WEBVTT - HighTower's Weissbluth Commits to Fiduciary Standards (Audio)

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<v Speaker 1>Global business news twenty four hours a day at Bloomberg

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<v Speaker 1>dot Com, the radio plus mobile lact and on your radio.

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<v Speaker 1>This is a Bloomberg Business Flash Strom, Bloomberg World Headquarters.

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<v Speaker 1>I'm Charlie Pellett. We have got thirteen minutes to go.

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<v Speaker 1>Ahead of that closing bell, the Dow and the SMP

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<v Speaker 1>five hundred index heading for another record close. Stocks are

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<v Speaker 1>extending gains amid corporate results that point to resilience in

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<v Speaker 1>the global economy. Dead on unexpected numbers this morning from

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<v Speaker 1>JP Morgan Chase up two percent, other bank stocks rallying

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<v Speaker 1>as well. Tomorrow we hear from Citigroup and Wells Fargo.

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<v Speaker 1>SMP five hundred index up twelve to sixty four again

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<v Speaker 1>there of six tents of one percent. Naz DAK up

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<v Speaker 1>twenty nine points, a gain of six tents of one percent.

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<v Speaker 1>The NaSTA Composite index. By the way, now at five

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<v Speaker 1>thousand thirty five, Dow Industrial is up one forty four points,

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<v Speaker 1>a gain of eight tenths of one percent. Gold up

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<v Speaker 1>ten dollars an ounce the thirteen thirty three, a gain

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<v Speaker 1>of seven tenths of one percent. The tenure Town fifteen

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<v Speaker 1>thirty seconds, the yield on the tenure one point five.

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<v Speaker 1>I'm Charlie Pellett. That's a Bloombard business flash. Thank you

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<v Speaker 1>very much, Charlie Pellett. It's time now for the e

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<v Speaker 1>t F Report. It's brought to you by Sector Spider

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<v Speaker 1>e t F S. Why buy a single stock when

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<v Speaker 1>e t F. Let's go to Katherine Calgary for the

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<v Speaker 1>e t F Report. Vanguard took in one forty billion

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<v Speaker 1>dollars in new money in the first half of the year.

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<v Speaker 1>Bloomberg Intelligence analyst Eric Baltuna says Vanguard's game continues to

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<v Speaker 1>cause Wall streets some pain. His reasoning, if you take

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<v Speaker 1>Vanguards three trillion dollars, they only take home about three

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<v Speaker 1>point nine billion dollars in fees from that money. To

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<v Speaker 1>put that into perspective, if for every three trillion active

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<v Speaker 1>mutual funds have they taken about thirty billion? And for

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<v Speaker 1>every three trillion hedge funds have they taken about fifty

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<v Speaker 1>five billion. Valtuna says a popularity of low cost e

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<v Speaker 1>t s and index funds represents a transfer of wealth

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<v Speaker 1>away from nancial middleman toward investor accounts. He has an

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<v Speaker 1>addition to Vanguard's low fees, the financial industry is also

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<v Speaker 1>being hurt by the lack of trading done by Vanguard's

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<v Speaker 1>index funds and e t s. Low turnover within those

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<v Speaker 1>funds means less revenue for Wall Street firms. That's your

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<v Speaker 1>Bloomberg ETF Report. I'm Catherine Cowdery. This is taking stock

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<v Speaker 1>with Gableen Hayes and Prim Fox on Bloomberg Radio. Your money,

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<v Speaker 1>your financial wellness. Someone that's looking out for your financial wellness.

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<v Speaker 1>Elliott Weiss Blooth. He is the founder and the chief

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<v Speaker 1>executive officer of High Tower, helping to manage about thirty

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<v Speaker 1>five billion dollars of customer assets. Elliott, thank you very

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<v Speaker 1>much for being in the studio. Always a pleasure him.

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<v Speaker 1>All Right, So you gotta just step back and tell

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<v Speaker 1>me what's been going on since last time we spoke,

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<v Speaker 1>Because you know, if you take a look at the

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<v Speaker 1>SMP five dred, you know you're up about six percent

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<v Speaker 1>so far this year. But you've kind of done a

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<v Speaker 1>round trip. If you already packed in January and held

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<v Speaker 1>onto your your stomach as the stock market crater, what's

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<v Speaker 1>been going on. Well, hopefully if you have a good

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<v Speaker 1>financial advisor, you, um didn't look at all the blood

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<v Speaker 1>that was showing in December and January and February. You

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<v Speaker 1>you sort of turned off the screen. You didn't look

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<v Speaker 1>at all the all the bad news. Markets recovered. Things

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<v Speaker 1>today look a little bit more stable. But if you

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<v Speaker 1>have somebody who's looking out for your investments for you, um,

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<v Speaker 1>you don't have to worry exactly about what's happening in

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<v Speaker 1>the marketplace because you've entrusted a professional, hopefully your fiduciary,

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<v Speaker 1>to keep an eye on that for you. I'm glad

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<v Speaker 1>you mentioned fiducier. Maybe we can just do a little

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<v Speaker 1>sidebar here, because fiduciary is a hot word this year

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<v Speaker 1>because it has to do with the new Department of Yeah, okay,

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<v Speaker 1>explain what's going on, and also about your registered reps

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<v Speaker 1>and responding. So, first of all, the fiduciary standard is

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<v Speaker 1>not new. The fiduciary standard is embedded in what it

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<v Speaker 1>means to be a doctor, to be a lawyer, to

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<v Speaker 1>be an accountant, And in the most simplest terms, it

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<v Speaker 1>means that the service provide or has a legal obligation

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<v Speaker 1>to put their clients or their patient or their person

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<v Speaker 1>they're serving first. They can't put their own economic interest

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<v Speaker 1>in front of what they're saying to their to the

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<v Speaker 1>patient of the client. So just when you go see

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<v Speaker 1>a doctor, you don't ever worry that a doctor is

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<v Speaker 1>prescribing a drug to you because they're getting paid to

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<v Speaker 1>prescribe that drugs. So the high degree of confidence in

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<v Speaker 1>the areas of medicine in our industry. Unfortunately, that term

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<v Speaker 1>has become a really hot topic. There are are parts

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<v Speaker 1>of the industry where there's a fiduciary duty, like High Tower,

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<v Speaker 1>and there are parts of the industry where people pretend

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<v Speaker 1>to be fiduciaries and they're not really fiduciaries. The Department

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<v Speaker 1>of Labor unfortunately has made that even more complicated because

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<v Speaker 1>what they've done is they've tried to redefine the fiduciary duty,

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<v Speaker 1>and they've done it with good intentions. I applaud their intention,

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<v Speaker 1>but it's kind of like if the U. S d A.

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<v Speaker 1>Came out and said, you know, we're gonna have vegetarian steak,

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<v Speaker 1>or we have a new way to kosher a pig,

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<v Speaker 1>all right, and you gotta look at that and you go, well,

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<v Speaker 1>how does that work Exactly, I'm going to be a vegetarian,

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<v Speaker 1>but I get have a stake once in a once

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<v Speaker 1>in a while. Well, that doesn't work. You can't be

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<v Speaker 1>a vegetarian and occasionally have state because that means you're

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<v Speaker 1>not a vegetarian. So similarly, with the Department of Labor,

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<v Speaker 1>they said, well, we're going to have fiduciaries, but here's

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<v Speaker 1>a bunch of exceptions and situations where the conflict of

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<v Speaker 1>interest can actually exist in their relationships. So that high tower,

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<v Speaker 1>we don't we don't buy that. We don't think that's

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<v Speaker 1>a true fiduciary duty. We think that those loopholes and

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<v Speaker 1>caveats sort of swiss cheesing of the Department of the

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<v Speaker 1>of the of the rule is really a problem because

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<v Speaker 1>it creates confusion. So we hope that the Department of

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<v Speaker 1>Labor and the the sec and and the government sort

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<v Speaker 1>of gets a little more organized, has a little more

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<v Speaker 1>frank conversations, and we have a single, clear, unambiguous fiduciary

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<v Speaker 1>duty standard where there's no ambiguity. Everybody understands what it

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<v Speaker 1>means and you can trust that when you have a fiduciary,

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<v Speaker 1>it's really a true fiduciary. All right, so now let's

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<v Speaker 1>talk about the actual money. Right and now we are

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<v Speaker 1>post brexit, we're living in a low interest rate and

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<v Speaker 1>by arment UH for a one case i R race,

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<v Speaker 1>they are tax advantaged accounts. What should people be thinking

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<v Speaker 1>about for those kinds of investments, Well, the most important

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<v Speaker 1>thing they should be doing is really getting the advice

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<v Speaker 1>of a third party. And everybody's situation is a little

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<v Speaker 1>bit different. A lot of it has to do with

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<v Speaker 1>where you are in your life cycle, a lot of

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<v Speaker 1>it has to do with the planning that hopefully you

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<v Speaker 1>have a financial plan that takes into consideration where you

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<v Speaker 1>are in terms of building a family and building a career,

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<v Speaker 1>and all of these are important tools that a financial

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<v Speaker 1>advisor will integrate into a holistic plan. And this is

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<v Speaker 1>where we talk about financial wellness. If you have a

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<v Speaker 1>thoughtful financial plan and a fiduciary advisor, you hopefully can

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<v Speaker 1>back away from what happens day to day in the

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<v Speaker 1>stock market or what happens week to week and a

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<v Speaker 1>situation like breaks that happens. If you trust your financial

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<v Speaker 1>advisor is doing what he's doing, you might have a

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<v Speaker 1>curiosity about sort of the global economic plitical landscape, but

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<v Speaker 1>you don't have anxiety that it's going to have a

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<v Speaker 1>have a an impact on your portfolio where you have

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<v Speaker 1>to actually engage to worry about it. That's what a

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<v Speaker 1>good financial advisor should be doing, should be doing for you.

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<v Speaker 1>I wonder whether your background as a lawyer, because I

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<v Speaker 1>know that you you have a law recovering right. But

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<v Speaker 1>the reason I bring that up is because lawyers are

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<v Speaker 1>either advocates or interrogators. There's always the other side and

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<v Speaker 1>people who are not professional in let's say, managing money,

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<v Speaker 1>who try to do it themselves. They're up against some

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<v Speaker 1>very smart, energetic, and powerful adversaries. Well so, statistically, um,

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<v Speaker 1>there's a doining how you count the data, Between five

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<v Speaker 1>and six trillion dollars of assets are managed by do

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<v Speaker 1>it yourselfers, and some of them are doing it themselves

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<v Speaker 1>in a very sort of disorganized fashion. Some of them

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<v Speaker 1>are plugged into a firm like Vanguard, and they're using

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<v Speaker 1>very thoughtful tools and dis and and products that have

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<v Speaker 1>very low cost to them. There's another six trillion dollars

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<v Speaker 1>that are being in the hands of brokers, folks that

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<v Speaker 1>are not fiduciaries. They may even call themselves financial advisors,

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<v Speaker 1>but from a legal perspective, they don't owe you a

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<v Speaker 1>fiduciary duty. And then there's a few trillion dollars that

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<v Speaker 1>are in the hands of true fiduciaries. So if you

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<v Speaker 1>take a look at those three segments of the industry, um,

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<v Speaker 1>we obviously are biased because we're in the business of

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<v Speaker 1>providing advice. We think that having a true professional manage

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<v Speaker 1>your financial plan and manage the assets for you is

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<v Speaker 1>obviously the right way to go compared to somebody who

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<v Speaker 1>has an agenda to sell you, to sell you a product.

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<v Speaker 1>But doing it yourself, and many people do it successfully themselves,

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<v Speaker 1>requires a lot of time and care and attention, and

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<v Speaker 1>it's probably better for you than at the hands of

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<v Speaker 1>somebody who has an ulterior motive and a conflict of

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<v Speaker 1>interest where you're unaware that they're actually making money off

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<v Speaker 1>of you, not making money for you. In the legal profession,

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<v Speaker 1>in the medical fashion, as a lawyer, you don't represent yourself.

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<v Speaker 1>As a doctor, you typically don't treat yourself or or

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<v Speaker 1>right or your family members for example, not allowed to unethical.

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<v Speaker 1>In the financial industry, people in the financial business, they

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<v Speaker 1>manage their own money many times should that change, I

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<v Speaker 1>don't think so that's a great point them. I think

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<v Speaker 1>in some cases the sort of I eat my own

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<v Speaker 1>cooking is a really good metric of credibility. Now, many

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<v Speaker 1>financial advisors will say, you know, I invest alongside my clients,

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<v Speaker 1>I use many of the products that my clients use,

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<v Speaker 1>and we think that's a perfectly suitable way to establish credibility. Now,

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<v Speaker 1>depending on where that financial advisor, maybe inside of their

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<v Speaker 1>own financial plan visa their clients, you may have some

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<v Speaker 1>differences in people's needs and risk tolerances. So it's not

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<v Speaker 1>a requirement from a client's perspective that their financial advisor

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<v Speaker 1>be invested in all the things that they are. But

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<v Speaker 1>there's nothing wrong with the nancial advisor, uh saying to

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<v Speaker 1>a client that I eat my own cooking and I

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<v Speaker 1>put my money at risk the same way that I

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<v Speaker 1>put your money at risk. Last point to you, low

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<v Speaker 1>interest rates? Is this the topic of the year for customers? Well,

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<v Speaker 1>I think it's been a bit of a topic for

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<v Speaker 1>a while. I think we've been living in this environment,

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<v Speaker 1>um for for some time now. Uh. And again, because

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<v Speaker 1>I'm not in the markets business, I'm a recovering lawyer,

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<v Speaker 1>and and UH do not do not comment on on

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<v Speaker 1>rates in which way they're going. But I certainly am

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<v Speaker 1>surrounded at High Tower by some very fine, thoughtful financial

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<v Speaker 1>advisors that are true professionals in this and the consensus

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<v Speaker 1>opinion from a couple of them that are sort of

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<v Speaker 1>close to close to me is that we're going to

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<v Speaker 1>be sort of in this environment for at least a

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<v Speaker 1>near term, and given where we've been, it's it's not

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<v Speaker 1>likely to change soon. Thank you very much for spending

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<v Speaker 1>time and coming into the studio. Elliott Wis Blooth is

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<v Speaker 1>the founder and the chief executive officer of High Tower,

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<v Speaker 1>helping to manage thirty five billion dollars. You're listening to

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<v Speaker 1>taking stock. We're going to take you through to the

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<v Speaker 1>clothes next, and this is Bloomberg. Yeah,