> 0:42:51.640 are these are people who are typically employed by a 0:42:51.680 --> 0:42:55.040 brokerage firm. They have worked together for many, many years. 0:42:55.520 --> 0:42:58.879 They are under this false belief that they're partners, right, 0:43:00.400 --> 0:43:03.279 they're co employees, they're coworker. Yeah, they're colleagues that are 0:43:03.280 --> 0:43:05.800 often seated with, you know, next to one another. Often 0:43:05.840 --> 0:43:11.239 they have like some type of fee sharing arrangement among them, right, 0:43:11.640 --> 0:43:14.160 But there's this misnomer among them. They think they're partners. 0:43:14.480 --> 0:43:18.000 And I'm not here to burst anyone's bubble, but it 0:43:18.080 --> 0:43:20.799 comes out, you know. I force it out when we 0:43:20.880 --> 0:43:24.080 have some of our initial consults on the business startup, 0:43:24.680 --> 0:43:28.600 because I'll ask them, I'll say, you know, hey, Barry, 0:43:28.800 --> 0:43:32.120 do you know do you know John's you know, time 0:43:32.160 --> 0:43:34.960 horizon until he wants to retire. No clue, no, no 0:43:34.960 --> 0:43:35.560 no idea. 0:43:35.600 --> 0:43:38.960 So, in other words, until there's a partnership agreement, nobody's 0:43:38.960 --> 0:43:39.440 a partner. 0:43:39.520 --> 0:43:41.960 No one's really a partner, right, right, And so what 0:43:41.960 --> 0:43:43.640 we try to force them to do is really get 0:43:43.680 --> 0:43:47.759 to know one another because within this team are a 0:43:47.800 --> 0:43:50.399 whole bunch of different dynamics. Right. Someone needs to come 0:43:50.440 --> 0:43:53.759 clean that they're on the precipice of getting a divorce. Right. 0:43:53.840 --> 0:43:56.399 Someone needs to come clean that their financial affairs are 0:43:56.440 --> 0:43:59.560 just in complete disarray, right, Which when your colleagues in 0:43:59.600 --> 0:44:02.440 an office doesn't really matter, right. But if that's your 0:44:02.520 --> 0:44:05.600 business partners, damn well better know that they're going to 0:44:05.680 --> 0:44:07.840 be declaring bankruptcy within the next few you know, a 0:44:07.840 --> 0:44:11.000 few months, right. And so these are the surprises that 0:44:11.120 --> 0:44:13.239 legitimately there's legitimately launch. 0:44:13.000 --> 0:44:15.800 A business and there's a oh, I got this back depending, 0:44:15.840 --> 0:44:17.759 but don't worry, it won't affect what we do. 0:44:17.920 --> 0:44:19.480 What makes the hair go up on the in the 0:44:19.480 --> 0:44:21.839 back of my neck is when we get off we're 0:44:21.840 --> 0:44:24.239 about to close a call like that and one of 0:44:24.280 --> 0:44:26.800 the people that are on the call will say, hey, Brian, 0:44:26.800 --> 0:44:28.480 can you hang on the line for a minute. Uh uh, 0:44:29.080 --> 0:44:33.600 I know what's coming. Every single time it's a it's 0:44:33.600 --> 0:44:38.719 a prior felony conviction that they haven't disclosed, or sometimes. 0:44:38.680 --> 0:44:40.680 Matter if it's out of the United States, like a 0:44:40.680 --> 0:44:43.879 felony in South America asking for a friend, Yeah, yeah, 0:44:44.040 --> 0:44:45.200 just asking for a friend. 0:44:45.320 --> 0:44:48.320 The Uh, you know they want to talk about marital 0:44:48.400 --> 0:44:51.200 issues and uh, is that any way one? But yeah, yeah, 0:44:51.239 --> 0:44:53.239 is there any way to own this without you know, 0:44:53.280 --> 0:44:55.400 while protecting it? Uh? They want to talk about the 0:44:55.440 --> 0:44:59.120 state issues. So anytime that there's that type of divide 0:44:59.239 --> 0:45:01.520 between would be partners, big red flag. We have a 0:45:01.520 --> 0:45:04.160 whole service protocol to try and make sure that we 0:45:04.200 --> 0:45:07.040 can diffuse that. And you know that's not our information 0:45:07.080 --> 0:45:08.640 to share, but it needs to be shared. 0:45:09.160 --> 0:45:12.399 How often did someone come to you with a proposal 0:45:13.120 --> 0:45:15.239 and you look at it and say, I just can't 0:45:15.280 --> 0:45:17.160 let you sign this. This is not this is not 0:45:17.239 --> 0:45:17.759 a good deal. 0:45:18.440 --> 0:45:21.280 You know, I'm from Jersey, right, so we we can't 0:45:21.320 --> 0:45:25.319 not share our opinion. It's part of our it's part 0:45:25.360 --> 0:45:27.160 of who we are, It's how we're brought up. But 0:45:27.200 --> 0:45:29.000 I won't say that. What I'm going to say is 0:45:30.400 --> 0:45:32.120 I'll say, in a polite way, I'll say what are 0:45:32.160 --> 0:45:34.920 you thinking? Right, because I'll say, like, what were your objectives? 0:45:34.960 --> 0:45:36.640 You know, what do you think that this are? 0:45:36.640 --> 0:45:39.080 You're going to finest your way around getting to this 0:45:39.160 --> 0:45:39.879 is a bad deal? 0:45:39.960 --> 0:45:42.520 I mean, come on, you know our colleagues in this industry, right, 0:45:42.520 --> 0:45:44.919 they're very prideful group. Right. Some may say that there's 0:45:44.960 --> 0:45:47.960 a big ego about them, and they're you know, they're 0:45:48.040 --> 0:45:50.600 used to being the smartest folks in the room. And 0:45:51.040 --> 0:45:54.239 what shocks me more than anything else that we've talked 0:45:54.239 --> 0:45:58.080 about today, what shocks me is how great investment advisors 0:45:58.680 --> 0:46:01.440 lose their when it comes to the securities analysis of 0:46:01.480 --> 0:46:02.719 their own security, right. 0:46:02.719 --> 0:46:06.160 Because there's no objectivity, they can't separate themselves. 0:46:05.680 --> 0:46:08.160 Right, So you know this, I mean, really, at the 0:46:08.239 --> 0:46:09.840 end of the day, what do you own? You have 0:46:09.880 --> 0:46:13.600 a concentrated securities position, right, right, You better than me 0:46:13.840 --> 0:46:17.160 as the investment advisor, can analyze the value of that security, right. 0:46:17.160 --> 0:46:19.879 You have all sorts of methods for doing that, and 0:46:19.960 --> 0:46:23.560 so my job is to is to redirect your skills 0:46:24.120 --> 0:46:26.080 to be able to do that. And most of the 0:46:26.160 --> 0:46:27.040 time they see that. 0:46:28.000 --> 0:46:30.120 So so let me ask you this question because I'm 0:46:30.280 --> 0:46:34.759 genuinely aghast. We talked earlier about people not making the 0:46:34.800 --> 0:46:36.400 phone call because they don't want to run up the 0:46:36.440 --> 0:46:39.640 legal bill every now and then. I'm horrified to see 0:46:39.640 --> 0:46:45.000 people not have attorneys, not have accountants sign documents like 0:46:45.160 --> 0:46:48.560 how much are you saving? You're talking about millions of 0:46:48.640 --> 0:46:52.280 dollars in revenue, tens of millions of dollars in revenue, 0:46:52.320 --> 0:46:55.560 millions of dollars in salary. How can you sign a 0:46:55.640 --> 0:47:00.759 document without having a lawyer review it? Oh, save ten 0:47:00.880 --> 0:47:04.279 thousand dollars. It's gonna cost you three million dollars over 0:47:04.320 --> 0:47:09.640 the next decade. I'm apoplectic here. I see this all 0:47:09.680 --> 0:47:11.960 the time. I'm genuinely aghast. 0:47:12.880 --> 0:47:16.040 I too share your sentiments. I mean, you know, of 0:47:16.120 --> 0:47:19.359 course I'm biased. I think that I think you should 0:47:19.440 --> 0:47:24.520 never go into a novel financial transaction, particularly one that 0:47:24.640 --> 0:47:27.680 capitalizes the decades of goodwill and trust that you have 0:47:27.760 --> 0:47:31.920 developed throughout the course of your career without number one, 0:47:32.280 --> 0:47:36.040 an objective party, right, even if that's a knowledgeable friend 0:47:36.040 --> 0:47:37.760 of yours to say, what the heck are you thinking? 0:47:38.920 --> 0:47:42.120 And an experienced party, right, someone who's been there before 0:47:42.320 --> 0:47:45.640 and knows what's important. You know what needs to be 0:47:45.680 --> 0:47:48.640 handled urgently, and what's everything else? Right? You know, what's 0:47:48.680 --> 0:47:50.600 the noise that we can kind of set to the side. 0:47:50.840 --> 0:47:54.840 But it amazes me the transactions that people enter into 0:47:55.360 --> 0:48:01.080 without the benefit of objective, experienced counsel. It really does. 0:48:01.200 --> 0:48:05.920 And you know, and this isn't just self interest speaking 0:48:06.600 --> 0:48:09.000 because the odds are they going to go to a 0:48:09.040 --> 0:48:12.839 different attorney than you. Sure, just statistically, But if you're 0:48:13.000 --> 0:48:16.120 signing a contract that's worth millions and millions of dollars, 0:48:17.040 --> 0:48:19.200 isn't it just common sense to have an attorney look 0:48:19.239 --> 0:48:24.600 it over. I mean, I'm genuinely aghast when I see 0:48:24.719 --> 0:48:27.520 and hear about these things, and it happens more often 0:48:28.000 --> 0:48:30.920 than one would imagine. And it's not like you're a minor. 0:48:30.960 --> 0:48:32.520 It's not like you're going to be able to get 0:48:32.520 --> 0:48:34.520 that you know. Oh no, they didn't know what they 0:48:34.560 --> 0:48:36.040 were doing. Let's just decay that. 0:48:36.440 --> 0:48:38.799 So here, here's the distinction that I've been able to 0:48:38.840 --> 0:48:41.040 call together over the years is that people that think 0:48:41.040 --> 0:48:43.880 of this as an investment, people that think of this 0:48:43.960 --> 0:48:47.279 as a business, are apt to spend that money. Sure right, 0:48:47.280 --> 0:48:50.000 they say, Hey, there's a transaction cost, and it's making 0:48:50.040 --> 0:48:52.920 sure I have good counsel to help optimize the transaction, 0:48:53.360 --> 0:48:57.040 mitigate risk, et cetera, et cetera. Think about brokers, even 0:48:57.040 --> 0:48:59.400 the most successful among them, who have been sitting in 0:48:59.440 --> 0:49:02.520 a wire house throughout, you know, for decades, throughout their 0:49:02.520 --> 0:49:07.319 whole career, they've never written a check for any business endeavor. Right, right. 0:49:07.400 --> 0:49:10.759 The only attorneys they've ever hired is, you know, is 0:49:10.800 --> 0:49:14.240 probably to buy a house and maybe get divorced. 0:49:14.320 --> 0:49:17.279 But but you would hire an attorney to buy a house, right, 0:49:17.280 --> 0:49:19.359 You wouldn't just go in and do the closing. Yeah, 0:49:19.400 --> 0:49:20.520 I could figure it out. 0:49:20.719 --> 0:49:23.040 But that's only because your realtor sent you to someone 0:49:23.080 --> 0:49:26.080 who's charging one thousand dollars to do the closing for you, right, 0:49:26.320 --> 0:49:28.359 It's not really because you would have found them on 0:49:28.400 --> 0:49:31.920 your own. Here right, when you're saying this is what 0:49:32.000 --> 0:49:35.520 objective counsel is going to cost, that's a tough check 0:49:35.600 --> 0:49:39.839 to stroke, so less you're thinking about the brighter right right. 0:49:39.960 --> 0:49:41.879 I guess if you're sitting in a place where you're 0:49:41.880 --> 0:49:44.080 not paying for legal, you're not paying for compliance, you're 0:49:44.120 --> 0:49:47.600 not playing for marketing, you're not paying for trading, you're 0:49:47.600 --> 0:49:49.799 not trade execution, you're not paying for any of that. 0:49:50.239 --> 0:49:54.120 It comes out of out of your gross revenue on 0:49:54.160 --> 0:49:57.359 a grid, So you don't really recognize that these are 0:49:57.400 --> 0:50:01.200 actual costs. I mean, giving up half of your comp 0:50:01.320 --> 0:50:05.560 or more to pay for that. I would think that's intuitive, 0:50:05.920 --> 0:50:09.480 but I guess not so. The last question about M 0:50:09.520 --> 0:50:12.239 and A that that I have to ask is I 0:50:13.000 --> 0:50:16.080 keep seeing these headlines? Is this the end of the 0:50:16.120 --> 0:50:20.640 small ria again? It seems a little you know, self interested, 0:50:20.800 --> 0:50:23.759 But what do we think about whether you want to 0:50:23.800 --> 0:50:26.880 call it a lifestyle practice or a small local practice. 0:50:28.320 --> 0:50:32.000 These are people everybody in the town knows and when 0:50:32.040 --> 0:50:35.319 they have a financial question go to Am I wrong 0:50:35.360 --> 0:50:37.440 in thinking those aren't going away? They're going to be 0:50:37.440 --> 0:50:38.080 here for a while. 0:50:39.680 --> 0:50:42.719 Those small RaaS will be here throughout the duration of 0:50:42.760 --> 0:50:46.640 our lives. And the reason for that is probably not 0:50:46.719 --> 0:50:50.200 what you think. The reason for that is technology. Is technology, okay, yeah, 0:50:50.200 --> 0:50:52.640 because what you could do as a as a solo 0:50:52.719 --> 0:50:55.680 practitioner or two or three people working in an office 0:50:55.719 --> 0:50:59.319 today is just so much more expansive than what you 0:50:59.360 --> 0:51:02.840 could do to years ago. That but I think even 0:51:02.880 --> 0:51:06.520 more compelling is the scalability of that technology, right, the 0:51:06.600 --> 0:51:09.640 fact that everything is a cloud based application and you 0:51:09.680 --> 0:51:12.440 can scale it down to a single user license. Think 0:51:12.480 --> 0:51:15.200 of the CRMs, right, I mean everyone knows the CRM. 0:51:14.960 --> 0:51:18.040 Salesforce is a big giant company. There's a dozen of 0:51:18.040 --> 0:51:19.640 them for rias. 0:51:19.920 --> 0:51:22.920 But to stand up a CRM twenty years ago, to 0:51:22.920 --> 0:51:26.000 stand up a CRM like a salesforce, right, you would 0:51:26.080 --> 0:51:28.840 have to buy a dedicated server, right posted in a 0:51:28.920 --> 0:51:30.960 cooled office, right. 0:51:31.480 --> 0:51:34.080 Have have replicate the data, manage it. 0:51:34.160 --> 0:51:36.279 Right. Yeah, you have backups all over the place, right, 0:51:36.320 --> 0:51:38.920 you know, backup tapes and all this, you know, crazy stuff. 0:51:39.080 --> 0:51:41.480 Now you buy a license and that's it. You buy 0:51:41.480 --> 0:51:43.439 a single license and you log in and you start 0:51:43.480 --> 0:51:46.960 to configure it. And so the scalability of technology, the 0:51:46.960 --> 0:51:53.040 scalability of telecommunications is the game changer, right. And I 0:51:53.040 --> 0:51:56.440 don't think too many people plot out the acceleration of 0:51:56.520 --> 0:52:02.640 the independent, fragmented wealth management business with the prominence of 0:52:02.840 --> 0:52:06.400 scalable technology solutions in the place, in the space. But 0:52:06.440 --> 0:52:08.720 I would say that they've developed in lockstep with one another. 0:52:08.840 --> 0:52:14.040 Huh really quite fascinating. Tell us about your practice. What 0:52:14.239 --> 0:52:16.520 is the thing that keeps you most busy? What are 0:52:16.560 --> 0:52:20.719 what are the other areas of practice that someone who says, hey, 0:52:20.760 --> 0:52:24.080 I want to set up a registered investment advisory, I 0:52:24.160 --> 0:52:27.840 have half a billion dollars in assets. What what is 0:52:27.920 --> 0:52:30.240 the thing that keeps you most active? 0:52:30.719 --> 0:52:33.080 So you know, we talked earlier about the work we 0:52:33.160 --> 0:52:37.640 do within Market Council Consulting, our consulting firm, But most 0:52:37.640 --> 0:52:40.920 of the time I'm spending is personally is Within our 0:52:41.000 --> 0:52:44.120 law firm we have we have three distinct practice areas. 0:52:44.120 --> 0:52:47.000 One is regulatory, where not only do we uh do 0:52:47.080 --> 0:52:51.000 we work a lot with with advisors on various legal matters, 0:52:51.000 --> 0:52:54.680 but also regulatory interactions right working with state and federal 0:52:54.719 --> 0:53:01.080 regulators on anything that rises beyond a simple examination. The 0:53:01.160 --> 0:53:04.560 second is business transactions. Right in our business transactions practice 0:53:04.960 --> 0:53:11.640 spans from startup all the way to interesting permutations of 0:53:11.719 --> 0:53:16.440 the business, whether it's business compliance, it's succession planning or implementation, 0:53:18.520 --> 0:53:21.800 it's selling off equity, M and A and everything in between. 0:53:22.080 --> 0:53:24.160 And then the third area, and probably the area that 0:53:24.200 --> 0:53:28.359 people know us most for, is employment transition work, where 0:53:28.400 --> 0:53:31.920 we help folks go from wherever they are to wherever 0:53:31.960 --> 0:53:35.440 they want to be and everywhere and help them navigate 0:53:35.920 --> 0:53:36.880 everything in between. 0:53:37.000 --> 0:53:40.000 So, if I'm in a right to work state, how 0:53:40.120 --> 0:53:44.200 challenging is it for me in the finance industry, either 0:53:44.239 --> 0:53:47.440 as a broker or a trader or a fund manager 0:53:47.600 --> 0:53:49.960 or an RIA to say, Hey, I want to switch 0:53:50.000 --> 0:53:50.879 and go somewhere else. 0:53:51.040 --> 0:53:55.319 You know, it's funny when I describe the employment arrangements 0:53:55.400 --> 0:53:58.520 or restrictions to people outside of this industry shocked. They 0:53:58.520 --> 0:54:01.880 think I'm making it up. They think it's a story, 0:54:01.880 --> 0:54:04.880 and I don't know. I think there's more interesting stories 0:54:04.880 --> 0:54:08.759 to tell than that. But it is beyond comprehension for 0:54:08.840 --> 0:54:12.280 those that don't spend time in this space. Right, everything 0:54:12.360 --> 0:54:16.799 from restrictive covenants such as the inability to solicit uh, 0:54:16.960 --> 0:54:20.320 you know, former customers, to no higher provisions, the inability 0:54:20.320 --> 0:54:24.680 to you know, to hire former colleagues, to non competes 0:54:25.080 --> 0:54:28.280 which everyone knows about, to garden leave provisions which require 0:54:28.280 --> 0:54:31.400 people to maybe provide some type of extended notice or 0:54:31.440 --> 0:54:32.839 to sit out for a period of time. 0:54:33.040 --> 0:54:33.120 Right. 0:54:33.520 --> 0:54:34.680 These restrictions are. 0:54:34.600 --> 0:54:37.759 Real, right, and they're being found to be legal. 0:54:37.600 --> 0:54:41.040 And they're found in varying degrees found to be enforceable, right, 0:54:41.040 --> 0:54:45.200 depending upon the reasonableness of the restrictions, the states that 0:54:45.239 --> 0:54:48.560 we're going to be dealing with these restrictions in and 0:54:49.280 --> 0:54:51.640 you know, and that's how enforceable they are. But we 0:54:51.680 --> 0:54:53.440 also have to look at the firms that they're leaving. 0:54:53.480 --> 0:54:55.960 You know, what's the reputation of the firm for actually 0:54:56.040 --> 0:54:58.360 enforcing the terms of those of those contracts. 0:54:58.800 --> 0:55:02.719 So we hired some ones from a major wirehouse and 0:55:02.760 --> 0:55:07.960 I got this like sieving email from general counsel. I 0:55:07.960 --> 0:55:10.320 picked the phone and go, dude, what's up. We're a 0:55:10.480 --> 0:55:12.600 member of protocol. He's like, oh, sorry, I don't worry 0:55:12.640 --> 0:55:14.960 about it, just deleted. Can you send me an email 0:55:15.000 --> 0:55:18.480 confirming here? Yeah, yeah, no problem. I mean, it was 0:55:18.680 --> 0:55:22.440 savage to h no worries mod It was just like 0:55:22.480 --> 0:55:26.279 a crazy transition. Explain to people who are not in 0:55:26.320 --> 0:55:30.120 the industry what protocol is and how that works and 0:55:30.480 --> 0:55:34.600 why people are just so, you know, Jacqueline Hyde, if 0:55:34.640 --> 0:55:35.759 you're not a member. 0:55:35.719 --> 0:55:40.800 So the Broker Protocol, I mean we should first probably 0:55:40.800 --> 0:55:44.600 say that before the Broker Protocol, the industry was a 0:55:44.600 --> 0:55:46.920 bit of a Wild West, right, free for all. It 0:55:47.120 --> 0:55:49.080 was a bit of the free for all, right. People 0:55:49.120 --> 0:55:52.680 were leaving to go to firms. In fact, I was 0:55:52.719 --> 0:55:54.960 in I was in court in the Southern District of 0:55:55.040 --> 0:55:56.920 New York, federal court, right because all these are handled 0:55:56.960 --> 0:56:02.080 in federal court. And I watched a firm go in 0:56:02.080 --> 0:56:04.480 front of a judge and say this broker should not 0:56:04.520 --> 0:56:07.840 be able to leave and solicit its clients, and here's 0:56:07.880 --> 0:56:11.040 our trade secrets and all of these things. And the 0:56:11.080 --> 0:56:14.120 next case that was called, this attorney was on the 0:56:14.160 --> 0:56:17.960 other side explaining why they had a right to recruit 0:56:18.120 --> 0:56:21.920 this broker. So the hypocrisy was not lost on federal judges, 0:56:21.920 --> 0:56:23.640 who quite frankly, have better things to do. 0:56:23.840 --> 0:56:27.239 Right. My partner Josh calls this a prisoner exchange, like 0:56:27.440 --> 0:56:30.240 guys from UBS go to Morgan, from Morgan to Merrill, 0:56:30.320 --> 0:56:33.640 from Meryll to JPM Chase and then and then back 0:56:33.680 --> 0:56:39.360 to UBS. It's literally everybody is chasing a signing bonus, which, 0:56:39.560 --> 0:56:42.120 if you have a decent amount of assets under management, 0:56:42.440 --> 0:56:43.880 can be millions of dollars. 0:56:43.960 --> 0:56:46.640 Right. And so from a distance, right, this looks like 0:56:46.719 --> 0:56:49.600 indentured servitude, right, or this looks like that we're trading 0:56:49.680 --> 0:56:52.719 human chattel. Right. Both things that are you know, completely 0:56:52.760 --> 0:56:55.680 illegal and way outdated. You know, not only in this 0:56:55.760 --> 0:56:58.680 country but in the world, but in the securities industry. 0:56:59.080 --> 0:57:01.120 There were still shades of that up until the Broker 0:57:01.160 --> 0:57:04.399 Protocol and maybe still in some pockets. 0:57:04.280 --> 0:57:05.839 When did the protocol first come out? 0:57:06.040 --> 0:57:10.879 So protocol has been existing since the mid two thousands, right, 0:57:10.960 --> 0:57:16.880 And it's a limited forbearance agreement that that effectively says 0:57:17.120 --> 0:57:19.640 if if a firm is a member of the protocol, 0:57:21.200 --> 0:57:26.160 they agree not to enforce certain terms restrictive covenants that 0:57:26.240 --> 0:57:30.240 might be contained in an employment agreement. If the broker 0:57:30.440 --> 0:57:34.280 that's leaving goes to another protocol firm and agrees to 0:57:34.320 --> 0:57:37.920 abide by the quote unquote protocol right taking of limited information, 0:57:38.600 --> 0:57:42.640 furnishing certain notice, and you know, there's a few other provisions. 0:57:42.600 --> 0:57:46.640 And somehow this escapes anty trust provisions somehow. I mean, 0:57:46.680 --> 0:57:48.960 shouldn't it be like, hey, you guys are creating a 0:57:48.960 --> 0:57:50.360 little oligopoly here. 0:57:50.680 --> 0:57:52.880 Somehow this deal that was concocted, you know, on the 0:57:52.880 --> 0:57:57.400 back of a cocktail napkin, you know, seemingly amongst four 0:57:58.120 --> 0:58:00.440 global titans you know of there's. 0:58:00.240 --> 0:58:03.440 No price fixing, So I guess it it escapes that way. 0:58:03.320 --> 0:58:06.640 The so so it was actually our first argument. So 0:58:06.680 --> 0:58:10.200 we were the first firm to add an r I 0:58:10.360 --> 0:58:13.800 A to the broker protocol. Oh really, And the administrator 0:58:13.840 --> 0:58:16.120 at the time said, uh, he called me up, sir Brian, 0:58:16.160 --> 0:58:18.040 you can't do this. It is not is not for RA. 0:58:18.160 --> 0:58:22.840 As which administrator it was of which the which government agency? 0:58:22.920 --> 0:58:26.280 No, No, no government agency. They just appointed a voluntary 0:58:26.320 --> 0:58:34.400 administrator within Yeah, there's no FINRA, there's no sec oversight this. 0:58:32.840 --> 0:58:35.200 This well, let's see what the judge has to say 0:58:35.320 --> 0:58:36.400 speaking of anti trust. 0:58:36.560 --> 0:58:39.440 So these four founders, right that you know that concocted this, 0:58:39.640 --> 0:58:42.680 uh you know, this this three page agreement. They say, 0:58:42.720 --> 0:58:44.640 this is not this was not meant for arias. And 0:58:44.720 --> 0:58:47.360 I say, well, you know, then it seems like we 0:58:47.440 --> 0:58:49.720 have a legal problem because it seems like you guys 0:58:49.720 --> 0:58:53.080 are creating a moat and this seems to be an agreement. 0:58:53.160 --> 0:58:57.560 To restrict competition in the space of providing financially. 0:58:57.680 --> 0:59:00.000 Absolutely, and so I said, so, I guess we're gonna 0:59:00.080 --> 0:59:01.680 have to you know, we're gonna have to then deal 0:59:01.840 --> 0:59:05.360 deal with that. They thought again about it, and they said, 0:59:05.360 --> 0:59:09.000 you know, on second thought, we're okay with the RAA joints. 0:59:08.680 --> 0:59:10.640 As opposed to a judge thrown the whole. 0:59:10.480 --> 0:59:15.800 Thing out right because they never they never defined the term, right, broker, right, like, 0:59:15.920 --> 0:59:17.400 I mean, we know what a broker is, but they 0:59:17.440 --> 0:59:19.680 never defined the term. I mean, arguably a car wash 0:59:19.720 --> 0:59:22.000 can join the broker protocol, right because it is like 0:59:22.040 --> 0:59:25.840 a prisoner exchange, right, It's it is, you know, it's 0:59:26.000 --> 0:59:29.280 it's very much a protocol. And so coming off of that, 0:59:29.320 --> 0:59:32.280 you know, thousands of RaaS have joined the broker protocol, 0:59:32.680 --> 0:59:38.080 and they are beneficiaries. Since they're often the RaaS often 0:59:38.120 --> 0:59:41.760 have a less restrictive environment. Their beneficiaries of this broker protocol, 0:59:41.800 --> 0:59:48.160 they're able to freely extrapolate talent from these otherwise restrictive 0:59:48.200 --> 0:59:51.120 scenarios and bring them to their firm. 0:59:51.320 --> 0:59:57.040 And I suspect capitalism supports that that you want competition 0:59:57.080 --> 0:59:59.960 in the marketplace for talent, you want the ability to 1:00:00.160 --> 1:00:03.720 become more efficient, more productive, move around, go where there's 1:00:03.760 --> 1:00:08.800 the best deal. It's almost you know, any other industry, 1:00:09.120 --> 1:00:10.320 it wouldn't even be a question. 1:00:11.000 --> 1:00:14.520 It wouldn't be a question. And I'm smirking here. I 1:00:14.560 --> 1:00:17.280 can't see that on radio. But because there's a running 1:00:17.360 --> 1:00:21.920 joke within the space, there's a gathering each year that 1:00:22.120 --> 1:00:26.000 is assembled by a leading labor employment firm in the space, 1:00:26.360 --> 1:00:29.640 and they bring together probably about one hundred practitioners who 1:00:29.680 --> 1:00:32.840 focus on employment law within the securities industry. And for 1:00:32.880 --> 1:00:38.120 many years, I was the only independent representative that was 1:00:38.280 --> 1:00:41.560 coming that worked with RaaS that would come to these meetings. 1:00:42.040 --> 1:00:46.480 And and it's a big Q and a session, right. 1:00:46.480 --> 1:00:50.200 We work on case studies, and there wasn't a case 1:00:50.200 --> 1:00:53.160 study that passed where I wasn't the butt of one 1:00:53.160 --> 1:00:55.280 of the jokes, you know, and like unless Brian decides 1:00:55.320 --> 1:00:58.000 to unravel this, you know. And so you know, for 1:00:58.120 --> 1:01:01.520 many years we were the troublemakers, and you know with 1:01:01.600 --> 1:01:07.120 the Broker Protocol. When the Broker Protocol UH experienced what 1:01:07.160 --> 1:01:11.080 we alleged was was some gamesmanship when Morgan Stanley about 1:01:11.120 --> 1:01:15.280 out of the protocol. UH, we actually forced a change 1:01:15.320 --> 1:01:18.760 in the administrator because lo and behold, the law firm 1:01:19.320 --> 1:01:23.280 that was representing Morgan Stanley UH forgot to send a 1:01:23.320 --> 1:01:27.560 timely notification of Morgan Stanley's withdrawal, and. 1:01:27.800 --> 1:01:29.560 So there was still members by accident. 1:01:29.760 --> 1:01:34.080 Well, the the the they announced, oh, you know, our 1:01:34.120 --> 1:01:37.160 o mission. But they're suddenly, you know, withdrawing from the 1:01:37.160 --> 1:01:41.280 protocol without the requisite notice. And so yeah, you know, 1:01:41.320 --> 1:01:45.440 we've been we've been advocates of of not only having 1:01:45.440 --> 1:01:48.280 the protocol UH, but making sure that the terms of 1:01:48.280 --> 1:01:51.440 the protocol are enforced, that there's no gamesmanship within the protocol. 1:01:51.960 --> 1:01:56.080 And what's the what's the game theory for one big 1:01:56.120 --> 1:02:02.080 firm with drawing from protocol? They that confident that because 1:02:02.120 --> 1:02:04.640 I know one of the provisions is no rating. You 1:02:04.680 --> 1:02:07.520 could take a couple of people, But you can't decimate 1:02:07.560 --> 1:02:10.560 an office. Sure, now that they're no longer involved, Hey, 1:02:10.560 --> 1:02:14.120 you're back to the wild West, let's go, you know, 1:02:14.440 --> 1:02:15.640 pillage Morgan Stanley. 1:02:15.720 --> 1:02:18.400 Well, there's still no rating, right, So the limitation on 1:02:18.520 --> 1:02:21.240 rating doesn't em any from the protocol. The protocol just 1:02:21.280 --> 1:02:23.280 doesn't protect you from rating. 1:02:23.400 --> 1:02:24.120 Oh okay. 1:02:24.240 --> 1:02:28.360 So I honestly think that some of the larger firms 1:02:28.360 --> 1:02:30.600 that are in the protocol are there as a matter 1:02:30.640 --> 1:02:33.720 of pride. I think that if they were to withdraw, 1:02:34.800 --> 1:02:38.480 I think that their advisors would see that as a 1:02:38.520 --> 1:02:42.600 sign of defeat. Really, I do believe that. I think 1:02:42.640 --> 1:02:44.880 that's one of you know, that's one of the theories. 1:02:44.920 --> 1:02:46.959 And I've spoken to executives at some of these large 1:02:47.000 --> 1:02:49.480 firms and they said that the optics around withdrawing would 1:02:49.520 --> 1:02:52.120 be would be terrible. They also believe that there's a 1:02:52.120 --> 1:02:54.920 brighter future for them. They believe that they can innovate 1:02:54.960 --> 1:02:59.320 their way out of this and have have brokers stay 1:02:59.360 --> 1:03:04.600 at these firms for all the right reasons. History indicates otherwise, 1:03:04.640 --> 1:03:08.480 because by all measures, they're losing the game to independent 1:03:08.480 --> 1:03:11.960 wealth management. But there's still a lot of really smart, 1:03:12.000 --> 1:03:14.040 talented people there. As we talked about the sport. 1:03:14.160 --> 1:03:16.360 So let's stay with this. I'll circle back to m 1:03:16.400 --> 1:03:20.000 and A later. So first, full disclosure, I've been wrong 1:03:20.160 --> 1:03:23.760 about the brokers industry for thirty years. I've been saying 1:03:23.800 --> 1:03:25.840 I don't see how they don't collapse under the weight 1:03:26.000 --> 1:03:31.560 of their own fees, churning underperformance, and the lack of 1:03:31.560 --> 1:03:34.760 a fiduciary standard. To me, it just makes more sense 1:03:34.800 --> 1:03:38.400 that your financial planner should be more like your attorney 1:03:38.480 --> 1:03:42.040 than a used car salesman. But that's starting to change. 1:03:42.040 --> 1:03:45.040 So I've been wrong for twenty five years and it's 1:03:45.080 --> 1:03:45.880 beginning to change. 1:03:46.000 --> 1:03:49.080 What's changing, So what is changing. 1:03:48.840 --> 1:03:53.439 Is the big broker dealers kind of figured out that 1:03:54.400 --> 1:04:00.520 the compliance nightmare and the legal nightmare of transactional business 1:04:01.200 --> 1:04:05.360 is so much harder than Wait, we could just charge 1:04:05.400 --> 1:04:09.760 a fee for managing their money, not sell them bs 1:04:09.800 --> 1:04:13.280 syndicate or not sell them IPOs that maybe they work, 1:04:13.400 --> 1:04:15.880 maybe they don't. The good ones all get sucked up 1:04:15.920 --> 1:04:19.040 by the institution, so the junk that's left will stick 1:04:19.040 --> 1:04:22.320 in MoMA. Those are all ticking time bombs. Let's just 1:04:22.520 --> 1:04:26.480 kind of go semi passive, keep it low key, and 1:04:27.080 --> 1:04:30.640 eliminate ninety nine percent of our compliance headaches. Like some 1:04:30.720 --> 1:04:34.160 of the bigger firms have gotten that message and either 1:04:34.160 --> 1:04:38.280 their hybrid you know, half RIA half bds or really 1:04:38.320 --> 1:04:43.680 have aggressively moved into VRIA space. So whereas I thought 1:04:44.160 --> 1:04:47.840 they would collapse under their own weight, they kind of said, oh, 1:04:48.160 --> 1:04:50.640 we want to eat from both sides of the table. 1:04:50.640 --> 1:04:52.640 So now that you're dealing with the reverse churn, right, 1:04:52.640 --> 1:04:54.919 you're dealing with you're dealing with clients who are paying 1:04:54.920 --> 1:04:55.440 a fee. 1:04:55.720 --> 1:04:58.560 Went from churn and burn to net and forget it. 1:04:58.640 --> 1:05:00.400 That's a good way to keep it, keep it running. 1:05:00.480 --> 1:05:03.960 Although that really to be fair, That really isn't isn't 1:05:04.440 --> 1:05:06.480 isn't fair because I know plenty of guys that are 1:05:07.200 --> 1:05:10.600 and men and women that are arias at big So 1:05:10.720 --> 1:05:14.200 I've been slagging everybody, so let me, you know, throw 1:05:14.240 --> 1:05:17.720 a compliment. Plenty of people at big farms do really 1:05:17.840 --> 1:05:22.360 nice work on behalf of their clients, mostly operating as arias. 1:05:22.480 --> 1:05:25.160 Every now and then they take off their RIA hat, 1:05:25.200 --> 1:05:28.240 they put on their broker dealer hat. Here's a secondary, 1:05:28.320 --> 1:05:32.200 here's some insurance product, here's this. So it's not really 1:05:32.400 --> 1:05:35.880 one hundred percent true fiduciary, but it looks so much 1:05:35.920 --> 1:05:38.400 more like it than it did in the nineteen nineties 1:05:38.720 --> 1:05:40.280 when it really was the wild West. 1:05:40.400 --> 1:05:42.600 So a couple of things on that. First of all, 1:05:43.480 --> 1:05:48.040 the way these sophisticated organizations do is they win a 1:05:48.120 --> 1:05:51.440 multiple fronts, right, because along with what you're saying here right, 1:05:51.440 --> 1:05:55.040 as they've evolved their product, they've they've mitigated risk, they've 1:05:55.080 --> 1:05:58.240 also engaged in some sleight of hint. Right. So where 1:05:58.480 --> 1:06:02.320 advisors are subject to a foot utree obligation, would you know, right, 1:06:02.440 --> 1:06:04.720 that means they have to act in the best interests 1:06:04.720 --> 1:06:05.960 of their clients. 1:06:05.720 --> 1:06:10.320 Which seems pretty instinctially how you want your financial advisors. 1:06:09.920 --> 1:06:13.040 You would think, right, But then then they get blessed 1:06:13.040 --> 1:06:16.200 and they get they get blessed by the SEC on 1:06:16.280 --> 1:06:20.080 this notion of a best interest standard, right, which is 1:06:20.480 --> 1:06:22.400 not a fiduciary not a fiduciary standard. 1:06:22.480 --> 1:06:24.400 You can call it what you want. It's it's black 1:06:24.480 --> 1:06:28.120 or white, either you're a fiduciary or you're something else entirely. 1:06:27.880 --> 1:06:30.720 But it just coincidentally has the two core words that 1:06:30.760 --> 1:06:32.400 define the fiduciarye standard. Right. 1:06:32.440 --> 1:06:34.320 I mean, this is where I go on a tirade 1:06:34.320 --> 1:06:36.840 as to hey, liars are going to lie and there 1:06:36.840 --> 1:06:38.840 ain't nothing you're going to do to change it. Like 1:06:38.920 --> 1:06:40.720 I want to give them the benefit of the data. 1:06:40.840 --> 1:06:43.880 I know you do, but I they just keep disappointing. 1:06:43.960 --> 1:06:45.880 But here's the distinction that I think will and it'll 1:06:45.880 --> 1:06:48.400 help you with your segue over to M and A 1:06:48.400 --> 1:06:52.720 as well, is that I think I think financial advisors, 1:06:52.760 --> 1:06:56.200 whether they are brokers or advisors, are largely an amazing 1:06:56.280 --> 1:06:58.800 crop of people. I think almost all of them are 1:06:58.840 --> 1:07:03.160 in it for the best of reasons. I think we 1:07:03.280 --> 1:07:06.600 have a high degree of success in the industry. People 1:07:06.640 --> 1:07:11.320 make a really fine living and they're doing good work. 1:07:11.320 --> 1:07:16.080 You can they're very well intentioned people. I think where 1:07:16.120 --> 1:07:19.800 you face this dichotomy is with the firms, right, because 1:07:19.840 --> 1:07:23.600 the firms, even if they push out a fee based. 1:07:23.400 --> 1:07:25.200 Program, they won't have it both ways. 1:07:25.240 --> 1:07:27.360 The question is the legal standard of care. The question 1:07:27.480 --> 1:07:30.120 is are the products and they're pure? Is there a 1:07:30.200 --> 1:07:33.640 cash threshold in there where they're scraping money off the top? Right, 1:07:33.920 --> 1:07:37.440 Because at the end of the day, this firm's management 1:07:37.560 --> 1:07:40.320 and their board have a fiduciary obligation to who the 1:07:40.360 --> 1:07:43.800 shareholder that's right, right, And that's the biggest distinction that 1:07:43.840 --> 1:07:49.640 we have between traditional brokerage industry and the wealth management industry, 1:07:50.400 --> 1:07:52.120 and that's changing. 1:07:52.760 --> 1:07:53.640 How is that changing? 1:07:53.800 --> 1:07:56.480 Well, I mean M and A has come upon the 1:07:56.480 --> 1:08:01.600 wealth management space. You know, there's there's hysteria right when 1:08:01.640 --> 1:08:03.960 when it comes to M and A, there's there's a 1:08:04.000 --> 1:08:06.640 real lack of logic that's out there in. 1:08:06.640 --> 1:08:09.440 Terms in terms of who's getting put together or the 1:08:09.480 --> 1:08:11.880 price is paid or what's the hysteria? 1:08:12.040 --> 1:08:15.160 Yes, all of it. Yes, I think that I think 1:08:15.200 --> 1:08:19.000 there's been an influxing capital into the space. Investors see 1:08:19.040 --> 1:08:23.840 this as a as a safe investment, right, but one 1:08:24.080 --> 1:08:28.080 with with significant upside, right like any other self regulatory. 1:08:28.160 --> 1:08:30.920 Oh so when you say these are these are finner rules, 1:08:30.960 --> 1:08:33.360 these are my attitude has always been they could go 1:08:33.439 --> 1:08:36.600 leap in a lake. They have no regulatory authority over me. 1:08:36.760 --> 1:08:39.400 Who gave up my seven? And every now and then 1:08:39.520 --> 1:08:42.760 I get a request from FINRA and I pick up 1:08:42.760 --> 1:08:46.760 the phone and my compliance people aren't happy, but I 1:08:46.880 --> 1:08:48.800 let them know what I really think. I've written what 1:08:48.920 --> 1:08:52.840 I really think. A whole decide that they were probably 1:08:52.880 --> 1:08:57.040 the single most corrupt organization in finance when it came 1:08:57.120 --> 1:09:00.320 to their arbitrations. It was just theft out and I 1:09:00.400 --> 1:09:02.439 will defend that in court if I have to. So, 1:09:02.640 --> 1:09:08.240 I am, but this is a nineties era perspective. I'm biased, 1:09:08.600 --> 1:09:10.920 And back then they weren't called Finnra. Back then they 1:09:10.920 --> 1:09:14.400 were called any SDR, which had such a harbor reputation 1:09:14.439 --> 1:09:16.960 they had to change their name. Tell me, am, I 1:09:17.360 --> 1:09:24.120 overstating a nineties era distaste for that self regulatory organization? 1:09:24.520 --> 1:09:27.679 Or is that you know how a lot of people felt. 1:09:28.439 --> 1:09:30.559 You are not overstating it. It is how a lot 1:09:30.560 --> 1:09:35.160 of people felt. The organization has evolved a little better, 1:09:35.200 --> 1:09:37.519 haven't that? But it hasn't gotten better on the whole. 1:09:37.600 --> 1:09:39.880 I mean there are areas where they have improved. The 1:09:39.960 --> 1:09:42.680 arbitration process has gotten better. 1:09:42.600 --> 1:09:46.439 By judicial decree because it was found to be third 1:09:46.479 --> 1:09:48.800 world corrupt. Again, am I exaggerating? 1:09:48.960 --> 1:09:50.839 You are not exaggerated, just like, oh. 1:09:50.720 --> 1:09:53.400 This is legalized theft and we're not going to allow 1:09:53.439 --> 1:09:56.360 this nonsense to go on. You can't do this anymore. 1:09:56.400 --> 1:10:00.799 You can't own the arbitration companies and mandai an arbitration 1:10:00.920 --> 1:10:01.360 go there. 1:10:01.439 --> 1:10:04.040 So you're absolutely correct with regards to the arbitration. But 1:10:04.120 --> 1:10:06.479 keep in mind you said, well, if I if I 1:10:06.560 --> 1:10:08.920 leave FINRA, right, if I no longer am a broker, 1:10:09.000 --> 1:10:11.040 and I decide to go fee only, they can go 1:10:11.080 --> 1:10:12.080 pound sand. 1:10:12.200 --> 1:10:14.240 But they're trying desperately to get in there. 1:10:14.280 --> 1:10:17.400 Well, but when you sign that U four, right, you 1:10:17.479 --> 1:10:20.520 gave them jurisdiction over you for two years. 1:10:20.240 --> 1:10:22.840 After I never signed the U four, I just walked back. 1:10:23.439 --> 1:10:26.200 No, no, not to you five. When you sign your registration, 1:10:26.400 --> 1:10:30.960 oh the original use, they have jurisdiction over you. That's so. Yeah. 1:10:31.040 --> 1:10:33.439 So so there's a two year period of time after 1:10:33.600 --> 1:10:36.240 you resign where they continue to retain. 1:10:36.520 --> 1:10:38.960 Oh no, I dropped the seven two years before I 1:10:39.040 --> 1:10:41.640 resigned because I didn't I wasn't doing any brokers. 1:10:41.320 --> 1:10:43.439 Work well and so and so a lot of these 1:10:43.479 --> 1:10:46.040 restrictions are tied to the fact that these folks are 1:10:46.080 --> 1:10:49.120 leaving broker dealers, right, and so, yeah, these are fin rules. 1:10:49.160 --> 1:10:51.719 Now listen that that seems like that is a class 1:10:51.800 --> 1:10:55.800 action lawsuit waiting to happen. Close. That whole setup is 1:10:56.240 --> 1:11:00.559 borderline employment restriction. You would think like a state like 1:11:00.640 --> 1:11:03.519 California would slam that stuff from going. 1:11:03.320 --> 1:11:08.320 On, except that states like California like the fact that 1:11:08.600 --> 1:11:12.639 broker dealers have that level of supervision and control. Right 1:11:13.280 --> 1:11:15.720 when it comes to protecting investors. 1:11:15.320 --> 1:11:19.360 Because again, the nasd R did such a great job 1:11:19.920 --> 1:11:25.479 protecting people from the worst brokers. Sarcasm alert. They you know, 1:11:25.880 --> 1:11:30.519 the voiceover is narrator. They didn't, right, I mean, they 1:11:30.560 --> 1:11:33.880 did a horrible job. What they did was protect And 1:11:33.880 --> 1:11:36.240 I don't want to make this a I have a 1:11:36.280 --> 1:11:39.920 lot of respect for shops like Morgan Stanley and Merrill 1:11:40.000 --> 1:11:44.439 Lynch that have been around for forever and help democratize investing, 1:11:44.520 --> 1:11:47.959 So I don't want to paint with too broad to brush. However, 1:11:48.240 --> 1:11:52.920 it seemed like the bigger member firms had, like Michael Jordan, 1:11:53.000 --> 1:11:56.760 a very different set of rules than what applied to 1:11:56.800 --> 1:12:00.720 the smaller firms. And meanwhile, the tiniest buck shops got 1:12:00.720 --> 1:12:03.600 away with murder for years and years and years. It 1:12:04.160 --> 1:12:05.640 seemed like a no win situation. 1:12:05.840 --> 1:12:09.240 Well, but that that's why, right, That's why they were 1:12:09.280 --> 1:12:12.439 able to justify a lot of these restrictive rules over 1:12:12.479 --> 1:12:15.120 the years, Right, because there were people out there doing 1:12:15.160 --> 1:12:16.439 bad things and. 1:12:16.320 --> 1:12:18.240 So that they failed to regulate. 1:12:18.439 --> 1:12:21.559 Right, And so when larger firms would push would advocate 1:12:21.640 --> 1:12:24.960 for these rules, right, no one thought about the law 1:12:25.000 --> 1:12:28.559 of unintended consequences. The big firms did right, there's really 1:12:28.600 --> 1:12:31.599 smart people at More Stanley and Merrilnch and Goldman Sachs. 1:12:31.640 --> 1:12:31.760 Right. 1:12:31.800 --> 1:12:33.920 I mean, these people are really smart and they have 1:12:34.040 --> 1:12:36.920 time to think about this stuff, right, whereas small firms, 1:12:36.920 --> 1:12:39.800 as you know, are just reacting to these rules on 1:12:39.840 --> 1:12:42.479 the most part right there, they don't have as many 1:12:42.520 --> 1:12:46.960 resources to participate in these meetings and the rulemaking and 1:12:46.960 --> 1:12:50.360 writing comment letters, and so as a result, large firms 1:12:50.439 --> 1:12:54.439 have an outsized influence over the rule making process. That's 1:12:54.479 --> 1:12:55.160 just the way it is. 1:12:56.120 --> 1:13:00.920 Really interesting. So let's talk about this space that I 1:13:01.000 --> 1:13:04.040 think has really gained traction in the past couple of years, 1:13:04.400 --> 1:13:08.200 the idea of the outsourced chief compliance officer. Tell us 1:13:08.240 --> 1:13:09.200 a little bit about that. 1:13:09.800 --> 1:13:14.040 You know, back in two thousand, we had two services 1:13:14.040 --> 1:13:17.559 at Market Council. One was the RAA Incubator, which we 1:13:17.640 --> 1:13:19.880 still have to this day. The other was called your 1:13:19.880 --> 1:13:23.040 Compliance Officer, and it was kind of a cheeky name. 1:13:23.360 --> 1:13:26.040 But keep in mind, this was like Windows two thousand era, right, 1:13:26.080 --> 1:13:28.360 where like everything was like my files and all that 1:13:28.400 --> 1:13:33.800 kind of stuff. The SEC promulgated compliance program role in 1:13:33.840 --> 1:13:39.200 the two thousands that, among other things, really clarified the 1:13:39.320 --> 1:13:44.560 role of a chief compliance officer, including what quality is 1:13:44.600 --> 1:13:49.040 a chief compliance officer need to have their autonomy, the 1:13:49.120 --> 1:13:51.960 level of control and authority that they had to have, 1:13:52.280 --> 1:13:55.400 and it made it clear to us that you cannot 1:13:55.600 --> 1:14:00.920 outsource the role of a C suite executive, specifically a 1:14:00.960 --> 1:14:06.120 chief compliance officer within an RAA. So for all the 1:14:06.120 --> 1:14:10.320 firms that we work with, their chief compliance officer is 1:14:10.360 --> 1:14:15.160 an employee of the firm, because that employee needs to 1:14:15.200 --> 1:14:19.760 have authority to manage and control other employees and monitor them. 1:14:20.560 --> 1:14:23.240 Tough to argue that that's possible when you have an 1:14:23.280 --> 1:14:25.519 outsourced vendor, that you could just sever their contract at 1:14:25.560 --> 1:14:31.840 any time. And so we built our services to help 1:14:31.920 --> 1:14:35.560 lead and direct the activities of the CEO, right to 1:14:35.600 --> 1:14:39.080 give them kind of an editorial calendar and an agenda, 1:14:39.840 --> 1:14:43.760 to give them information for which to do their job effectively, 1:14:44.160 --> 1:14:47.160 and then to layer on underneath them and help administer 1:14:47.479 --> 1:14:50.000 their work and you know, and do and carry out 1:14:50.720 --> 1:14:54.479 help carry out their responsibilities. So the chief compliance officer 1:14:54.720 --> 1:14:56.519 always has their finger on the trigger. 1:14:57.000 --> 1:15:01.920 So how many firms can out source chief compliance officer 1:15:02.479 --> 1:15:06.559 be an employee of and still stay true to that mandate? 1:15:06.720 --> 1:15:07.160 I don't know. 1:15:07.320 --> 1:15:09.600 You can't do ten thousand, but you could probably do 1:15:09.720 --> 1:15:10.639 twenty or forty. 1:15:10.920 --> 1:15:12.920 I don't know. I mean, the SEC hasn't been clear 1:15:12.960 --> 1:15:14.640 on it. We don't think it's possible at all. Like 1:15:14.680 --> 1:15:17.439 we don't really yeah, I mean, you know, our reading 1:15:17.479 --> 1:15:21.200 of the rule indicates that, you know, someone who is 1:15:21.280 --> 1:15:24.479 an outsourced service provider cannot serve in the role as 1:15:24.600 --> 1:15:28.720 chief compliance officer. But I know other firms do it right, 1:15:28.720 --> 1:15:33.360 They've made a business out of it. But before we 1:15:33.439 --> 1:15:37.360 hired a chief compliance officer, we were working with a 1:15:37.400 --> 1:15:40.080 regulatory compliance firm out in LA. 1:15:40.560 --> 1:15:43.960 They were very helpful. It wasn't that they were a 1:15:44.080 --> 1:15:49.360 chief compliance officer. But let's be honest, effectively when you're 1:15:49.439 --> 1:15:51.559 hiring a third party, and I got to think this 1:15:51.640 --> 1:15:55.320 is true for Market Council also, when you're saying to somebody, hey, 1:15:55.439 --> 1:15:57.680 we don't know what the policies and procedures should be. 1:15:57.720 --> 1:15:59.400 We don't know what we What do we need to 1:15:59.400 --> 1:16:01.759 do to make sure? Will we pass our next audit? 1:16:01.800 --> 1:16:04.120 What do we do to make sure? Like you want 1:16:04.120 --> 1:16:07.040 to be on the right side of the compliance rules, 1:16:07.320 --> 1:16:09.280 tell us what we can and can't do us give 1:16:09.360 --> 1:16:11.760 us a black line and we'll stay on the right side. 1:16:11.800 --> 1:16:12.080 Of it. 1:16:12.600 --> 1:16:15.240 Whether that person is a full time employee or an 1:16:15.240 --> 1:16:19.519 outside attorney that's giving you advice, how big a difference 1:16:19.560 --> 1:16:19.920 is there? 1:16:20.800 --> 1:16:23.920 To me, the distinction here is that we're helping run 1:16:23.960 --> 1:16:26.920 an outsource compliance department. Right, we should be all of 1:16:26.920 --> 1:16:30.679 the resources that a fully functional outsource compliance or compliance 1:16:30.680 --> 1:16:33.160 department should be on the other end of an email 1:16:33.200 --> 1:16:35.000 and the other end of a phone call, any type 1:16:35.439 --> 1:16:40.680 of communication. But to me, it's critical that that chief executive, 1:16:40.720 --> 1:16:44.240 the chief compliance officer, the c suite individual sits as 1:16:44.280 --> 1:16:46.040 an employee of the firm so that they have the 1:16:46.040 --> 1:16:49.839 proper authority. They're granted the proper authority within the corporate documents, 1:16:49.840 --> 1:16:52.400 that they have the authority to carry out their responsibilities, 1:16:52.600 --> 1:16:56.799 including the ability to hire and fire personnel. The SEC 1:16:56.840 --> 1:17:00.439 says that person needs that authority, And I've never seen 1:17:02.040 --> 1:17:04.599 in all my years of practicing law, I've never seen 1:17:05.200 --> 1:17:08.719 a vendor relationship where you give the vendor the authority 1:17:08.800 --> 1:17:12.400 to hire or fire an employee. It just doesn't happen. Right, 1:17:12.520 --> 1:17:16.960 So our reading of it doesn't allow a third party 1:17:16.960 --> 1:17:19.960 a vendor to actually serve as a CCO. We think 1:17:20.000 --> 1:17:23.439 we can as an outside provider, we can layer on 1:17:23.520 --> 1:17:25.880 the top end underneath the CECO and we can provide 1:17:25.920 --> 1:17:28.080 them with all of the support and guidance that they need. 1:17:28.439 --> 1:17:32.360 But it's really critical to me that someone within that 1:17:32.479 --> 1:17:36.640 management with a management role takes on the role of it. 1:17:36.800 --> 1:17:39.559 And it doesn't necessarily have to be a single, dedicated person. 1:17:39.600 --> 1:17:43.160 It could be someone wearing multiple hats and when they say, okay, 1:17:43.160 --> 1:17:46.599 now I'm chief compliance officer, you're working directly with them. 1:17:46.680 --> 1:17:49.280 Yeah. A lot of people have noted recently. You know 1:17:49.600 --> 1:17:51.320 what I think has been a longtime trend, which is 1:17:51.360 --> 1:17:55.519 that the chief operating officer often also serves as chief 1:17:55.520 --> 1:17:58.880 compliance officer. I don't think that's the wrong call, right 1:17:58.880 --> 1:18:01.559 when someone needs to wear more hats, because to me, 1:18:02.640 --> 1:18:07.320 regulatory compliance is simply an operational baseline standard. Right, that's 1:18:07.360 --> 1:18:10.360 your non negotiable line, right. It's like, we never dip 1:18:10.439 --> 1:18:14.080 below that standard. Right. Maybe we're striving for excellence, you know, 1:18:14.120 --> 1:18:15.880 we're trying to get you know, nine out of ten 1:18:15.960 --> 1:18:19.800 on these but regulatory compliance is that non negotiable line, right, 1:18:19.840 --> 1:18:22.120 And so it makes sense that if someone's going to 1:18:22.160 --> 1:18:25.040 serve dual role, that the chief operating officer steps in. 1:18:25.520 --> 1:18:28.200 Assuming you have a chief operator were especially you know, 1:18:28.360 --> 1:18:31.120 smaller firm five ten people, they may not have an 1:18:31.160 --> 1:18:31.800 operating offer. 1:18:31.840 --> 1:18:35.200 Then it's you know, who's signed the operating agreement last right. 1:18:35.200 --> 1:18:40.519 Right, or whoever's overseeing the advisors they're cfps, and it's 1:18:40.560 --> 1:18:44.400 not you know, on a broker side, that person is 1:18:44.439 --> 1:18:50.040 trying to encourage transactions with which generate revenue on the 1:18:50.120 --> 1:18:53.519 fiduciary side. On the ra side, hey, the revenue takes 1:18:53.520 --> 1:18:56.000 care of itself. Is a fee agreement. You just want 1:18:56.000 --> 1:18:58.599 to make sure the advisor's doing with what they're supposed 1:18:58.640 --> 1:19:02.519 to be doing and staying compliant. It shouldn't shouldn't be 1:19:02.640 --> 1:19:06.680 an interference in the actual business. But I'm really down 1:19:07.000 --> 1:19:09.559 down a rabbit hole and I'm projecting my own experience. 1:19:09.840 --> 1:19:13.200 Well, but within that experience, don't you think that it's 1:19:13.240 --> 1:19:15.439 as much a quality of service issue as anything else? 1:19:15.520 --> 1:19:15.600 Right? 1:19:15.680 --> 1:19:19.920 We talked earlier about the distinction between compliance, legal and risk. 1:19:20.280 --> 1:19:23.719 But much of what you know regulatory compliance is something 1:19:23.760 --> 1:19:27.040 that we can handle, right. We know it's a finite 1:19:27.080 --> 1:19:30.200 you know, set of rules, right, But what you're getting 1:19:30.240 --> 1:19:34.240 into is is moderating oversight, right, making sure that people 1:19:34.280 --> 1:19:36.720 are doing the right thing. And quite often when you 1:19:36.760 --> 1:19:38.639 when you find a dispute with a client, it comes 1:19:38.680 --> 1:19:41.320 down to poor communications. 1:19:40.880 --> 1:19:45.320 Almost almost always. So. So you mentioned earlier the SEC, 1:19:46.040 --> 1:19:50.479 and I think I brought up audits pre pandemic. The 1:19:50.600 --> 1:19:53.679 rule of thumb was, hey, expect an audit every three years, 1:19:53.680 --> 1:19:57.400 and then the pandemic happened and for three years, you know, 1:19:57.439 --> 1:20:00.240 everybody was sort of frozen. What do you I think 1:20:00.320 --> 1:20:04.240 is going to happen going forward in terms of what 1:20:05.120 --> 1:20:08.080 the audit procedures going to look like, what the frequency is, 1:20:08.520 --> 1:20:11.840 because I have to imagine the SEC is getting to 1:20:11.880 --> 1:20:14.680 the point where hey, let's go back to if not 1:20:15.040 --> 1:20:18.040 the old regime, well something that looks like it, and 1:20:18.479 --> 1:20:20.040 the world is normalizing again. 1:20:20.720 --> 1:20:22.880 I just don't think it matters really. 1:20:23.000 --> 1:20:26.360 Yeah, you know, I remember prepping for i know, first 1:20:26.800 --> 1:20:30.120 audit and it was like, you know, it was like 1:20:30.240 --> 1:20:35.080 the bar exam, going to the prom and the SATs 1:20:35.160 --> 1:20:36.160 all rolled into one. 1:20:36.640 --> 1:20:39.920 I think your perception is shaped by when you entered 1:20:39.920 --> 1:20:43.040 into this industry. Right, People used to market all the time, 1:20:43.439 --> 1:20:48.360 death taxes, regulatory exams. Right. The thing I can share 1:20:48.520 --> 1:20:51.240 is that there's a zero mortality rate, you know, attached 1:20:51.240 --> 1:20:52.560 to regulatory. 1:20:52.400 --> 1:20:55.439 But there are fines there are like, hey, you guys suck, 1:20:55.479 --> 1:20:58.240 You better get your act together. Just as a matter 1:20:58.280 --> 1:21:01.120 of pride, you never want to have something like that happened. 1:21:01.520 --> 1:21:06.120 There's there's no question that the SEC's regulatory exams have 1:21:06.200 --> 1:21:10.880 gotten better, and they've gotten better primarily because the SEC 1:21:10.960 --> 1:21:13.680 has more data and they're using that data. Right, So 1:21:13.760 --> 1:21:17.080 before the SEC even walks into an advisor's office, they 1:21:17.120 --> 1:21:20.240 often have a short list of deficiencies and I can 1:21:20.280 --> 1:21:23.120 find those that they're looking for or they already know about, 1:21:23.600 --> 1:21:26.800 really absolutely, because because it's as simple as this, they're 1:21:26.840 --> 1:21:30.880 pulling your your form adv disclosure statement, right, They're pulling 1:21:30.920 --> 1:21:34.519 your marketing collateral, they're pulling your client agreements right, and 1:21:34.560 --> 1:21:36.600 sometimes they're asking you for this in advance of the 1:21:36.680 --> 1:21:41.280 visitors just for this. Most of the time, for advisors 1:21:41.320 --> 1:21:44.479 that existing advisors that are on board with US, there 1:21:44.520 --> 1:21:47.200 are conflicts just within those agreements. 1:21:46.600 --> 1:21:49.240 Meaning that they they're in opposite each other and you 1:21:49.280 --> 1:21:51.960 can't actually fulfill all those. 1:21:51.800 --> 1:21:55.320 Obligations either that or one is so vague that it 1:21:55.360 --> 1:21:58.559 could be argued that it's misleading, right. I mean, when 1:21:58.600 --> 1:22:01.479 advisors talk about their fees, this is a really big 1:22:01.520 --> 1:22:02.440 area because. 1:22:02.200 --> 1:22:05.160 Isn't that on a form adv disclosure? Isn't that all man? 1:22:05.160 --> 1:22:08.160 We're really inside baseball today, I mean, isn't that all 1:22:08.200 --> 1:22:10.040 out there? How do you mess that up? 1:22:10.720 --> 1:22:13.000 It's so easy to mess that up. Really absolutely, I'd 1:22:13.040 --> 1:22:15.360 say more advisors mess up their fees and their conflicts 1:22:15.360 --> 1:22:18.280 of interest than anything else, right, because with their fees, 1:22:18.760 --> 1:22:22.040 advisors want to be aspirational in their disclosure. They want 1:22:22.040 --> 1:22:24.280 to say, our fee is one percent right. They don't 1:22:24.280 --> 1:22:26.400 want to get into all of the qualities they look 1:22:26.400 --> 1:22:29.400 at when they discount that fee. They don't want to 1:22:30.120 --> 1:22:33.200 disclose conflicts of interests that come along with the way 1:22:33.200 --> 1:22:35.599 in which they structured that fee. And we are definitely 1:22:35.640 --> 1:22:39.280 getting into inside baseball. But conflicts of interest are by 1:22:39.320 --> 1:22:41.880 and large the biggest area that the SEC can find 1:22:42.680 --> 1:22:45.440 without even stepping into the office or talking to an individual. 1:22:45.600 --> 1:22:49.160 And it's because they can see your business practices and 1:22:49.200 --> 1:22:51.240 they can see what you've disclosed. And most of the 1:22:51.280 --> 1:22:53.920 time when you talk to advisors, they say, well, that's 1:22:53.920 --> 1:22:56.559 not a conflict because we would never do that right. 1:22:57.360 --> 1:23:01.120 And that's just a real significant misunderstanding what a conflict is. 1:23:01.640 --> 1:23:06.439 And you need an objective party to step in and say, hey, 1:23:06.800 --> 1:23:09.880 I know you you know you guys are good people, right, 1:23:09.960 --> 1:23:12.880 but this is a conflict of interest. What we do 1:23:12.960 --> 1:23:16.280 to mitigate that conflict or eliminate that conflict is another issue. 1:23:16.280 --> 1:23:18.240 But we have to call out the conflict and disclosure. 1:23:18.280 --> 1:23:22.519 So I started out with a disclosure. Let's wrap up 1:23:22.840 --> 1:23:27.439 the last segment with a disclosure. Which is my rule 1:23:27.439 --> 1:23:30.720 of thumb is always even if there is a conflict, 1:23:30.840 --> 1:23:34.040 and we really work hard on the fiduciary side of 1:23:34.080 --> 1:23:36.280 the street. I don't mean just our WM, but the 1:23:36.320 --> 1:23:42.719 whole Ria industry tries to not have a conflict. Isn't 1:23:42.880 --> 1:23:46.400 all of this stuff satisfied by just disclosed? Disclosed? Disclose 1:23:46.760 --> 1:23:49.840 if you let the clients know, Hey, we set up 1:23:50.080 --> 1:23:54.719 a fintech venture fund because we feel we can push 1:23:54.800 --> 1:23:58.920 those companies out there and do really a benefit for them, 1:23:59.000 --> 1:24:01.639 and we want a PARTI in the upside. By the way, 1:24:01.640 --> 1:24:04.280 if you're interested in it, we we have upside. And 1:24:04.320 --> 1:24:08.800 here's the disclosure. If I disclose everything, how do you 1:24:08.960 --> 1:24:11.479 how do you get into trouble? Does that resolve? Does 1:24:11.560 --> 1:24:14.920 disclosure resolve all of And I'm not looking for free 1:24:15.000 --> 1:24:20.520 legal advice here, it's a legit question. Does disclosure resolve 1:24:20.800 --> 1:24:22.000 the conflict. 1:24:21.479 --> 1:24:26.400 Issue mostly mostly? So going back to mostly but I 1:24:26.439 --> 1:24:27.759 just want to I don't want to just have mostly 1:24:27.800 --> 1:24:32.599 hanging out there mostly, but it doesn't resolve at all. Right, 1:24:32.640 --> 1:24:37.160 And some conflicts are are simply improper, right, you simply 1:24:37.200 --> 1:24:39.120 can't can't disclose them away. 1:24:39.120 --> 1:24:40.759 Like like what sort of conflict? 1:24:40.840 --> 1:24:43.840 Well, so so use that example right where you disclose 1:24:44.240 --> 1:24:47.120 that you have this venture fund, right is your own fund. 1:24:47.240 --> 1:24:48.479 And as by. 1:24:48.360 --> 1:24:50.920 The way, one of the things we will not put 1:24:50.960 --> 1:24:55.320 into the venture funds is an ETF or or anything 1:24:55.400 --> 1:24:57.920 investing that then we're going to buy for the client 1:24:57.920 --> 1:25:00.960 because clearly you're on both sides the trade. There, that's 1:25:00.960 --> 1:25:01.360 a no no. 1:25:01.600 --> 1:25:03.840 So there you go, right, there's one of them. How 1:25:03.840 --> 1:25:06.040 about the other one being if these are if these 1:25:06.080 --> 1:25:09.920 are funds that you are recommending an allocation, you're not 1:25:09.960 --> 1:25:12.559 going to recommend your own fund get paid for the 1:25:12.600 --> 1:25:15.200 investment advice and that get paid out of fund express, right, 1:25:15.360 --> 1:25:18.160 that's right. So there are some conflicts that are just 1:25:18.160 --> 1:25:19.960 just too far. Right, the SEC is going to say 1:25:19.960 --> 1:25:21.960 you could disclose what you want. But in my second 1:25:22.000 --> 1:25:25.160 week working at the at the SEC and the Enforcement Division, 1:25:25.840 --> 1:25:29.080 after I took Chuck Senator's class that we talked about earlier. 1:25:29.840 --> 1:25:35.000 He assigned me to work for this powerhouse of a litigator, 1:25:35.240 --> 1:25:37.800 Sue Curtain. I don't know how I just remembered her name. 1:25:37.960 --> 1:25:39.840 I couldn't tell you what I had for breakfast, right, 1:25:39.880 --> 1:25:44.840 But I said to Sue my friends, clearly, my sense 1:25:45.000 --> 1:25:48.679 of like this raa thing is crazy. Like my sense 1:25:48.760 --> 1:25:52.080 is that so long as you disclose, that you are 1:25:52.160 --> 1:25:55.439 stealing ten thousand dollars a day from the client, right, 1:25:55.520 --> 1:25:59.880 that that so much of the recourse is precluded. Right. 1:26:00.400 --> 1:26:03.000 She just laughed at me and she said, you're a 1:26:03.040 --> 1:26:07.520 quick study. Right. And so clearly there are anti fraud provisions, 1:26:08.240 --> 1:26:14.160 but disclosure is a key component to the advisor's act 1:26:14.200 --> 1:26:16.840 and one that so many advisors have trouble with. They 1:26:16.880 --> 1:26:19.720 have a trouble really yeah, because I mean think of it, right, 1:26:19.760 --> 1:26:22.240 the last time, the last time you went to your doctor, 1:26:22.240 --> 1:26:25.800 would he say how you feeling? Right? I feel great? Really? 1:26:25.840 --> 1:26:27.800 Because I'm looking at your blood sugars, I'm looking at 1:26:27.800 --> 1:26:32.080 your weight, and the numbers are telling me a different story. Right. 1:26:32.120 --> 1:26:35.040 And so that's what happens with advisors. They are so 1:26:35.320 --> 1:26:38.800 blinded by their own good intentions and their purpose that 1:26:38.840 --> 1:26:42.240 they don't see the harm that they could do if 1:26:42.240 --> 1:26:44.360 they set out to do it. Got and so as 1:26:44.400 --> 1:26:46.679 an objective advisor, your job is to shine a mirror 1:26:46.680 --> 1:26:48.760 and say, just imagine for a moment there was a 1:26:48.800 --> 1:26:51.840 bad actor, right, could we do this? Which is listen, 1:26:51.880 --> 1:26:53.519 I don't want to get off on another tangent on 1:26:53.600 --> 1:26:57.320 your ear. But that's why cybersecurity and fraud. Cyber fraud 1:26:57.560 --> 1:27:00.640 is such a problem for advisors because they're running a 1:27:00.680 --> 1:27:05.519 business that's that has a foundation in familiarity. Right, they 1:27:05.600 --> 1:27:07.679 can't have you call and just say, what's your social 1:27:07.680 --> 1:27:09.320 Security number? Right? What's your what's your mother? 1:27:09.400 --> 1:27:12.200 And we've heard we've heard people, we've heard horrible stories 1:27:12.240 --> 1:27:16.679 about AI, especially somebody like you who's in the public 1:27:17.640 --> 1:27:20.160 or me in the public domain. You could use AI, 1:27:20.400 --> 1:27:23.280 pull a bunch of language out and create a phone 1:27:23.320 --> 1:27:28.720 call that sounds like a person you were telling a 1:27:28.760 --> 1:27:34.120 story about that. How dangerous is cybersecurity and this sort 1:27:34.160 --> 1:27:38.960 of AI generated impersonation to fraud protection? 1:27:39.040 --> 1:27:42.600 Yeah, I mean, let's let's just touch on cybersecurity. Cybersecurity 1:27:42.640 --> 1:27:45.120 is a people problem, right, It's just that the root 1:27:45.160 --> 1:27:47.559 of where they're getting the data is technology, and. 1:27:47.520 --> 1:27:51.519 The social engineer acting is is is the data. 1:27:51.560 --> 1:27:54.200 But it's almost all coming from people. Right. It's it's 1:27:54.240 --> 1:27:56.160 your unroot to a conference or I'm unrout to a 1:27:56.200 --> 1:28:00.720 conference and someone is specifically targeting your colleagues, right, I 1:28:00.760 --> 1:28:04.840 got I got an email from from one of my 1:28:04.920 --> 1:28:08.479 colleagues years ago. Uh, and he received an email before 1:28:08.520 --> 1:28:10.880 that that said, Hey, as you know, I'm flying out 1:28:10.920 --> 1:28:13.720 to this conference is a well known conference in our interspace. 1:28:14.080 --> 1:28:15.640 I'm not going to be available, but I need you 1:28:15.680 --> 1:28:18.439 to send me the following financial reports, to which he 1:28:19.080 --> 1:28:22.200 replied to me and he said, I don't have access 1:28:22.200 --> 1:28:25.800 to those financial reports. I replied to him, Well, that's 1:28:25.840 --> 1:28:28.679 exactly why you don't have access to these financial reports. 1:28:29.720 --> 1:28:33.559 They're you know, these cyber criminals are getting and I 1:28:33.600 --> 1:28:36.839 hate to call them that because people they're getting clever. Fantasy, 1:28:37.080 --> 1:28:39.960 they're getting clever, they're getting a depth, they're getting more nimble. 1:28:40.280 --> 1:28:45.000 You know, they're small advisors are not the primary subjects 1:28:45.040 --> 1:28:47.160 of a denial of service attack, right, I mean that's 1:28:47.160 --> 1:28:51.599 what big financial institutions are. After what they're they're going 1:28:51.680 --> 1:28:55.880 to get duped because of the feigned familiarity that they 1:28:55.920 --> 1:28:58.599 have to have with their clients. It's you know, it's 1:28:58.720 --> 1:29:02.439 it's the you know, South calling saying or emailing saying, 1:29:02.479 --> 1:29:04.880 as you know, I'm going on a cruise. How did 1:29:04.880 --> 1:29:07.120 the criminal know this because they went through Sally's emails 1:29:07.160 --> 1:29:09.599 and she's they see she's booked on a cruise, as 1:29:09.600 --> 1:29:12.720 you know, I'm on a cruise, put on Instagram or 1:29:12.760 --> 1:29:16.000 it's on on social media, right, And so these criminals 1:29:16.040 --> 1:29:19.400 are scaling down. It's a scalability issue. They're scaling down 1:29:19.400 --> 1:29:21.560 to the point that they can go after these individual 1:29:22.120 --> 1:29:25.400 crimes and they're succeeding unbelievable. 1:29:25.520 --> 1:29:29.080 Unbelievable. All right, So I have two curveball questions I 1:29:29.120 --> 1:29:32.120 got to ask you before we get to our favorite 1:29:32.200 --> 1:29:34.960 questions in our last five minutes. The first is you 1:29:35.000 --> 1:29:38.680 were a chef in the US Coast Guard Auxiliary. How 1:29:38.720 --> 1:29:39.679 the hell did that happen? 1:29:40.120 --> 1:29:46.640 You know? I uh, I'm an incredibly curious person. Some 1:29:46.680 --> 1:29:52.280 would say just you know, I'm just jumping. And anytime 1:29:52.360 --> 1:29:55.479 I'm interested in something, I want to know. I want 1:29:55.520 --> 1:29:56.760 to know how people do it, I want to know 1:29:56.760 --> 1:30:00.000 how things work. And so I joined the Coast Guard 1:30:00.000 --> 1:30:02.599 Auxiliary when I bought a boat back in two thousand. 1:30:02.680 --> 1:30:05.959 So we're not talking about JAG. We're talking about literally 1:30:06.080 --> 1:30:07.320 the Coast Guard Auxiliary. 1:30:07.360 --> 1:30:10.519 Yeah, the Coast Guard Auxiliary. Now it's you know, it's 1:30:10.600 --> 1:30:15.559 a group of largely retired servicemen and women who get 1:30:15.600 --> 1:30:19.040 together to help support the US Coast Guard. Right they 1:30:19.080 --> 1:30:20.519 call it, you know, they call the US Coast Guard 1:30:20.560 --> 1:30:23.160 the gold Side, And we were the silver Side. And 1:30:23.200 --> 1:30:27.040 so I joined to get free boating education. I joined 1:30:27.040 --> 1:30:30.200 to learn navigation, joined joined to learn weather. 1:30:30.360 --> 1:30:33.599 And they give a lot as a fellow voter, they 1:30:33.640 --> 1:30:36.160 give courses. Yeah, you could sign up. You can learn 1:30:36.200 --> 1:30:38.360 to sail, you can learn to navigate by the stars. 1:30:38.400 --> 1:30:40.040 You can do all of it with them. 1:30:40.120 --> 1:30:42.960 Yeah and so, and I love the camaraderie of the group. 1:30:42.960 --> 1:30:45.160 And one of the programs they had, they used to 1:30:45.200 --> 1:30:48.720 call the Chef program the Auxiliary Chef program. Now they 1:30:48.720 --> 1:30:51.840 call it Auxiliary Food Service. But the program is about 1:30:51.920 --> 1:30:55.160 augmenting the capabilities of the gold Side so that someone 1:30:55.160 --> 1:30:57.240 can take a few days leave or that's or that 1:30:57.880 --> 1:30:59.639 or when they run you know, when they run low, 1:30:59.720 --> 1:31:03.160 or when they're having a special event. And taught me 1:31:03.200 --> 1:31:06.720 about food safety, taught me about a food quantity, and 1:31:06.800 --> 1:31:10.120 I just I've always loved the I've always loved the 1:31:10.120 --> 1:31:12.640 gratitude of pulling off what people don't know. Right, you 1:31:12.760 --> 1:31:14.800 did it, and it's kind of an extension of what 1:31:14.840 --> 1:31:15.000 I do. 1:31:15.320 --> 1:31:18.320 That sounds fun. And then you almost had a career 1:31:18.360 --> 1:31:22.519 in radio. Tell us how you sidestep that and went 1:31:22.560 --> 1:31:23.719 into legal practice. 1:31:23.720 --> 1:31:24.840 I think what you meant to say is have a 1:31:24.880 --> 1:31:25.559 face for radio. 1:31:25.600 --> 1:31:28.800 I definitely same. Same. So you you were in your 1:31:28.800 --> 1:31:31.000 college radio station. Tell us a little bit about that. 1:31:31.080 --> 1:31:37.600 So I was convinced to do college radio early on 1:31:37.880 --> 1:31:40.080 our freshman year and we got a show. It was 1:31:40.120 --> 1:31:42.120 the worst time. It was during Monday night football, right. 1:31:42.240 --> 1:31:45.000 Who listens to radio during Monday night football at college? Nobody? 1:31:45.960 --> 1:31:48.280 But that was freeing, right, because we can kind of 1:31:48.280 --> 1:31:51.400 do whatever we wanted on the air and make mistakes 1:31:51.400 --> 1:31:54.280 and no one really noticed. And so over the years 1:31:54.560 --> 1:31:56.680 we got bumped up to the point that we got 1:31:56.720 --> 1:32:00.000 our slot Thursday night eight to eleven, which was like prime. 1:32:00.920 --> 1:32:02.160 Everyone listened to the radio. 1:32:02.280 --> 1:32:04.320 Sure, you're getting ready to go out for a Satursday 1:32:04.400 --> 1:32:05.000 night in college? 1:32:05.400 --> 1:32:10.080 Pree gaming? Right? And so we, uh, we were doing 1:32:10.120 --> 1:32:13.040 our thing. Unbeknownst to us, there were ratings. I didn't 1:32:13.080 --> 1:32:14.519 know anything about ratings. I knew you had to get 1:32:14.520 --> 1:32:17.160 an FCC license, but I didn't know anything about ratings. 1:32:17.240 --> 1:32:21.720 And unbeknownst to us, we hit the UH, you know 1:32:22.080 --> 1:32:24.800 as like the top program in that time slot in 1:32:24.880 --> 1:32:27.919 New Haven and got all all sorts of crazy recognition. 1:32:27.960 --> 1:32:30.080 But we were just you know, two roommates getting on 1:32:30.160 --> 1:32:32.479 and UH and doing an old school rap show. 1:32:33.040 --> 1:32:35.599 That's a let wait, old school rap show. 1:32:35.640 --> 1:32:36.880 Old school rap wait. 1:32:36.960 --> 1:32:38.880 So the two of you would drop and beats and 1:32:39.000 --> 1:32:42.120 lyrics on the radio. That sounds really embarrassed. 1:32:42.200 --> 1:32:46.280 I wasn't rapping, okay, but and I call it old school. 1:32:46.280 --> 1:32:49.320 It's only old school sitting here today, right, it wasn't 1:32:49.400 --> 1:32:50.599 old school back then. 1:32:51.120 --> 1:32:54.120 We've talked about this before. To me, old school is 1:32:54.479 --> 1:32:57.760 is Pol's boutique and Beastie Boys. That's about as far 1:32:57.760 --> 1:32:59.200 as my hip hop progressed. 1:32:59.240 --> 1:33:01.160 That's pretty good, Yeah, not too bad. 1:33:01.439 --> 1:33:04.000 So in the last few minutes I have you, let's 1:33:04.160 --> 1:33:08.160 jump to our favorite questions that we ask all our guests, 1:33:08.200 --> 1:33:11.200 starting with what have you been watching? What have you 1:33:11.240 --> 1:33:15.920 been streaming? And what's kept you entertained in the pandemic 1:33:15.960 --> 1:33:17.360 and post pandemic era. 1:33:17.880 --> 1:33:20.880 So I will tell you that I am. I am 1:33:20.920 --> 1:33:21.959 not a good streamer. 1:33:22.160 --> 1:33:24.720 Okay, it's not hard. 1:33:24.800 --> 1:33:27.719 I know it's not hard. But I'm one of these 1:33:27.840 --> 1:33:31.639 people that almost prefers there to be crap on TV right, 1:33:31.720 --> 1:33:33.760 so that I can do other stuff and have that 1:33:33.800 --> 1:33:36.080 on in the back. Okay, So I love I love 1:33:36.120 --> 1:33:39.439 putting on sports in the background that I'm marginally interested in. Right, 1:33:39.560 --> 1:33:41.439 Throw on a Yankee game. I could hear the announcer 1:33:41.400 --> 1:33:44.080 of the inflection and the voice. Throw on a soccer game. 1:33:44.200 --> 1:33:46.799 I love watching soccer, or actually I love having soccer 1:33:46.920 --> 1:33:47.839 on right. 1:33:48.040 --> 1:33:51.880 And there is a certain energy to World Cup, the 1:33:51.960 --> 1:33:55.720 back and forth. It's like waves and you can kind 1:33:55.720 --> 1:33:57.240 of half pay attention to it. 1:33:57.240 --> 1:34:01.120 It's awesome and and you know, undeniably anytime you get 1:34:01.120 --> 1:34:03.280 into March madness, it's one of the best times of year. 1:34:04.400 --> 1:34:07.320 So I don't really obsess over over much on TV. 1:34:07.439 --> 1:34:10.040 I will put on any anything on that Geo or 1:34:10.439 --> 1:34:12.839 History channel and kind of geek out over that stuff. 1:34:13.320 --> 1:34:17.120 But my deal is I use like one of these 1:34:17.920 --> 1:34:20.400 services where anything I find interesting, I just tag it 1:34:20.439 --> 1:34:22.840 as like a to watch watch it later, Yeah, like 1:34:22.880 --> 1:34:25.680 something like that, right, and then and then I have 1:34:25.840 --> 1:34:28.040 that on my TV. So if I'm watching with any 1:34:28.040 --> 1:34:30.519 of my kids or my girlfriend, they they can go 1:34:30.560 --> 1:34:33.840 into that treasure trove and be ensured that it's something 1:34:33.880 --> 1:34:36.000 I wanted to watch at some point in time. And 1:34:36.040 --> 1:34:37.160 so that's usually our deal. 1:34:37.600 --> 1:34:41.000 Let's let's talk about mentors who helped shape your career. 1:34:41.960 --> 1:34:46.400 You know, I think I think everyone that I came 1:34:46.439 --> 1:34:48.080 across did in some way, shape or form. 1:34:48.120 --> 1:34:48.240 You know. 1:34:48.280 --> 1:34:51.559 I used to I used to hate this question about 1:34:51.560 --> 1:34:53.800 like who's your idol, because I never I never thought 1:34:53.800 --> 1:34:57.559 that that was a fair assessment of anyone. But but 1:34:57.640 --> 1:35:01.840 in terms of mentors, you know, I had so many 1:35:01.880 --> 1:35:05.120 and continue to have so many that that came before 1:35:05.160 --> 1:35:08.439 me that I learned from. Some I strangely learned what 1:35:08.560 --> 1:35:10.599 I didn't want to be and the road I didn't 1:35:10.600 --> 1:35:12.479 want to take right. It was a lot of a 1:35:12.479 --> 1:35:15.720 lot of other people's mistakes that I would that I 1:35:15.720 --> 1:35:18.720 would learn from. But I mean, the list is just 1:35:19.800 --> 1:35:23.360 so plentiful of people that that literally would just give 1:35:23.400 --> 1:35:26.400 me a hand up. I had a very a very 1:35:27.160 --> 1:35:33.599 unique and special type of relationship with with the gentleman 1:35:33.680 --> 1:35:37.800 who was my boss as I interned at merri Lynch. 1:35:37.840 --> 1:35:40.120 One of my first jobs in the securities industry in 1:35:40.280 --> 1:35:45.280 undergrad many many years later, I had we continue to 1:35:45.280 --> 1:35:48.160 stay in touch and I had the uh, the privilege 1:35:48.200 --> 1:35:53.040 of helping him and his team leave merri Lynch. Oh yeah, 1:35:53.120 --> 1:35:55.439 and it was and it was fascinating. And then many 1:35:55.479 --> 1:35:58.719 years after that, when he went to exit his his firm, 1:35:59.360 --> 1:36:01.760 A had the privilege of helping him again. And so like, 1:36:01.800 --> 1:36:04.160 that's you know, to me, those are the relationships that 1:36:05.479 --> 1:36:08.680 that just make make this all worthwhile, right, continuing to 1:36:08.800 --> 1:36:11.880 not be involved in the individual transaction, but rather being 1:36:11.920 --> 1:36:13.840 a part of of someone's life. 1:36:14.040 --> 1:36:17.719 And that's interesting that that's a full arc from from 1:36:17.800 --> 1:36:23.599 employer to team leaving to retirement. That that's not usual. 1:36:23.600 --> 1:36:25.280 You don't usually get to see something like that. 1:36:25.400 --> 1:36:27.680 It's not usual. But I'm really really grateful for those 1:36:27.720 --> 1:36:28.640 types of experiences. 1:36:28.800 --> 1:36:30.759 Let's talk about books. What are some of your favorites? 1:36:30.760 --> 1:36:31.959 What are you reading currently? 1:36:32.760 --> 1:36:36.880 So you and I went to a conference and we. 1:36:36.880 --> 1:36:43.920 S Darren's Individual Advisor Conference in Independent, Independent, and we 1:36:44.000 --> 1:36:47.280 got to live through a tornado that turned the sky 1:36:47.400 --> 1:36:50.439 black and people standing in front of these giant plates 1:36:50.439 --> 1:36:53.799 of glass and hey, I'm not from Texas, but maybe 1:36:53.840 --> 1:36:55.680 those big windows are not where you want to be. 1:36:55.800 --> 1:36:58.120 Is this funnel comes ripping towards the hotel? 1:36:58.400 --> 1:37:01.640 Probably not, but that's where that's where I pulled my 1:37:01.720 --> 1:37:04.479 latest book from the speaker they had that night was 1:37:04.920 --> 1:37:05.920 Jeremy Siegel. 1:37:05.680 --> 1:37:07.639 The professor always great. 1:37:07.880 --> 1:37:10.080 It is always great, and so I jumped into his 1:37:10.120 --> 1:37:11.400 book stocks for the long run. 1:37:12.240 --> 1:37:15.400 Now in like the eighth edition or something six right now, 1:37:15.439 --> 1:37:18.679 sixth edition. But yeah, that sold a couple of million copies. 1:37:18.720 --> 1:37:21.200 It's one of the best sellers in the space. 1:37:22.000 --> 1:37:24.400 I found it. So here's my disclosure about books. Right. 1:37:24.400 --> 1:37:26.719 There are certain books I read when I was young 1:37:27.160 --> 1:37:32.160 that had such an impression on me, and nowadays, anytime 1:37:32.200 --> 1:37:35.120 someone tells me about an interesting book, I buy it 1:37:35.240 --> 1:37:38.479 first and I start reading it. So I've begun reading. 1:37:38.920 --> 1:37:41.880 I looked knowing that you're gonna ask me this question. 1:37:42.200 --> 1:37:43.960 I have one hundred and forty four books that I've 1:37:44.000 --> 1:37:46.200 started reading and I'm in progress as some. 1:37:46.560 --> 1:37:47.559 Are you going to read them? 1:37:47.560 --> 1:37:48.160 Because I will. 1:37:48.200 --> 1:37:52.519 By the way, some people seem to feel that books 1:37:52.560 --> 1:37:55.240 are like homework and once you start, you have to finish. 1:37:55.240 --> 1:37:58.160 There's nothing wrong with picking up a book and saying, oh, 1:37:58.160 --> 1:38:00.559 I'm not enjoying this and moving to a book that 1:38:00.960 --> 1:38:02.000 you'll actually like. 1:38:02.080 --> 1:38:03.640 I totally agree with you. I mean, there's too many 1:38:03.680 --> 1:38:05.840 books that I read the first chapter like nine times 1:38:06.120 --> 1:38:07.680 because I keep picking up and I'm like, all right, 1:38:07.680 --> 1:38:10.120 if I'm not into this, it's okay, Like just you know, 1:38:10.400 --> 1:38:14.559 toss it to the side. I also started reading book 1:38:14.720 --> 1:38:18.439 The Hard Thing About Hard Things. You know, it's a 1:38:18.479 --> 1:38:19.160 fascinating book. 1:38:19.640 --> 1:38:22.880 Who authored that? By Ben Horowitz of Andresen Harrowez. He's 1:38:23.040 --> 1:38:26.040 also a prior guest. He's a fascinating guy. 1:38:26.120 --> 1:38:31.920 Yeah, and I love his take on we're not talking 1:38:31.960 --> 1:38:35.479 about the herd issues, right, Like, I think through things 1:38:35.560 --> 1:38:38.120 that people call luck or things that people call happenstance, 1:38:38.160 --> 1:38:40.600 and I think I love to think through all of 1:38:40.640 --> 1:38:44.920 the permutations that led to that point in time, right, 1:38:44.960 --> 1:38:49.280 all the decision points and even lack thereof. And you know, 1:38:49.320 --> 1:38:51.920 he kind of starts to get to to some of 1:38:51.960 --> 1:38:52.720 that things. 1:38:52.800 --> 1:38:56.080 Just because somebody's lucky doesn't mean they weren't good or 1:38:56.760 --> 1:38:59.720 putting themselves in a position where a little luck and 1:38:59.760 --> 1:39:00.360 shoe on that. 1:39:01.160 --> 1:39:02.280 But where's that right balance? 1:39:02.360 --> 1:39:02.479 Right? 1:39:02.479 --> 1:39:04.160 Do you want to be you know, you don't want 1:39:04.160 --> 1:39:06.880 to be so pompous to say that there is no luck, right, right, 1:39:07.040 --> 1:39:11.000 But you also don't want to, you know, be you know, 1:39:11.200 --> 1:39:13.840 so soft as to say like, oh, it's all luck, right, 1:39:13.880 --> 1:39:16.679 It's it's not it's you know, it's some it's some logica. 1:39:17.120 --> 1:39:20.320 It's some logical confluence there, right, and setting yourself for luck. 1:39:22.080 --> 1:39:24.600 You know. I'm getting to to that point that you know, 1:39:24.600 --> 1:39:27.920 people recommend books about about how much time we have left. 1:39:28.640 --> 1:39:31.439 So someone recommended this book four thousand weeks. 1:39:31.720 --> 1:39:35.440 I love that title, by the way, it's awesome genius. Yeah, yeah, 1:39:35.479 --> 1:39:39.080 I started that, but I need better time management skills 1:39:39.080 --> 1:39:41.519 in order to finish it. But it's it's you know, 1:39:41.560 --> 1:39:43.439 it's one of those things you could just pick up 1:39:43.479 --> 1:39:44.840 a chapter at a time, so. 1:39:45.320 --> 1:39:47.479 You can, and and it's a I'd say it's a 1:39:47.520 --> 1:39:49.000 light read. It's probably not a light read, but it 1:39:49.040 --> 1:39:51.320 is more of a time management book, right than a 1:39:51.320 --> 1:39:52.800 book about our own mortality. 1:39:53.240 --> 1:39:54.920 Explain what four thousand weeks are? 1:39:55.000 --> 1:39:56.479 Yeah, it's it's how much time you have in your 1:39:56.479 --> 1:39:57.400 lifetime if. 1:39:57.280 --> 1:39:59.559 You're if you're lucky, you know, you and I have 1:39:59.560 --> 1:40:01.360 a thousand weeks left, yeah, and. 1:40:01.280 --> 1:40:03.800 So and so it it it puts some degree of 1:40:03.800 --> 1:40:06.160 impetus to get to the things that you're just saying, 1:40:06.280 --> 1:40:07.200 we'll do it later. 1:40:07.320 --> 1:40:10.520 Your bucket list, which most people don't don't tag. 1:40:10.720 --> 1:40:13.200 So so, like I I always love having a variety 1:40:13.240 --> 1:40:16.240 of books that that I'm reading that kind of checked 1:40:16.240 --> 1:40:19.000 the box. Whether it's it's hard finance books, or it's 1:40:19.040 --> 1:40:22.679 strategy books, or it's uh, it's it's empathy and uh, 1:40:22.800 --> 1:40:26.760 you know, emotional books. But the stuff that I read 1:40:26.800 --> 1:40:29.040 when I was younger kind of in my you know, 1:40:29.840 --> 1:40:31.920 I guess, early late teens, early twenties. 1:40:32.040 --> 1:40:32.960 Give us an example. 1:40:34.479 --> 1:40:38.080 I read The Millionaire next Door right when I was young, Yeah, right, 1:40:38.360 --> 1:40:41.559 and like I just it just stuck with me. 1:40:41.840 --> 1:40:44.840 Really. Yeah, there's just there's certain books that just sit 1:40:45.040 --> 1:40:47.600 with me aspects of that that are very valid. I 1:40:47.600 --> 1:40:50.719 shouldn't just have like an automatic Yeah. And I can't 1:40:50.840 --> 1:40:51.639 respond well. 1:40:51.800 --> 1:40:54.839 And I can't tell you anything about the book itself, 1:40:55.080 --> 1:40:56.639 but what I can tell you it left me with 1:40:56.760 --> 1:41:00.000 is that you always have control over what you spend, right, 1:41:00.479 --> 1:41:02.920 and less over what you what you make. 1:41:03.000 --> 1:41:07.320 Now, by the way, I'm gonna withdraw my I'm gonna 1:41:07.320 --> 1:41:10.000 I'm gonna say that respond to that again because I'm 1:41:10.040 --> 1:41:12.799 thinking of a different book, and it's not this one. 1:41:13.320 --> 1:41:22.519 So raspberry with Raspberry withdrawing, I'm thinking of, well, I 1:41:22.520 --> 1:41:25.559 didn't say that, but yeah, that's what I was. What 1:41:25.680 --> 1:41:30.760 makes Millionaire next Door so fascinating is that we tend 1:41:30.800 --> 1:41:34.920 to think, well, you you read it more recently than 1:41:34.920 --> 1:41:40.840 I probably did. No read so what I remember that is, Hey, 1:41:41.000 --> 1:41:45.920 the fancy car, the big house. That's not the average millionaire. 1:41:46.280 --> 1:41:49.120 The typical person who's accumulated a net worth north of 1:41:49.120 --> 1:41:54.160 a million dollars is living a fairly sedate life there. 1:41:54.280 --> 1:41:57.599 They they have a modest home, not a big, fancy home. 1:41:57.920 --> 1:42:00.320 They have a five year old car, They're not having 1:42:00.320 --> 1:42:04.799 a ferrari or a porch. They basically are are living 1:42:04.960 --> 1:42:09.360 lives of quiet success without that of feeling the need 1:42:09.439 --> 1:42:13.720 to show off. You see the indicitia of wealth. You 1:42:13.760 --> 1:42:16.160 don't see the liabilities on the other side of it. 1:42:16.720 --> 1:42:19.280 There's there's no doubt that if I could sum the 1:42:19.320 --> 1:42:21.920 book up in one word, it was moderation, right, is 1:42:21.920 --> 1:42:24.600 it enjoy just and don't enjoy the success? Right? And 1:42:24.640 --> 1:42:27.760 it was such an offset to popular culture at that time, 1:42:28.040 --> 1:42:31.880 which was celebrating excess. Right. It was athletes and entertainers 1:42:31.920 --> 1:42:34.360 just like that was the look of millionaires until I 1:42:34.400 --> 1:42:38.599 read that book also a little later on read where 1:42:38.600 --> 1:42:39.759 are all the customers Yachts? 1:42:42.080 --> 1:42:45.400 Not been a good speed? What's his name? I read 1:42:45.439 --> 1:42:47.200 that book a long time ago, and it's hilarious. 1:42:47.240 --> 1:42:49.759 It's hilarious, right, I mean, it's about this guy walking 1:42:49.760 --> 1:42:52.920 through Wall Street basically saying, hey, wait, I see I 1:42:52.920 --> 1:42:55.479 see all the yachts from the people who work here, 1:42:55.479 --> 1:42:59.559 But where where are all the customers yachts? And and 1:42:59.600 --> 1:43:01.320 I thought that was just a really good take. 1:43:01.479 --> 1:43:03.960 Fred Schwead, Yeah, I had a search for that because 1:43:04.000 --> 1:43:05.080 I couldn't access his. 1:43:05.120 --> 1:43:08.040 Name, and it's just, you know, it just it's very poignant. 1:43:08.080 --> 1:43:10.960 And to this day I think about that when we 1:43:11.000 --> 1:43:14.360 think about the inequity that exists between financial institutions and 1:43:14.479 --> 1:43:19.559 retail customers, right, and the good work that since that 1:43:19.600 --> 1:43:25.040 book was written, that advisors have really done to democratize investing. 1:43:25.120 --> 1:43:28.240 And that book was written seventy five years maybe even longer. 1:43:28.280 --> 1:43:29.640 I want to say it was in the forties if 1:43:29.640 --> 1:43:35.960 I recall like postwar period, yeah, forties, fifties, I'm thinking fifties, 1:43:36.400 --> 1:43:38.200 nineteen forty very good. 1:43:38.880 --> 1:43:40.439 I thought it was a little I thought it was 1:43:40.439 --> 1:43:43.559 a little later. So any other books before we get 1:43:43.600 --> 1:43:45.080 to our last two questions? 1:43:45.240 --> 1:43:49.280 You know there's other books that that stuck with me. 1:43:49.720 --> 1:43:53.160 Freakonomics is one. You know, how to make economics interesting 1:43:53.240 --> 1:43:57.000 to the masses. I just love the approach that those 1:43:57.000 --> 1:44:00.280 guys took. And I'm just a I'm just a heard 1:44:00.320 --> 1:44:03.360 when it comes to economics to technology and all that 1:44:03.400 --> 1:44:06.639 sort of thing and building a business. In two thousand, 1:44:06.720 --> 1:44:09.040 it was tough to avoid books like the e Myth 1:44:09.600 --> 1:44:15.559 write this concept that business process drives consistent results? Which did? 1:44:15.600 --> 1:44:18.920 It wasn't necessarily a foregone conclusion back in two thousand 1:44:19.640 --> 1:44:21.040 and so I thought it was really compelling. 1:44:21.560 --> 1:44:24.519 All right, And our final two questions, what sort of 1:44:24.560 --> 1:44:28.280 advice would you give to a recent college grad interested 1:44:28.479 --> 1:44:33.360 in a career similar to yours? Regulatory compliance, legal finance? 1:44:33.920 --> 1:44:35.080 How would you advise them? 1:44:35.640 --> 1:44:38.000 So, my oldest daughter just graduated from pitt last year. 1:44:38.920 --> 1:44:43.479 My middle that was Ella, my middle one, Jake, is 1:44:43.560 --> 1:44:48.760 graduating from Georgetown next month. And my youngest, Sidney, is 1:44:48.800 --> 1:44:52.200 a freshman at University of Miami. Both Jacob and Sidney 1:44:52.240 --> 1:44:56.080 are in our finance majors. And so I've had some 1:44:56.240 --> 1:44:58.800 I've had these are been real talks. These aren't just theoretical. 1:44:59.280 --> 1:45:02.240 What I would tell them that the finance industry can 1:45:02.280 --> 1:45:03.719 be a lot of things to a lot of people. 1:45:04.240 --> 1:45:07.240 That there's not a single career within the finance industry. 1:45:07.240 --> 1:45:10.720 There's there's an entire world. It's great to work for 1:45:10.760 --> 1:45:13.080 a sector that's on top, but remember that our entire 1:45:13.080 --> 1:45:16.280 economy is cyclical. Right, If you're picking a job today, 1:45:16.320 --> 1:45:19.280 I understand the hot jobs are in finance and pharmaceuticals, 1:45:20.400 --> 1:45:22.599 but you know, you have to think through the duration 1:45:22.720 --> 1:45:23.840 of your career, right, and. 1:45:24.240 --> 1:45:26.759 Was job five years ago, ten years ago? 1:45:27.080 --> 1:45:29.160 Exactly? So do you only want a job that exists 1:45:29.200 --> 1:45:31.760 in the finance sector or do you want to find 1:45:31.760 --> 1:45:36.280 a job that's transportable elsewhere? And so so, speaking to 1:45:36.360 --> 1:45:40.120 Jake about that, right, he had experience working working for US, 1:45:40.600 --> 1:45:45.120 he had experienced working within on the investment banking side, 1:45:45.560 --> 1:45:50.840 working for David Devaux, he had experienced working within with 1:45:50.920 --> 1:45:54.240 a venture capital firm. And when it came time to 1:45:54.280 --> 1:45:56.680 find a full time job, you know, my advice to 1:45:56.760 --> 1:45:59.920 him was, you want a flight to quality that's not 1:46:00.320 --> 1:46:03.400 in the finance space, but hones your skills in finance. 1:46:03.400 --> 1:46:06.599 So he he's going to do a CFO rotation at 1:46:06.920 --> 1:46:10.479 one of large pharmaceutical companies like that to me is 1:46:10.520 --> 1:46:13.240 a good, you know, first step out of college, right, 1:46:13.280 --> 1:46:15.920 fine stability. I know that all the hype is around 1:46:16.000 --> 1:46:20.440 startup and is around fundraising and private and public investors. 1:46:21.080 --> 1:46:24.080 I just don't think that that's where I don't think 1:46:24.080 --> 1:46:29.360 that's where you really make your your your foundation of knowledge. 1:46:29.960 --> 1:46:30.759 At those places. 1:46:30.920 --> 1:46:32.800 None of the kids want to go work for the 1:46:32.840 --> 1:46:34.599 old man in his business take it over. 1:46:34.840 --> 1:46:37.719 It's it's never it's we've never discussed it as an option. 1:46:38.520 --> 1:46:41.800 They've all worked with me. But I think and that 1:46:41.920 --> 1:46:42.560 was plenty. 1:46:42.760 --> 1:46:47.200 Well, no, it wasn't plenty. Actually, I still I still 1:46:47.280 --> 1:46:50.360 love my daughter and I still work together all the time. 1:46:50.479 --> 1:46:55.519 She's a salesforce consultant and she is one of the 1:46:55.520 --> 1:46:57.200 easiest people in the world that I can talk to 1:46:57.240 --> 1:47:00.360 because she knows where I'm going with things before is 1:47:00.360 --> 1:47:04.320 a shorthand that it's amazing and so I would never 1:47:04.560 --> 1:47:08.639 preclude that. But you know, part of what we do 1:47:08.840 --> 1:47:12.160 stems from a degree of confidence in your skills and capabilities. 1:47:12.680 --> 1:47:15.320 And in order for I think in order for any 1:47:15.640 --> 1:47:18.479 child to get that, they have to prove themselves in 1:47:18.640 --> 1:47:20.840 the in the open market. They have to go out 1:47:20.880 --> 1:47:22.960 there and do it for themselves so that when they 1:47:22.960 --> 1:47:26.280 come back, you know, their soul is fulfilled. Right then, 1:47:26.360 --> 1:47:29.080 I feel like they've worked for Dad their whole life. Right. 1:47:29.160 --> 1:47:30.800 No, that makes a whole lot of sense. And our 1:47:30.880 --> 1:47:36.240 final question, what do you know about the world of finance, investing, 1:47:36.479 --> 1:47:41.200 regulation compliance? Today? You wish you knew twenty five or 1:47:41.240 --> 1:47:43.479 so years ago when you were first getting started. 1:47:44.040 --> 1:47:48.599 That's so easy. I wish I knew not to listen 1:47:49.200 --> 1:47:53.400 to financial media when they would say markets are up 1:47:53.439 --> 1:47:57.920 today because or markets are down on fears of blank. 1:47:58.479 --> 1:48:01.439 I used to think, Barry, that I was missing something. 1:48:01.880 --> 1:48:03.840 I used to think that I was just you know, like, 1:48:04.240 --> 1:48:08.040 how do they know that all of the millions, billions 1:48:07.560 --> 1:48:10.760 of inputs and outputs in the market all came down 1:48:10.800 --> 1:48:12.439 to that. And the fact is they don't, Right, They're 1:48:12.479 --> 1:48:15.880 oversimplifying a very complex problem. And I wish I knew 1:48:15.960 --> 1:48:16.599 that back then. 1:48:17.000 --> 1:48:19.040 I also wish that's fascinating. 1:48:19.120 --> 1:48:23.960 Yeah, I also wish I knew that that I know 1:48:24.160 --> 1:48:27.439 more than I thought I knew. I wish I had 1:48:27.479 --> 1:48:31.759 a little more confidence. And you know now I'm confident, 1:48:31.800 --> 1:48:33.559 not because I know a lot. I'm confident in my 1:48:33.600 --> 1:48:36.400 ability to recover from failures quickly and to change course. 1:48:36.640 --> 1:48:40.080 And I think most business owners we find ourselves like 1:48:40.120 --> 1:48:42.479 fish in a tank. Right, you hit the glass, you 1:48:42.560 --> 1:48:46.120 just change direction, Whereas when you're earlier, you don't want 1:48:46.120 --> 1:48:47.920 to touch the glass. You know, you don't want to. 1:48:47.960 --> 1:48:50.640 You don't want to hit that glass. And so and 1:48:50.680 --> 1:48:52.720 probably the last thing I would I would wish I 1:48:52.760 --> 1:48:55.320 knew back then was just to start with the objectives 1:48:55.320 --> 1:48:58.679 in mind, because even with investing and work backwards, start 1:48:58.680 --> 1:49:00.719 with the why, what's my thesis? What am I trying 1:49:00.760 --> 1:49:04.880 to go after? I just want to tell you my 1:49:05.040 --> 1:49:07.639 best investing skills came out of a really bad habit, 1:49:08.360 --> 1:49:12.280 which is I would get the newspaper, typically the Sunday paper, 1:49:12.320 --> 1:49:15.240 but you know on Wednesdays there were a certain section Thursday, 1:49:15.479 --> 1:49:17.160 and I would grab them and I would pile them 1:49:17.200 --> 1:49:19.040 up in my office, right. And I used to have 1:49:19.080 --> 1:49:23.360 piles of newspapers everywhere, and I would read certain people's 1:49:23.360 --> 1:49:28.080 columns pretty religiously, but late, right, so I would only 1:49:28.160 --> 1:49:30.719 typically read them after they've been out for a month, 1:49:30.720 --> 1:49:35.280 two months, sometimes six or twelve months. Right. And the 1:49:35.479 --> 1:49:39.720 knowledge that I gained by how wrong people are with 1:49:39.800 --> 1:49:44.720 twenty twenty hindsight was absolutely amazing. So what started out 1:49:44.760 --> 1:49:47.960 as a really bad habit was so helpful to me 1:49:48.680 --> 1:49:51.840 in putting things in context because now naturally, when I 1:49:51.880 --> 1:49:56.559 read something every day, I say, well, they don't know that, right, 1:49:56.920 --> 1:49:59.680 they're asserting that, but they don't know that. And it's 1:49:59.720 --> 1:50:00.920 really so. 1:50:00.920 --> 1:50:05.120 One of my old time favorite publications, laslo Berni, puts 1:50:05.120 --> 1:50:11.120 out an annual media round up and it's presented without commentary, 1:50:11.560 --> 1:50:15.840 and it's just the most important media stories from the 1:50:15.880 --> 1:50:18.200 Wall Street Journal, the New York Times, the Washington Post, 1:50:18.240 --> 1:50:22.920 the La Times, and it's just xerox and bound, and 1:50:23.240 --> 1:50:25.720 it's by the time you get it, everything's a year 1:50:25.760 --> 1:50:29.800 old and exactly what you're describing as you go through it, 1:50:30.320 --> 1:50:33.519 the things that are the big scary headlines, they just 1:50:33.560 --> 1:50:37.280 look horrific a year later, like that's wrong, Oh my god, 1:50:37.320 --> 1:50:39.080 how did anybody think this guy knew what he's doing. 1:50:39.240 --> 1:50:41.880 You just go through page after page after page, and 1:50:41.960 --> 1:50:46.040 you realize nobody knows anything, and they're just faking it 1:50:46.080 --> 1:50:48.759 till they make it. When you have a little time 1:50:48.840 --> 1:50:53.639 and distance, it's just clear that, hey, people have there 1:50:53.640 --> 1:50:56.320 are hours of TV that need to be filled. There 1:50:56.320 --> 1:50:59.240 are pages of newspaper that need to be filled. There 1:50:59.240 --> 1:51:02.880 are just you know, pixels and pixels online that need 1:51:02.960 --> 1:51:06.479 to be filled, most of which doesn't stand the test 1:51:06.520 --> 1:51:06.840 of time. 1:51:07.040 --> 1:51:11.640 So when the day after Silicon Valley Bank blew up, right, 1:51:12.439 --> 1:51:15.360 I got a call from a reporter and they use 1:51:15.400 --> 1:51:19.559 the words in these unprecedented times, right, And I had 1:51:19.560 --> 1:51:21.360 to stop for a moment and I said, how old 1:51:21.400 --> 1:51:25.439 are you? Because these are precedented times? Like we know 1:51:25.560 --> 1:51:28.720 exactly you know what we're dealing with, and hopefully we 1:51:28.760 --> 1:51:31.439 don't go back to, you know, to to that again. 1:51:31.520 --> 1:51:34.639 But I think it just gives you a sense of place, right, 1:51:34.680 --> 1:51:37.160 And at the end of the day, isn't that what 1:51:37.200 --> 1:51:39.960 we all yearn for? You know, even as as a 1:51:39.960 --> 1:51:42.280 young person starting out their career, you want to find 1:51:42.320 --> 1:51:43.920 your tribe, You want a sense of place, and you 1:51:43.960 --> 1:51:44.559 want a purpose. 1:51:45.120 --> 1:51:46.720 I like that that that you could do a lot 1:51:46.760 --> 1:51:50.560 worse than that. We have been speaking with Brian Hamburger. 1:51:50.600 --> 1:51:53.639 He is the founder of the Hamburger Law Firm, as 1:51:53.680 --> 1:52:00.400 well as the leading regulatory compliance and consulting firm, Market Council. 1:52:00.520 --> 1:52:03.360 If you enjoy this conversation, well, feel free to check 1:52:03.400 --> 1:52:08.320 out any of our previous nearly five hundred discussions we've had. 1:52:08.720 --> 1:52:13.640 You can find those at YouTube, iTunes, Spotify, or wherever 1:52:13.720 --> 1:52:17.320 you find your favorite podcasts. Feel free to sign up 1:52:17.400 --> 1:52:21.000 to my daily reading list at Ridolts dot com, Follow 1:52:21.080 --> 1:52:24.160 me on Twitter at rid Holts, follow all of the 1:52:24.160 --> 1:52:28.960 Bloomberg Family of podcasts at podcast I would be remiss 1:52:29.080 --> 1:52:31.639 if I did not thank the crack team that helps 1:52:31.640 --> 1:52:36.920 put these conversations together each week. Paris Wald is my producer. 1:52:37.080 --> 1:52:41.920 Sean Russo is my head of research. Samantha Danzinger is 1:52:41.960 --> 1:52:46.200 my audio engineer. Attika of Albron is our project manager. 1:52:46.800 --> 1:52:50.480 I'm Barry Ridolts. You've been listening to Masters in Business 1:52:50.760 --> 1:53:05.200 on Bloomberg Radio.