WEBVTT - Day Two Live from the Future Proof Festival 0:00:02.920 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business 0:00:10.720 --> 0:00:13.960 Week inside from the reporters and editors who bring you 0:00:14.000 --> 0:00:18.360 America's most trusted business magazine, plus global business, finance and 0:00:18.400 --> 0:00:22.680 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.040 --> 0:00:25.800 and Tim Stenebeck from Bloomberg Radio. 0:00:27.160 --> 0:00:29.880 Carol Maslow, Barry Redholts. We are live here at Futureproof 0:00:29.880 --> 0:00:33.760 in Huntington Beach, California. Bloomberg Radios Lives broadcast from future 0:00:33.760 --> 0:00:36.360 Proof sponsored by JP Morgan Asset Management. 0:00:36.640 --> 0:00:39.440 We want to kick off our coverage this hour. We've 0:00:39.479 --> 0:00:41.080 got a special guest, Marlena Lee. 0:00:41.120 --> 0:00:44.000 She's global head of investment Solutions at the registered investment 0:00:44.040 --> 0:00:45.400 advisor Dimensional Investing. 0:00:45.440 --> 0:00:47.440 They've got seven hundred and forty. 0:00:47.159 --> 0:00:50.880 Billion dollars in firm Whine Assets under management. Welcome, Welcome, 0:00:50.920 --> 0:00:53.520 Thanks for joining us. Carol's so excited to be here. 0:00:53.600 --> 0:00:56.640 Tell us a little bit about your firm because founded 0:00:56.640 --> 0:00:59.640 about forty years ago. But historically you guys look at 0:00:59.640 --> 0:01:03.320 AKAD research and then think about how that applies to investing. 0:01:03.720 --> 0:01:05.880 I am curious about research that you're finding interesting in 0:01:05.920 --> 0:01:07.080 today's market environment. 0:01:07.360 --> 0:01:09.919 Yeah, so absolutely right, Carol. We were founded in nineteen 0:01:09.959 --> 0:01:11.520 eighty one, so it's been forty two. 0:01:11.440 --> 0:01:12.600 Forty senior year cycles. 0:01:12.640 --> 0:01:12.880 Yeah. 0:01:12.920 --> 0:01:16.520 Absolutely, And from the very beginning, our founders were actually 0:01:16.640 --> 0:01:19.240 folks who worked on some of the very first index funds, 0:01:20.040 --> 0:01:23.840 and they kind of really liked some of the ideas 0:01:23.840 --> 0:01:26.839 that were coming out of the academic research around different 0:01:26.880 --> 0:01:30.920 drivers of expected return, but also just that flexibility has value. 0:01:31.319 --> 0:01:35.560 So from our very beginning we had these ideas that, hey, 0:01:35.560 --> 0:01:38.759 you want really low cost, well diversified portfolios that an 0:01:38.760 --> 0:01:41.400 index fund would give you, but you do leave money 0:01:41.440 --> 0:01:43.839 on the table when you have the rigidities of index funds. 0:01:43.880 --> 0:01:48.200 So adding some flexibility and using academic research to pursue 0:01:48.200 --> 0:01:51.600 out performance is a winning strategy, and we have forty 0:01:51.680 --> 0:01:53.080 years of track record to show it. 0:01:54.080 --> 0:01:57.680 Their focus, if I remember correctly, David Booth began with 0:01:57.960 --> 0:02:02.080 this small cap factor and took that from a single 0:02:02.160 --> 0:02:04.960 fund that was slow to catch on, and eventually people 0:02:05.000 --> 0:02:07.480 figured out, hey Booth seems to know what he's doing, 0:02:07.840 --> 0:02:11.440 and expand into a whole bunch of other elements of 0:02:12.000 --> 0:02:14.680 French and FAUMA or advisors to the firm. You have 0:02:14.840 --> 0:02:19.240 like long standing ties to University of Chicago Darmouth, like 0:02:19.560 --> 0:02:24.880 really fascinating academic backgrounds, including a number of Nobel laureates. 0:02:24.960 --> 0:02:25.840 Absolutely, Barry. 0:02:25.880 --> 0:02:28.960 So we have I think five Nobel laureates that are 0:02:29.000 --> 0:02:32.799 associated in some way with the firm, either through as 0:02:32.840 --> 0:02:37.000 academic consultants, advisors to the firm, or on the fun board, 0:02:37.040 --> 0:02:40.280 so representing our investors in the fund. And they all 0:02:40.360 --> 0:02:44.520 joined and got involved before they won their Nobel laureates, 0:02:44.520 --> 0:02:46.799 So really deep academic ties. 0:02:47.360 --> 0:02:48.720 Yes, absolutely right, Barry. 0:02:48.760 --> 0:02:51.960 That our very first fund was focused on this small 0:02:51.960 --> 0:02:56.040 cat premium that was well before smart beta or factory investing. 0:02:56.080 --> 0:02:58.520 Was your original smart beta so well. 0:02:58.520 --> 0:03:01.120 I like to call it pioneers of factor based investing. 0:03:01.160 --> 0:03:04.959 You know, we're absolutely the first value came on the scene, 0:03:05.120 --> 0:03:08.280 of course, right as Fama and French were writing their 0:03:08.320 --> 0:03:09.880 three factor model paper. 0:03:10.919 --> 0:03:12.600 These days we're. 0:03:12.480 --> 0:03:17.160 Looking at profitability adding that to the lineup. Profitability is 0:03:17.200 --> 0:03:21.000 a fantastic compliment for value because those premiums tend not 0:03:21.120 --> 0:03:23.480 to show up at the same times. So we do 0:03:23.560 --> 0:03:26.239 think that when you build a portfolio that focus on both, 0:03:26.400 --> 0:03:27.680 you can help smooth out the ride. 0:03:27.760 --> 0:03:30.160 You are teaching assistant right for your gene Fama I 0:03:30.400 --> 0:03:31.320 was tell us a little bit. 0:03:31.320 --> 0:03:34.520 Oh is that true because David Booth was Gene Fama's 0:03:34.560 --> 0:03:36.440 teaching assistant forty plus years ago. 0:03:36.880 --> 0:03:38.920 Yes, we share that in common. 0:03:39.320 --> 0:03:40.800 How did that shape you or tell us a little 0:03:40.800 --> 0:03:41.840 bit about that experience. 0:03:42.120 --> 0:03:45.000 Oh my gosh, it was the best experience. I would 0:03:45.000 --> 0:03:47.360 have done it for free. Yeah, I was a Bell laureate. 0:03:47.840 --> 0:03:48.720 He wasn't at the. 0:03:48.680 --> 0:03:50.440 Time, right, but he did become so. 0:03:50.520 --> 0:03:53.360 Before arriving at Dimensional, I was doing my PhD at 0:03:53.400 --> 0:03:57.040 the University of Chicago, studied under Professor Fama, and then 0:03:57.120 --> 0:04:00.440 became his teaching assistant. And when I told he was 0:04:00.480 --> 0:04:03.400 also on my dissertation committee. And when I told him 0:04:03.400 --> 0:04:06.080 I didn't really want to do the academic thing. He 0:04:06.520 --> 0:04:10.720 was so kind because my other advisors they tried to 0:04:10.760 --> 0:04:14.400 convince me otherwise. But Fama he connected me to Dimensional. 0:04:14.920 --> 0:04:17.240 And it's such a perfect fit because I got to 0:04:17.320 --> 0:04:21.320 continue focusing on this academic research that I had spent 0:04:21.400 --> 0:04:25.239 five years of my life learning and studying, and instead 0:04:25.279 --> 0:04:28.640 being able to apply it and helping to explain it 0:04:28.720 --> 0:04:34.120 to investors who deeply care because it does help. Understanding 0:04:34.200 --> 0:04:36.839 the research just leads to a better investment. 0:04:36.839 --> 0:04:37.200 Dot Com. 0:04:37.240 --> 0:04:40.440 I think if you understand that there's more of robust, 0:04:40.520 --> 0:04:44.320 a better way to pursue higher returns than stock picking 0:04:44.440 --> 0:04:47.880 or trying to time the markets. And just the confidence 0:04:47.920 --> 0:04:51.200 that it gives someone to be a long term discipline investors, 0:04:51.440 --> 0:04:53.400 which I think is really important to be able to 0:04:53.440 --> 0:04:56.159 stick with market downturns and get. 0:04:56.000 --> 0:04:58.159 You an environment where trades to move so quickly and 0:04:58.240 --> 0:05:01.760 react to day to day news events, whether it's company 0:05:01.839 --> 0:05:04.560 stock specific or just macro specific, that when you really 0:05:04.640 --> 0:05:07.240 understand the deep research behind something right, you can have 0:05:07.240 --> 0:05:09.640 a lot more conviction behind an investment, whether to buy 0:05:09.720 --> 0:05:10.120 or sell. 0:05:10.240 --> 0:05:10.440 Yeah. 0:05:10.440 --> 0:05:14.120 Absolutely, I think that we are most investors are investing 0:05:14.120 --> 0:05:17.080 for decades. Yeah, and we should have a decade long 0:05:17.240 --> 0:05:20.400 investment horizon. And the research speaks to decades long of 0:05:21.480 --> 0:05:24.839 patterns and data as opposed to like what's going to 0:05:24.880 --> 0:05:27.680 happen tomorrow or what's going to happen in the you know, 0:05:27.800 --> 0:05:28.760 in the next few months. 0:05:29.160 --> 0:05:32.080 So Fama French was a good couple of decades ago. 0:05:32.200 --> 0:05:36.320 Those first three factors were really interesting. You're essentially an 0:05:36.400 --> 0:05:40.039 academic at heart. What's the most interesting new research you're 0:05:40.080 --> 0:05:45.760 finding that might eventually become some form of real life 0:05:45.800 --> 0:05:47.000 application of theory. 0:05:47.440 --> 0:05:50.000 Well, there's always little improvements that we can make. But 0:05:50.080 --> 0:05:53.440 I would say profitability was the last really big one. 0:05:54.560 --> 0:05:56.400 Some people might think of it as quality. 0:05:56.600 --> 0:05:59.000 I was going to ask, I think of quality as 0:05:59.000 --> 0:06:01.320 the last big one. You using profitability in the same 0:06:01.320 --> 0:06:04.360 way as quality. So when I think equality, I think 0:06:04.400 --> 0:06:09.240 of low debt, good management, no other problems, and you're 0:06:09.320 --> 0:06:12.200 just cutting that down to straight up profitability. 0:06:11.600 --> 0:06:12.760 Just straight up profitability. 0:06:12.960 --> 0:06:15.680 And once you capture profitability, a lot of those other 0:06:15.800 --> 0:06:17.840 variables they're not important for explaining it. 0:06:17.960 --> 0:06:19.240 Over revenue growth. 0:06:19.680 --> 0:06:22.520 Well, revenue growth, So we it's just so funny we 0:06:22.560 --> 0:06:24.800 talk so much about the importance of like growing your business, 0:06:24.839 --> 0:06:27.000 because profitability great profits you can play around with. 0:06:27.360 --> 0:06:29.440 Well, let's let's back it up and just talk about 0:06:29.440 --> 0:06:33.239 why profitability should help explain returns in the first place. 0:06:33.640 --> 0:06:35.320 When you invest in a company. 0:06:35.040 --> 0:06:39.160 You get future cash flows and it's all discounted back 0:06:39.200 --> 0:06:40.120 to a price today. 0:06:40.160 --> 0:06:41.039 That's the stock price. 0:06:41.640 --> 0:06:45.400 That discount rate is the expected return. So what we 0:06:45.480 --> 0:06:48.200 want is we don't get to look up the expected 0:06:48.279 --> 0:06:51.479 return in Bloomberg. Instead, we have to infer it from 0:06:51.680 --> 0:06:54.760 two variables that we can sort of see. We definitely 0:06:54.760 --> 0:06:57.760 get to see price today, but we don't get a 0:06:57.800 --> 0:07:01.919 perfect view of those exps future cash flows. But it 0:07:01.960 --> 0:07:06.120 turns out today's profitability just levels our pretty dang good 0:07:06.160 --> 0:07:08.440 predictor of those profits several. 0:07:08.279 --> 0:07:09.479 Years out into the future. 0:07:09.560 --> 0:07:12.520 The most company the most profitable companies today tend to 0:07:12.560 --> 0:07:16.840 stay the most profitable companies for many years now. Profitability 0:07:16.920 --> 0:07:20.640 growth is another aspect that does help a little bit, 0:07:21.400 --> 0:07:24.320 but the most important one to capture is the level 0:07:24.360 --> 0:07:24.920 of profits. 0:07:25.080 --> 0:07:25.160 Ye. 0:07:25.400 --> 0:07:28.120 And then the challenge with profitability growth is it does 0:07:28.160 --> 0:07:30.480 introduce a lot of additional turnover. So it's something that 0:07:30.560 --> 0:07:35.000 we're actively partnering with Robert Novi marks another academic that 0:07:35.040 --> 0:07:38.320 we work very closely with to see if there's there's 0:07:38.320 --> 0:07:41.040 certainly something there in the data, but whether it would 0:07:41.080 --> 0:07:44.400 survive transactions, costs, things like that are also very important 0:07:44.440 --> 0:07:47.000 before you add something to a live portfolio, where you 0:07:47.040 --> 0:07:48.680 have to patrading costs and things like that. 0:07:48.760 --> 0:07:53.240 Yeah, so I want to unpack why profitability has persistence 0:07:53.240 --> 0:07:56.680 into the future when and what's so different from just 0:07:56.840 --> 0:07:59.760 profits because most people think of pe as their measure, 0:08:00.200 --> 0:08:04.040 but profitability means it's a company that sometimes has a 0:08:04.080 --> 0:08:07.840 moat and a strategic advantage that they're not carrying a 0:08:07.840 --> 0:08:11.680 lot of debt that can eventually eat into future profits. 0:08:11.720 --> 0:08:15.480 What other elements are you looking at that explain why 0:08:15.520 --> 0:08:18.640 profitability tends to persist out into the distance. 0:08:18.840 --> 0:08:22.360 It's a fantastic question, Barry, because actually, across a lot 0:08:22.400 --> 0:08:25.760 of different measures of profitability, you see that companies with 0:08:25.840 --> 0:08:29.800 higher profitability have higher returns than companies with low profitability. 0:08:30.000 --> 0:08:32.760 That's you can look at a very top line number 0:08:32.840 --> 0:08:35.480 like revenues, you can look at net income, so at 0:08:35.480 --> 0:08:38.960 the very bottom it all helps create spreads and returns. 0:08:39.080 --> 0:08:41.840 So that's really important because it gives you a better 0:08:41.880 --> 0:08:44.480 sense that that's something that's real in the data. You're 0:08:44.520 --> 0:08:48.160 not just cherry picking something that's really like a fragile 0:08:48.200 --> 0:08:52.640 academic result, and so that's comforting. What we end up 0:08:52.720 --> 0:08:56.839 using in our portfolios we call operating profitability because. 0:08:56.480 --> 0:08:59.120 We want something that's going to predict future profitability. 0:08:59.200 --> 0:09:01.560 So you don't want things that are super variable year 0:09:01.679 --> 0:09:06.080 year or one one time events. So operating profitability gets 0:09:06.120 --> 0:09:09.680 to the heart of what are kind of a more 0:09:09.720 --> 0:09:14.760 stable stream of revenues minus costs, and that's what we 0:09:14.800 --> 0:09:18.840 see or what we use in the portfolios. That is 0:09:18.840 --> 0:09:21.280 something that is stable enough where we can run a 0:09:21.320 --> 0:09:25.760 portfolio that focuses on high profitability names in a portfolio 0:09:25.800 --> 0:09:26.800 without a lot of turnover. 0:09:27.160 --> 0:09:30.240 Is there an overlap between profitability and momentum or is 0:09:30.240 --> 0:09:31.720 that just something completely different? 0:09:31.960 --> 0:09:33.120 It turns out to be different. 0:09:33.840 --> 0:09:37.240 The thing that's more related to momentum or price momentum, 0:09:37.280 --> 0:09:40.120 which is what we usually think of as momentum, is 0:09:40.160 --> 0:09:43.400 earning's momentum is related. So Robert Novemars did have a 0:09:43.440 --> 0:09:45.280 paper or a few years back where he showed that 0:09:45.320 --> 0:09:48.800 those two things are quite related. We do take account 0:09:48.880 --> 0:09:49.520 momentum in. 0:09:49.480 --> 0:09:51.120 The portfolios as well. 0:09:51.520 --> 0:09:54.040 But the thing with momentum, just like I was saying 0:09:54.080 --> 0:09:57.280 with profitability growth, is that it does tend to have 0:09:58.040 --> 0:10:01.440 high turnover if you try to pursue it directly. So 0:10:01.880 --> 0:10:05.120 a better way to take advantage of momentum is if 0:10:05.120 --> 0:10:10.439 you're already managing a portfolio. Let's just say that's pursuing size, value, profitability. 0:10:10.480 --> 0:10:13.080 You want to trade a little bit every day in 0:10:13.160 --> 0:10:15.760 order to make sure you're focused on those premiums, not 0:10:16.040 --> 0:10:19.360 introducing style drift into the portfolios. But you can take 0:10:19.679 --> 0:10:23.760 into account something like price momentum at that point of trade. 0:10:23.800 --> 0:10:26.559 So I could say, hey, here's the stock I want 0:10:26.600 --> 0:10:31.240 to buy, but it's down momentum, therefore it should continue 0:10:31.240 --> 0:10:32.760 to underperform for a little while. 0:10:32.960 --> 0:10:35.720 Let's just wait before I buy it, or vice versa. 0:10:35.840 --> 0:10:38.160 If I want to sell something that has up momentum, 0:10:38.400 --> 0:10:39.800 I could just wait a little. 0:10:39.960 --> 0:10:42.600 Just I just want to follow up with that because 0:10:43.040 --> 0:10:46.040 I understand the way we use dimensional funds in our shop. 0:10:46.440 --> 0:10:48.680 I understand the way they operate. But I want you 0:10:48.720 --> 0:10:51.720 to clarify something because I don't want people to misunderstand 0:10:51.720 --> 0:10:52.280 what you say. 0:10:52.720 --> 0:10:53.360 What you said. 0:10:54.000 --> 0:10:56.839 It's not that you think you have to trade every 0:10:56.920 --> 0:10:59.800 day for the sake of trading. You what I The 0:10:59.840 --> 0:11:02.520 way I know the way you guys have run various 0:11:02.559 --> 0:11:08.200 funds are you are opportunistically looking for your time and 0:11:08.280 --> 0:11:11.520 place to pick up specific things. And it's not like, hey, 0:11:11.600 --> 0:11:14.520 let's go trade today. It's let's see if anything that's 0:11:14.600 --> 0:11:17.439 on our by list that we're looking to accumulate has 0:11:17.520 --> 0:11:19.760 become a more attractive price point. 0:11:20.000 --> 0:11:20.240 Am I? 0:11:20.400 --> 0:11:21.920 Am I doing that any justice? 0:11:22.520 --> 0:11:23.000 So great? 0:11:23.400 --> 0:11:25.199 That's absolutely right. 0:11:25.280 --> 0:11:27.960 When I say we look to trade every day. The 0:11:28.040 --> 0:11:32.160 turnover in our portfolios are is very low. So a 0:11:32.200 --> 0:11:35.360 core portfolio might have something in the high single digits. 0:11:35.920 --> 0:11:39.400 A higher, more narrow portfolio like a small value portfolio, 0:11:39.480 --> 0:11:42.760 for example, might be somewhere between twenty to thirty percent turnover. 0:11:43.160 --> 0:11:47.000 Just to translate that, a twenty five percent annualized turnover 0:11:47.120 --> 0:11:49.560 means when I buy a stock, I expect to hold 0:11:49.600 --> 0:11:53.480 it for four years. So it's a long holding period, 0:11:53.800 --> 0:11:56.640 which we think is really important because as you're incurring 0:11:56.640 --> 0:11:59.520 trading costs, you can spread that across a long holding period. 0:12:00.000 --> 0:12:02.480 But the daily rebalancing also just gives us a lot 0:12:02.480 --> 0:12:06.840 of flexibility. So those are index like levels of turnover, 0:12:07.320 --> 0:12:09.800 like passive indices like level of turnover. 0:12:09.559 --> 0:12:11.480 Right, But whereas an index might. 0:12:11.400 --> 0:12:15.240 Try to drive all of that turnover into defined reconstitution 0:12:15.440 --> 0:12:18.680 days once to four times per year, we can spread 0:12:18.679 --> 0:12:21.120 it across two hundred and twenty trading days a year, 0:12:21.120 --> 0:12:23.600 which makes it really easy to control training costs. 0:12:23.600 --> 0:12:27.360 More, Does the macro change any of this impact this? 0:12:27.559 --> 0:12:29.160 I mean, here, we are, you know, obviously in a 0:12:29.240 --> 0:12:31.760 you know, waiting the FED meeting, and I do wonder 0:12:31.800 --> 0:12:34.160 as the Fed's getting ready to finally cut rates, like 0:12:34.200 --> 0:12:37.640 it's a different cycle environment, does the macro play into this? 0:12:38.080 --> 0:12:40.200 You know, I would love to be able to say 0:12:40.240 --> 0:12:42.680 here's when the premiums are going to be higher or lower, 0:12:42.880 --> 0:12:45.920 But the data is just too noisy. So we view, 0:12:46.520 --> 0:12:49.520 at least in these equity portfolios, we want to be 0:12:49.960 --> 0:12:53.560 focused on these premiums day and day out, and macro 0:12:54.040 --> 0:12:57.680 environments don't really change that view. And it goes back 0:12:57.720 --> 0:12:59.720 to that idea for why we see these premiums in 0:12:59.720 --> 0:13:03.320 the first it's low prices combined with good future cash flows, 0:13:03.920 --> 0:13:07.600 and that should always indicate higher expector returns than something 0:13:07.600 --> 0:13:09.440 with a high price and low cash flow. 0:13:09.640 --> 0:13:12.000 And that's true regardless of what the Fed's going to do. 0:13:12.400 --> 0:13:17.240 Recession expansion, regardless of recession, long recession, doesn't matter. Those 0:13:17.280 --> 0:13:21.319 premiums are not correlated with all of these macroeconomic variables. 0:13:21.400 --> 0:13:23.320 And we would love to be able to figure out 0:13:23.520 --> 0:13:25.560 to crack the nut of how to focus on these 0:13:25.600 --> 0:13:27.959 premiums during certain times, but we think it's best to 0:13:28.000 --> 0:13:28.800 do it every day. 0:13:29.400 --> 0:13:30.800 Really interesting, very cool. 0:13:30.679 --> 0:13:33.880 Stuff in a nutshell ten seconds, the market environment an 0:13:33.880 --> 0:13:36.400 interesting one, a hard one, a complex one. 0:13:36.400 --> 0:13:37.880 How would you describe it? 0:13:37.880 --> 0:13:44.200 It's always complex, it's always changing. It is easy, But 0:13:44.720 --> 0:13:47.600 I do think that when you have a long term view. 0:13:47.559 --> 0:13:49.719 Right now today, it doesn't matter or what. 0:13:49.960 --> 0:13:52.280 It doesn't matter, like we're going to be positioned on 0:13:52.360 --> 0:13:56.079 these premiums regardless of and that's part of why our 0:13:56.120 --> 0:13:58.360 clients like this, because they know what to expect from us. 0:13:58.559 --> 0:14:00.560 It's really interesting, kind of a healthy thing, right when 0:14:00.559 --> 0:14:02.920 we're so day to day to talk about the long term. 0:14:03.240 --> 0:14:07.359 I always think of Dimensional funds as indexing plus it's indexing, 0:14:07.720 --> 0:14:09.560 but the next level goes beyond it. 0:14:09.720 --> 0:14:12.000 Very cool stuff, Marlena, thank you, Thank you, appreciate it. 0:14:12.080 --> 0:14:12.679 Marlene ut Lee. 0:14:12.720 --> 0:14:15.840 She's global head of Investment Solutions at Dimensional Investing, joining 0:14:15.880 --> 0:14:17.240 us right here on Bloomberg BusinessWeek. 0:14:18.440 --> 0:14:21.960 You're listening to the Bloomberg Business Week podcast. Catch us 0:14:22.000 --> 0:14:25.240 Live weekday afternoons from two to five pm. Easter listen 0:14:25.280 --> 0:14:27.440 on Apple car Play and then Broight Auto with a 0:14:27.480 --> 0:14:31.560 Bloomberg Business app or wants us Live on YouTube. 0:14:31.720 --> 0:14:34.160 You are listening and watching future Proof pub Carol Manser, Almit, 0:14:34.240 --> 0:14:37.440 Barry Ridholtz. And we should point out that Bloomberg Radios 0:14:37.480 --> 0:14:40.520 Live broadcast from future Proof is sponsored by JP Morgan 0:14:40.600 --> 0:14:42.520 Asset Management. All right, we do want to get to 0:14:42.560 --> 0:14:44.920 our next guest. She is Joanne Bradford. She's president and 0:14:44.960 --> 0:14:47.320 Chief Money Officer ever to Main Money. It was founded 0:14:47.400 --> 0:14:49.520 in twenty twenty two by Adam Dell, former head of 0:14:49.560 --> 0:14:53.600 product at Marcus by Goldman Sachs. It's a financial advisory 0:14:53.600 --> 0:14:55.880 firm and her background is killer. We're going to get 0:14:55.880 --> 0:14:59.040 into that because she was a chief revenue officer at Microsoft, 0:14:59.120 --> 0:15:01.000 president of Honey of so FI. 0:15:01.440 --> 0:15:03.840 Welcome, welcome, welcome, and you're a friend of Barry's, of course, 0:15:04.800 --> 0:15:05.800 how are you good? 0:15:06.040 --> 0:15:06.400 Thanks? 0:15:07.280 --> 0:15:09.200 Talk to us a little bit about the environment today. 0:15:09.400 --> 0:15:11.200 And when you come to an event like this, what 0:15:11.240 --> 0:15:12.400 do you want to hear? Who do you want to 0:15:12.400 --> 0:15:14.760 hear from? What are the questions you're asking of people? 0:15:15.560 --> 0:15:18.840 Yeah? I do two things here. I advise a company 0:15:18.840 --> 0:15:21.840 called Wealth dot com and they announced a thirty million 0:15:21.880 --> 0:15:28.080 dollars Series A led by Google Ventures and City Congratulations yesterday, 0:15:28.240 --> 0:15:30.920 which was exciting and it shows you that, like, hey, 0:15:30.960 --> 0:15:34.600 look it's time for some automation and some technology and 0:15:34.600 --> 0:15:38.280 for some AI to be applied to this category because 0:15:38.280 --> 0:15:41.240 it's sort of the last one to break, you know. 0:15:41.680 --> 0:15:43.800 I was in the advertising business, which they said will 0:15:43.800 --> 0:15:47.440 always be sold over Martini's people to people, and this 0:15:47.640 --> 0:15:50.040 business has said the same. And I think we're sort 0:15:50.080 --> 0:15:54.320 of seeing the beginnings of that in this part of 0:15:54.360 --> 0:15:58.280 the business, not you know, like the Visa's MasterCards, plaid stripes, 0:15:58.320 --> 0:16:01.880 those things, but actually in in the wealth management side 0:16:01.880 --> 0:16:04.480 of it. So it's exciting to see that to be 0:16:04.600 --> 0:16:07.240 a part of it. I think there are sort of 0:16:07.280 --> 0:16:10.080 two camps here, and all the people I've talked to 0:16:10.200 --> 0:16:13.440 one is, hey, look, I'm just going to keep doing 0:16:13.440 --> 0:16:16.160 what I'm doing and I hope that I get to 0:16:16.200 --> 0:16:18.960 the end of my career before the iceberg melts. And 0:16:19.000 --> 0:16:21.920 then there's other people that are like, no, I actually 0:16:21.960 --> 0:16:24.120 I'm going to try to change this. I want to 0:16:24.160 --> 0:16:27.320 be digital first. I want to go after millennials. I 0:16:27.360 --> 0:16:29.760 want to talk about how people have different needs around 0:16:29.760 --> 0:16:33.880 their money today. You know. So those are the two 0:16:34.320 --> 0:16:36.160 sort of camps, and I think it sort of happens 0:16:36.200 --> 0:16:39.360 in every industry, but it's clear it's playing out. 0:16:39.200 --> 0:16:40.080 Here, Joanne. 0:16:40.120 --> 0:16:44.840 Are those two very different generations? Is it philosophical or 0:16:44.920 --> 0:16:47.560 is it The fifty and older group is like I'm 0:16:47.560 --> 0:16:50.000 just going to run out the clock, and the thirty 0:16:50.120 --> 0:16:52.880 forty some things are like, no, it's got to be digital. 0:16:52.880 --> 0:16:55.880 It's got to be technology. That's what our clients want. 0:16:56.120 --> 0:17:00.720 I think it's both the providers and the customers right, 0:17:01.640 --> 0:17:04.440 because you know, I think the last conference we were at 0:17:04.480 --> 0:17:06.639 they said, you know, in the next ten years, a 0:17:06.680 --> 0:17:11.000 third of this industry is going to retire. And then 0:17:11.119 --> 0:17:13.679 you know, I worked at SOFI and we built a 0:17:13.720 --> 0:17:17.440 digital first tool right where everybody wants to do everything 0:17:18.080 --> 0:17:21.280 on a device, wants to have it done, and then 0:17:21.320 --> 0:17:23.840 they still do want to know that there's human and 0:17:23.920 --> 0:17:26.280 a person that understands their values on the other side 0:17:26.280 --> 0:17:29.480 of it. I think it's happened everywhere in life except 0:17:29.920 --> 0:17:33.600 in personal wealth management. So it's finally going to show 0:17:33.680 --> 0:17:36.720 up here, but it's not. We're not quite ready for 0:17:36.760 --> 0:17:37.040 it yet. 0:17:37.080 --> 0:17:38.240 But how does it change? 0:17:38.240 --> 0:17:40.679 How do you see the transformation in terms of it 0:17:40.760 --> 0:17:44.640 becoming more digital or digital you know, and embracing of technology. 0:17:45.040 --> 0:17:49.000 Yeah, I mean I literally I have a private wealth manager. 0:17:49.000 --> 0:17:50.560 I don't really want to talk to them. I just 0:17:50.640 --> 0:17:53.080 open up my schwab every day and look. 0:17:52.920 --> 0:17:56.000 At it, and we'll first stop opening it every day. 0:17:55.760 --> 0:17:59.360 Please every No, I like it once a week. 0:17:59.640 --> 0:18:00.479 It feel good. 0:18:00.520 --> 0:18:03.560 I just had a conversation about long term investing every day. 0:18:03.520 --> 0:18:04.040 Is too much. 0:18:04.640 --> 0:18:07.080 Every day, But I look at my AMEX bill every day. 0:18:07.080 --> 0:18:08.520 You want to show me your AMX bill on the 0:18:08.520 --> 0:18:09.720 credit card, Like what did I buy? 0:18:09.800 --> 0:18:11.520 When my husband says, let's look at the AMEX bill, 0:18:11.600 --> 0:18:13.840 I'm like, well I do it. 0:18:13.880 --> 0:18:16.240 You know, in this morning, I was like sitting watching TikTok. 0:18:16.280 --> 0:18:18.680 Next thing, you know, I'm like, oh, Apple pay oops, bang. 0:18:19.080 --> 0:18:22.280 My husband calls it the BOD and he's not talking 0:18:22.280 --> 0:18:23.960 about Board of directors. 0:18:23.640 --> 0:18:24.440 Box of the day. 0:18:24.600 --> 0:18:27.040 So he's like a box of the day showed up 0:18:27.080 --> 0:18:27.320 for you. 0:18:27.600 --> 0:18:31.280 But what does it mean for estate planning and tax 0:18:31.359 --> 0:18:33.000 planning and educational planning? 0:18:33.040 --> 0:18:35.040 Like how do you guys think about because that's your world. 0:18:35.160 --> 0:18:37.320 Yeah, so when we want to let's talk about domain 0:18:37.480 --> 0:18:41.040 money for a second. So our average customer is thirty 0:18:41.119 --> 0:18:43.960 nine years old, makes two hundred and fifty thousand dollars 0:18:44.040 --> 0:18:48.439 a year, and doesn't really want to put their money 0:18:48.480 --> 0:18:52.520 into Aumah. They have made some money, they're trying to 0:18:52.560 --> 0:18:54.600 figure it out. They might have some stock, they get 0:18:54.600 --> 0:18:57.080 a bonus, and they just don't know what to do. 0:18:57.160 --> 0:19:02.240 They're overwhelmed. They may have gotten married, may have gotten divorced, 0:19:03.200 --> 0:19:06.240 and they want some professional help. So it's a flat 0:19:06.240 --> 0:19:08.920 fee financial plan. We saw one for twenty five hundred dollars. 0:19:09.000 --> 0:19:10.679 We look at all your expend to, we look at 0:19:10.680 --> 0:19:13.720 all your spending, we analyze it. We use a bunch 0:19:13.720 --> 0:19:17.040 of technologies in AI. We put together a plan with 0:19:17.119 --> 0:19:19.199 a paraplanner, and then we give it back to you 0:19:19.200 --> 0:19:21.320 in a ninety minute discussion, and then we set up 0:19:21.320 --> 0:19:22.760 a discussion after that with. 0:19:22.720 --> 0:19:24.200 All your to dos and follow ups. 0:19:24.240 --> 0:19:28.200 Well, actually log into Zoom your Schwab account on Zoom 0:19:28.200 --> 0:19:30.360 with you and help you change, like move that there, 0:19:30.440 --> 0:19:32.920 because that's really where people freak out is they don't 0:19:32.920 --> 0:19:36.280