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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This week on the podcast Yet Another Banger. Sam Safe

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Speaker 2: is founder and CEO of Purpose Unlimited. One of their

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Speaker 2: holdings is Purpose Investments, about forty billion Canadian He is

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Speaker 2: a serial entrepreneur and financial innovator. He created the world's

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Speaker 2: first bitcoin etf in Canada, long before the US came

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Speaker 2: up with one. He built one of the larger etf

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Speaker 2: firms in Canada, sold it to Blackrock. On and on

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Speaker 2: the conversation goes about all these fascinating things. I thought

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Speaker 2: the conversation was really really intriguing, and I think you

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Speaker 2: will also with no further ado, my conversation with Purpose Investments.

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Speaker 3: Some Safe, Some Safe.

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Speaker 4: Welcome to Bloomberg, Barry, It's great to be here, and

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Speaker 4: thank you for that kind introduction.

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Speaker 2: So I'm kind of fascinated by your background, your career,

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Speaker 2: the whole multiple innovations, serial entrepreneurship. But let's roll back

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Speaker 2: to the early days. You wanted to be an architect

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Speaker 2: and then you went for a bachelor's in Industrial and

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Speaker 2: Systems engineering from the University of Toronto. What was the

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Speaker 2: original career plan.

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Speaker 4: Yeah, I mean, since as long as I can remember,

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Speaker 4: architecture was my kind of goal, and that fundamentally was

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Speaker 4: something that just inspired me. I loved the mix of

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Speaker 4: the creative side of my brain and the call it

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Speaker 4: systems and structural mathematical side of my brain and bring

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Speaker 4: them together.

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Speaker 1: And just design was always something exciting.

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Speaker 4: The interesting thing was that, you know, so now you're

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Speaker 4: faced with this decision, you apply to you know, school

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Speaker 4: for architecture and for engineering. And then in my you know,

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Speaker 4: I went and spoke to a couple of architects and

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Speaker 4: every single one of them said, this is.

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Speaker 1: A stupid career choice.

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Speaker 4: You won't be doing anything that you will you think

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Speaker 4: you'll be doing. It'll be gruntwork, you won't enjoy it,

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Speaker 4: and there's no money in it.

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Speaker 1: And I, you know, of course, said well what am

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Speaker 1: I signing up for?

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Speaker 4: So I said, okay, I'm going to go do engineering

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Speaker 4: with the idea that maybe I'll switch, and fundamentally that

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Speaker 4: was not going to happen.

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Speaker 1: And you know, I was in first year of engineering

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Speaker 1: and said, okay, what is my second choice? What else?

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Speaker 4: And you know, I really loved the concept of strategy

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Speaker 4: and finance. I didn't know anything about finance and I

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Speaker 4: hadn't been learning anything about it, but I got excited

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Speaker 4: about investment banking and things like that, and so, you know,

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Speaker 4: ultimately I decided that was the path I was going

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Speaker 4: to pursue, and coming out of an engineering degree, I

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Speaker 4: ended up, luckily just a timing really uniquely. At the

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Speaker 4: end of nineteen ninety eight, got an opportunity to join

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Speaker 4: the biggest bank in Canada, RBC, in their investment banking division,

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Speaker 4: and so engineering was a really interesting path towards it.

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Speaker 1: And you know, at the time.

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Speaker 4: The tech bubble was happening, and I guess someone in

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Speaker 4: investment banking said, hey, we need more engineers in here

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Speaker 4: to tell us, you know, how to think. And the

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Speaker 4: learning curve was pretty amazing in terms of starting with

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Speaker 4: nothing and basically learning on the go.

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Speaker 2: Huh. So you spend six years at RBC helping them

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Speaker 2: build out their structured products group. Tell us about that experience.

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Speaker 2: What did you learn?

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Speaker 4: So investment banking is one of the amazing early learning experiences.

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Speaker 4: And I've always been in sort of pursuit of you know,

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Speaker 4: learning and call it pushing myself to certain limits. And

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Speaker 4: you know, investment making today is very hard. Investment banking

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Speaker 4: twenty five years ago was even harder. And you know,

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Speaker 4: young analysts, young individually, you're ultimately working on you know,

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Speaker 4: amazing things. But at the same time you are you know,

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Speaker 4: being you know, you're working like a dog, like eighty

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Speaker 4: to one hundred hour weeks. That's there is no better

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Speaker 4: place as a twenty ey two year old, twenty three

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Speaker 4: year old, twenty five year old to ultimately have immersive

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Speaker 4: learning like and so it was amazing for me when

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Speaker 4: I when I went into it.

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Speaker 1: It's funny I.

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Speaker 4: Had as a young individual always you know, I was

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Speaker 4: an immigrant to Canada. You know, I didn't you know,

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Speaker 4: my family was a good middle class family, but we didn't,

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Speaker 4: you know, have stuff.

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Speaker 1: So I always dreamed about this idea of.

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Speaker 4: All the riches and golds and things of that, and

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Speaker 4: you know, investment making kind of one of the things

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Speaker 4: that kind of excited me was this idea of you know, hey,

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Speaker 4: you're going to make lots of money. And and you know,

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Speaker 4: the interesting thing was during the tenure, you know, the

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Speaker 4: first few years, you know, you start making good money

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Speaker 4: for a young individual, and then you kind of realize,

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Speaker 4: wait a minute, this isn't actually motivating me. I remember succinctly,

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Speaker 4: I came home. I was twenty five years old. It

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Speaker 4: was three in the morning or two in the morning,

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Speaker 4: and I just sat down and kind of weeped because

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Speaker 4: I said, you know, I'm working like a dog, and

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Speaker 4: I'm pursuing this goal, but I'm not happy. And I

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Speaker 4: had to actually go through a deep perspective of like, Okay,

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Speaker 4: what is the thing that actually drives me? What is

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Speaker 4: the thing that actually motivates me to wake up on

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Speaker 4: Monday morning and skip to work because I'm still.

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Speaker 1: Enjoying what I'm doing.

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Speaker 4: And what I realized was that the thing that actually

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Speaker 4: I was in pursuit of was the idea of seeing

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Speaker 4: my ideas progress, seeing the things that I was doing

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Speaker 4: have real tangible outcome. And I go back to that

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Speaker 4: principle of what was it that excited me about architecture

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Speaker 4: or design. It was this very simple principle of you know,

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Speaker 4: when you build something or you design something, you can

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Speaker 4: actually see it in front of you afterwards. And so

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Speaker 4: I actually correlate that really specifically around what was the

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Speaker 4: thing that was my intrinsic motivation. So at that point

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Speaker 4: I just said, look, I'm still learning, I'm having an

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Speaker 4: amazing time, but am I going to ultimately achieve what

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Speaker 4: I want here, and I said I won't, so I

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Speaker 4: kind of gave myself a put I call it. I

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Speaker 4: was twenty five years old and I said, Okay, I'm

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Speaker 4: still here learning, I'm going to build my networks. I'm

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Speaker 4: going to do all this stuff. But if I am

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Speaker 4: in seat on my thirtieth birthday, I'm going to resign

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Speaker 4: on that day. And that kind of woke up my

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Speaker 4: mind to what else is out there, And over the

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Speaker 4: next number of years, I started thinking about what was

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Speaker 4: it that was going to be the next for me,

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Speaker 4: and that ultimately came when I was twenty eight and

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Speaker 4: started Claymore.

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Speaker 2: So let's talk about Clay Moore. You launched this in

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Speaker 2: two thousand and five. Globally, ETFs were a thing, but

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Speaker 2: not the giants than they were today. They certainly were

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Speaker 2: a tiny niche product in Canada back then. What did

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Speaker 2: you see that all the other banks and all the

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Speaker 2: other finance bros Completely missed?

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Speaker 1: So you're absolute right.

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Speaker 4: So in Canada specifically, there were fourteen ETFs listed on

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Speaker 4: the Toronto Stock Exchange, basically all by Barclay's Eye units

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Speaker 4: at the time I shares, and in the United states.

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Speaker 4: You know, of course ETFs were starting to become popular,

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Speaker 4: specifically in the institutional crowd, retail crowd. You had I think,

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Speaker 4: perhaps like wisdomsr had just sort of entered the business

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Speaker 4: and players like that, and so it was it was

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Speaker 4: not an area that was logical or call it clear

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Speaker 4: that said, I had. One of the things I had

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Speaker 4: the benefit of, I'd actually covered some management firms globally

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Speaker 4: and during my time at RBC, and i'd actually got

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Speaker 4: the opportunity to cover Barclays and got to know the

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Speaker 4: leadership of the of the organization and help them raise

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Speaker 4: the capital. But more importantly, was supported and understood what

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Speaker 4: they were doing on the indexing ETS side. And it

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Speaker 4: got me really excited. I started to see the trends.

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Speaker 4: But what I struggled with was the fundamental principle of

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Speaker 4: you know, passive indexing.

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Speaker 1: I really did.

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Speaker 4: I actually love the principles of what indexing did. And

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Speaker 4: at the time ETFs were deemed as indexing, right, that

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Speaker 4: was the concept, right, It was actually anything you did

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Speaker 4: outside of pure indexing was a no no. The industry

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Speaker 4: players would say, well, this isn't an index. And so

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Speaker 4: I got really excited about you know, the idea of

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Speaker 4: you know what an ETF does, It's low cost, great

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Speaker 4: product in terms of rapper and structure, transparent discipline, and

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Speaker 4: its approach using an index. However, I just hated the

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Speaker 4: fundamental principle of what market cap indexing did, which is

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Speaker 4: basically by high and sell low.

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Speaker 1: Right. So, in around the time.

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Speaker 4: That I left our received started Claymore, I had actually

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Speaker 4: read a research paper just serendipitously came out around the

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Speaker 4: same time in two thousand and four by Rob are

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Speaker 4: Not and Jason Sue, We'll spend some time on Rob,

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Speaker 4: who's a really important person in my life, and they

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Speaker 4: had published this article around non market cap weated indexes,

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Speaker 4: smart data, Yes, and it was I read this article

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Speaker 4: and I'm engineer, so I love these technical things, and

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Speaker 4: I just got excited, and basically a couple of months later,

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Speaker 4: I reached out, We went down and spent time with

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Speaker 4: Rob in Pasadena.

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Speaker 1: And he was a big thing.

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Speaker 4: I remember Rob was a pretty big deal, but he

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Speaker 4: took the time, he spent half a day with me,

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Speaker 4: and I walked out of that office just having clarity

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Speaker 4: on the future of what I was going to build,

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Speaker 4: and more importantly, the future of where the industry opportunity was.

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Speaker 4: And that was the principal starting point of the vision

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Speaker 4: for building Claymore and you know the future of what

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Speaker 4: I felt was going to be a really amazing thing

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Speaker 4: around indexing and the future of indexing around and we

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Speaker 4: used of course, we launched the first public investment fund

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Speaker 4: on fundamental index and the RAFFI indexes.

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Speaker 2: Huh really interesting. So you grow this to thirty four

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Speaker 2: ETFs and a couple of closed end funds and about

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Speaker 2: eight billion dollars Canadian I think, yeah, six billion US.

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Speaker 2: What was the hardest part of building that sort of

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Speaker 2: asset manager considering all the other products were giant bank owns.

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Speaker 4: Well, you know, Canada of course has many structural I mean,

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Speaker 4: it's an amazing region for opportunity financial services. That said,

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Speaker 4: it is also you know, highly concentrated with the big

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Speaker 4: banks and the control that they have with their distribution,

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Speaker 4: and so it's a very challenging market for independence as

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Speaker 4: you can imagine.

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Speaker 1: That said, you know what, I really I go back

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Speaker 1: to the period we had a really amazing product. No

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Speaker 1: one knew what it was.

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Speaker 4: I remember we'd go out in two thousand and five,

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Speaker 4: two thousand and six, two thousand and seven. We'd sit

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Speaker 4: down and talk to advisors across the country and you know,

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Speaker 4: I'd walk into a room and I'd have a sign

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Speaker 4: in sheet and saying, you know, name and email. But

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Speaker 4: then I'd ask the question, how many of you use ETFs?

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Speaker 4: And back then it was one out of ten would

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Speaker 4: say yes. Most people were like, what's an ETF? It's

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Speaker 4: what EFTs? You know, like, this is the time, right,

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Speaker 4: But I fundamentally believe what we were doing is important,

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Speaker 4: and it was, you know, we grew in Canada. Of course,

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Speaker 4: remember about one tenth size of the American market, so

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Speaker 4: you know, eight billion aggregate would be like eighty billion

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Speaker 4: in that timeframe. But we actually in the first couple

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Speaker 4: of years grew to about a billion dollars. So at

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Speaker 4: the beginning of a weight, we got to eight hundred million,

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Speaker 4: which is a great, great outcome early on in you know,

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Speaker 4: from nothing, and then in the real thing happened in

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Speaker 4: two thousand and eight, you know, and it's you know,

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Speaker 4: it was a really great wake up call and called

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Speaker 4: learning for me. We went through two thousand and eight

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Speaker 4: and every single month and o eight we grew positively.

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Speaker 4: We had the net positive sales I think we were

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Speaker 4: going to bite the market environment. And in September October specifically,

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Speaker 4: we had positive net sales, and I think we were

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Speaker 4: the only firm in the country that had that. The

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Speaker 4: principle was that disruption was critical for us at a

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Speaker 4: time when we were trying to build a challenger idea

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Speaker 4: and tell a really strong narrative. We needed the complacency

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Speaker 4: of our investor base, of the advisor community of institutions

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Speaker 4: to wake up and say, hey, wait a minute, you

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Speaker 4: know what should I be thinking about next? And that

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Speaker 4: was a really important point. So coming out of two thousand,

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Speaker 4: we ended up in two thousand and eight growing from

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Speaker 4: eight hundred million to one point one billion, despite the

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Speaker 4: head of the markets, and then in two thousand and

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Speaker 4: nine we went from one point one billion to four

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Speaker 4: point four billion. Wow, So just an accelerant coming out

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Speaker 4: of the financial crisis. The next year we went from

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Speaker 4: four point four to five point seven, and then to

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Speaker 4: six point eight, and then ultimately two months later when

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Speaker 4: we closed the deal with black Rock to sell it,

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Speaker 4: it was eight billion. And the momentum was just so

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Speaker 4: unbelievably strong. And the reason was because when people the

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Speaker 4: financial crisis occurred people left the market and they were

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Speaker 4: going to cash, and then when they were re entering

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Speaker 4: the market, they were asking themselves, now, what where do

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Speaker 4: I go?

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Speaker 1: What's the best investment vehicles?

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Speaker 4: And all of a sudden, easys became something that they

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Speaker 4: were learning about, understanding, and we were.

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Speaker 1: Right there and it was amazing.

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Speaker 4: At the same time, we also saw the acceleration towards

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Speaker 4: the trends that were happening in advice as you know,

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Speaker 4: the movement towards discretionary portfolio management, you know, the historical

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Speaker 4: mindset towards commission oriented new issue type business that became

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Speaker 4: challenged because of the market and the banks and the

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Speaker 4: broker dealers wanted more stability, so advisors started to transition

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Speaker 4: their practices towards more discretionary investment processes and model portfolios

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Speaker 4: and ETFs of course, you know, fit extremely well.

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Speaker 1: In the US.

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Speaker 4: We've of course seen the RAA movement coming out of that,

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Speaker 4: and those were an amazing backdrop of trend that that

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Speaker 4: just drove the market and in parallel, the ETF industry

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Speaker 4: alongside of it, and it's been an unbelievable number of

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Speaker 4: years for everyone.

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Speaker 2: Really interesting. So so the sale to Blackrock what motivated

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Speaker 2: the exit, what was the process like, and how hard

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Speaker 2: was it to let go of this thing that you

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Speaker 2: had built?

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Speaker 1: Very hard.

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Speaker 4: So there's a My financial partner in the call it

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Speaker 4: latter years was a firm called Googa IM Partners and

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Speaker 4: an amazing partner, an organization. Worked really well with them,

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Speaker 4: and you know, really proud of the relationship we built there.

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Speaker 4: And the interesting thing was, of course I had sort

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Speaker 4: of approached them and said, let's let's sort of, you.

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Speaker 1: Know, let me buy you out.

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Speaker 4: You know, they'd had a great outcome and it was

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Speaker 4: a wonderful locome, but you know, we just sort of

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Speaker 4: couldn't get to a price that made sense.

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Speaker 1: So we decided to go through a process.

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Speaker 4: And I at the time felt, Okay, we'll run a process,

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Speaker 4: but I'm going to also be a buyer at the process,

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Speaker 4: and I agreed.

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Speaker 1: We agreed to that. At the end of the day

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Speaker 1: though the process was very robust.

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Speaker 4: Blackrock was a leading partner at that and I remember

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Speaker 4: pivoting multiple times as the price kept going up on

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Speaker 4: who my partner was going to be to finanza my buyout.

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Speaker 4: And then at the end, I remember, on in December

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Speaker 4: of twenty eleven, I was was my daughter's birthday. I

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Speaker 4: was on the phone with one of my strategy partners

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Speaker 4: around the purchase and we were having conversation about strategy,

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Speaker 4: execution plan. And then I got off the phone. I

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Speaker 4: walked down to my wife and I said, I'm holding

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Speaker 4: on too much. The price has gotten well above what

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Speaker 4: my target price was.

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Speaker 1: I'm being too emotional. I think that the right thing

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Speaker 1: to do is to sell.

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Speaker 4: So I called the bankers. I said, I'll put my

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Speaker 4: name behind the black Rock bid. I flew down to

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Speaker 4: New York on January second. We spent a few days

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Speaker 4: in a room negotiating the purchase. Still agreement.

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Speaker 1: I mean, now it's the deal.

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Speaker 4: I think on January eleventh and close a deal on

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Speaker 4: March second, and that it was a really difficult period

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Speaker 4: for me. I had a chip on my shoulder. I'd

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Speaker 4: built this thing. You used the word serial entrepreneur earlier,

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Speaker 4: and I actually have never believed I'm a serial entrepreneur.

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Speaker 4: I don't build businesses to build businesses. I build business

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Speaker 4: because I truly love what I do. I'm in pursuit

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Speaker 4: of really building things that have endurance, have great value

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Speaker 4: to our customers, that really think about changing the industry,

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Speaker 4: and so this was a moment where I felt like

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Speaker 4: something was being ripped out of me, and so I

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Speaker 4: had a chip on my shoulder. We closed the transaction

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Speaker 4: and I said, I need to take the time. I

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Speaker 4: actually ended up building the business plan for what I

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Speaker 4: was going to do next, which ultimately is purpose and

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Speaker 4: while simple, within thirty days. But I said to myself,

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Speaker 4: if I start today, I'm going to fail because I'm

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Speaker 4: not doing it for the right motivation.

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Speaker 1: I'm doing it for the wrong reasons.

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Speaker 4: I want to do it because I'm in pursuit of

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Speaker 4: getting back in the business.

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Speaker 1: And so I ended up.

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Speaker 4: Consulting for the Irregulator for a couple of weeks, and

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Speaker 4: then I ultimately went to with my wife for three

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Speaker 4: months overseas to Southeast Asia and I detached. I Back then,

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Speaker 4: we had blackberries. I still probably have BlackBerry. People famously

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Speaker 4: know I love blackberries. But I had BlackBerry and I

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Speaker 4: turned it off and no one could get a hold

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Speaker 4: of me. We went throughout Southeast Asia and it was

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Speaker 4: the greatest thing. And I said to myself, if I

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Speaker 4: come back and I have the energy and excitement around

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Speaker 4: this business plan, then I'm going to do it. And

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Speaker 4: of course we came back and you know, I once

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Speaker 4: we landed in North America, you get all the texts

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Speaker 4: and all the news, and my energy just started to

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Speaker 4: really powerfully go up. And I said, okay, let's go,

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Speaker 4: and I registered purpose and started the business plan.

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Speaker 2: So we're going to talk in a little bit about

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Speaker 2: why I think you're a serial entrepreneur. But you said

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Speaker 2: something that I'm kind of fascinated by. And it requires

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Speaker 2: a degree of self awareness that many people in our

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Speaker 2: industry sometimes don't have. I don't want to say always

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Speaker 2: don't have. We all have blind spots. You said you

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Speaker 2: became aware that you were too emotional, too self involved,

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Speaker 2: too you were holding too tightly. How did you come

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Speaker 2: to that realization? You know, listeners aboard of hearing me

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Speaker 2: talk about my early days on a training desk, But

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Speaker 2: I became very aware that, oh, this is just way

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Speaker 2: too much fun. You're trading for the dopamine hit, not

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Speaker 2: for P and L. You either have to become more

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Speaker 2: disciplined or shift your career. What was that insight that

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Speaker 2: led you to say, Oh, I'm gripping this way too tightly.

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Speaker 4: So I think self reflection is one of the great

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Speaker 4: virtues that we all should have. It's one of the

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Speaker 4: things I think often people don't have enough of. And

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Speaker 4: I actually think, you know, it's something that requires anchoring

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Speaker 4: to sort of early on to the kind of goals

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Speaker 4: and the things that matter to you. So you're disciplined

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Speaker 4: around what you're self reflecting around and it's hard as humans,

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Speaker 4: like we're not trained, our mental state is not trained

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Speaker 4: this way. So it's just something that I feel very

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Speaker 4: confident in my ability to constantly be asking myself, Am

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Speaker 4: I on the right track? Am I doing the right things?

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Speaker 4: Am I pursuing the right goals? Am I going to

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Speaker 4: achieve the things that I want to achieve on the

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Speaker 4: path I'm on? And that that's just I think it's

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Speaker 4: a critical learning and you know, the growth mindset that

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Speaker 4: comes with that curiosity and willingness to be vulnerable is

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Speaker 4: critical as a human. So this is this is I

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Speaker 4: think a really important thing. I think our industry can

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Speaker 4: always use that because you know, I like, I love

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Speaker 4: the financial services industry one because it starts with a

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Speaker 4: really amazing mission. We are here in service of individuals

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Speaker 4: to help them ultimately achieve their out comes, their goals.

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Speaker 1: There it is such an unbelievably.

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Speaker 4: High mission industry, and we don't do enough to talk

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Speaker 4: about that. Instead, we talk too much about ourselves. We're

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Speaker 4: self centered. We talk about you know, hey, let me

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Speaker 4: tell you about me, and now that I'm done talking

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Speaker 4: about me, let me talk to you more about me.

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Speaker 4: And you go to someone's website, it's always about me, me, me,

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Speaker 4: it's never about the customer. And so there's this amazing

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Speaker 4: opportunity as an industry to step back, reflect and say,

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Speaker 4: why are we here? What's the actual job that we're

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Speaker 4: here to do? And it is ultimately in service of

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Speaker 4: individuals and their outcomes one hundred percent, and we complicate

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Speaker 4: that so much, and so I think self reflection on

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Speaker 4: that as an industry is a big opportunity, and those

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Speaker 4: who get it are those who stand out and differentiate

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Speaker 4: more than anybody else.

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Speaker 2: Really really fascinating. Coming up, we continue our conversation with

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Speaker 2: some safe founder and CEO of Purpose Investments discussing financial innovation.

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Speaker 2: I'm Barry rich Alts. You're listening to Masters in Business

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Speaker 2: on blue Berg Radio. I'm Barry Redhults. You're listening to

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Speaker 2: Masters in Business on Bloomberg Radio. I'm speaking with some

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Speaker 2: Safe he is the founder and CEO of Purpose Investments.

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Speaker 2: So we were talking earlier. You sold Claymore to black Rock,

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Speaker 2: and instead of taking a couple of years off, a

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Speaker 2: month or two later you essentially start Purpose as well

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Speaker 2: as co founding Wealth Simple. So many people take a

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Speaker 2: breather after an exit. Why go straight back in? And

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Speaker 2: why two companies at want?

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Speaker 4: So I had, As I said earlier, I had a

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Speaker 4: very clear eye on what I wanted to do next.

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Speaker 4: I was really excited about where the industry was going,

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Speaker 4: what we were doing, with the momentum we were seeing.

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Speaker 4: And it felt actually now I had this amazing gift.

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Speaker 4: I was blessed with a blank piece of paper. And

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Speaker 4: so when you have a blank piece of paper, so

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Speaker 4: oftentimes businesses want to keep evolving, you want to, but

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Speaker 4: you have to kind of deal with your legacy, you know,

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Speaker 4: and technical data and things like that. And so I felt,

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Speaker 4: blank piece of paper I can get to do. How

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Speaker 4: would I start from scratch? And so I had this

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Speaker 4: great energy. But I looked at both the continued evolution

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Speaker 4: of modernization of investment management, but I also saw a

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Speaker 4: bigger picture opportunity in wealth management. I said, the opportunity

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Speaker 4: is not just you know, let's build ass some management products.

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Speaker 4: Because when I started claymar I came from it from

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Speaker 4: a technical engineering perspective, and I said, when I look

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Speaker 4: at all the billboards and I look at all the advertising,

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Speaker 4: all it says is, hey, we beat the market.

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Speaker 1: We did this.

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Speaker 4: And I said, okay, well, the job to be done

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Speaker 4: is to beat the markets. And I thought that's what

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Speaker 4: we were supposed to do. So I was in pursuit

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Speaker 4: of building a product and a business that ultimately solved

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Speaker 4: for helping people beat the markets. What I realized and

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Speaker 4: one of my great stories around this was the first

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Speaker 4: product we launched was the Canadian Fundamental RAFFI Fundamental Index,

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Speaker 4: and we launched that and it was amazing. But it

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Speaker 4: hit its five year numbers in twenty ten, just early

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Speaker 4: twenty eleven, and of course five years you start to

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Speaker 4: see real track record. And at the time it was

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Speaker 4: the number two Canadian equity fund. It beat every active fund,

439
00:22:07,320 --> 00:22:11,520
Speaker 4: all the main index. It outperformed by two hundred basis points,

440
00:22:11,920 --> 00:22:14,240
Speaker 4: and that's a great accolade, of course in our industry.

441
00:22:14,400 --> 00:22:16,879
Speaker 4: That's what you know, you were really excited about. And

442
00:22:16,960 --> 00:22:19,960
Speaker 4: I felt, wait a minute, I actually don't know if

443
00:22:19,960 --> 00:22:22,680
Speaker 4: we actually did anything, because it went down in two

444
00:22:22,680 --> 00:22:25,720
Speaker 4: thousand and eight, just like the Maid Index thirty five

445
00:22:25,760 --> 00:22:28,320
Speaker 4: percent or whatever it was. And I also looked at

446
00:22:28,320 --> 00:22:30,080
Speaker 4: the journey and I said, if someone had bought it

447
00:22:30,119 --> 00:22:31,919
Speaker 4: on day one when we launched it and held it

448
00:22:31,920 --> 00:22:34,080
Speaker 4: all through that five years, they would have received that return.

449
00:22:34,280 --> 00:22:36,240
Speaker 4: But the reality of what human nature was is that

450
00:22:36,280 --> 00:22:39,000
Speaker 4: they were buying it at different times when they got fearful,

451
00:22:39,000 --> 00:22:41,919
Speaker 4: they were selling it, and you know, their return was

452
00:22:42,040 --> 00:22:44,959
Speaker 4: very different than the fund's return. And I asked myself,

453
00:22:45,000 --> 00:22:47,880
Speaker 4: I said, did we actually change the industry?

454
00:22:47,920 --> 00:22:48,520
Speaker 1: Did we do anything?

455
00:22:48,560 --> 00:22:50,920
Speaker 4: Yes, we did something great technically, the product was excellent.

456
00:22:51,119 --> 00:22:53,720
Speaker 4: We were moving the needle of how the industry operates,

457
00:22:53,960 --> 00:22:56,320
Speaker 4: but we weren't changing the way the client and the

458
00:22:56,320 --> 00:22:58,360
Speaker 4: customer was experiencing what we did.

459
00:22:58,920 --> 00:23:00,159
Speaker 1: And so that for me.

460
00:23:00,200 --> 00:23:02,560
Speaker 4: And at the same time I told you about Guggenheim

461
00:23:02,680 --> 00:23:05,040
Speaker 4: was our partners and they had been working on their

462
00:23:05,040 --> 00:23:07,600
Speaker 4: wealth part of the business with Danny Knoman, and I

463
00:23:07,600 --> 00:23:10,720
Speaker 4: had this wonderful gift again to have the opportunity to

464
00:23:10,800 --> 00:23:14,480
Speaker 4: learn and understand how the Danny was brought in to

465
00:23:14,600 --> 00:23:18,960
Speaker 4: help them understand how to help billionaires and wealthy families

466
00:23:19,000 --> 00:23:23,200
Speaker 4: and call it patriarchs and matriarchs to understand the transition

467
00:23:23,280 --> 00:23:26,960
Speaker 4: from wealth creation to wealth management. And it was so

468
00:23:27,080 --> 00:23:31,040
Speaker 4: powerful and the principles of what Danny talked about really

469
00:23:31,160 --> 00:23:33,920
Speaker 4: resonated with me. I became a student of behavioral science

470
00:23:34,400 --> 00:23:37,960
Speaker 4: and that sort of became really powermount to my view

471
00:23:38,000 --> 00:23:40,120
Speaker 4: of what a modern assa management firm needs to think about,

472
00:23:40,119 --> 00:23:43,320
Speaker 4: which is not just beat the markets, but develop investment

473
00:23:43,320 --> 00:23:46,679
Speaker 4: products that actually have outcomes and goal orientation towards them.

474
00:23:46,720 --> 00:23:51,480
Speaker 4: How do you help advisors and investors ultimately communicate together

475
00:23:51,560 --> 00:23:54,959
Speaker 4: and work collaboratively around the actual goal the customers are

476
00:23:54,960 --> 00:23:57,439
Speaker 4: asking us to do, which is help them meet their goals.

477
00:23:57,800 --> 00:23:58,400
Speaker 1: And so I just.

478
00:23:58,320 --> 00:24:02,040
Speaker 4: Felt the asse management industry, wealth industry both could ultimately

479
00:24:02,080 --> 00:24:02,879
Speaker 4: optimize around that.

480
00:24:03,320 --> 00:24:06,160
Speaker 1: And that was what Purpose's mission was going to be around.

481
00:24:06,320 --> 00:24:09,960
Speaker 4: Is outcom oriented modern investment management, optimizing for all the

482
00:24:10,000 --> 00:24:12,520
Speaker 4: inputs and how we manage money, not being active, not

483
00:24:12,560 --> 00:24:15,760
Speaker 4: being passive. And then second is how do we help

484
00:24:16,600 --> 00:24:19,800
Speaker 4: restructure the way wealth management could ultimately be oriented towards

485
00:24:19,800 --> 00:24:22,000
Speaker 4: the customer journey as opposed to, Hey, we're just going

486
00:24:22,080 --> 00:24:23,480
Speaker 4: to give you a sixty to forty portfolio.

487
00:24:23,640 --> 00:24:27,000
Speaker 2: Huh really really fascinating. Tell us a little bit about

488
00:24:27,040 --> 00:24:31,920
Speaker 2: wealth Simple, which I described earlier as the default investing

489
00:24:31,960 --> 00:24:36,119
Speaker 2: app for a young generation of Canadians. What did you

490
00:24:36,200 --> 00:24:41,800
Speaker 2: see before apps like Robinhood were big and successful that

491
00:24:42,320 --> 00:24:43,919
Speaker 2: was a thing that young people wanted.

492
00:24:44,280 --> 00:24:48,399
Speaker 4: Yeah, So the principal insight that I sort of had was,

493
00:24:49,680 --> 00:24:50,879
Speaker 4: you know, if you looked at the way that the

494
00:24:50,880 --> 00:24:54,320
Speaker 4: industry was operating, one of the big negatives was that

495
00:24:54,720 --> 00:24:57,600
Speaker 4: because the industry made so much money, the margins were

496
00:24:57,600 --> 00:25:00,560
Speaker 4: so good, we actually relied in a l easy way

497
00:25:00,560 --> 00:25:03,240
Speaker 4: on what we call average economics. So what does that mean?

498
00:25:03,400 --> 00:25:06,359
Speaker 4: Where do you see that It comes out as on average?

499
00:25:06,520 --> 00:25:08,640
Speaker 4: You know, I like to run money for bigger customers.

500
00:25:08,680 --> 00:25:11,200
Speaker 4: On average, my bigger customers make me more money, and

501
00:25:11,280 --> 00:25:13,919
Speaker 4: on average, my smaller customers don't make any money. And

502
00:25:14,000 --> 00:25:16,400
Speaker 4: how does that show up? You know, smaller customers get

503
00:25:16,400 --> 00:25:21,520
Speaker 4: treated poorly, get high fees, get relegated to lower quality services,

504
00:25:21,840 --> 00:25:25,879
Speaker 4: and larger investors ultimately get all the value. And people

505
00:25:25,880 --> 00:25:29,040
Speaker 4: are gravitating towards hey minimums and big fees for big,

506
00:25:29,080 --> 00:25:31,600
Speaker 4: big services for high net worth and ultra high networth.

507
00:25:31,800 --> 00:25:34,520
Speaker 4: And I just felt that was stupid. The only economics

508
00:25:34,520 --> 00:25:38,880
Speaker 4: class I took in engineering was something called ABC economics,

509
00:25:39,119 --> 00:25:43,439
Speaker 4: and what that is is actually activity based economics. And

510
00:25:43,480 --> 00:25:46,760
Speaker 4: so the idea of unit economics, and I said, what

511
00:25:46,760 --> 00:25:49,480
Speaker 4: we need to understand in this industry is that I

512
00:25:49,520 --> 00:25:53,199
Speaker 4: actually disagree that small accounts don't make you money. I

513
00:25:53,280 --> 00:25:55,920
Speaker 4: just think that the systems, the principles of the infrastructure

514
00:25:55,920 --> 00:25:58,919
Speaker 4: of the industry are poorly designed to serve smaller clients.

515
00:25:59,400 --> 00:26:01,560
Speaker 4: And so what I I felt my whole wealth model

516
00:26:01,720 --> 00:26:06,240
Speaker 4: was how do we restructure the infrastructure of the industry.

517
00:26:06,440 --> 00:26:08,520
Speaker 4: How do we think about it from a unit economics

518
00:26:08,920 --> 00:26:12,280
Speaker 4: using technology and structure and pipes that would ultimately allow

519
00:26:12,320 --> 00:26:15,919
Speaker 4: for that. And then what you do is bifurcate the

520
00:26:16,040 --> 00:26:20,679
Speaker 4: value for the different segments of customers fall early stage customers,

521
00:26:20,920 --> 00:26:23,200
Speaker 4: middle of massiffluent all the way to ultra high net

522
00:26:23,200 --> 00:26:25,960
Speaker 4: worth based on a service level offering. And the service

523
00:26:26,040 --> 00:26:28,840
Speaker 4: level offering would change an increase based on the needs

524
00:26:28,840 --> 00:26:29,639
Speaker 4: of those customers.

525
00:26:29,960 --> 00:26:31,240
Speaker 1: So that was the principle.

526
00:26:31,640 --> 00:26:34,879
Speaker 4: And I said, at the earliest stage, if you're twenty

527
00:26:34,920 --> 00:26:36,840
Speaker 4: years old, twenty five years old, this is the most

528
00:26:36,880 --> 00:26:41,439
Speaker 4: amazing period to build for. But the industry was treating

529
00:26:41,480 --> 00:26:43,320
Speaker 4: them awful. So I said, let's go build this, and

530
00:26:43,359 --> 00:26:45,240
Speaker 4: so we started with the technology, the infrastructure, and what

531
00:26:45,240 --> 00:26:49,520
Speaker 4: will Simple has done is really unbelievable. It has become

532
00:26:49,880 --> 00:26:54,879
Speaker 4: in Canada the most competitive platform in financial services against

533
00:26:54,920 --> 00:26:57,439
Speaker 4: the big six Canadian banks. Canada has never seen anything

534
00:26:57,520 --> 00:27:00,159
Speaker 4: like this before. And it all is rooted on on

535
00:27:00,720 --> 00:27:03,760
Speaker 4: serving customers where they're needing us to serve them right

536
00:27:03,800 --> 00:27:06,440
Speaker 4: when they're getting started or along the earliest stage of

537
00:27:06,440 --> 00:27:09,960
Speaker 4: their journey, and then helping them compound not only their

538
00:27:10,040 --> 00:27:13,560
Speaker 4: wealth but also the overall financial experience as they grow.

539
00:27:13,600 --> 00:27:16,959
Speaker 4: From twenty five thirty thirty five, forty it has been

540
00:27:17,000 --> 00:27:18,160
Speaker 4: an amazing experience.

541
00:27:18,240 --> 00:27:19,919
Speaker 1: And you know today Well.

542
00:27:19,800 --> 00:27:21,760
Speaker 4: Simple, I mean, I think we're we run about one

543
00:27:21,840 --> 00:27:24,760
Speaker 4: hundred and fifty billion, but we're doing more in net

544
00:27:24,800 --> 00:27:28,119
Speaker 4: deposits than the biggest bank in Canada, RBC. That is

545
00:27:28,160 --> 00:27:31,399
Speaker 4: an unbelievable City six and I'm proud of what that

546
00:27:31,680 --> 00:27:34,800
Speaker 4: team and what the organization is doing to challenge the

547
00:27:34,840 --> 00:27:37,760
Speaker 4: industry and change the way Canadians are served.

548
00:27:37,960 --> 00:27:41,560
Speaker 2: So let's stay with wealth Simple a minute, because initially

549
00:27:41,960 --> 00:27:44,840
Speaker 2: I assumed this was kind of a rub and hood

550
00:27:44,960 --> 00:27:49,280
Speaker 2: like app with free trading and gamification and you know

551
00:27:49,680 --> 00:27:53,960
Speaker 2: up to but not quite sports betting like that sort of. Hey,

552
00:27:54,000 --> 00:27:56,160
Speaker 2: this isn't going to get anybody to their goals. It's

553
00:27:56,600 --> 00:28:01,040
Speaker 2: fun entertaining stuff during the lockdown of the pandemic. Tell

554
00:28:01,119 --> 00:28:06,520
Speaker 2: us about wealth simple in terms of the differences with

555
00:28:06,640 --> 00:28:07,840
Speaker 2: an app like Robinhood.

556
00:28:07,920 --> 00:28:11,400
Speaker 4: Yeah, So the starting point actually is you start with

557
00:28:11,680 --> 00:28:13,960
Speaker 4: the customer where they need you the most. Right when

558
00:28:14,000 --> 00:28:16,920
Speaker 4: you're twenty five or thirty, you know, you're either just

559
00:28:16,960 --> 00:28:19,520
Speaker 4: getting started, you might have five, ten, twenty, thirty thousand dollars,

560
00:28:20,000 --> 00:28:21,760
Speaker 4: and the principle of it is you want to help

561
00:28:21,800 --> 00:28:22,800
Speaker 4: them ultimately get going.

562
00:28:23,080 --> 00:28:24,640
Speaker 1: So building a discipline, a structure.

563
00:28:24,680 --> 00:28:26,800
Speaker 4: So we have the manage money programs, which are you

564
00:28:27,080 --> 00:28:29,800
Speaker 4: open an account very simply and clearly, you basically build

565
00:28:29,840 --> 00:28:32,680
Speaker 4: your portfolio, and your portfolio is basically a glide path

566
00:28:32,800 --> 00:28:35,680
Speaker 4: on the markets and and such, and then you surround

567
00:28:35,720 --> 00:28:39,280
Speaker 4: that with you know, the types of services and solutions,

568
00:28:39,320 --> 00:28:43,680
Speaker 4: so direct trading accounts, you know, cash management, credit cards,

569
00:28:44,520 --> 00:28:47,200
Speaker 4: you know all the crypto things like that are really important.

570
00:28:47,360 --> 00:28:50,040
Speaker 1: So my principle is there's always a view of attention

571
00:28:50,240 --> 00:28:50,840
Speaker 1: of these things.

572
00:28:51,240 --> 00:28:52,880
Speaker 4: I come from a different way of it, which is,

573
00:28:53,200 --> 00:28:54,720
Speaker 4: these are things that people are going to be in

574
00:28:54,720 --> 00:28:57,160
Speaker 4: pursuit of, and what you want as an organization is

575
00:28:57,160 --> 00:28:59,240
Speaker 4: not to duck your head in the sand at any stage.

576
00:28:59,280 --> 00:29:01,000
Speaker 4: If you're an advisor, you know, saying hey, I don't

577
00:29:01,040 --> 00:29:03,440
Speaker 4: do crypto is actually a wrong message or because your

578
00:29:03,440 --> 00:29:04,960
Speaker 4: customers are going to be in pursuit of it. We

579
00:29:05,000 --> 00:29:08,080
Speaker 4: know that sixty seventy percent of highit worth individuals have

580
00:29:08,280 --> 00:29:11,240
Speaker 4: a direct account and many of them are curious and

581
00:29:11,320 --> 00:29:15,960
Speaker 4: engaged in buying interesting areas like that. So I think

582
00:29:16,000 --> 00:29:19,000
Speaker 4: an advisor firm or any firm, a financial service firm,

583
00:29:19,040 --> 00:29:22,240
Speaker 4: has to find a way to balance the foundations of

584
00:29:22,280 --> 00:29:25,760
Speaker 4: what is good long term you know, call it discipline investing,

585
00:29:26,120 --> 00:29:29,160
Speaker 4: along with saytiating the needs and the desires of what

586
00:29:29,200 --> 00:29:33,080
Speaker 4: an individual wants so that they don't always you know,

587
00:29:33,200 --> 00:29:35,400
Speaker 4: turn their head to I need something different. And that

588
00:29:35,480 --> 00:29:38,040
Speaker 4: actually comes from the mindset of find a safe and

589
00:29:38,080 --> 00:29:40,320
Speaker 4: secure way to do those types of things on behalf

590
00:29:40,320 --> 00:29:43,680
Speaker 4: of the customers and educate them and size it effectively.

591
00:29:44,320 --> 00:29:47,320
Speaker 4: So you know, like for example, while Simple recently got

592
00:29:47,320 --> 00:29:49,240
Speaker 4: approval to do prediction markets, and this is a really

593
00:29:49,320 --> 00:29:50,520
Speaker 4: high tension area.

594
00:29:50,680 --> 00:29:53,200
Speaker 1: It's you know, people have a you know, binary.

595
00:29:52,840 --> 00:29:55,680
Speaker 4: View of this, and my view is if customers are

596
00:29:55,680 --> 00:29:57,480
Speaker 4: going to be doing it, you want them to do

597
00:29:57,520 --> 00:30:00,280
Speaker 4: it with you in a safe and secure way, then

598
00:30:00,360 --> 00:30:02,600
Speaker 4: to do it elsewhere, and that's how you have to

599
00:30:02,640 --> 00:30:06,320
Speaker 4: ultimately be building around. But at the same time, the

600
00:30:06,400 --> 00:30:10,200
Speaker 4: whole business is oriented around helping someone where they need

601
00:30:10,240 --> 00:30:12,760
Speaker 4: it the most, around their financial journey so they can

602
00:30:12,840 --> 00:30:14,000
Speaker 4: ultimately achieve their goals.

603
00:30:14,160 --> 00:30:14,600
Speaker 1: That's it.

604
00:30:15,120 --> 00:30:20,560
Speaker 2: So this discussion about whether or not you're a serial entrepreneur,

605
00:30:20,800 --> 00:30:24,560
Speaker 2: I have to click through a bunch of things that

606
00:30:24,640 --> 00:30:28,960
Speaker 2: you've built that are fascinating. Starting with the world's first

607
00:30:29,000 --> 00:30:33,880
Speaker 2: spot bitcoin ETF back in twenty twenty one, long years

608
00:30:33,920 --> 00:30:38,920
Speaker 2: before the US approved one. It crossed a billion dollars

609
00:30:38,960 --> 00:30:41,960
Speaker 2: in the first month. How did you get the Canadian

610
00:30:42,000 --> 00:30:44,959
Speaker 2: regulators to approve this? How did you make them comfortable

611
00:30:45,600 --> 00:30:48,400
Speaker 2: three years before the SEC was comfortable.

612
00:30:48,760 --> 00:30:52,360
Speaker 4: So, first off, I've had a deep thesis on crypto

613
00:30:53,000 --> 00:30:55,160
Speaker 4: for a long time, and that's the starting point is

614
00:30:55,200 --> 00:30:58,120
Speaker 4: I wasn't doing it because hey, cool, dos your idea.

615
00:30:58,440 --> 00:31:01,440
Speaker 4: Let's launch this and throw some thing against the wall.

616
00:31:01,600 --> 00:31:05,000
Speaker 4: I had, you know, in twenty sixteen, just like most people,

617
00:31:05,320 --> 00:31:06,920
Speaker 4: you know, I had been like, you know, been asked

618
00:31:06,960 --> 00:31:08,560
Speaker 4: about bitcoin, and I was like, I don't know, it

619
00:31:08,560 --> 00:31:09,520
Speaker 4: looks like a sort.

620
00:31:09,400 --> 00:31:10,120
Speaker 1: Of scammy thing.

621
00:31:10,160 --> 00:31:12,280
Speaker 4: And then I sort of self reflected and said, wait

622
00:31:12,280 --> 00:31:14,120
Speaker 4: a minute, people are actually asking my opinion on this.

623
00:31:14,160 --> 00:31:16,120
Speaker 4: I should go and do some research. So I spent

624
00:31:16,160 --> 00:31:18,960
Speaker 4: the time learning and understanding the space. I actually the

625
00:31:18,960 --> 00:31:21,360
Speaker 4: best way to do that is make an investment. And

626
00:31:21,800 --> 00:31:24,760
Speaker 4: you know, over the next twelve months, I just became

627
00:31:24,840 --> 00:31:28,000
Speaker 4: this student of what was happening. And you know what

628
00:31:28,040 --> 00:31:30,479
Speaker 4: really excited me was, of course Ethereum, which is this

629
00:31:30,680 --> 00:31:35,280
Speaker 4: call it sister technology that was really around taking what

630
00:31:35,280 --> 00:31:38,479
Speaker 4: Bitcoin had done and really expanding the capabilities of it,

631
00:31:38,520 --> 00:31:41,240
Speaker 4: around smart crypto and.

632
00:31:41,200 --> 00:31:44,520
Speaker 1: All the ust it exactly. And so I got very

633
00:31:44,520 --> 00:31:46,160
Speaker 1: excited about that. And so what I.

634
00:31:46,080 --> 00:31:48,320
Speaker 4: Said was, we're so early in this, the infrastructure is

635
00:31:48,360 --> 00:31:52,240
Speaker 4: not there, The fraud risks all of it for investors

636
00:31:52,320 --> 00:31:53,840
Speaker 4: is going to be so high. So I actually launched

637
00:31:54,240 --> 00:31:59,880
Speaker 4: the first publicly traded vehicle on Ethereum, called ether cap

638
00:32:00,440 --> 00:32:02,120
Speaker 4: Partner with a group of people and I said, we're

639
00:32:02,120 --> 00:32:03,960
Speaker 4: going to raise the money. We're going to buy a

640
00:32:04,160 --> 00:32:05,200
Speaker 4: ether on the balance sheet.

641
00:32:05,320 --> 00:32:05,640
Speaker 1: Effect.

642
00:32:05,840 --> 00:32:07,920
Speaker 4: You know, we've seen these now become more popular in

643
00:32:07,960 --> 00:32:09,680
Speaker 4: the last number of years, but it was the first

644
00:32:09,680 --> 00:32:11,840
Speaker 4: one and we did this in twenty eighteen, and I'll

645
00:32:11,840 --> 00:32:13,680
Speaker 4: tell you it was an amazing thing. And my message wise,

646
00:32:13,720 --> 00:32:15,120
Speaker 4: we're going to find a safe and secure way for

647
00:32:15,120 --> 00:32:18,440
Speaker 4: people to co invest alongside of us on this really

648
00:32:18,440 --> 00:32:22,200
Speaker 4: great journey because of the asymmetric opportunity of this bet

649
00:32:22,840 --> 00:32:24,760
Speaker 4: that informed me on so much. And then at some

650
00:32:24,920 --> 00:32:27,000
Speaker 4: point and we used to do self custody in that

651
00:32:27,040 --> 00:32:29,360
Speaker 4: corporation and all the rest of it, and then at

652
00:32:29,360 --> 00:32:31,400
Speaker 4: some point we started to see the infrastructure change and

653
00:32:31,440 --> 00:32:33,400
Speaker 4: that's when we went into the regulator and said, look,

654
00:32:33,600 --> 00:32:36,760
Speaker 4: there's an opportunity here. The infrastructure is changing around how

655
00:32:36,960 --> 00:32:40,960
Speaker 4: you can custody and fit this into a liquid ETF structure.

656
00:32:41,200 --> 00:32:44,160
Speaker 4: We worked with them for nine months and ultimately got

657
00:32:44,160 --> 00:32:46,920
Speaker 4: them comfortable. And this is a really important principle that

658
00:32:46,960 --> 00:32:51,160
Speaker 4: I believe we as a registrant, as a money manager,

659
00:32:51,840 --> 00:32:54,000
Speaker 4: we have great ideas, great innovation, and as long as

660
00:32:54,040 --> 00:32:57,000
Speaker 4: our ideas are aligned with where the regulator wants the

661
00:32:57,040 --> 00:32:59,680
Speaker 4: future to go, it's really important to engage with the

662
00:32:59,720 --> 00:33:04,040
Speaker 4: regus later and have that dual relationship. That idea of

663
00:33:04,080 --> 00:33:07,320
Speaker 4: helping them, educating them on where we need to get to.

664
00:33:07,880 --> 00:33:09,560
Speaker 4: And so that was the kind of work we've done

665
00:33:09,680 --> 00:33:12,440
Speaker 4: all throughout my career, and we did that on crypto

666
00:33:12,640 --> 00:33:15,200
Speaker 4: and frankly, we really excited that we got the opportunity

667
00:33:15,200 --> 00:33:18,120
Speaker 4: to launch it and that model. What we did actually

668
00:33:18,200 --> 00:33:22,000
Speaker 4: ultimately informed the series of products launched in the US

669
00:33:22,240 --> 00:33:25,320
Speaker 4: a couple of years later on how ultimately to structure

670
00:33:25,560 --> 00:33:28,680
Speaker 4: ETFs in the crypto space. And of course the industry

671
00:33:28,680 --> 00:33:31,560
Speaker 4: has grown and we've moved an asset from the fringe

672
00:33:31,600 --> 00:33:33,280
Speaker 4: all the way to the core, which is what ultimately

673
00:33:33,280 --> 00:33:34,720
Speaker 4: my thesis was in a deep way.

674
00:33:34,720 --> 00:33:37,480
Speaker 2: And ef capital today is in what structure we.

675
00:33:37,400 --> 00:33:40,320
Speaker 4: Actually converted it from that corporation to an ETF once

676
00:33:40,800 --> 00:33:43,840
Speaker 4: that was available, and the gain there we built staking

677
00:33:43,840 --> 00:33:46,800
Speaker 4: into it and those things weren't again available in an

678
00:33:46,800 --> 00:33:50,200
Speaker 4: ETF form or call it doable, until they were, and

679
00:33:50,240 --> 00:33:52,920
Speaker 4: when they were, we ultimately moved to the most efficient vehicle,

680
00:33:52,920 --> 00:33:54,080
Speaker 4: which is the ETF structure.

681
00:33:54,240 --> 00:33:58,960
Speaker 2: Let's talk about longevity pension funds, launched in twenty twenty one,

682
00:33:59,800 --> 00:34:04,520
Speaker 2: the world's first income for life mutual funds, which uses

683
00:34:04,640 --> 00:34:09,120
Speaker 2: longevity risk pooling to pay lifetime income like a defined

684
00:34:09,200 --> 00:34:14,759
Speaker 2: benefit pension investors include allions and omers. How is this

685
00:34:14,960 --> 00:34:18,200
Speaker 2: different from what in the US we think of as

686
00:34:18,320 --> 00:34:19,680
Speaker 2: traditional annuities.

687
00:34:20,080 --> 00:34:22,960
Speaker 4: So this is actually so first of this was my

688
00:34:23,200 --> 00:34:26,880
Speaker 4: original thesis on purpose, which was, you know, the industry

689
00:34:26,920 --> 00:34:28,720
Speaker 4: was all solving for the accumulation phase.

690
00:34:28,800 --> 00:34:29,439
Speaker 1: Let's build them.

691
00:34:29,320 --> 00:34:32,200
Speaker 4: Investment products to call it, solve for how do we

692
00:34:32,239 --> 00:34:34,880
Speaker 4: save money? But no one was really solving within the

693
00:34:34,920 --> 00:34:39,319
Speaker 4: asset management industry around the challenges of decumulation. And it

694
00:34:39,360 --> 00:34:41,200
Speaker 4: was kind of left to the insurers, you know, with

695
00:34:41,520 --> 00:34:45,160
Speaker 4: annuities and with defined benefit pensions and such. And I

696
00:34:45,200 --> 00:34:47,040
Speaker 4: just felt there was this gap there that was really

697
00:34:47,080 --> 00:34:51,400
Speaker 4: critical and you need to deeply understand the sort of

698
00:34:51,400 --> 00:34:55,840
Speaker 4: the principles of you know how, longevity and structure and

699
00:34:55,880 --> 00:34:57,600
Speaker 4: all the rest of it. We're going to be critically

700
00:34:57,640 --> 00:35:01,000
Speaker 4: in there. And so I asked the team, I said,

701
00:35:01,040 --> 00:35:02,759
Speaker 4: we need to solve for decumulation. And we were in

702
00:35:02,840 --> 00:35:04,279
Speaker 4: pursuit of it. We were spending a lot of time

703
00:35:04,280 --> 00:35:07,760
Speaker 4: working on it. Ultimately we came across a structure and

704
00:35:08,120 --> 00:35:09,600
Speaker 4: I just got really excited.

705
00:35:09,640 --> 00:35:10,800
Speaker 1: And the principles.

706
00:35:10,800 --> 00:35:12,919
Speaker 4: We had to go to the regulator again and say

707
00:35:12,960 --> 00:35:15,040
Speaker 4: there are some exemptions we need to make this work.

708
00:35:16,280 --> 00:35:19,160
Speaker 4: If I step back for a moment, the greatest financial

709
00:35:19,200 --> 00:35:22,680
Speaker 4: product ever created in our business or in the financial

710
00:35:22,680 --> 00:35:26,680
Speaker 4: industry is the divine benefit pension plant. And frankly, if

711
00:35:26,719 --> 00:35:29,359
Speaker 4: you go back to what that represented, it was such

712
00:35:29,360 --> 00:35:33,000
Speaker 4: an amazing bargain. You join a company, the company says,

713
00:35:33,040 --> 00:35:37,239
Speaker 4: we will, in an institutional way, organize to have a

714
00:35:37,400 --> 00:35:40,960
Speaker 4: savings program alongside of your career, and it will not

715
00:35:41,000 --> 00:35:44,200
Speaker 4: only solve for your savings needs while you're working, but

716
00:35:44,320 --> 00:35:47,600
Speaker 4: once you retire, it will also solve for your income

717
00:35:47,920 --> 00:35:50,080
Speaker 4: longevity for as long as you live and in some

718
00:35:50,160 --> 00:35:53,640
Speaker 4: cases your spouse. That is like, if you think about

719
00:35:53,719 --> 00:35:56,719
Speaker 4: the journey of a customer, it is the most unbelievably

720
00:35:56,760 --> 00:35:59,600
Speaker 4: comforting and principal thing that we've done. And the industry

721
00:35:59,600 --> 00:36:03,040
Speaker 4: has done everything over the last forty years to break

722
00:36:03,040 --> 00:36:07,719
Speaker 4: that down, kill it and on with the concept of hey,

723
00:36:07,760 --> 00:36:10,959
Speaker 4: we're giving you choice, and that has been so bad

724
00:36:11,000 --> 00:36:14,040
Speaker 4: for people. So I always believe that we needed to

725
00:36:14,040 --> 00:36:18,000
Speaker 4: get back to bring the system back. If every Canadian,

726
00:36:18,200 --> 00:36:20,960
Speaker 4: every American had access to a defined benefit pench plon,

727
00:36:21,320 --> 00:36:24,040
Speaker 4: ninety five percent of them would be unbelievably better off.

728
00:36:24,320 --> 00:36:27,239
Speaker 4: The reality is it's not good for the industry. The

729
00:36:27,320 --> 00:36:30,799
Speaker 4: fragmentation allows for agency to increase. And so what I've

730
00:36:30,840 --> 00:36:32,960
Speaker 4: always said is how do we bring this back into

731
00:36:33,000 --> 00:36:35,880
Speaker 4: the structure, And so Longevity Pension Plan was designed on

732
00:36:35,960 --> 00:36:38,200
Speaker 4: how do we build a pension line for all? How

733
00:36:38,200 --> 00:36:40,359
Speaker 4: do we do that in a mutual fund structure which

734
00:36:40,400 --> 00:36:44,359
Speaker 4: is accessible the annuity structure that is of course it

735
00:36:44,400 --> 00:36:48,800
Speaker 4: works similarly. The problem is it has it has the

736
00:36:48,800 --> 00:36:50,880
Speaker 4: structure of you have to go off book for an advisor,

737
00:36:51,000 --> 00:36:54,000
Speaker 4: or advisors don't really like them. Investors have to ultimately

738
00:36:54,080 --> 00:36:57,120
Speaker 4: go through an insurance structure and it's individualized. Whereas the

739
00:36:57,160 --> 00:36:59,799
Speaker 4: defined bension plane is a pool. And so when you

740
00:36:59,800 --> 00:37:02,960
Speaker 4: get longevity risk pooling like that which is done in

741
00:37:03,000 --> 00:37:05,520
Speaker 4: a defined benefit BENSUIP plan, why couldn't you do.

742
00:37:05,520 --> 00:37:06,439
Speaker 1: That in a mutual fund.

743
00:37:06,480 --> 00:37:08,400
Speaker 4: And that was our principle and so we designed that

744
00:37:08,440 --> 00:37:11,760
Speaker 4: it's the first fund to really incorporate longevity risk pooling.

745
00:37:12,120 --> 00:37:15,440
Speaker 1: So putting lives together with a mutual goal of.

746
00:37:15,640 --> 00:37:18,960
Speaker 4: I'm putting money at work to ultimately solve for my

747
00:37:19,120 --> 00:37:21,760
Speaker 4: lifetime comfort that I'm going to have in number life

748
00:37:21,840 --> 00:37:25,120
Speaker 4: and if I die early, I'm ultimately supporting the cohort

749
00:37:25,280 --> 00:37:26,680
Speaker 4: but I'm getting what I needed from it.

750
00:37:27,040 --> 00:37:30,400
Speaker 2: So I want to click through four other innovative products,

751
00:37:30,600 --> 00:37:32,840
Speaker 2: but I don't want to spend all week on it.

752
00:37:33,239 --> 00:37:37,840
Speaker 2: Let's click through these four quickly, starting with cash management ETFs.

753
00:37:38,280 --> 00:37:40,160
Speaker 4: Yeah, so cash is something I think that of course

754
00:37:40,160 --> 00:37:43,600
Speaker 4: everybody needs access to. So we had launched the first

755
00:37:43,600 --> 00:37:46,920
Speaker 4: money market ETF in when I was running Claymore. When

756
00:37:46,920 --> 00:37:49,240
Speaker 4: I came back with Purpose, we saw the movement towards

757
00:37:49,239 --> 00:37:52,319
Speaker 4: deposit rates were much higher than money markets, so we

758
00:37:52,360 --> 00:37:54,640
Speaker 4: actually went in. The unique thing we did there was

759
00:37:54,960 --> 00:37:58,279
Speaker 4: we went and built a ETF that linked to a

760
00:37:58,280 --> 00:38:00,440
Speaker 4: deposit account, so it's not to a security so it's

761
00:38:00,440 --> 00:38:03,200
Speaker 4: actually one of the first of its kind, and that

762
00:38:03,280 --> 00:38:05,600
Speaker 4: was a hugely important thing back in twenty fourteen. And

763
00:38:05,640 --> 00:38:08,600
Speaker 4: of course the cash management industry has grown dramatically. We

764
00:38:08,640 --> 00:38:10,840
Speaker 4: haven't seen this in the United States yet, so we

765
00:38:10,880 --> 00:38:15,520
Speaker 4: haven't seen deposit based cash ETFs. We've seen money market

766
00:38:15,880 --> 00:38:18,959
Speaker 4: based ETFs, but we haven't seen deposit based. So it's

767
00:38:19,320 --> 00:38:21,160
Speaker 4: you know, based on the buck you know, it increases

768
00:38:21,160 --> 00:38:24,440
Speaker 4: based on the on the value doesn't fluctuate, and it

769
00:38:24,440 --> 00:38:26,920
Speaker 4: goes right into the bank deposits of you know, several

770
00:38:26,920 --> 00:38:29,239
Speaker 4: banks and you get therefore a higher rate.

771
00:38:29,440 --> 00:38:31,560
Speaker 1: So we were really really proud of that innovation. It has.

772
00:38:31,640 --> 00:38:33,960
Speaker 4: It goes to show the kind of principal first or

773
00:38:34,000 --> 00:38:36,600
Speaker 4: the first principle mindset that our organization always thinks about

774
00:38:36,680 --> 00:38:39,680
Speaker 4: is solving problems because many advisors moving to discretion and

775
00:38:39,719 --> 00:38:42,319
Speaker 4: we're saying, like, I want to bulk trade cash, but

776
00:38:42,480 --> 00:38:45,160
Speaker 4: it's my organization isn't making it easy.

777
00:38:45,400 --> 00:38:48,480
Speaker 2: So I have to sweep it exactly Sodian at night

778
00:38:48,600 --> 00:38:53,200
Speaker 2: into it really is is it should be capable of

779
00:38:53,239 --> 00:38:58,439
Speaker 2: being automated and maximizing yield without increasing risk. But there

780
00:38:58,440 --> 00:39:00,000
Speaker 2: are just a million impediments.

781
00:39:00,480 --> 00:39:03,000
Speaker 4: I sell qqqs and I want to go into cash

782
00:39:03,000 --> 00:39:06,520
Speaker 4: in my balance of my model, my administrative assistant has

783
00:39:06,560 --> 00:39:08,440
Speaker 4: to go and do all the basically account by account.

784
00:39:08,680 --> 00:39:12,000
Speaker 4: Now with the ETF, you were able to go from

785
00:39:12,719 --> 00:39:15,200
Speaker 4: from you know, qqs to cash and then back to

786
00:39:15,280 --> 00:39:17,560
Speaker 4: qqqs or whatever you were doing in just a simple

787
00:39:17,719 --> 00:39:18,279
Speaker 4: single trade.

788
00:39:18,480 --> 00:39:22,319
Speaker 2: Let's let's talk about option based income products. I've never

789
00:39:22,360 --> 00:39:26,200
Speaker 2: been a fan of this as a brokerage product. It

790
00:39:26,360 --> 00:39:30,359
Speaker 2: just felt like there was so much costs, so much

791
00:39:30,400 --> 00:39:33,759
Speaker 2: commission built into it. It really when when you're dealing

792
00:39:33,840 --> 00:39:37,920
Speaker 2: with relatively tight margins, it's a challenge as a retail

793
00:39:37,960 --> 00:39:40,920
Speaker 2: investor to derive any value out of it, real value.

794
00:39:41,200 --> 00:39:44,920
Speaker 2: It's certainly great for generating fees. How do you how

795
00:39:44,920 --> 00:39:48,880
Speaker 2: do you manage an option based income product that works

796
00:39:49,360 --> 00:39:50,520
Speaker 2: for the retail investor.

797
00:39:50,640 --> 00:39:53,040
Speaker 1: So let's start with the principle why right?

798
00:39:53,520 --> 00:39:55,799
Speaker 4: I believe that options and derivatives actually play a really

799
00:39:55,840 --> 00:39:58,879
Speaker 4: important role for management of portfolios and return stream.

800
00:39:58,920 --> 00:39:59,960
Speaker 1: So it goes back to that principle.

801
00:40:00,160 --> 00:40:02,920
Speaker 4: Can you design outcomes and the trade offs that come

802
00:40:02,920 --> 00:40:04,920
Speaker 4: with options, because that's ultimately what you're doing, whether it's

803
00:40:04,960 --> 00:40:08,280
Speaker 4: call options or put options, and so for an investment

804
00:40:08,320 --> 00:40:11,440
Speaker 4: return stream that you're designing, options can be really powerful.

805
00:40:11,719 --> 00:40:15,279
Speaker 4: That said that, to your point, they're high friction for

806
00:40:15,320 --> 00:40:18,160
Speaker 4: an advisor, very hard to execute and you know, across

807
00:40:18,160 --> 00:40:20,640
Speaker 4: your business, but too for individuals. It's very hard and

808
00:40:20,760 --> 00:40:23,000
Speaker 4: very expensive to you know, the spreads and the costs

809
00:40:23,080 --> 00:40:23,720
Speaker 4: and the sizing.

810
00:40:24,280 --> 00:40:25,160
Speaker 1: But it's excellent.

811
00:40:25,200 --> 00:40:28,960
Speaker 4: It's actually what option structures are really designed for ETFs

812
00:40:28,960 --> 00:40:31,360
Speaker 4: and institutional money management in a great way because you

813
00:40:31,400 --> 00:40:34,640
Speaker 4: can do at scale really amazing programs. So we've been

814
00:40:34,640 --> 00:40:37,000
Speaker 4: doing these for twenty five years. You know, back when

815
00:40:37,000 --> 00:40:39,200
Speaker 4: I was at RBC, we used to help firms build them.

816
00:40:39,239 --> 00:40:42,719
Speaker 4: At Claymore, I build them, and then at Purpose we've

817
00:40:42,760 --> 00:40:45,440
Speaker 4: done it, and I find that they are so designed,

818
00:40:45,960 --> 00:40:50,279
Speaker 4: so perfectly designed for the structural outcome that you want

819
00:40:50,320 --> 00:40:52,680
Speaker 4: to ultimately create and manipulate in your return stream.

820
00:40:52,960 --> 00:40:54,960
Speaker 1: But they do come with trade offs. I'll give you

821
00:40:54,960 --> 00:40:55,600
Speaker 1: a great example.

822
00:40:55,840 --> 00:40:57,200
Speaker 4: One of the first things when I was in my

823
00:40:57,400 --> 00:40:59,960
Speaker 4: you know, starting in my career in talking to advisors,

824
00:41:00,760 --> 00:41:03,360
Speaker 4: the thing that they the old school advisor would say, oh,

825
00:41:03,440 --> 00:41:05,560
Speaker 4: I write put options or call options for a couple

826
00:41:05,600 --> 00:41:08,919
Speaker 4: of my clients on their large names, but I can't

827
00:41:08,920 --> 00:41:09,880
Speaker 4: do it for all my clients.

828
00:41:10,239 --> 00:41:11,360
Speaker 1: And I'd say, why do you do that?

829
00:41:11,360 --> 00:41:13,799
Speaker 4: Well, because you know I'm owning this stock, and you know,

830
00:41:13,880 --> 00:41:15,319
Speaker 4: if I'm going to own it for the next ten years,

831
00:41:15,320 --> 00:41:18,320
Speaker 4: why not generate some income along the way. And that

832
00:41:18,719 --> 00:41:21,080
Speaker 4: was a really important mindset that people had, but they

833
00:41:21,120 --> 00:41:23,400
Speaker 4: couldn't do it across their business. And I said, well,

834
00:41:23,480 --> 00:41:26,960
Speaker 4: if I own a name like a JP Morgan and

835
00:41:27,000 --> 00:41:29,280
Speaker 4: I'm going to own I love JP Morgan. The actual

836
00:41:29,320 --> 00:41:31,879
Speaker 4: optimal well way to own JP Morgan is to have

837
00:41:32,080 --> 00:41:35,920
Speaker 4: eighty percent long JP Morgan and twenty percent covered call

838
00:41:36,000 --> 00:41:39,160
Speaker 4: overlaid JP Morgan, so that you're generating the long term

839
00:41:39,160 --> 00:41:43,200
Speaker 4: beta of JP Morgan. Plus you're generating some ongoing return

840
00:41:43,320 --> 00:41:46,120
Speaker 4: from the option income as volatility is there, and you're

841
00:41:46,120 --> 00:41:48,239
Speaker 4: taking advantage of the volatility to generate a return trip.

842
00:41:48,719 --> 00:41:50,800
Speaker 4: And that's the best way, optimally from a risk adjust

843
00:41:51,120 --> 00:41:53,040
Speaker 4: basis to generally own most stocks.

844
00:41:53,400 --> 00:41:54,399
Speaker 1: So how do you do that?

845
00:41:54,719 --> 00:41:57,080
Speaker 4: And so if you design product We've designed something called

846
00:41:57,080 --> 00:42:00,560
Speaker 4: the Yield Chairs which was designed specifically around single name

847
00:42:00,640 --> 00:42:02,759
Speaker 4: stocks that we people most love, and then you write

848
00:42:02,800 --> 00:42:05,120
Speaker 4: options against them to generate the option income so that

849
00:42:05,239 --> 00:42:07,080
Speaker 4: it complements a long only position.

850
00:42:07,239 --> 00:42:09,680
Speaker 2: How do you avoid getting called away when the stock

851
00:42:09,800 --> 00:42:15,120
Speaker 2: has a sudden surge and all the problem isn't merely hey,

852
00:42:15,160 --> 00:42:17,600
Speaker 2: you can always go out and re buy it, but

853
00:42:17,760 --> 00:42:20,239
Speaker 2: now you have a giant capital gains hit you have

854
00:42:20,280 --> 00:42:21,880
Speaker 2: to pay when the stock gets called.

855
00:42:21,800 --> 00:42:24,000
Speaker 4: So in one thing in Canada is we don't actually

856
00:42:24,040 --> 00:42:25,960
Speaker 4: have the difference between short and long term capital gains.

857
00:42:26,040 --> 00:42:27,080
Speaker 1: Yeah, so it's a really nice thing.

858
00:42:27,400 --> 00:42:29,040
Speaker 4: You know, you can buy and sell something in a

859
00:42:29,120 --> 00:42:31,920
Speaker 4: day and ultimately get capital gain streatment at the lowest rate.

860
00:42:32,680 --> 00:42:34,520
Speaker 1: Our rate is a little higher, but but still it's.

861
00:42:34,480 --> 00:42:37,640
Speaker 2: A short term thirty percent long term.

862
00:42:37,719 --> 00:42:40,520
Speaker 4: Yeah, so our long term is twenty five twenty seven percent.

863
00:42:42,000 --> 00:42:46,080
Speaker 4: The principal mindset, though, is this is what institutional programs

864
00:42:46,120 --> 00:42:48,520
Speaker 4: are really great at. You don't write one option on

865
00:42:48,520 --> 00:42:50,280
Speaker 4: one strike, price on one position.

866
00:42:50,840 --> 00:42:52,759
Speaker 1: You use stack them, so you might have if you have.

867
00:42:52,760 --> 00:42:55,640
Speaker 2: A whole matrix exactly different strikes, different dates.

868
00:42:55,719 --> 00:42:58,560
Speaker 4: And then with technology today you can optimize all the

869
00:42:58,640 --> 00:43:01,319
Speaker 4: structural elements of do you roll it for tax efficiency?

870
00:43:01,640 --> 00:43:04,160
Speaker 4: Do you ultimately buy it back? Do you do you

871
00:43:04,480 --> 00:43:06,799
Speaker 4: wear along a curve an option? Do you basically roll

872
00:43:06,800 --> 00:43:09,680
Speaker 4: the capitol into at any point? So you're constantly in

873
00:43:09,680 --> 00:43:13,320
Speaker 4: this call it vintaging of your portfolio overlay, which is

874
00:43:13,320 --> 00:43:15,759
Speaker 4: really important. That's what institutional money management needs to do.

875
00:43:15,960 --> 00:43:18,719
Speaker 4: If you're just singularly buying one option on one strike byce,

876
00:43:18,760 --> 00:43:21,239
Speaker 4: that's actually a very low quality execution.

877
00:43:21,560 --> 00:43:22,880
Speaker 2: Yeah, we used to see a lot of that on

878
00:43:22,920 --> 00:43:26,560
Speaker 2: the broker side. So the single stock yield chairs. How

879
00:43:26,560 --> 00:43:29,520
Speaker 2: many different versions of this are there or are they

880
00:43:29,560 --> 00:43:30,560
Speaker 2: all tossed into.

881
00:43:30,320 --> 00:43:34,279
Speaker 4: Twenty No, we have a single names, so I think

882
00:43:34,320 --> 00:43:36,560
Speaker 4: we might be at like twenty something twenty five. I

883
00:43:36,719 --> 00:43:38,279
Speaker 4: don't know what the exact number, but it's north of

884
00:43:38,320 --> 00:43:40,440
Speaker 4: twenty Canadian and US names.

885
00:43:40,520 --> 00:43:42,240
Speaker 1: And they've been very popular.

886
00:43:42,760 --> 00:43:44,799
Speaker 4: You know, they've been very popular with both advisors and

887
00:43:44,880 --> 00:43:45,719
Speaker 4: direct investors.

888
00:43:46,200 --> 00:43:50,040
Speaker 2: Huh. Really interesting. Coming up, we continue our conversation with

889
00:43:50,120 --> 00:43:55,239
Speaker 2: Sam Safe, CEO and founder of Purpose Investments, discussing why

890
00:43:55,320 --> 00:43:59,280
Speaker 2: he built Purpose Unlimited. I'm Barry rich Alts. You're listening

891
00:43:59,320 --> 00:44:04,080
Speaker 2: to Masters Business on Bloomberg Radio. I'm Barry Redults. You're

892
00:44:04,120 --> 00:44:07,440
Speaker 2: listening to Masters in Business on Bloomberg Radio. My extra

893
00:44:07,520 --> 00:44:11,239
Speaker 2: special guest this week is Some Safe. He is the

894
00:44:11,320 --> 00:44:16,719
Speaker 2: founder and CEO of Purpose Unlimited, which also owns Purpose Investments.

895
00:44:17,440 --> 00:44:22,000
Speaker 2: He has founded and sold a variety of different companies

896
00:44:22,200 --> 00:44:27,200
Speaker 2: over the past let's call it twenty almost twenty five years.

897
00:44:26,880 --> 00:44:31,600
Speaker 2: So Purpose is now about thirty one thirty two billion

898
00:44:32,120 --> 00:44:37,239
Speaker 2: Canadian or about twenty two billion US across ETF's cash, alternatives,

899
00:44:37,280 --> 00:44:42,320
Speaker 2: private assets, et cetera. Tell us the problem that Purpose

900
00:44:42,440 --> 00:44:45,080
Speaker 2: is trying to solve for your clients.

901
00:44:45,440 --> 00:44:49,120
Speaker 4: Sure, so total Purpose actually run over around forty billion,

902
00:44:49,200 --> 00:44:51,520
Speaker 4: now forty BILLI yeah, on the platform. So on the

903
00:44:51,520 --> 00:44:54,120
Speaker 4: asset management side, just over thirty and on the wealth

904
00:44:54,160 --> 00:44:57,239
Speaker 4: side now just round ten and growing quite fast, and

905
00:44:57,280 --> 00:44:59,600
Speaker 4: the principal mindset has always been so on the asset

906
00:44:59,600 --> 00:45:03,080
Speaker 4: management side, was you know, let's build a modernization of

907
00:45:03,120 --> 00:45:06,319
Speaker 4: investment management and products and services to meet clients where

908
00:45:06,320 --> 00:45:08,360
Speaker 4: they need to be. How do we help advisors and

909
00:45:08,440 --> 00:45:11,920
Speaker 4: investors build more resilient portfolios, not just long only equities

910
00:45:11,920 --> 00:45:14,319
Speaker 4: and long only bonds, but how do you optimize for

911
00:45:14,400 --> 00:45:18,000
Speaker 4: the types of return streams that support a world where

912
00:45:18,000 --> 00:45:22,480
Speaker 4: potentially bonds aren't your protective assets. How do you optimize

913
00:45:22,480 --> 00:45:25,120
Speaker 4: for the types of return streams that ultimately are designed

914
00:45:25,160 --> 00:45:27,560
Speaker 4: around an outcome as opposed to just the return of

915
00:45:27,560 --> 00:45:28,160
Speaker 4: a beta.

916
00:45:28,360 --> 00:45:29,560
Speaker 1: And so those are the first start.

917
00:45:29,600 --> 00:45:31,799
Speaker 4: And we have the inputs of we care about not

918
00:45:31,800 --> 00:45:35,279
Speaker 4: only the quality of our investment product that we manufacture,

919
00:45:35,280 --> 00:45:39,920
Speaker 4: but also they call it artisan quality of our investment inputs.

920
00:45:39,920 --> 00:45:44,239
Speaker 4: So the team, the capabilities the process for investment strategy

921
00:45:45,000 --> 00:45:48,000
Speaker 4: using both quantitative methods active methods in each of the

922
00:45:48,120 --> 00:45:51,400
Speaker 4: different categories. I think the second component was then we

923
00:45:51,480 --> 00:45:54,320
Speaker 4: have this big picture that goes back to this system

924
00:45:54,400 --> 00:45:57,280
Speaker 4: and I use the reference to the defined benefit pension

925
00:45:57,320 --> 00:45:58,600
Speaker 4: plan as a phenomenal product.

926
00:45:58,600 --> 00:45:59,120
Speaker 1: How do we.

927
00:45:59,320 --> 00:46:04,920
Speaker 4: Redesigning the way advice and investment management work together on

928
00:46:05,040 --> 00:46:08,040
Speaker 4: ultimately achieving a client's goal. And so we've designed this

929
00:46:08,080 --> 00:46:11,640
Speaker 4: whole infrastructure around the wealth management to support one the

930
00:46:11,680 --> 00:46:15,080
Speaker 4: movement towards independent wealth management. So as you know in

931
00:46:15,080 --> 00:46:18,160
Speaker 4: the United States, you've seen the US RIA segment. Canada

932
00:46:18,320 --> 00:46:20,680
Speaker 4: has a nascent segment there, and you know, we saw

933
00:46:20,760 --> 00:46:23,520
Speaker 4: this really important movement towards and a need for that.

934
00:46:23,600 --> 00:46:25,759
Speaker 4: So we built the infrastructure to support and movement towards

935
00:46:25,800 --> 00:46:28,480
Speaker 4: independent wealth management. But then also the services and the

936
00:46:28,520 --> 00:46:31,280
Speaker 4: tools and the capabilities over and above that to support

937
00:46:31,600 --> 00:46:36,280
Speaker 4: advisors in basically driving their businesses towards more planning based,

938
00:46:36,640 --> 00:46:42,080
Speaker 4: portfolio outcome oriented investment management and wealth management and experiences

939
00:46:42,080 --> 00:46:45,080
Speaker 4: as opposed to you know, I pick better stocks in

940
00:46:45,120 --> 00:46:48,600
Speaker 4: the next guy, I'm better at delivering better returns. More

941
00:46:48,680 --> 00:46:51,080
Speaker 4: around how do we help customers ultimately achieve their goals,

942
00:46:51,120 --> 00:46:53,560
Speaker 4: And so we've built all of this technology and systems

943
00:46:53,600 --> 00:46:54,480
Speaker 4: around that outcome.

944
00:46:54,800 --> 00:46:59,120
Speaker 2: So I like the idea of emphasizing outcomes over benchmarks,

945
00:46:59,640 --> 00:47:03,080
Speaker 2: but you know, we have half a century maybe longer,

946
00:47:03,640 --> 00:47:09,799
Speaker 2: of organizing portfolios around those benchmarks and trying to beat

947
00:47:09,840 --> 00:47:12,640
Speaker 2: the index. Explain what's wrong with that approach?

948
00:47:12,800 --> 00:47:15,319
Speaker 4: Well, it goes back to the behavioral science start. That's

949
00:47:15,360 --> 00:47:17,680
Speaker 4: first and second ones. It is also a structural thing.

950
00:47:18,000 --> 00:47:21,600
Speaker 4: If you go back to the last the last ten

951
00:47:21,680 --> 00:47:24,880
Speaker 4: years or so, when I looked at the space that

952
00:47:25,080 --> 00:47:28,279
Speaker 4: I felt that the industry had become a little bit

953
00:47:28,280 --> 00:47:32,520
Speaker 4: complacent towards this idea that the call it the best

954
00:47:32,560 --> 00:47:35,160
Speaker 4: and optimal portfolio was a sixty forty portfolio. And the

955
00:47:35,200 --> 00:47:37,760
Speaker 4: reason was if you actually span yourself out and looked

956
00:47:37,800 --> 00:47:41,440
Speaker 4: at the returns of the sixty forty portfolio going back,

957
00:47:41,719 --> 00:47:43,560
Speaker 4: you know, one hundred, one hundred and ten years, which

958
00:47:43,600 --> 00:47:47,919
Speaker 4: we did the research on, it actually only met its

959
00:47:47,960 --> 00:47:51,799
Speaker 4: long term goal of seven percent in five of call

960
00:47:51,840 --> 00:47:54,359
Speaker 4: it eleven or so decades. And this is a couple

961
00:47:54,320 --> 00:47:57,080
Speaker 4: of years ago we did that research, and those of

962
00:47:57,120 --> 00:47:59,600
Speaker 4: those five, three of them were in the period of

963
00:48:00,000 --> 00:48:04,920
Speaker 4: teen eighty to twenty twenty, and so I felt that

964
00:48:04,920 --> 00:48:08,480
Speaker 4: that had created this bias and anchoring bias in call

965
00:48:08,520 --> 00:48:10,759
Speaker 4: it the industry. You know, Barry, the one thing you

966
00:48:10,800 --> 00:48:13,200
Speaker 4: realize about our industry is that very few people have

967
00:48:13,280 --> 00:48:18,160
Speaker 4: a historical experience beyond nineteen eighty. Most people's career spans

968
00:48:18,200 --> 00:48:21,080
Speaker 4: are from nineteen eighty onwards, and so you know, you

969
00:48:21,120 --> 00:48:23,120
Speaker 4: get biased towards what you know, what you see?

970
00:48:23,160 --> 00:48:24,880
Speaker 1: What do you see when interest.

971
00:48:24,719 --> 00:48:28,520
Speaker 4: Rates go up, they pretty rapidly go back down. When

972
00:48:28,640 --> 00:48:30,759
Speaker 4: you look at any three or four year cycle, the

973
00:48:30,800 --> 00:48:33,720
Speaker 4: sixty to forty portfolio generally was giving you positive returns,

974
00:48:34,160 --> 00:48:36,960
Speaker 4: and so that meant, hey, that's an optimal way to invest.

975
00:48:37,280 --> 00:48:39,200
Speaker 4: I looked at it and said, wait a minute, if

976
00:48:39,200 --> 00:48:42,000
Speaker 4: you actually look at periods where interust rates actually not

977
00:48:42,160 --> 00:48:43,920
Speaker 4: just go up a little bit and then come back down,

978
00:48:43,960 --> 00:48:47,000
Speaker 4: but actually go up and stay up, how does that

979
00:48:47,040 --> 00:48:48,120
Speaker 4: affect bond portfolios?

980
00:48:48,120 --> 00:48:50,440
Speaker 1: How does that affect the overall balanced portfolio?

981
00:48:50,640 --> 00:48:52,560
Speaker 4: And so I said that we needed to be prepared

982
00:48:52,560 --> 00:48:54,280
Speaker 4: for that, and that's what was the starting point.

983
00:48:54,400 --> 00:48:57,279
Speaker 1: The second though, was this behavioral component, and I.

984
00:48:57,239 --> 00:48:58,880
Speaker 4: Just said, look at the end of the day, you know,

985
00:48:58,920 --> 00:49:01,720
Speaker 4: we've kind of lost touch with what the customer actually

986
00:49:01,760 --> 00:49:04,160
Speaker 4: is asking us to do. And the customer wakes up

987
00:49:04,200 --> 00:49:06,799
Speaker 4: and says, look, what I care about is I want

988
00:49:06,800 --> 00:49:08,960
Speaker 4: to know when I wake up, I'm going to be okay.

989
00:49:09,480 --> 00:49:12,440
Speaker 4: And you need to be in the business of serving

990
00:49:12,480 --> 00:49:15,280
Speaker 4: me on helping me solve that question.

991
00:49:15,600 --> 00:49:18,960
Speaker 1: Am I going to be okay? And like a pension plan, you.

992
00:49:18,880 --> 00:49:21,640
Speaker 4: Should have a liability a goal, and you should have

993
00:49:21,760 --> 00:49:24,560
Speaker 4: an input, which is your portfolio, your savings program and

994
00:49:24,600 --> 00:49:27,640
Speaker 4: your portfolio all designed around are you going to be okay?

995
00:49:28,160 --> 00:49:30,480
Speaker 1: And I felt that, you know, the idea that you.

996
00:49:30,400 --> 00:49:32,040
Speaker 4: Know, we should wake up and say, hey, we're here

997
00:49:32,080 --> 00:49:33,440
Speaker 4: to beat the S and P five hundred or we're

998
00:49:33,440 --> 00:49:36,480
Speaker 4: here to beat some benchmark was a silly concept. All

999
00:49:36,520 --> 00:49:39,239
Speaker 4: that matters to a customer is am I going to

1000
00:49:39,280 --> 00:49:41,160
Speaker 4: be okay? And everything we do every day should be

1001
00:49:41,200 --> 00:49:43,600
Speaker 4: in service of that. And so that's how I always

1002
00:49:43,600 --> 00:49:46,480
Speaker 4: looked at it, and the principle of the design of

1003
00:49:46,520 --> 00:49:50,680
Speaker 4: an investment firm should be around the kinds of programs

1004
00:49:50,840 --> 00:49:54,240
Speaker 4: and asset strategies that help an advisor build better portfolio

1005
00:49:54,320 --> 00:49:56,200
Speaker 4: to answer the question of am I going to be okay?

1006
00:49:56,200 --> 00:49:56,800
Speaker 1: With their customers?

1007
00:49:56,840 --> 00:49:59,120
Speaker 2: So I have so many different ways to go with

1008
00:49:59,160 --> 00:50:03,400
Speaker 2: this that I'm very enthusiastic about. Maybe we'll put a

1009
00:50:03,440 --> 00:50:06,600
Speaker 2: pin in the whole idea of out of sample testing

1010
00:50:06,680 --> 00:50:12,319
Speaker 2: because everybody is so framed by it's not just their

1011
00:50:12,320 --> 00:50:15,279
Speaker 2: own hindsight bias, but the recency bias of what they

1012
00:50:15,440 --> 00:50:20,000
Speaker 2: just experienced entirely has such a big issue. But let's

1013
00:50:20,040 --> 00:50:22,800
Speaker 2: stick with the concept of behavioral finance and the sixty

1014
00:50:22,920 --> 00:50:26,720
Speaker 2: forty I have gotten a lot of pushback for saying,

1015
00:50:27,360 --> 00:50:30,320
Speaker 2: if you're in your twenties, thirties, forties, do you really

1016
00:50:30,360 --> 00:50:35,359
Speaker 2: need bonds if you're not going to retire for well,

1017
00:50:35,520 --> 00:50:40,200
Speaker 2: twenty something year old might not retire for fifty years. Yeah,

1018
00:50:40,239 --> 00:50:46,040
Speaker 2: there's some emotional salve from some ballast that's uncorrelated and

1019
00:50:46,560 --> 00:50:50,319
Speaker 2: doesn't have the volatility of equities. But if I go

1020
00:50:50,440 --> 00:50:53,480
Speaker 2: back in time, forget what the market did. If I

1021
00:50:53,560 --> 00:50:56,799
Speaker 2: was twenty today, I wouldn't own a single bond, and

1022
00:50:56,840 --> 00:50:59,320
Speaker 2: if I was seventy five today, I would own a

1023
00:50:59,360 --> 00:51:05,080
Speaker 2: whole lot more tax premunis. So raises the question, sixty

1024
00:51:05,200 --> 00:51:07,960
Speaker 2: forty does that make sense for a forget twenty year old,

1025
00:51:08,040 --> 00:51:09,280
Speaker 2: for anybody under fifty.

1026
00:51:10,280 --> 00:51:13,040
Speaker 4: It's actually a really important question, and in many cases

1027
00:51:13,080 --> 00:51:13,759
Speaker 4: the answer is.

1028
00:51:13,840 --> 00:51:15,080
Speaker 1: No, you don't need bonds.

1029
00:51:15,080 --> 00:51:17,719
Speaker 4: And you know, the reality of it is that if

1030
00:51:17,760 --> 00:51:19,960
Speaker 4: you look at the last five six years, bonds wouldn't

1031
00:51:19,960 --> 00:51:22,720
Speaker 4: have done you any good. And so you know, especially

1032
00:51:22,760 --> 00:51:24,479
Speaker 4: if you're in an environment like we're in right now,

1033
00:51:24,600 --> 00:51:27,000
Speaker 4: where you know the greatest risk right now to a

1034
00:51:27,040 --> 00:51:30,560
Speaker 4: portfolio oftentimes is the volatility the uncertainty and interest rates

1035
00:51:30,560 --> 00:51:33,840
Speaker 4: and inflation, and so I think it actually the return

1036
00:51:34,520 --> 00:51:38,600
Speaker 4: this was logical in twenty eighteen twenty nineteen zero.

1037
00:51:38,440 --> 00:51:41,520
Speaker 2: Right, You go from nineteen eighty twenty twenty forty years

1038
00:51:41,560 --> 00:51:42,319
Speaker 2: of bonds.

1039
00:51:42,000 --> 00:51:42,839
Speaker 1: Of phenomenal Yeah.

1040
00:51:42,880 --> 00:51:45,080
Speaker 2: I mean that's a unique.

1041
00:51:45,400 --> 00:51:45,600
Speaker 1: Yeah.

1042
00:51:46,000 --> 00:51:48,000
Speaker 4: But the thing that was the thing that was the

1043
00:51:48,000 --> 00:51:50,760
Speaker 4: big driving for us was the movement between the seventies

1044
00:51:50,800 --> 00:51:53,280
Speaker 4: to the eighties when interest rates spiked into the teens.

1045
00:51:53,760 --> 00:51:55,560
Speaker 4: That was the thing that's set up, of course, the

1046
00:51:55,600 --> 00:51:59,480
Speaker 4: next forty years of declining interest rates, and so you

1047
00:51:59,560 --> 00:52:01,000
Speaker 4: have to step back and have that context.

1048
00:52:01,040 --> 00:52:02,200
Speaker 1: It's just like timing the market.

1049
00:52:02,480 --> 00:52:04,400
Speaker 4: The reality is that if you had bought in the

1050
00:52:04,400 --> 00:52:06,560
Speaker 4: mid seventies, you would have had a horrible experience.

1051
00:52:06,600 --> 00:52:08,120
Speaker 1: Right with that portfolio structure.

1052
00:52:08,239 --> 00:52:12,560
Speaker 2: There's pre and post pull fulker that's the defining But it's.

1053
00:52:12,400 --> 00:52:16,080
Speaker 4: Actually different that it's pre and post the economic situation

1054
00:52:16,200 --> 00:52:19,239
Speaker 4: that was happening that led to an inflationary spike that

1055
00:52:19,280 --> 00:52:22,040
Speaker 4: we ultimately had to address, and that was what you

1056
00:52:22,040 --> 00:52:25,279
Speaker 4: were dealing with. But to your point, recency bias drove

1057
00:52:25,320 --> 00:52:28,480
Speaker 4: people to believe that this was the optimal way to invest.

1058
00:52:28,719 --> 00:52:31,759
Speaker 4: I think for an individual, again, it goes back to Okay, Yes,

1059
00:52:31,800 --> 00:52:33,160
Speaker 4: equity is a hope based strategy.

1060
00:52:33,520 --> 00:52:35,040
Speaker 1: Investing is a hope based strategy.

1061
00:52:35,440 --> 00:52:37,560
Speaker 4: And when you're in your twenties and thirties and forties

1062
00:52:37,560 --> 00:52:40,560
Speaker 4: and even potentially you know, fifties, because you know, I'd

1063
00:52:40,600 --> 00:52:43,080
Speaker 4: say call it twenty years before retirement, call it like

1064
00:52:43,080 --> 00:52:45,919
Speaker 4: a pension plot. T minus twenty years anything T minus

1065
00:52:45,920 --> 00:52:48,200
Speaker 4: twenty years plus is a lot of You have a

1066
00:52:48,280 --> 00:52:50,439
Speaker 4: lot of room for hope. Hope is a wonderful thing

1067
00:52:50,440 --> 00:52:53,000
Speaker 4: that you should take advantage of because you know, ultimately

1068
00:52:53,000 --> 00:52:55,160
Speaker 4: you want strength and momentum, and you have the time

1069
00:52:55,280 --> 00:52:57,520
Speaker 4: to get it right. But once you get into that

1070
00:52:57,560 --> 00:53:00,279
Speaker 4: T minus twenty period, that's the period where you better

1071
00:53:00,280 --> 00:53:02,360
Speaker 4: have some structure and discipline to what you're ultimately achieving

1072
00:53:02,400 --> 00:53:04,640
Speaker 4: to get to T. Because the one good thing is

1073
00:53:04,640 --> 00:53:06,560
Speaker 4: you can move T T can move. That's the time

1074
00:53:06,560 --> 00:53:09,279
Speaker 4: of retirement that can move. You could say it's sixty five,

1075
00:53:09,320 --> 00:53:11,080
Speaker 4: but if you really needed to and your advisor said,

1076
00:53:11,080 --> 00:53:12,360
Speaker 4: hey it's a bad time, you need to move to

1077
00:53:12,400 --> 00:53:14,040
Speaker 4: sixty seven, you can move to sixty seven. A it's

1078
00:53:14,080 --> 00:53:16,040
Speaker 4: going really well, we can move to sixty three. But

1079
00:53:16,480 --> 00:53:20,600
Speaker 4: T minus twenty is a really important window where structure

1080
00:53:20,680 --> 00:53:24,880
Speaker 4: discipline in your portfolio has to be designed. Everything before that, Absolutely,

1081
00:53:24,880 --> 00:53:26,840
Speaker 4: you can take as much hope as you want, you

1082
00:53:26,880 --> 00:53:28,880
Speaker 4: can take as much risk as you want, because you

1083
00:53:28,920 --> 00:53:29,960
Speaker 4: haven't entered that window.

1084
00:53:30,000 --> 00:53:30,879
Speaker 1: That's how I look at it.

1085
00:53:31,440 --> 00:53:37,680
Speaker 2: Really interesting as someone who's partial to the math and

1086
00:53:37,760 --> 00:53:42,360
Speaker 2: science half of my brain, I'm curious how you reconcile

1087
00:53:43,160 --> 00:53:50,520
Speaker 2: the rigorous, structured environment of being an engineer, Like there

1088
00:53:50,560 --> 00:53:56,239
Speaker 2: is an internal logic and a set of hard mathematical

1089
00:53:56,280 --> 00:53:59,880
Speaker 2: principles that govern that. How do you reconcile that with

1090
00:54:00,160 --> 00:54:06,880
Speaker 2: the squishy emotional side of all of Dannie Kahneman's teachings,

1091
00:54:07,239 --> 00:54:10,600
Speaker 2: which is, hey, this is just how we are built.

1092
00:54:11,120 --> 00:54:13,760
Speaker 2: We weren't made for this sort of decision making.

1093
00:54:14,040 --> 00:54:14,239
Speaker 3: Yeah.

1094
00:54:14,280 --> 00:54:18,399
Speaker 4: I think the beauty of when you marry the first principles,

1095
00:54:19,040 --> 00:54:21,160
Speaker 4: you know, call it linear kind of thinking around what

1096
00:54:21,239 --> 00:54:23,840
Speaker 4: engineering can do, and then you apply that with the

1097
00:54:23,920 --> 00:54:27,239
Speaker 4: nonlinearity of human behaviors. It's actually a phenomenal. We call

1098
00:54:27,280 --> 00:54:30,960
Speaker 4: it a mixture of thinking. And that's what you want.

1099
00:54:31,000 --> 00:54:33,520
Speaker 4: You want those multiple inputs to basically change your mental

1100
00:54:33,520 --> 00:54:36,040
Speaker 4: model of how to design and think. What I love

1101
00:54:36,080 --> 00:54:38,720
Speaker 4: about engineering in general is it is a reverse engineering

1102
00:54:38,719 --> 00:54:42,200
Speaker 4: mindset is going back to the hypothesis a scientific method, right,

1103
00:54:42,239 --> 00:54:44,960
Speaker 4: which is I have an idea of what the answer

1104
00:54:44,960 --> 00:54:46,799
Speaker 4: will be, but I'm going to do everything I can

1105
00:54:46,880 --> 00:54:49,920
Speaker 4: to prove that. So if you apply that to any problem,

1106
00:54:50,200 --> 00:54:52,080
Speaker 4: which is, hey, i'd like to solve for this problem,

1107
00:54:52,120 --> 00:54:53,440
Speaker 4: I have an idea of how to solve it, and

1108
00:54:53,440 --> 00:54:55,520
Speaker 4: then you reverse engineer how to ultimately get there, or

1109
00:54:55,600 --> 00:54:57,719
Speaker 4: you build around a scientific method of it. It's a

1110
00:54:57,760 --> 00:55:00,680
Speaker 4: wonderful way to approach problem solving in general. And then

1111
00:55:00,719 --> 00:55:02,320
Speaker 4: if you bring in the input. So one of the

1112
00:55:02,320 --> 00:55:04,560
Speaker 4: things we did a purpose is we've actually brought on

1113
00:55:05,080 --> 00:55:08,640
Speaker 4: behavioral scientists to actually support the organization in the way

1114
00:55:08,680 --> 00:55:11,600
Speaker 4: we think about product design, the way we think about marketing,

1115
00:55:11,640 --> 00:55:13,560
Speaker 4: and all the things that we do, because it actually

1116
00:55:13,560 --> 00:55:16,440
Speaker 4: helps influence the mental models and the way that we

1117
00:55:16,520 --> 00:55:17,279
Speaker 4: make decisions.

1118
00:55:17,520 --> 00:55:18,600
Speaker 1: Those are really powerful.

1119
00:55:18,640 --> 00:55:21,560
Speaker 4: So I just believe it's goes back to that original

1120
00:55:21,560 --> 00:55:24,880
Speaker 4: comment abound the creative mind and the call it structured

1121
00:55:25,239 --> 00:55:27,520
Speaker 4: discipline and mind. I think you bring those two together,

1122
00:55:27,640 --> 00:55:30,319
Speaker 4: it's a very powerful mixture to build with.

1123
00:55:31,080 --> 00:55:35,120
Speaker 2: Really interesting. So we've been speaking for an hour and

1124
00:55:35,440 --> 00:55:38,600
Speaker 2: artificial intelligence has not come up, which I think is

1125
00:55:38,640 --> 00:55:43,000
Speaker 2: a first this year. How do you think about AI

1126
00:55:43,800 --> 00:55:46,560
Speaker 2: from a managerial perspective, how do you think about it

1127
00:55:46,560 --> 00:55:52,280
Speaker 2: from an investment perspective? What do you see the impact

1128
00:55:52,360 --> 00:55:56,880
Speaker 2: of this going forward? Especially, I appreciate the opportunity to

1129
00:55:56,920 --> 00:56:01,839
Speaker 2: ask someone who's an engineer about this because essentially this

1130
00:56:01,920 --> 00:56:04,440
Speaker 2: is software engineering at the highest level.

1131
00:56:04,960 --> 00:56:07,080
Speaker 1: So I've never been more excited in my career.

1132
00:56:07,160 --> 00:56:12,640
Speaker 4: I feel a sense of energy in the last nine months,

1133
00:56:13,239 --> 00:56:16,600
Speaker 4: specifically coming into twenty twenty six that I've just been

1134
00:56:17,320 --> 00:56:21,480
Speaker 4: excited about because of what this new technology is enabling us.

1135
00:56:21,880 --> 00:56:23,800
Speaker 1: And more importantly, it's not.

1136
00:56:23,719 --> 00:56:26,239
Speaker 4: Just how do we build features or you know, solve

1137
00:56:26,280 --> 00:56:29,000
Speaker 4: some problems or create a little bit of incremental productivity.

1138
00:56:29,239 --> 00:56:32,080
Speaker 4: It is about the grassroots, you know, go to first

1139
00:56:32,080 --> 00:56:35,239
Speaker 4: principles of how should we ultimately design the way we work,

1140
00:56:35,320 --> 00:56:38,600
Speaker 4: the way we optimize our business in and around a

1141
00:56:38,719 --> 00:56:42,320
Speaker 4: technology a replatforming. You know, it would be no different

1142
00:56:42,360 --> 00:56:44,000
Speaker 4: than in two thousand if you were going through this

1143
00:56:44,000 --> 00:56:47,360
Speaker 4: period and the Internet was now becoming real and scalable,

1144
00:56:47,640 --> 00:56:49,680
Speaker 4: and you were sitting there as a retailer or any

1145
00:56:49,680 --> 00:56:52,600
Speaker 4: other business saying, if I just think about the historical

1146
00:56:52,640 --> 00:56:54,560
Speaker 4: way to run a business, and I've got this new thing.

1147
00:56:55,000 --> 00:56:55,840
Speaker 1: I think you lost.

1148
00:56:56,080 --> 00:56:58,239
Speaker 4: Whereas if you actually said no, no, I need to

1149
00:56:58,320 --> 00:57:01,759
Speaker 4: redesign the way I work to this new platform Mobile Era,

1150
00:57:01,800 --> 00:57:04,040
Speaker 4: which was a different one, same thing I did redesign

1151
00:57:04,080 --> 00:57:06,279
Speaker 4: the way we work, and AI is the same thing.

1152
00:57:06,680 --> 00:57:08,960
Speaker 1: So we've been at purpose.

1153
00:57:08,719 --> 00:57:12,280
Speaker 4: Have been really deeply embedded in the way we operate

1154
00:57:12,320 --> 00:57:16,880
Speaker 4: the company. The first thing is we are effectively driving

1155
00:57:16,880 --> 00:57:20,760
Speaker 4: forward deploy engineering, data science, and product across the whole organization.

1156
00:57:21,200 --> 00:57:24,520
Speaker 4: We are driving into smaller teams and squads. We're rolling

1157
00:57:24,560 --> 00:57:27,720
Speaker 4: that out across everything, and we're driving the company with

1158
00:57:27,800 --> 00:57:31,960
Speaker 4: this mindset that we What a modern organization needs to

1159
00:57:32,040 --> 00:57:38,080
Speaker 4: design around is vulnerability, the ability to have innovation and

1160
00:57:38,200 --> 00:57:42,160
Speaker 4: intelligence moving through the organization constantly and data flowing and communication,

1161
00:57:43,320 --> 00:57:44,880
Speaker 4: you know, and this is on top of, of course,

1162
00:57:44,960 --> 00:57:48,240
Speaker 4: leadership strength. In the past, the organization was all driven

1163
00:57:48,280 --> 00:57:51,200
Speaker 4: by leadership strengths. How good was the leadership And my

1164
00:57:51,280 --> 00:57:54,320
Speaker 4: view is vulnerability and communication are going to be the

1165
00:57:54,320 --> 00:57:57,080
Speaker 4: things that really drive and AI enables for that in

1166
00:57:57,120 --> 00:58:00,360
Speaker 4: a really amazing way. What that is is a system

1167
00:58:00,360 --> 00:58:02,440
Speaker 4: of way you work. So we are doing that in

1168
00:58:02,480 --> 00:58:05,280
Speaker 4: a great way. The same time, though you know, when

1169
00:58:05,280 --> 00:58:08,160
Speaker 4: I look at the industry, we are still stuck in

1170
00:58:08,240 --> 00:58:11,480
Speaker 4: this idea of AI as a feature set. So I'm

1171
00:58:11,480 --> 00:58:14,160
Speaker 4: going to design features. I'm going to design something I

1172
00:58:14,240 --> 00:58:16,520
Speaker 4: used to do that took me an hour. I can

1173
00:58:16,560 --> 00:58:18,600
Speaker 4: do it now in five minutes. Those are really cool.

1174
00:58:18,760 --> 00:58:20,520
Speaker 4: But that's no different than what excelled it for us.

1175
00:58:20,560 --> 00:58:22,640
Speaker 4: You know, you know the accounting industry. You can imagine,

1176
00:58:22,760 --> 00:58:24,680
Speaker 4: you know when excel came, was a little nervous, but

1177
00:58:24,720 --> 00:58:26,640
Speaker 4: then actually adopted it and wanted to do and it

1178
00:58:26,680 --> 00:58:29,600
Speaker 4: created a great value. But what this actually allows for

1179
00:58:29,720 --> 00:58:32,000
Speaker 4: is a way to change the way we operate. And

1180
00:58:32,000 --> 00:58:34,120
Speaker 4: that's what I hope that the industry really leans into

1181
00:58:34,160 --> 00:58:35,000
Speaker 4: more deeply.

1182
00:58:35,120 --> 00:58:37,520
Speaker 2: Really really fascinating. All right, I only have you for

1183
00:58:37,560 --> 00:58:42,000
Speaker 2: a couple more minutes. Let's jump into our favorite questions

1184
00:58:42,040 --> 00:58:45,360
Speaker 2: that we ask all of our guests, starting with who

1185
00:58:45,320 --> 00:58:48,440
Speaker 2: are your early mentors who helped shape your career?

1186
00:58:49,080 --> 00:58:51,480
Speaker 4: So I talked about Rob or not. And Rob is

1187
00:58:51,520 --> 00:58:54,360
Speaker 4: someone that I care so deeply about. He not only

1188
00:58:54,480 --> 00:58:57,680
Speaker 4: introduced me to his own way of thinking. Rob has

1189
00:58:57,680 --> 00:59:00,440
Speaker 4: a special thing and you spend time with him. Rob

1190
00:59:00,640 --> 00:59:05,720
Speaker 4: is you know, unbelievably intelligent that can go toe to

1191
00:59:05,720 --> 00:59:08,160
Speaker 4: toe with any Nobel Prize laureate, you know, from an

1192
00:59:08,200 --> 00:59:11,160
Speaker 4: academic perspective, but at the same time actually is an

1193
00:59:11,160 --> 00:59:16,960
Speaker 4: excellent communicator and marketer. It's a very rare combination, and

1194
00:59:17,040 --> 00:59:18,800
Speaker 4: he taught me that in such a deep way. So

1195
00:59:18,920 --> 00:59:21,400
Speaker 4: much of who I am was during that format of

1196
00:59:21,440 --> 00:59:23,960
Speaker 4: the years of working alongside and seeing him in motion.

1197
00:59:24,680 --> 00:59:26,920
Speaker 1: So he's been an amazing person in my life.

1198
00:59:27,520 --> 00:59:31,040
Speaker 4: He also introduced me to his advisory group, which was

1199
00:59:31,080 --> 00:59:35,200
Speaker 4: people like Harry Markowitz, Peter Bernstein, Rick Roll, you know,

1200
00:59:35,560 --> 00:59:38,440
Speaker 4: Keith ambecksh here, some of the most amazing deep thinkers

1201
00:59:38,840 --> 00:59:41,560
Speaker 4: that I got this immersive opportunity to spend time with

1202
00:59:41,640 --> 00:59:45,960
Speaker 4: that just informed so much of my principal thinking at

1203
00:59:46,000 --> 00:59:48,280
Speaker 4: a time when I was very raw and really open

1204
00:59:48,320 --> 00:59:49,200
Speaker 4: to that curiosity.

1205
00:59:49,240 --> 00:59:53,600
Speaker 2: It was exciting, really really interesting. I have some hilarious

1206
00:59:53,760 --> 00:59:56,080
Speaker 2: rob or not stories that I will share with you

1207
00:59:56,440 --> 00:59:59,520
Speaker 2: off air. Let's talk about books. What are some of

1208
00:59:59,560 --> 01:00:01,240
Speaker 2: your favorite What are you reading right now?

1209
01:00:01,560 --> 01:00:05,120
Speaker 4: So I love books, and autobiographies are one of the

1210
01:00:05,160 --> 01:00:06,920
Speaker 4: things I actually think. You know, people always say learn

1211
01:00:06,960 --> 01:00:09,600
Speaker 4: from failure. I love to talk about learn from success.

1212
01:00:09,800 --> 01:00:12,200
Speaker 4: So how do you learn from people's you know, careers

1213
01:00:12,240 --> 01:00:17,560
Speaker 4: and lifetimes successes. So some of my favorite books An

1214
01:00:17,680 --> 01:00:19,480
Speaker 4: Education of an American Dreamer by Peter G.

1215
01:00:19,560 --> 01:00:19,880
Speaker 1: Peterson.

1216
01:00:19,920 --> 01:00:21,640
Speaker 4: I don't know if you've read that one. A phenomenal,

1217
01:00:21,840 --> 01:00:25,400
Speaker 4: great story about an individual who of course ended up

1218
01:00:25,520 --> 01:00:29,400
Speaker 4: co founding Blackstone later in life. But just an under

1219
01:00:29,360 --> 01:00:31,600
Speaker 4: the little journey about an immigrant family who.

1220
01:00:31,440 --> 01:00:32,360
Speaker 1: Just basically moved.

1221
01:00:32,640 --> 01:00:36,360
Speaker 4: He just did unbelievable things and the evolution of a career.

1222
01:00:36,400 --> 01:00:40,160
Speaker 1: That's so fascinating. Creativity, inc you know, we're just talking

1223
01:00:40,160 --> 01:00:40,520
Speaker 1: about that.

1224
01:00:41,040 --> 01:00:44,320
Speaker 2: I literally just got it delivered two days ago.

1225
01:00:44,480 --> 01:00:46,800
Speaker 4: I love that because when I finished that book, I

1226
01:00:46,800 --> 01:00:49,680
Speaker 4: said to myself, if I was to ever write an

1227
01:00:49,760 --> 01:00:51,240
Speaker 4: autobiography about my career.

1228
01:00:51,040 --> 01:00:52,760
Speaker 1: I hope it would sound like this.

1229
01:00:53,360 --> 01:00:56,000
Speaker 4: It was the creativity of what Ed Katsmill did, but

1230
01:00:56,240 --> 01:00:59,680
Speaker 4: more importantly, the relationship of how he explained his partnership

1231
01:00:59,680 --> 01:01:02,440
Speaker 4: with jobs and the love he had for Steve and

1232
01:01:02,480 --> 01:01:03,960
Speaker 4: the way he was so intricate about that.

1233
01:01:03,960 --> 01:01:06,360
Speaker 1: It was just so inspiring for me. I loved it.

1234
01:01:07,200 --> 01:01:09,720
Speaker 4: And then you know, I look at some of them,

1235
01:01:09,720 --> 01:01:11,720
Speaker 4: of course, recent books that have just really inspired me

1236
01:01:11,840 --> 01:01:15,040
Speaker 4: around unreasable hospitality. I think one of the greatest business

1237
01:01:15,040 --> 01:01:17,160
Speaker 4: books one of the best business books has been written

1238
01:01:17,160 --> 01:01:18,640
Speaker 4: in the last couple of years. If you haven't read it,

1239
01:01:18,640 --> 01:01:22,640
Speaker 4: it's a critical book. And then I recently finished a

1240
01:01:22,720 --> 01:01:25,680
Speaker 4: couple of years ago. It Never Split the Difference by

1241
01:01:25,760 --> 01:01:29,200
Speaker 4: Chris Voss, and it is unbelievably strong, and in fact,

1242
01:01:29,280 --> 01:01:32,400
Speaker 4: yesterday we had the team from Chris Voss's group come

1243
01:01:32,440 --> 01:01:35,440
Speaker 4: in and train our people on how to apply that

1244
01:01:35,520 --> 01:01:38,479
Speaker 4: type of negotiation skill into our daily way we work.

1245
01:01:38,880 --> 01:01:42,400
Speaker 4: It's an unbelievable way to think about the concept of

1246
01:01:42,440 --> 01:01:46,120
Speaker 4: being comfortable with the word no. We're so afraid to

1247
01:01:46,160 --> 01:01:49,720
Speaker 4: hear no in life and in business, but actually allowing

1248
01:01:49,840 --> 01:01:52,040
Speaker 4: no to become something that lets you get to yes.

1249
01:01:52,080 --> 01:01:54,480
Speaker 4: It's really important, whereas it's so counter to all the

1250
01:01:54,520 --> 01:01:56,640
Speaker 4: things that people had learned through the Harvard programs around

1251
01:01:56,720 --> 01:01:59,320
Speaker 4: getting to yes. It's actually an unbelievable way to think

1252
01:01:59,320 --> 01:02:00,520
Speaker 4: about Nico and.

1253
01:02:00,800 --> 01:02:03,160
Speaker 2: One of the people I work with just recommended that

1254
01:02:03,200 --> 01:02:06,160
Speaker 2: book Never Split the Difference. And it's sitting on a pile.

1255
01:02:06,320 --> 01:02:09,760
Speaker 2: I'm holding my hand up this high and I'm like,

1256
01:02:09,800 --> 01:02:11,880
Speaker 2: all right, I'll get around to it one day. I'm

1257
01:02:11,880 --> 01:02:14,560
Speaker 2: gonna have to move that up to the a little

1258
01:02:14,640 --> 01:02:18,680
Speaker 2: higher in the pile. Let's talk about streaming. What are

1259
01:02:18,720 --> 01:02:22,280
Speaker 2: you either watching or listening to, either Netflix or podcasts

1260
01:02:22,320 --> 01:02:22,720
Speaker 2: or whatever.

1261
01:02:23,360 --> 01:02:26,080
Speaker 4: We have four kids at home, so you know, my

1262
01:02:26,160 --> 01:02:28,600
Speaker 4: wife and I are always trying to find that hour

1263
01:02:28,720 --> 01:02:32,680
Speaker 4: to stream. The one show that you know has really

1264
01:02:32,680 --> 01:02:35,960
Speaker 4: touched me is the show Shrinking, of course on l TV.

1265
01:02:36,520 --> 01:02:38,720
Speaker 1: And it's just the way that the.

1266
01:02:38,680 --> 01:02:43,280
Speaker 4: Writer, Brett Rolstein talks about emotions and you know, communicating.

1267
01:02:43,280 --> 01:02:46,040
Speaker 4: It's just such a touching I finish every episode that

1268
01:02:46,040 --> 01:02:48,760
Speaker 4: I think. I'm teary eyed every single time. That's been

1269
01:02:48,760 --> 01:02:50,680
Speaker 4: amazing thing about my wife and I. We love, you know,

1270
01:02:50,760 --> 01:02:52,320
Speaker 4: lots of different shows we just don't get to We

1271
01:02:52,320 --> 01:02:55,640
Speaker 4: have like seven different series that we are in the

1272
01:02:55,640 --> 01:02:58,880
Speaker 4: middle of watching right now. Uh and but but we

1273
01:02:59,080 --> 01:03:01,360
Speaker 4: try to find that time and it's an important time

1274
01:03:01,360 --> 01:03:01,960
Speaker 4: for both of us.

1275
01:03:02,600 --> 01:03:06,240
Speaker 2: You mentioned on Reasonable Hospitality. We just finished the final

1276
01:03:06,240 --> 01:03:11,160
Speaker 2: season of The Bear and throughout that show you can

1277
01:03:11,240 --> 01:03:14,160
Speaker 2: see some of the ideas right from that book.

1278
01:03:14,240 --> 01:03:16,880
Speaker 4: You see it in season two, you really so much. Yeah,

1279
01:03:16,920 --> 01:03:19,440
Speaker 4: that's when it really becomes prevalent and they of course.

1280
01:03:19,400 --> 01:03:22,400
Speaker 2: A little hot dogs and all the stuff they do

1281
01:03:22,600 --> 01:03:26,760
Speaker 2: to go over over and above the call of duty.

1282
01:03:26,800 --> 01:03:30,960
Speaker 2: It's impressive, it really is. So our final two questions

1283
01:03:31,800 --> 01:03:33,920
Speaker 2: what sort of advice would you give to a recent

1284
01:03:34,000 --> 01:03:38,680
Speaker 2: college grad interest in a career in either investing or

1285
01:03:39,000 --> 01:03:40,000
Speaker 2: financial innovation.

1286
01:03:40,920 --> 01:03:43,360
Speaker 4: So, you know, I'd say there's two answers to this

1287
01:03:43,440 --> 01:03:44,880
Speaker 4: that are important because we're you know, you got the

1288
01:03:44,920 --> 01:03:47,880
Speaker 4: tension of what's happening with AI around this industry.

1289
01:03:48,040 --> 01:03:51,440
Speaker 1: I'll start with the foundations. This is a wonderful industry

1290
01:03:51,480 --> 01:03:51,760
Speaker 1: to be in.

1291
01:03:52,520 --> 01:03:54,760
Speaker 4: And if you look at the sort of trajectory, financial

1292
01:03:54,800 --> 01:03:57,360
Speaker 4: services as an industry will continue to grow meaningfully.

1293
01:03:57,480 --> 01:03:59,040
Speaker 1: If you're in the wealth industry, it will double.

1294
01:03:59,040 --> 01:04:00,960
Speaker 4: In the ESSA management inustry double just in the next

1295
01:04:00,960 --> 01:04:05,080
Speaker 4: ten years by virtue of savings and market appreciation. So

1296
01:04:05,520 --> 01:04:08,120
Speaker 4: you know, as an industry participant, the size of the

1297
01:04:08,160 --> 01:04:09,920
Speaker 4: pie is growing and continuously.

1298
01:04:10,000 --> 01:04:11,360
Speaker 1: So that's a really good thing too.

1299
01:04:11,400 --> 01:04:15,120
Speaker 4: You've got an aging demographic of individuals in the space,

1300
01:04:15,160 --> 01:04:18,040
Speaker 4: you know, advisors of constantly aging, and so there's a

1301
01:04:18,080 --> 01:04:21,200
Speaker 4: huge opportunity for younger talent to come in and so

1302
01:04:21,600 --> 01:04:24,760
Speaker 4: that's an awesome setup to be in the business. The

1303
01:04:24,800 --> 01:04:27,320
Speaker 4: principle I'll go back to is it's an amazing place

1304
01:04:27,480 --> 01:04:30,480
Speaker 4: that has high mission. But I want young people if

1305
01:04:30,520 --> 01:04:32,600
Speaker 4: I was to come into it, to really focus on

1306
01:04:32,640 --> 01:04:36,520
Speaker 4: how do I achieve this to help conduct the customer

1307
01:04:36,720 --> 01:04:40,480
Speaker 4: truly win, as opposed to the historical mindset of I'm

1308
01:04:40,480 --> 01:04:42,000
Speaker 4: here to basically manage money and do.

1309
01:04:41,960 --> 01:04:42,600
Speaker 1: All these things.

1310
01:04:42,800 --> 01:04:44,880
Speaker 4: And I think there's a really amazing opportunity to do

1311
01:04:44,920 --> 01:04:47,440
Speaker 4: that in a great way and approach it if I

1312
01:04:47,440 --> 01:04:49,920
Speaker 4: take the tension of AI. You know, there's always this

1313
01:04:50,000 --> 01:04:51,560
Speaker 4: question of like what's it going to do to the

1314
01:04:51,560 --> 01:04:55,080
Speaker 4: advisor industry or the investment industry, And I look at

1315
01:04:55,080 --> 01:04:58,000
Speaker 4: it as only enabling. If you think about the opportunity

1316
01:04:58,000 --> 01:05:00,160
Speaker 4: for a young person today, this is going to to

1317
01:05:00,200 --> 01:05:04,040
Speaker 4: be an unbelievable period. The way I would approach this, though,

1318
01:05:04,520 --> 01:05:07,440
Speaker 4: is recognize as a young person that a career in

1319
01:05:07,520 --> 01:05:10,400
Speaker 4: any financial service or any career is not a sort

1320
01:05:10,440 --> 01:05:13,240
Speaker 4: of a set of stairs. It's actually looks more like

1321
01:05:13,280 --> 01:05:15,720
Speaker 4: a J curve, and you're going to have to go

1322
01:05:15,800 --> 01:05:19,360
Speaker 4: through very difficult periods that look very uncomfortable, where you

1323
01:05:19,440 --> 01:05:22,040
Speaker 4: look like you're not doing great to ultimately see this

1324
01:05:22,120 --> 01:05:25,000
Speaker 4: great outcome. And that comes from curiosity, learning and immersing

1325
01:05:25,040 --> 01:05:28,160
Speaker 4: yourself to ultimately take risks and do really important things.

1326
01:05:28,320 --> 01:05:30,160
Speaker 4: It's an unbelievable time right now, I think as an

1327
01:05:30,200 --> 01:05:32,840
Speaker 4: individual and a young person coming into this space.

1328
01:05:33,600 --> 01:05:37,040
Speaker 2: Good answer, and let's jump to our final question, what

1329
01:05:37,080 --> 01:05:40,000
Speaker 2: do you know about the world of investing, of ETFs,

1330
01:05:40,080 --> 01:05:44,000
Speaker 2: of again, of financial innovation today might have been useful

1331
01:05:44,120 --> 01:05:47,120
Speaker 2: twenty five years ago when you were really ramping.

1332
01:05:46,840 --> 01:05:50,000
Speaker 4: Up Well, I mean, I think that I go back

1333
01:05:50,040 --> 01:05:55,040
Speaker 4: to the constant learning of how behaviors and emotions really

1334
01:05:55,240 --> 01:05:58,720
Speaker 4: drive outcome. And I wish, you know, I'd learned that earlier.

1335
01:05:58,720 --> 01:06:01,120
Speaker 4: I wish I'd kind of been exposed to it. I

1336
01:06:01,160 --> 01:06:03,080
Speaker 4: think the most important thing, though, is it is this

1337
01:06:03,200 --> 01:06:07,960
Speaker 4: idea of how do we help truly solve problems along

1338
01:06:08,000 --> 01:06:09,800
Speaker 4: the journey of a customer. How do we put the

1339
01:06:09,800 --> 01:06:13,680
Speaker 4: customer and their moment of need at any point, whether

1340
01:06:13,680 --> 01:06:17,040
Speaker 4: they're twenty five, forty five, sixty five, or eighty five,

1341
01:06:17,440 --> 01:06:20,680
Speaker 4: and ultimately help them with the types of services and

1342
01:06:20,680 --> 01:06:23,160
Speaker 4: solutions that drive that. If I had had that principal

1343
01:06:23,240 --> 01:06:25,680
Speaker 4: mindset twenty plus years ago, I think I would have

1344
01:06:25,680 --> 01:06:29,080
Speaker 4: built even more powerful businesses back then. It's really fun

1345
01:06:29,400 --> 01:06:31,880
Speaker 4: to do what we're doing, but I wish we'd done

1346
01:06:31,920 --> 01:06:32,680
Speaker 4: this even earlier.

1347
01:06:33,040 --> 01:06:36,600
Speaker 2: Some I am so glad we finally got to do this.

1348
01:06:36,720 --> 01:06:39,080
Speaker 2: We've tried to set this up a couple of times

1349
01:06:39,400 --> 01:06:44,080
Speaker 2: and the dates just kept getting crossed. I'm thrilled you

1350
01:06:44,160 --> 01:06:47,000
Speaker 2: came in to do this. We have been speaking with

1351
01:06:47,080 --> 01:06:51,920
Speaker 2: some say founder and CEO of Purpose Investments. If you

1352
01:06:52,120 --> 01:06:55,040
Speaker 2: enjoy this conversation, we'll be sure to check out any

1353
01:06:55,080 --> 01:06:58,400
Speaker 2: of the six hundred and fifty discussions we've had over

1354
01:06:58,440 --> 01:07:03,680
Speaker 2: the past twelve years. You can find those at iTunes, Spotify,

1355
01:07:03,920 --> 01:07:08,120
Speaker 2: Bloomberg YouTube, wherever you get your favorite podcasts. I would

1356
01:07:08,120 --> 01:07:10,040
Speaker 2: be remiss if I didn't thank the correct team that

1357
01:07:10,080 --> 01:07:14,480
Speaker 2: helps put these conversations together each week. Alexis Noriega is

1358
01:07:14,520 --> 01:07:19,120
Speaker 2: my video producer. Joan Russo is my researcher. Anna Luke

1359
01:07:19,320 --> 01:07:23,720
Speaker 2: is my podcast producer. I'm Barry Ritoults. You've been listening

1360
01:07:23,800 --> 01:07:26,760
Speaker 2: to Masters in Business on Bloomberg Radio.