Speaker 1: This is Masters in Business with Barry Riddholds on Bloomberg Radio.
Speaker 1: This week we have a special and unusual guest on
Speaker 1: the podcast, somebody I'm pretty confident that most of you
Speaker 1: have never heard of. His name is Nick Murray. He
Speaker 1: is an author and consultants to the advisory industry. He's
Speaker 1: often been called an advisor's advisor. He's written eleven books,
Speaker 1: probably the most famous of which to the professional is
Speaker 1: Behavioral Investment Counseling UH. Some of the other books he's
Speaker 1: written have titles like Simple Wealth, Inevitable Wealth. He is
Speaker 1: an extremely insightful person who has been working in the
Speaker 1: financial services industry for nearly half a century. He began
Speaker 1: his career early on you'll hear at a number of
Speaker 1: well known brokerage firms, and found himself more and more
Speaker 1: offering advice to other advisors and brokers rather too specific
Speaker 1: individual clients, and that evolved, as he discusses, some thirty
Speaker 1: plus years ago, into a full time career working as
Speaker 1: an advisor to advisors. He has a very substantial and
Speaker 1: loyal following amongst a certain group of people in the
Speaker 1: financial industry. He preaches some very common sense things that
Speaker 1: are a little counterintuitive. You might be surprised to learn
Speaker 1: how important stock picking and market timing is to long
Speaker 1: term returns. Uh. The answer is going to rock you
Speaker 1: back on your heels. All those things matter much, much
Speaker 1: less than your own behavior as an investor and your
Speaker 1: own behavior as a financial advisor or broker. One of
Speaker 1: the things I find really fascinating about Nick Murray is
Speaker 1: that the average person has no idea who this guy is.
Speaker 1: In fact, I would go so far as to say
Speaker 1: the average investor has no idea that there is an
Speaker 1: industry that exists helping advisors do their job. And I
Speaker 1: don't just mean software and various mutual fund managers and
Speaker 1: product creators, but someone who actually facilitates the process of
Speaker 1: the ideal way, the optimal way for financial advisors to
Speaker 1: interact with their clients. A lot of this is kind
Speaker 1: of inside baseball. I suspect we're gonna have a lot
Speaker 1: of people in the financial services industry finding about out
Speaker 1: about this and listening to it. He speaks all over
Speaker 1: the country, probably gives fifty plus speeches a year, and
Speaker 1: commands a i um speaking fee because he is in
Speaker 1: such demands. UH. For those of you who want to
Speaker 1: know a little more about how the financial services industry works,
Speaker 1: or those of you who are just interested in the
Speaker 1: work that he does. Here is Nick Murray. This is
Speaker 1: Masters in Business with Barry Ridholts on Bloomberg Radio. My
Speaker 1: guest today is Nick Murray. You may not know who
Speaker 1: he is, but if you're in the financial services industry,
Speaker 1: you probably should. He is known as the Advisers Advisors,
Speaker 1: one of the industry's premier resources for registered investment advisors
Speaker 1: and others. He is the author of eleven books for
Speaker 1: financial services professional, most famously Simple Wealth Inevitable Wealth, which
Speaker 1: has been described as the most successful privately published book
Speaker 1: of the last fifteen years. In two thousand and seven,
Speaker 1: Nick was the recipient of the Malcolm S. Forbes Public
Speaker 1: Awareness Award for Excellence in advancing Financial Understanding. Nick, welcome
Speaker 1: to Bloomberg. It's very nice to be here. I would
Speaker 1: point out that I've never claimed that Simple Wealth was
Speaker 1: anything but one of the most successful privately published books
Speaker 1: of the last fifteen years. We don't want to start
Speaker 1: hyperbole this early in the Okay, we'll save it for
Speaker 1: the latter second hyperbole in segment five. A. Alright, so
Speaker 1: a little bit about your background. You went to Columbia
Speaker 1: years and years. I went to Columbia seven years of
Speaker 1: college wasted, just like Bluto, seven years of college down
Speaker 1: the drain um, but always not lost because my major
Speaker 1: was economics, and of course in the mid nineteen sixties
Speaker 1: they were teaching Kanzie and economics still do, which I
Speaker 1: would have had to go back and re learn all
Speaker 1: over again anyway. So it wasn't, as we say, a
Speaker 1: total loss. Okay. So so you come out of school
Speaker 1: in nineteen sixty seven, you go to E. F. Hutton
Speaker 1: and then you're at Shearson, ultimately ending up at Bear
Speaker 1: Stearns before saying to yourself, I'm in demand by advisors
Speaker 1: more so than anything else. Maybe that's the sort of
Speaker 1: area I should focus my attention on. How how did
Speaker 1: that transit? It was kind of it was kind of
Speaker 1: a half step. In nineteen um years ago, about twenty
Speaker 1: five years ago, now that you mentioned it, and now
Speaker 1: that you mentioned it, in August, I published the book
Speaker 1: called UM Serious Money, The Art of Marketing Mutual Funds
Speaker 1: UM because there was no other book on the subject,
Speaker 1: and you know, started to get a lot of requests
Speaker 1: to to come to firms other than Bear sterns and
Speaker 1: talk about this, and I it was just a collision
Speaker 1: course and so I kind of took myself off was
Speaker 1: an independent advisor, UM and also doing this whatever it
Speaker 1: is that I do now, and then at the end
Speaker 1: of the decade, at the turn of the century, I
Speaker 1: kind of said both, Yeah, you better do one or
Speaker 1: the other. So let me ask you a question. I've
Speaker 1: heard other people ask this, and I actually rarely asked
Speaker 1: this question, but for someone like yourself, it's a fascinating
Speaker 1: way to frame this. When people ask you what do
Speaker 1: you do? You know it's typical cocktail party chat or
Speaker 1: how do you answer that question? I say that I'm
Speaker 1: an advisor to other financial advisors, that I was for
Speaker 1: a quarter of a century or more a financial advisor,
Speaker 1: and now that I consult and and speak and write
Speaker 1: to other financial advisors. And if they don't go to
Speaker 1: completely to sleep, well, I'm still saying that. I just
Speaker 1: kind of walk away. That's UM. I find myself in
Speaker 1: an odd situation When people ask me what do I do?
Speaker 1: The answer is always, well, what day you I It's
Speaker 1: not like I have a nine to five. I can't
Speaker 1: just say I'm an accountant or a doctor. It's much
Speaker 1: more complicated, and once you see that glaze over the eyes,
Speaker 1: it's like, all right, I think I'm I'm boring them
Speaker 1: to death. My attitude is that's what you get for
Speaker 1: asking me. That's right. So so from the financial services
Speaker 1: industry as an advisor to actually helping advisors help their
Speaker 1: own clients. You know, what was the motivational drive of that?
Speaker 1: How did that come about? That? Was it strictly due
Speaker 1: to demand from advisors? What what makes you say? You know,
Speaker 1: I have a bunch of clients and I like them,
Speaker 1: but these other advisors they're they're kicking my door down.
Speaker 1: How do you make that transition? Well, first of all,
Speaker 1: a lot of it's just getting older and making choices.
Speaker 1: I mean, it's just you know, there come there came
Speaker 1: a point where I didn't think that I could do
Speaker 1: both with distinction. You couldn't be an advisor to clients
Speaker 1: and an advisor to traveling all over the country and
Speaker 1: writing in and doing all this other stuff. You speak frequently.
Speaker 1: How many events do you speak out a year? I
Speaker 1: guess it's running around four dozen. All right, so almost
Speaker 1: weekly you're on the road somewhere. It bunches, but yes,
Speaker 1: it averages out to once a week, and you have
Speaker 1: about thirty subscribers to your newsletter. And what I want
Speaker 1: to point out about your newsletter, Unlike just about every
Speaker 1: other newsletter I've ever seen, yours is described as having
Speaker 1: zero forecasts. Explain that, Um, it's funny. Nobody has ever
Speaker 1: said that. I don't know anything about other newsletters, and
Speaker 1: nobody's ever said that to me before. But I'll take
Speaker 1: you at your word. I UM, I don't know how
Speaker 1: anybody who's a counselor to advisors who are trying to
Speaker 1: get their clients to think and act long term would
Speaker 1: sully himself with a with a forecast of any kind.
Speaker 1: I think could just Hey, I'm not qualified to forecast.
Speaker 1: This doesn't bother me because no one else is either.
Speaker 1: That was my next question. So you don't think that
Speaker 1: the gold is going to five thousand this year? Is
Speaker 1: that we are at some point? It is at some point?
Speaker 1: But is that February? Is that Novary? When? Because that's
Speaker 1: my favorite forecast I've I've seen that for now for
Speaker 1: ten years. Gold goes up, gold goes down. The forecast
Speaker 1: never changes. My favorite forecast is DW five thousand, which
Speaker 1: you see about every ninety days from someone or other.
Speaker 1: I'm Barry Ridhults. You're listening to Masters in Business on
Speaker 1: Bloomberg Radio. My special guest today is Nick Murray. He
Speaker 1: is the advisor to Advisors. And one of the things
Speaker 1: that I really like about UM your various writings, especially
Speaker 1: your regular newsletter, is your emphasis on out performance and
Speaker 1: why we obsessively focus on it to our debt from it.
Speaker 1: Describe that if you would well, it covers a lot
Speaker 1: of ground. I mean it kind of depends on what
Speaker 1: you mean by out performance, if you mean alpha. Jore.
Speaker 1: My attitude is forget it. The the individual investor struggling
Speaker 1: with everything else. He's got a struggle in his life
Speaker 1: and and trying to make sense out of his long
Speaker 1: term investments. The best way and the easiest way, in
Speaker 1: the most fatal way that he can blow himself up
Speaker 1: and will blow himself up, is chasing alpha. Is mistaking
Speaker 1: out performance for a financial goal, which is not the
Speaker 1: great task of the individual investment advisor. To me and
Speaker 1: and particularly the holistic financial planner is keeping everybody on
Speaker 1: their long term plan. And I think you can do
Speaker 1: one or the other. You can sort of follow a
Speaker 1: plan or you can chase performance, but I don't think
Speaker 1: you can do both at the same time. One or
Speaker 1: the other will will take you over. And if alpha
Speaker 1: takes you over as opposed to outcomes, I think you're
Speaker 1: dead in the marketplace. So I have a few quotes
Speaker 1: of yours that I want to throw at you and
Speaker 1: have you, um respond to, one of which was investor
Speaker 1: behavior is far more important a determinant to someone's returns
Speaker 1: than either stock picking or market timing. Explain that I
Speaker 1: don't know that I ever said that, Um, Then no, no,
Speaker 1: But here's what what I've said is even stronger than that,
Speaker 1: which is word for word, the dominant determinant of long term,
Speaker 1: real life financial outcomes is not investment performance, it's invest
Speaker 1: or behavior. So so let's let's explore that a little bit.
Speaker 1: So the total arns that a person is getting from
Speaker 1: their portfolio matters less than what they do in response
Speaker 1: to various inputs. Is that a fair way to describe that?
Speaker 1: How How if at all they respond inappropriately to market stimuli.
Speaker 1: So give us a few examples of inappropriate responses you
Speaker 1: have of your portfolio and dot com. And we saw
Speaker 1: plenty of that, And we saw plenty of that and
Speaker 1: you have of your portfolio in gold and cash. In
Speaker 1: the spring of two thousand and nine, and we certainly
Speaker 1: saw a lot of people panicking out of the market
Speaker 1: in March o nine it was ever thus and and
Speaker 1: that's pretty much human behavior. There's not a whole lot
Speaker 1: of that's that's fairly perennial or or everlasting. That's the
Speaker 1: nature of how people react, isn't it. That's why the
Speaker 1: financial adviser was sent into the world by God, because
Speaker 1: it is essential to human nature. The the financial advisor
Speaker 1: doesn't manage money, he manages people. And again this is
Speaker 1: an either or choice. You you every advisor has to
Speaker 1: comes to that fork in the road, I think, and
Speaker 1: the good ones go down the road of of managing
Speaker 1: investor behavior and sort of letting the portfolio as as
Speaker 1: long as it's allocated to the right stuff in the
Speaker 1: long run, leaving the portfolio alone. I'm I'm a firm believer.
Speaker 1: This is a slightly different point, but it seems to
Speaker 1: want to come up. I'm a firm believer that the
Speaker 1: more often you change the portfolio for whatever reason, the
Speaker 1: lower your return will go. That turnover is absolutely correlated
Speaker 1: negatively too to return the way I heard that some
Speaker 1: years ago was don't just do something? Sit there very much,
Speaker 1: so I think it was Lewis rukais his last words.
Speaker 1: So there is um. You've written many books, one of
Speaker 1: which I have right here called Behavioral Investment Counseling, and
Speaker 1: there is there is a section in it that has
Speaker 1: some information that I had a double check because it
Speaker 1: was so outrageous when you first read it. You you
Speaker 1: have to say, let me make sure this is true.
Speaker 1: So I'm gonna read this data over twenty years, the
Speaker 1: average large cap equity mutual funds, and this is as
Speaker 1: of oh seven, so it's before the crisis and before
Speaker 1: the recovery, the average large cap mutual equity mutual funds,
Speaker 1: according to Lipper Analytics, has returned ten point eight one
Speaker 1: but the average investor in those funds have received only
Speaker 1: four point four eight percent of those In other words,
Speaker 1: they're retaining less than half of the gains of the
Speaker 1: funds they own. How is it possible to underperform your
Speaker 1: own investments by buying them and selling them at the
Speaker 1: wrong times? And how those data which which you're quoting
Speaker 1: from the book. That study is done every year and
Speaker 1: every year it comes out the same there's been no
Speaker 1: change post crisis, post recovery. By the way, the second
Speaker 1: number is from dal Bar, which actually dal Bar does
Speaker 1: the study. And that's my point that if you read
Speaker 1: the twenty annual dal Bar studies, they basically cluster around
Speaker 1: the same conclusion, which is that the average investor blows
Speaker 1: about half the return of either the market or the
Speaker 1: average fund. And that's not through picking this fund over
Speaker 1: that fund. It's through their own behavior, switching funds, switching
Speaker 1: from here to that. So they sell something at the
Speaker 1: wrong time and swap into something at the wrong time. Well,
Speaker 1: well sure, because what they do, what what I think
Speaker 1: everybody is inclined to do, is switch out of something
Speaker 1: that's gone cold into something that appears to be hot,
Speaker 1: and and again. I think that's a very fundamental human behavior.
Speaker 1: And if you stop for ten seconds, you realize that
Speaker 1: what they're doing again and again and again is selling
Speaker 1: low to buy high, which I read somewhere is about
Speaker 1: the opposite of what you're supposed to do. I think
Speaker 1: I've seen that as well, and it just it can
Speaker 1: have no other outcome, So mean reversion not really something
Speaker 1: that the average investor is thinking about. In other words,
Speaker 1: buying something that's dipped and selling something that's rallied, they're
Speaker 1: doing the opposite. They're left to their own devices that
Speaker 1: they're they're doing the opposite, which is why, in my experience,
Speaker 1: almost all of the great advisors are rebalancing annually. Hey,
Speaker 1: they're coming back to the original plan. But in the
Speaker 1: act of rebalancing, what you're doing is kicking out stuff
Speaker 1: that shot out the lights and redeploying it into stuff
Speaker 1: that's just waiting to go instead of the opposite, which
Speaker 1: is what everybody does if you leave them to their
Speaker 1: own device, And the research shows that's the closest thing
Speaker 1: to a free lunch on Wall Street. There's no risk,
Speaker 1: no cost, and you're actually adding a few basis points
Speaker 1: of performance over a long time. Total no brainer. You're
Speaker 1: listening to Masters in Business on Bloomberg Radio. My special
Speaker 1: guest today is Nick Murray. He is the author of
Speaker 1: eleven books on investing and how advisors should interact with clients.
Speaker 1: Let's talk a little bit about that. So, so you
Speaker 1: began in ninety seven. What was the role of the
Speaker 1: advisor back then? Was that a very different era or
Speaker 1: was it just the same thing? It was the it
Speaker 1: was the neanderthal he it was. It was stockpicking still
Speaker 1: just in seven, which was very very close to as
Speaker 1: you know, the top of the great post World War
Speaker 1: two bullmarket twenty years nifty fifty. Everybody was all excited
Speaker 1: and then had really become a garbage market, really become
Speaker 1: a garbage market. And it was it was really the
Speaker 1: first great outbreak of mass uh performance mania since the twenties,
Speaker 1: and no one had an adult memory of that, and
Speaker 1: no one knew what it was about. And the market
Speaker 1: had been going up for you know, two years, yeah,
Speaker 1: and and it was it was allegedly a stock pickers market.
Speaker 1: It was all about beating the market by individual stock selection.
Speaker 1: Heaven helpless and and around the same time, you know,
Speaker 1: you stop and think back to it. Yeah, you had
Speaker 1: these short little recessions in these short little market corrections
Speaker 1: in the fifties and early sixties, But overall, the long
Speaker 1: term returns for most of people's adult life at that
Speaker 1: point had been a one way trade, hadn't it be?
Speaker 1: And And so that was doubt kissed a thousand and
Speaker 1: nineteen sixty it did, and it wasn't over it on
Speaker 1: a permanent basis again until that is exactly correct. So,
Speaker 1: so how does somebody how does an advisor counsel clients three,
Speaker 1: four or five years into that it looks like the
Speaker 1: market is never going up again? Well, I hope that
Speaker 1: um an advisor is counseling clients to be buying with
Speaker 1: both hands, because that's when, that's when you're supposed to Now,
Speaker 1: isn't what a lot of people do. I don't think
Speaker 1: it is. But the narrow answer to the narrow question
Speaker 1: what should a what should an advisor be counseling people
Speaker 1: in a period like that, is is a continue to
Speaker 1: work your plan, be you're getting some kind of a
Speaker 1: big intermediate to longer term sale. You'll never see these
Speaker 1: prices again. You had to know, uh, you know, nine
Speaker 1: seventy four when the when the the pe was eight
Speaker 1: or something, because the bonds were risk free and the
Speaker 1: market had just fallen fifty from So so let me
Speaker 1: So you said that was a narrow question, let me
Speaker 1: ask this in a more general, broad set question. What
Speaker 1: makes a successful financial advisor somebody who can make a
Speaker 1: plan for his clients empathetically, bravely, smartly and keep them
Speaker 1: on it and regardless of the fads or fears of
Speaker 1: the moment, regardless of the fads or fears of the moment.
Speaker 1: This brings us back to the behavioral issue. How significant
Speaker 1: is what an advisor does in terms of managing the
Speaker 1: poor impulses and emotional instincts of the average investor. Again,
Speaker 1: that's what I think he was sent into the world
Speaker 1: to do. So now let's let me ask you a
Speaker 1: somewhat different question about that. What's the ideal client? Like,
Speaker 1: So you just described what the role of the advisor is.
Speaker 1: What's the role of the client in all this? The
Speaker 1: role of the client is to come to an advisor,
Speaker 1: realizing that he cannot make for himself a lifetime much
Speaker 1: less multi generational investment plan, much less financial plan, and
Speaker 1: find an advisor that he can trust, and sit down
Speaker 1: with that advisor and make that plan and ask the
Speaker 1: advisor to keep him on it even when he doesn't
Speaker 1: want to stay on it. That's what the ideal client is.
Speaker 1: It's somebody who I'm not going to tell my lawyer
Speaker 1: how to defend me. I'm not going to tell my
Speaker 1: accountant how to do my taxes, and I'm sure I'm
Speaker 1: not going to tell my doctor what to prescribe on
Speaker 1: what theory if you think that's rational. Does someone go
Speaker 1: to an investment advisor, much less a financial planner, and say,
Speaker 1: this is what I want to do. You go to
Speaker 1: a planet because you don't know what you want to do,
Speaker 1: or you suspect that what you want to do is
Speaker 1: wrong because you've tried it a bunch of times and
Speaker 1: it hasn't worked. So that's to me. The ideal client
Speaker 1: is the one who treats his financial planner the way
Speaker 1: he does his attorney and his accountant and his doctor.
Speaker 1: He goes and says, as nearly as I can tell,
Speaker 1: this is my problem, tell me how to fix it.
Speaker 1: That makes plenty sense. What about the client who goes
Speaker 1: to an advisor and says, I just saw this guy
Speaker 1: on TV and here's what he said. How should that
Speaker 1: be handled? If you think he's right, go do what
Speaker 1: he said. I'm Barry. What helps? You're listening to Master's
Speaker 1: in Business Bloomberg Radio. My special guest today is Nick Murray.
Speaker 1: He is the advisor to advisors and has spent the
Speaker 1: better part of his adult lifetime trying to teach advisors
Speaker 1: the proper way of interacting with their clients. And just
Speaker 1: before the break, we were discussing a very typical error
Speaker 1: that advisors make, which is placating clients when they're engaging
Speaker 1: in bad behavior. Discuss what what the problem is with that? Well,
Speaker 1: the problem is that you're taking money from people in
Speaker 1: exchange for enabling them to do things that you know
Speaker 1: are wrong. Hey, I think that's immoral. Be I don't
Speaker 1: know how you look at yourself in the mirror and
Speaker 1: see all you're doing is postponing the inevitable. If you're
Speaker 1: helping people do the bad things that they want to do,
Speaker 1: you're you're that's going to be a train wreck eventually.
Speaker 1: And when it is a train wreck, they'll turn around
Speaker 1: and blame you. I've seen it happen any number of
Speaker 1: times where where advisors, you know, kept trying to get
Speaker 1: the client on this on the straight and narrow, said Okay,
Speaker 1: I'll let him do this, I'll let him buy gold,
Speaker 1: I'll let him go to cash this, that and the
Speaker 1: other thing, because he saw the only alternative as losing
Speaker 1: the account, which he didn't realize what was what he
Speaker 1: really wanted. And and when the client hit the wall,
Speaker 1: he turned around and sued. The guy sued the advisor.
Speaker 1: So so let's back up and I know you're talking
Speaker 1: metaphorically and not any specific account, but you're a big
Speaker 1: advocate of where there's not a good fit between a
Speaker 1: client and an advisor, to terminate that relationship or fire
Speaker 1: the client. I'm I'm not actually, I'm I'm a big
Speaker 1: fan of not starting the relationship because you know in
Speaker 1: the first twenty minutes, so you should never get I
Speaker 1: don't think an advisor in a per efect world, and
Speaker 1: I know this is not a perfect world, but I
Speaker 1: don't think that the advisor should ever get to the
Speaker 1: point where he's gotta fire a guy because he knows
Speaker 1: he knew going in, you're going in. This is a
Speaker 1: absolutely in the first twenty minutes. So what happens in
Speaker 1: the real world where you think you're sympatico, you're you're
Speaker 1: you know, especially if you're not promoting yourself as a Look,
Speaker 1: I'm not a stock picker, I'm not a market time
Speaker 1: or I'm a long term asset allocator, even with the
Speaker 1: best of intentions, and where you think there's a fit
Speaker 1: when you're six or seven years into a long term
Speaker 1: bull market and people forget how they their buddies panicked
Speaker 1: out in the in the bottom you know, you look
Speaker 1: at their tenure returns. They're doing much much better than
Speaker 1: the guy who's chasing returns at the top and panicking
Speaker 1: out at the bottom. And now this guy discovers the
Speaker 1: next great thing, gold nanotechnology, Netflix, Facebook, you, you name it,
Speaker 1: whatever it is. How how do you deal with the
Speaker 1: client who suddenly says, hey, listen, I'd like to juice
Speaker 1: my returns. My neighbor told me that he bought the
Speaker 1: Facebook I p O and it's now almost a hundred.
Speaker 1: Why don't you get me the Facebook ip O. That's
Speaker 1: a real world behavior. It's a very real world behavior.
Speaker 1: So what's how should that be handled? How should that
Speaker 1: be dealt with? I don't do individual stocks. I have
Speaker 1: no understanding of Facebook's business model. In my own defense,
Speaker 1: I don't think Warren Buffett does either. But I don't
Speaker 1: want to. I don't want to do, you know, um,
Speaker 1: anything by association. This is not a part of our plan.
Speaker 1: This is not something that I would feel competent to
Speaker 1: advise you on. I'm not going to do that. If
Speaker 1: you if you want to take some money, um, that
Speaker 1: is not essential to your long term plan and play
Speaker 1: with it by all means, you know, be encouraged to
Speaker 1: do that elsewhere. So you're a fan of the um
Speaker 1: an account that acts as an emotional release so they
Speaker 1: don't mess up their long term money. But here's a
Speaker 1: small amount of money that if you lose it, it's
Speaker 1: it's who cast. If that's the only way that you
Speaker 1: can keep him from coming up the long term plan, sure,
Speaker 1: and what about people who are just hell bent on
Speaker 1: self destruction? Terminate that relationship again again. I think that
Speaker 1: if you've been in the business for any length of
Speaker 1: time and you're honest with yourself, and you're not just
Speaker 1: looking at and saying, boy, this is a really big account,
Speaker 1: and I hope I get it, and I'll say whatever
Speaker 1: I have to say to get it. If you're honest
Speaker 1: with yourself, you know in the first twenty minutes you
Speaker 1: people who are seriously bent on self destruction confess that
Speaker 1: to you without realizing they're doing it very very early
Speaker 1: in the game, long before you're you're deep into the weeds.
Speaker 1: We we have a couple of cfps in our office
Speaker 1: and they have a list of knockout indicators, and it's
Speaker 1: when we start when people start asking questions about sharp
Speaker 1: ratios and things like that. We know, hey, you really
Speaker 1: want a hedge fund. You're not looking for a long
Speaker 1: term financial plan. You want a whole lot more juice,
Speaker 1: and and that's not what we do. We're really boring.
Speaker 1: You want you want a whole lot more cocktail party chatter.
Speaker 1: And uh, it's amazing how many of those sort of
Speaker 1: knockout indicators pop up. And you're absolutely right, it's in
Speaker 1: the first ten minutes of the conversation. So so let's
Speaker 1: talk a little bit about risk and reward, all right,
Speaker 1: because risk is something that a lot of people have
Speaker 1: a tendency to think about, sometimes incorrectly. Um, how should
Speaker 1: retail investors think about risk? They should define it, first
Speaker 1: of all. And retail investors can't the retail investor, and
Speaker 1: this is a huge part of his his problem and
Speaker 1: his desperate need for an advisor. The the individual investor
Speaker 1: cannot distinguish between risk and volatility. I was gonna say,
Speaker 1: if everybody uses volatility as a proxy, but volatility really
Speaker 1: is not risk. Volatility has nothing to do with risk.
Speaker 1: Risk is the chance of a permanent loss of capital.
Speaker 1: Volatility is unpredictability, both high and low around a long
Speaker 1: term trend line. One thing with the other got absolutely
Speaker 1: nothing to do. And this is far out breaking news
Speaker 1: for the American individual investor. Why does anybody get out
Speaker 1: at the bottom of the market because he looks at
Speaker 1: a temporary decline, because they're all temporary declines, and he
Speaker 1: says I have lost ex per cent of my money.
Speaker 1: In fact, he has not lost anything unless and until
Speaker 1: he sells. This is a distinction that in my experience,
Speaker 1: people cannot make without an advisor, basically standing athwart their portfolio,
Speaker 1: go and stop. Don't do that. We're speaking with Nick Murray.
Speaker 1: He is the author of eleven different books on finance
Speaker 1: and an advisor to the advisor community. So let's go
Speaker 1: over some of the worst mistakes that investors make. You
Speaker 1: hinted at a few of them. They end up getting
Speaker 1: enamored by things like I P O S. They get
Speaker 1: aggressive at the top, they panic at the bottom. Really,
Speaker 1: a lot of this just comes down to emotions, doesn't it. Sure,
Speaker 1: it all comes down to emotions. They give into emotions,
Speaker 1: they get excited, they get enthusiastic, or they get terrified.
Speaker 1: Um where they get greedy. So let's talk a little
Speaker 1: bit about greed. What what about private equity and venture
Speaker 1: investing and hedge funds. They sound so sexy and sophisticated.
Speaker 1: We've been anecdotally hearing more and more question is about
Speaker 1: that from different people. What what are your thoughts on
Speaker 1: on those areas of investment. I have really studied those areas.
Speaker 1: But if you find one that has outperformed mainstream equities
Speaker 1: over the long term with anything remotely like the volatility
Speaker 1: of mainstream equities, I'll be interested to learn about it.
Speaker 1: I haven't found one yet. Um, the things that you're
Speaker 1: talking about, basically are very subject, in my experience, to vogues,
Speaker 1: And so you know, you would you would have you
Speaker 1: would go into the crash of two thousand seven, two
Speaker 1: thousand and nine with maybe two hundred million, two hundred
Speaker 1: and fifty million dollars in total in in commodity futures funds,
Speaker 1: and you would come out of the crash with two
Speaker 1: and a half billion because momentarily that stuff had held
Speaker 1: up better than mainstream equities. So what did everybody do?
Speaker 1: They took all of their money out of mainstream equities
Speaker 1: somewhere near the bottom and invested it in whatever you
Speaker 1: call these things, futures managed futures. I don't even know
Speaker 1: the terminology at at at a time when there was
Speaker 1: so much money coming into these things that they could
Speaker 1: not possibly perform, and and it was ever Thus so
Speaker 1: I you know, I don't manage money today. But if
Speaker 1: somebody came to me and said I want to put
Speaker 1: a third of my money in managed futures and and
Speaker 1: private equity and all this other stuff that you that
Speaker 1: you mentioned, I would say, these are not areas that
Speaker 1: I know anything about. They're not areas that I'm interested
Speaker 1: in knowing anything about. Deep down, without adopting the you
Speaker 1: of the burdener proof, I suggest to you that I
Speaker 1: have never seen evidence that these things consistently outperform mainstream
Speaker 1: equities over the long term. But it is your money,
Speaker 1: and you're the client, and you should go find somebody
Speaker 1: who is good at, or you think is good at
Speaker 1: counseling you in in these areas, because I will never
Speaker 1: be We've been speaking with Nick Murray. He is the
Speaker 1: author of eleven separate books on investing and well known
Speaker 1: as an advisor to advisers. If you enjoy this conversation,
Speaker 1: be sure and check out our podcast extras, where we
Speaker 1: keep the tape rolling and continue our conversation. Be sure
Speaker 1: and check out my daily column on Bloomberg View dot com.
Speaker 1: Follow me on Twitter at Ridhults. You can see Nick
Speaker 1: Murray's writings and subscribe to his newsletters at either Nick
Speaker 1: Murray dot com or Nick Murray Newsletters dot com. I'm
Speaker 1: Barry Ridhults. You're listening to Masters in Business. I'm Bloomberg Radio.
Speaker 1: Welcome to the podcast portion of our show. Our special
Speaker 1: guest today, Nick Murray. Who this is a little inside baseball.
Speaker 1: If you're a registered investment advisor or if you work
Speaker 1: in asset management, you probably have heard the name Nick Murray. UH.
Speaker 1: For for you civilians out there who may not know
Speaker 1: the name UM, he is the person who is essentially
Speaker 1: helping advisors help you and has a legendary history and
Speaker 1: the legendary UH following amongst the advisor community. And if
Speaker 1: I haven't said this previously, Nick, thank you so much
Speaker 1: for doing this. It was a pleasure UM inviting you,
Speaker 1: and I've been reading you for a long time and
Speaker 1: I'm certainly familiar, um with a number of your books,
Speaker 1: some of which I actually brought with me for you
Speaker 1: to sign. I will be happy to do that. Thank
Speaker 1: you for the opportunity to have the conversation. So, so
Speaker 1: let's talk a little bit about some of the things
Speaker 1: that you So we have no time constraints here, so
Speaker 1: don't feel like you have to give me short broadcast answers. Um.
Speaker 1: That's the whole beauty of this is that we can
Speaker 1: sort of wax eloquent as long as long as you like. Um.
Speaker 1: Before we were talking a little bit about risk, and
Speaker 1: some of the questions I didn't get to, but we
Speaker 1: hinted at. So, so the flip side of risk is reward.
Speaker 1: What is it about reward that makes investors lose their minds?
Speaker 1: How is it that you know, in the midst of
Speaker 1: a downturn you see one type of investor behavior, and
Speaker 1: then after a market has run up for a couple
Speaker 1: of years, you start to see another type of investor behavior.
Speaker 1: I don't know how to answer that other than by
Speaker 1: copying out to human nature. That's not a cop out.
Speaker 1: That's it's it's permanent, it's forever, it's you know. One
Speaker 1: of my favorite investing books, this this will go right
Speaker 1: to your point is UM, How I Trade Stocks and
Speaker 1: Bonds was written in nine four by uh Wykoff is
Speaker 1: his name, And if you went through this book, and
Speaker 1: substituted where where he says railroads, you put in airlines,
Speaker 1: and when he says telephone and telegraph, you put Internet.
Speaker 1: I defy anybody to tell the difference between that book
Speaker 1: written almost a century ago, Richard Wykoff's book, and a
Speaker 1: book written a year ago. They're almost identical where they'd
Speaker 1: have to be, because human nature is immutable, if you um.
Speaker 1: My favorite book about the Ties and the crash intellectually
Speaker 1: is more Kleines Rainbow's End, and one of the great
Speaker 1: beauties of that book is that it came out in
Speaker 1: two thousand and one, halfway down the great implosion of
Speaker 1: dot com, and to pick up that book and read
Speaker 1: about the mania and then the complete collapse at a
Speaker 1: moment when you were living through a mania and a
Speaker 1: complete collapse, all you could do uh reading it was
Speaker 1: to say, I'm watching that movie all over again. It's funny,
Speaker 1: I should pick this book up. It's a it's a cliche,
Speaker 1: but it's true. The one thing we learned from history
Speaker 1: is that nobody learns anything from history, and that, in
Speaker 1: my opinion, is why God sent the behavioral investment counselor
Speaker 1: into the world. So more important than performance, more important
Speaker 1: than stock picking. Having someone facilitate your emotional well being
Speaker 1: or prevent you from doing the things that we know
Speaker 1: people tend to do well, not as an abstraction, but
Speaker 1: in service to a plan. So describe that a little bit,
Speaker 1: because you've you've referenced it in my mind, I know
Speaker 1: what a plan is, but perhaps someone listens thing is
Speaker 1: not that clued into what you mean by a financial plan. Well,
Speaker 1: I'm not sure that I mean anything specific by it.
Speaker 1: But what I mean is that you're you're fifty two
Speaker 1: years old and your wife is fifty two years old,
Speaker 1: and suddenly you realize you have not saved enough for
Speaker 1: retirement and you and suddenly you realize that you have
Speaker 1: said all along, the two of you to each other,
Speaker 1: sixty two and out. And so one day, you know,
Speaker 1: you go to sleep one night thinking about the Mercedes
Speaker 1: and the trip to Europe, and you wake up the
Speaker 1: next morning saying, we have less than ten years to go.
Speaker 1: And that's that's kind of a jolt for a lot
Speaker 1: of people. And and and believe me, I'm sure you
Speaker 1: know a lot of people show up in Advisor's offices
Speaker 1: at the point where they got that jolt. Now, what's
Speaker 1: what's going to be the next thing that happens. The
Speaker 1: advisor is going to say, Okay, ten years from now,
Speaker 1: what is the sum of capital that will produce as
Speaker 1: some reasonable withdrawal rate that will produce what you need
Speaker 1: to live on for the rest of your life. And
Speaker 1: out of that, you would assume, comes a written date specific,
Speaker 1: dollar specific retirement accumulation plan, and out of that comes
Speaker 1: an asset allocation model. What rate of return will it
Speaker 1: take to get you from where we are now to
Speaker 1: that amount of money at age sixty two? When we
Speaker 1: know that rate of return, we have backed into an
Speaker 1: asset allocation model, haven't we. If it's nine, welcome to
Speaker 1: the wonderful world of being an equity investor, because it
Speaker 1: did no other there's no other known way to get
Speaker 1: there um consistently. So now we get up from that
Speaker 1: conversation and we have a we have a goal, We
Speaker 1: have presumably a plan for reaching that goal. The folks
Speaker 1: that and I have to put in a number of
Speaker 1: dollars every one of the hundred and twenty months from
Speaker 1: age fifty two to age sixty two, and they're going
Speaker 1: to have to realize a rate of return of why
Speaker 1: on that that's a plan. Now, what are we asking
Speaker 1: the plan to do. I don't think we're asking the
Speaker 1: I wouldn't be asking the plan to do anything but
Speaker 1: produce um long term trendline returns, that's all. But let's
Speaker 1: make sure that we don't foul those up. Let's let's
Speaker 1: make sure that during those hundred and twenty months when
Speaker 1: the market goes down, which is gonna do once or twice,
Speaker 1: isn't it, that we don't panic out and go to
Speaker 1: cash or gold coins or something insane like that. And
Speaker 1: and the once during the ten years um that the
Speaker 1: that the SMP five hundred suddenly goes from you know,
Speaker 1: two thousand to five thousand because of nanotechnology, that we
Speaker 1: don't junk the plan and take eight of the assets
Speaker 1: and throw a limit at nanotechnology. That's what I'm That's
Speaker 1: what I mean by not not managing behavior in the abstract,
Speaker 1: but managing it in service to the plan. The plan
Speaker 1: doesn't the Plan doesn't want you to do that stuff.
Speaker 1: So let me ask you about two different types of clients.
Speaker 1: And again some of this is anecdotal, but I'm sure
Speaker 1: what I'm about to tell you isn't anything radically different
Speaker 1: from what other people have experienced. One is the client
Speaker 1: that has a substantial pile of wealth, but they're afraid
Speaker 1: that they're going to outlive their money, right, you know,
Speaker 1: and you could show them, Look, there's only three inputs.
Speaker 1: What you start with, how much you contribute, how much
Speaker 1: time you have, And we're assuming a reasonable rate of return.
Speaker 1: We're not assuming we're not assuming two percent. He is
Speaker 1: a mixed portfolio. What do you say to people who
Speaker 1: what do you say to either investors or advisors where
Speaker 1: there is a reasonable sum of wealth to begin with,
Speaker 1: where people continue to be concerned, they have a little
Speaker 1: post traumatic stress disorder from the crisis from the O
Speaker 1: eight oh nine crash. They're afraid that something's gonna happen
Speaker 1: that's going to interfere with their ability to retire on
Speaker 1: a timely basis, or they're not gonna be able to
Speaker 1: they're gonna run out of money, um and outlive it. Well,
Speaker 1: that's two different things. Okay, So let's take the outlive
Speaker 1: the money first, because I seem to be hearing a
Speaker 1: lot of that letter. Well, the outlive the money is
Speaker 1: actually the big risk, and it's and it's the silent
Speaker 1: risk I think because people don't focus on it. People say,
Speaker 1: if I had X number of dollars at retirement and
Speaker 1: I could withdraw from that, why number of dollars in retirement,
Speaker 1: I would be fine, And of course they wouldn't. Because
Speaker 1: modern two person retirement is now thirty years long, and
Speaker 1: a trend line inflation, the cost of living goes up
Speaker 1: two and a half times. That's the thing that's the
Speaker 1: big risk um people going off the reservation. Okay, that's
Speaker 1: always a risk in fads and fears. We always have
Speaker 1: to live with that. But I think year in and
Speaker 1: year out, decade in and decade out, people have to
Speaker 1: be looking at the modern retirement as essentially a problem
Speaker 1: of purchasing power. And I think most people still look
Speaker 1: at it essentially as a problem of principle. So let's
Speaker 1: let's talk about that, because that's a fascinating um descriptor.
Speaker 1: We currently live in a low inflation environment. History tells
Speaker 1: us that this is somewhat temporary. How significant is retaining
Speaker 1: purchase power purchasing power ten twenty thirty years into the future,
Speaker 1: especially as lifespans just keep getting longer and longer and longer.
Speaker 1: As I say, it's the issue, most important issue for
Speaker 1: financial plan well for a retirement plan. By the way,
Speaker 1: how often do you ever hear anybody in the news
Speaker 1: media or television news say your biggest threat is inflation
Speaker 1: years from now because you're going to outlive your money.
Speaker 1: Never never, that's again, I mean, I keep coming back
Speaker 1: to this, but that's why God sent the behavioral investment
Speaker 1: counselor into the world, because no one will say the truth.
Speaker 1: How many times is somebody going to turn on CNBC
Speaker 1: to hear somebody say, you know, the big problem is
Speaker 1: not loss of principle, it's erosion to purchasing power. The
Speaker 1: ninth time that media say the truth, people will will
Speaker 1: no longer turn on the media. They'll they'll either get
Speaker 1: it or they won't want to hear it anymore. And
Speaker 1: that's why you can never get truth from media. You
Speaker 1: can only get news. You can say that again. Let's
Speaker 1: say you can never get truth from media because people
Speaker 1: are either bored with it or don't believe it is.
Speaker 1: You know, they either get bored with it or they
Speaker 1: get it. They get it, and it's old news at
Speaker 1: that poa. People say, okay, I got this. Now I've
Speaker 1: just heard this for the ninth time. It's starting to
Speaker 1: sound familiar to me. I'm going to go to my
Speaker 1: financial planner and plan out a retirement during which my
Speaker 1: course of living goes up two and a half times,
Speaker 1: and make awful, awful sure that I own things whose
Speaker 1: income is going up at at least that rate. And honey,
Speaker 1: don't forget to turn off the television set before we
Speaker 1: get in the car to go to the financial planner.
Speaker 1: This is what media cannot abide. It can't allow it,
Speaker 1: and so it cannot tell the great truth. It's it's
Speaker 1: focused on capturing eyeballs, not winning hearts and minds, so
Speaker 1: to speak. Headlines not history, headlines not history. I really
Speaker 1: like that. It's uh an era of distraction that we
Speaker 1: live in. There's a never ending stream of things. We
Speaker 1: mentioned Facebook earlier, but between Facebook and Twitter and a
Speaker 1: million channels and everything else, what is then impact of
Speaker 1: all of these various streams of of snippets of news
Speaker 1: and data and information. Well, I think inside the media themselves,
Speaker 1: it's the The effect is that they go crazier and
Speaker 1: crazier and crazier trying to capture eyeballs. They there's no
Speaker 1: thought anymore. There's just trying to flag you down and
Speaker 1: in the and and of course in the the poor
Speaker 1: American household, what's going on is they're getting submerged in noise.
Speaker 1: They're getting completely inundated with noise. And there's so much
Speaker 1: noise that you can't really analyze anything anymore or think
Speaker 1: about anything anymore. And what the normal mind does is
Speaker 1: it goes to data mining. It takes out of the
Speaker 1: noise what it wanted to hear, all the selective perception
Speaker 1: information bias. Oh, I kind of like that. I'm gonna
Speaker 1: grab onto it. That to me is the big, big
Speaker 1: outcome of the tsunami of noise. So you we have
Speaker 1: a retirement system in the United States. We don't have
Speaker 1: very much left in terms of pension funds. We're not
Speaker 1: like Europe with a guaranteed retirement that leaves people with
Speaker 1: an ira H some sort of four oh one k
Speaker 1: if if they're fortunate enough to have their company offer
Speaker 1: that and then whatever other savings uh they can do.
Speaker 1: What are your thoughts on things like for oh one
Speaker 1: case iras and tax deferred retirement accounts, Well, my bias
Speaker 1: is to think that you should fund any protected harm
Speaker 1: and fund that you can, even though you're given up
Speaker 1: capital gains treatment on the other end, for the compounding effect,
Speaker 1: you are um and there are people who who agree
Speaker 1: with that, in people who don't, I guess, um net net.
Speaker 1: If you're putting money in pre tax, aren't you essentially
Speaker 1: leaving yourself that much more money to invest? Well? I
Speaker 1: think you are, and I'm not oversimplifying that one. I
Speaker 1: don't think so, all right? And then I had a
Speaker 1: reader who when when they said, oh, you're interviewing Nick Murray,
Speaker 1: ask him what he thinks about annuities? And so I'll
Speaker 1: ask you, what do you think about annuities? You have
Speaker 1: to refine the question. You have to narrow the question.
Speaker 1: What do you think about annuities for a person who's
Speaker 1: already maxed out all their other tax deferred accounts? It depends.
Speaker 1: First of all, are we talking about fixed annuities? Are
Speaker 1: variable annuities? And let's let's go let's let's go into that.
Speaker 1: Most of what I see advertise these days are variable
Speaker 1: a nuity. But what do you think about fixed annuities?
Speaker 1: I think that their cancer, the same as all bonds
Speaker 1: are cancer. All fixed income is cancer. It's death on
Speaker 1: the installment plan, it's the planned liquidation of purchasing power.
Speaker 1: Within your lifetime, the planned liquidation of purchasing well, death
Speaker 1: securities are the planned liquidation of purchasing powers. So what's
Speaker 1: the role of fixed income into a broad asset allocation model?
Speaker 1: I didn't know that it had one. No, So you
Speaker 1: you prefer an all equity portfolio for long term investors?
Speaker 1: For long term investors, yes, for money that has more
Speaker 1: than and I and I confess this is arbitrary, more
Speaker 1: than a five year horizon. For capital that has more
Speaker 1: than a five year horizon, I cannot after some provision
Speaker 1: for an emergency fund. And what I've always said for
Speaker 1: retirees was two years living expenses in a in a
Speaker 1: money market fund. But two full years, well, yeah, that's
Speaker 1: that's a substantial sum. How how realistic is that for
Speaker 1: many people? Because we often see preached while you're working
Speaker 1: six months emergency funds and getting people to do that
Speaker 1: is a challenge. Yes it is, but look at it,
Speaker 1: and I don't gainsay the challenge. Again, that's the job
Speaker 1: of the advisor. But but if I'm going to get
Speaker 1: if I'm going to try to get people to put
Speaker 1: substantially all of their retirement assets in equities for the
Speaker 1: third for the next thirty years, which I'm sure going
Speaker 1: to try to do. I'm gonna err on the side
Speaker 1: of caution with maybe a bigger, you know, emergency fund
Speaker 1: than you need, not for financial reasons, but for for
Speaker 1: emotional reasons that you that you know that you could
Speaker 1: turn off your withdrawal for two whole years and you're okay,
Speaker 1: and you're okay. That makes perfect sense. Let's talk a
Speaker 1: little bit about some of the new technologies that are
Speaker 1: out there, um, and some of the new investment fads,
Speaker 1: knowing in advance what you're gonna say about most of these.
Speaker 1: What are your thoughts on smart data? I have no
Speaker 1: idea what to do. I was expecting something along those lines,
Speaker 1: you know, beta that's smarter than regular beta. That would
Speaker 1: be a wonderful, wonderful thing, I think if it were.
Speaker 1: And and then the next thing, um, I know your
Speaker 1: answer to what what are your thoughts on robo advisors? Well,
Speaker 1: I think robo advisor is a contradiction in terms. It's
Speaker 1: it's an oxymoron. So either you're doing it yourself or
Speaker 1: you have an advisor doing it for you. But having
Speaker 1: software do it doing it for you doesn't really accomplish much,
Speaker 1: does it. No, it doesn't, because what it does is
Speaker 1: it it asks you a lot of questions which you
Speaker 1: have virtually no equipment to answer. What is your risk tolerance?
Speaker 1: Does anybody, any sentient being, on any given moment, know
Speaker 1: what is risk tolerance is? And is it any less
Speaker 1: labile than blood pressure? I mean, if the market goes
Speaker 1: up for a week, his risk tolerance goes down if
Speaker 1: it goes you know what I mean. You know where
Speaker 1: I'm going with this. When you ask people the risk tolerance,
Speaker 1: what you're really asking is what has the market been
Speaker 1: doing for the past six months? Absolutely so, the machine
Speaker 1: asks people questions that they have only the vaguus idea
Speaker 1: how to answer. It takes those questions and and hands
Speaker 1: back a canned portfolio. When the canned portfolio goes down
Speaker 1: every five years, whether it needs to or not, uh,
Speaker 1: you know, the client calls up the robot and says,
Speaker 1: open the pod. The Doris How and How says, I'm
Speaker 1: afraid I can't do that, Dave. You know, I just it.
Speaker 1: I can't hold the concept of robot and the concept
Speaker 1: of advisor in my mind at the same time. Something
Speaker 1: is one or the other. There was and I think
Speaker 1: it's starting to abate because people like you have have
Speaker 1: made these kinds of arguments. But there was a period
Speaker 1: of I want to say about two or three quarters
Speaker 1: where the advisor community was genuinely distressed over the coming robots,
Speaker 1: and UM, that seems to be starting to abate a
Speaker 1: little bit. What what's your read on that? Well, my
Speaker 1: selfish read on that is none of my subscribers were
Speaker 1: victims of that. I if if a real, honest to
Speaker 1: goodness advisor was worried about a robot, he was really
Speaker 1: fessing that he had no value proposition at all. Let's
Speaker 1: let's talk about the value proposition, because that's the question
Speaker 1: I have teed up a little further down the road.
Speaker 1: And this is something UH for listeners that Nick has
Speaker 1: written about extensively. What is the value proposition of advisors
Speaker 1: who are essentially managing the behavior of their clients? So
Speaker 1: so how would you define that? Well, the any value
Speaker 1: proposition is the relationship between what somebody is giving you
Speaker 1: and what he's charging you for it. Right, So there's
Speaker 1: there's there's two variables in a value proposition, what you
Speaker 1: get and what it costs. And so um, an advisor
Speaker 1: has a positive value proposition when his client says, the
Speaker 1: advice I'm getting here is much more valuable to me
Speaker 1: and my family than what I am being charged for it.
Speaker 1: The converse is also true at the moment that a
Speaker 1: that a a poor American client wakes up and says,
Speaker 1: you know what, I'm paying this guy all this money
Speaker 1: and I'm underperforming the S and P five. Why am
Speaker 1: I doing that? At that moment, the advisor has lost
Speaker 1: his value proposition. It's gone negative. And why because the
Speaker 1: advisor hasn't made the points of what his value propersy.
Speaker 1: What is it that of that an advisor does that
Speaker 1: it is worth palpably an order of magnitude more than
Speaker 1: the one percent or so that we're charging in the
Speaker 1: industry for for asset management. To me, there are three things.
Speaker 1: One is planning, which we know they can't do on
Speaker 1: their own. One is a long term historical perspective, which
Speaker 1: we know they can't get out of the noise. And
Speaker 1: the third, and of course the monster for me, is
Speaker 1: behavioral coaching in periods of stress. If if it isn't
Speaker 1: intuitive to somebody that the value of those three things
Speaker 1: must be far greater than a point, then ay, there's
Speaker 1: either something wrong with him or his advisers a stumble bump,
Speaker 1: because if you couldn't make those points clearly and compelling
Speaker 1: lee and have a reasonable person sit there and say
Speaker 1: I got it, I see why. That's in total, those
Speaker 1: three things have got to be worth more and and
Speaker 1: at critical inflection points, and much more than the point
Speaker 1: that you're charging me. Well, using the study that you
Speaker 1: mentioned in behavioral investment coaching, if people are under performing
Speaker 1: their own investments by six and you could prevent them,
Speaker 1: let's go at half and you could prevent them from
Speaker 1: doing that for a point, your five points ahead. That's
Speaker 1: compounded as an enormous thing compounded, it's off the page
Speaker 1: that that's before we even start talking about By the way,
Speaker 1: here's an intelligent rational asset allocation that avoids the fads
Speaker 1: and the whatever is in vogue and and basically keeps
Speaker 1: you on the straight and narrow. That that sounds like
Speaker 1: the value proposition there? Well, I hope so, so I
Speaker 1: know I only have you for a limited amount of time.
Speaker 1: You're heading uh two part south. It's not hot enough
Speaker 1: in New York today at ninety degrees and humid. You
Speaker 1: want to Kentucky and hit but it's a but it's
Speaker 1: a wet heat, so it's not it's not that bad.
Speaker 1: So let me let me go through some of my
Speaker 1: favorite questions that that I asked that I ask of
Speaker 1: all of my guests. And some of these you've either
Speaker 1: hinted at or alluded to, and and feel free to
Speaker 1: to be as as brief or as worthy as you
Speaker 1: like on any of these. So we haven't one of
Speaker 1: the things I speak to people about all the time,
Speaker 1: or our mentors. And you've kind of said, you know,
Speaker 1: I don't really know how to describe mentors because I've
Speaker 1: cut my own path and and done something different. But
Speaker 1: who are the people that influenced your approach to helping
Speaker 1: investors manage their clients? Well, they're mostly people I've read
Speaker 1: rather than people that I interacted with personally. So then
Speaker 1: let me ask you that same question differently, what are
Speaker 1: some of your favorite books on investing behavior and related subjects?
Speaker 1: And I'll put up Fortunately for me, as far as
Speaker 1: I know, there is no other book about investor behavior
Speaker 1: managing investor behavior than mine. But you know that the
Speaker 1: two big books that philosophically were important to me um
Speaker 1: I mean of critical importance to merit are high X,
Speaker 1: The Road to Serfdom and of course closer to home
Speaker 1: um Stocks for the Long Run by Jeremy Siegan, which
Speaker 1: I regard as definitive. Really yeah, yeah, and it just
Speaker 1: gets better by the way each um it's on the
Speaker 1: fourth or fifth edition, now it's been and it just
Speaker 1: gets better. And before people send me emails saying why
Speaker 1: don't you get Jeremy Siegel on the answer is he
Speaker 1: will be on. I just have to wait for him
Speaker 1: to come to New York from Philly. Always worth listening to,
Speaker 1: but much more worth reading. What I find fascinating about Seagull.
Speaker 1: And I don't know if a lot of people know this.
Speaker 1: Him and Bob Schiller of Yale. So Siegel's at Wharton,
Speaker 1: Schiller's at Yale. They're longstanding friends and colleagues. They're family's
Speaker 1: vacation together. They know each other. The two of them
Speaker 1: could not be any more different as as personalities, and
Speaker 1: yet they're they're fast friends. So Stocks for the Long Run,
Speaker 1: Road to Serfdom. Anything else leap out as significant or
Speaker 1: seminal or of economics or investing. So let me ask
Speaker 1: you about economics, because you you remind me a little
Speaker 1: bit of Larry swedd Row, who says he doesn't care
Speaker 1: about earnings report or economics reports. He just wants his
Speaker 1: clients invested for the long run. How important are are
Speaker 1: the economic data points of the day, week, and month.
Speaker 1: There are no importance to the long term investor at all.
Speaker 1: They can only be distractions. They're only so that that
Speaker 1: makes me wonder why hiak as opposed to Burton, Malkiel
Speaker 1: or Graham and dot or something along those much further
Speaker 1: upstream at a at a theory of how economics works.
Speaker 1: This is not about data points. This is not about it. No,
Speaker 1: this is about broad philosophy, philosophy, free markets, government involvement, etcetera, etcetera.
Speaker 1: That that's um You've you've alluded to that you've quoted
Speaker 1: Hawk and some of your newsletters. But I don't know
Speaker 1: how how seminal and how significant that was. It was
Speaker 1: actually really critical. I'm a a Queen's Irish Catholic from um,
Speaker 1: you know, a family of Roosevelt Democrats, And in my turn,
Speaker 1: I was a Kennedy Democrat. And I got to Columbia
Speaker 1: and was trying to finish at night when the riots
Speaker 1: broke out, and I was coming from the office every
Speaker 1: day in a suit which I had paid for and
Speaker 1: I had paid for my tuition, and Columbia let the
Speaker 1: hooligans take over the campus. And I looked around and said,
Speaker 1: I don't know if I'm a liberal anymore. That's the
Speaker 1: old joke, is a conservative as a liberal who has mugged?
Speaker 1: Is that is? That? Was that your experience? Yeah? Actually
Speaker 1: it was. I mean it's anecdotal, but it's true. It
Speaker 1: sounds like something one is looking for retrospectively, but I'm not.
Speaker 1: It's it's it's the That was the dividing line. I
Speaker 1: walked off the campus in I've never been back. And
Speaker 1: that's why, to quote Bluto, um seven years of college
Speaker 1: down the drain was and I so, you know, then
Speaker 1: then I started looking around for another way to process
Speaker 1: reality and and basically founded in higak. And then you know,
Speaker 1: in the Reagan Revolution, I mean, the the great mystery
Speaker 1: of of America life in my lifetime. The great surprise
Speaker 1: to me is that that we have to go back
Speaker 1: now and fight the Reagan Revolution again because I thought
Speaker 1: that it would have been proven. Isn't the nature of
Speaker 1: politics and economics for that matter. The story of the
Speaker 1: pendulum swinging from this cycle. Hey, look, great society. Hey
Speaker 1: look big tax cuts and reduction of regulation. Hey look up,
Speaker 1: now we're reregulating. Hey, look now are dereguling. Isn't it
Speaker 1: every forty years? It's it's you know, it's it's It's
Speaker 1: funny because I grew up at people always surprised when
Speaker 1: I say this, So you're you have a couple of
Speaker 1: years on me, but not that many. I grew up
Speaker 1: a Jacob Javits Republican in Nassau County, Long Island, and
Speaker 1: that sort of flavor of republicanism, which was small government,
Speaker 1: balanced but ugets, low taxes, but no overseas involvement, right
Speaker 1: because we learned from Vietnam, And no government intervention in
Speaker 1: the bedroom, because you know that's private and the government
Speaker 1: has nothing to do with it. And I've watched each
Speaker 1: of those things over I'm fifty four, I've watched each
Speaker 1: or I will be shortly, each of those things swing
Speaker 1: back and forth over that half century, and it's in
Speaker 1: it's in vogue, it's out of vogue. This is in vogue,
Speaker 1: this is out of even sadly, all of that is true,
Speaker 1: and it's just that I'm taking it badly. Well, but
Speaker 1: you you know that the pendulum is gonna eventually swing
Speaker 1: back from one extreme to another. And it's why I
Speaker 1: always mocked my politically active hedge fund buddies who seem
Speaker 1: to think that the occupant of the White House is
Speaker 1: going to be the final determinant of their portfolio. And
Speaker 1: a presentation I gave, I have these two slides. I
Speaker 1: love to show this. It angers everybody. Anytime you could
Speaker 1: get everybody be angry, you're onto something. So the first
Speaker 1: slide shows two thousand and one George Bush tax cuts,
Speaker 1: and my Democratic buddies will say, giant tax cuts, gonna
Speaker 1: blow out the Deficit's not gonna do anything for the economy.
Speaker 1: Get out of stocks. And then over the ensuing six years,
Speaker 1: the market goes up. Fast forward to March o nine.
Speaker 1: Now it's my Republican buddies and they're saying, this Obama
Speaker 1: guy is a Kenyan Muslim socialist. Get out of the markets.
Speaker 1: And now over the next seven years of markets, it
Speaker 1: almost makes no difference who's in there. If you're making
Speaker 1: your decisions based on the politics. To get out of
Speaker 1: the markets, you're asking for an underperforming portfolio. You're asking
Speaker 1: for a disaster because there's no correlation between the economy
Speaker 1: and the markets over any but the very very longest term.
Speaker 1: And what I will say is, I've never seen two
Speaker 1: economies like I see two economies now, you meaning being
Speaker 1: the private economy has basically walled itself off from the
Speaker 1: corporate economy, has basically walled itself off from the political,
Speaker 1: the the what I would call the collectivist, redistributionist impulse
Speaker 1: you in in the crash. I mean, the one of
Speaker 1: the great things, one of the many great things that
Speaker 1: came out of the crash for me, was the reliquefication
Speaker 1: of Corporate America, paying down debt, accumulating gigantic amounts of
Speaker 1: cash and not letting go of it. Have have Corporate
Speaker 1: America's balance sheets ever been healthier than they can't have been,
Speaker 1: but certainly not in my lifetime, right. It's it's amazing.
Speaker 1: And I say that to people and they look at
Speaker 1: me like I have two heads. You have the cleanest
Speaker 1: balance sheets, the least amount of short term high price debt,
Speaker 1: and the most amount of manageable debt relative to equity
Speaker 1: and cash on hand. And you've also got excess reserves
Speaker 1: in the banking system like you've never seen before. And
Speaker 1: we'll never see again. We just implemented the Vulcan rule,
Speaker 1: which now says, hey, listen, you could you could be
Speaker 1: a hedge fund if you want. You just can't be
Speaker 1: taxpayer ensured. The A lot of the rules that were undone,
Speaker 1: commodity futures, monetization at class Deegal repeal, A lot of
Speaker 1: those have slowly been put back into place. So the
Speaker 1: fear that we're setting up for an imminent crash and
Speaker 1: everything is going to go back to the Stone Age
Speaker 1: really seems to be fairly on irrational and not guided
Speaker 1: by any sort of of rationality of fact. I think
Speaker 1: that it's a basic inbred catastrophism. People to look at
Speaker 1: corporate America today, the cash positions, the debt positions, the
Speaker 1: the just almost anything you want to look at, pe
Speaker 1: s no more than slightly above the twenty five year
Speaker 1: averages full fully valued, maybe a touch above six fifteen
Speaker 1: maybe maybe Yeah, that's the most I would give you
Speaker 1: sixteen versus fifteen. And in the next breath, I would say,
Speaker 1: what the hell do you expect in a in a
Speaker 1: market there's no competition for bonds and the um so,
Speaker 1: so do you you know where do you get a
Speaker 1: catastrophist worldview out of that. I call that the recency effect.
Speaker 1: We just lived through and then we just just happened.
Speaker 1: So my muscle memory is I'm ignoring the huge run
Speaker 1: ups in O nine because I'm so scarred by what
Speaker 1: happened in OH seven and O eight, which tells you
Speaker 1: how early we are in this bullmarket. Which again I
Speaker 1: say that to people and they look at me like
Speaker 1: I have two heads. When they stop looking at you
Speaker 1: like you have two heads, is let me know, because
Speaker 1: then it's getting late. Okay, It's that's a validation all
Speaker 1: of the looking when when you when we say things
Speaker 1: like that and people look at us like we have
Speaker 1: two heads, that's the best news we got today. You know,
Speaker 1: we talked about noise and distraction before. I had a
Speaker 1: really interesting conversation. So for those of you who are listening,
Speaker 1: a friend, Ben Carlson is in the Engineer's booth. You
Speaker 1: may know him from a Wealth of Common Sense, is
Speaker 1: a blog and a book he writes. And we were
Speaker 1: talking on the way here about you know, ten years ago,
Speaker 1: pre Twitter, pre Facebook, during the dot com collapse in
Speaker 1: the late nineties and the early two thousands, the same
Speaker 1: people who were saying dumb stuff that we now read
Speaker 1: on Twitter or Facebook or elsewhere. We didn't have access
Speaker 1: to some of the really ridiculous and I won't mention
Speaker 1: any names, but some of the stuff that's just a
Speaker 1: third and ridiculous and insane. You would hear someone would
Speaker 1: say something at a cocktail party or a barbecue, and
Speaker 1: you'd roll your eyes walk away and say, God, this
Speaker 1: guy must be losing so much money he can't get
Speaker 1: out of his own way. I don't want to be
Speaker 1: infected by him. I don't want to hear him. Now
Speaker 1: that's my tweet stream. Now that's what I see on
Speaker 1: LinkedIn and Facebook and and online and and in various
Speaker 1: UH media outlets. You can't escape it today, where as
Speaker 1: you used to be able to walk away from it.
Speaker 1: Long may it wave, because that basically tells you there's
Speaker 1: a lot more. If you saw, I mean you, if
Speaker 1: you saw, of course, you saw uh J where Greece
Speaker 1: was circling toilet China. China blew up and amid all
Speaker 1: this worldwide chaos for reasons they couldn't begin to explain.
Speaker 1: The New York Stock Exchange shut down for four hours.
Speaker 1: There was nothing, nothing on TV. That day, but that
Speaker 1: it was the Titanic and Pearl Harbor and and the
Speaker 1: Twin Towers. It was every disaster in history it was.
Speaker 1: It was the Black Plague. I mean, I haven't seen
Speaker 1: figures for um, you know, mutual fund on et F withdrawals,
Speaker 1: but I imagine they spiked like they have rarely done
Speaker 1: a one day spike in our time. And my son
Speaker 1: actually is in the real estate business in in Brooklyn
Speaker 1: Heights and he emailed me and he said, am I
Speaker 1: supposed to be taking this seriously? And I said, no,
Speaker 1: of course not. What why and yeah? And he said,
Speaker 1: because everyone in my office is crowded around the TV set.
Speaker 1: The phones are not being answered. Everybody's watching this like
Speaker 1: the Handenburg. And I said, you know, I thank you
Speaker 1: so much for telling me this, because it tells me
Speaker 1: how early we are still, how early we are in
Speaker 1: this bull market. I don't think we have any idea
Speaker 1: candidly how early this could be the third or fourth inning.
Speaker 1: People talking about it like it's the eleventh like it's
Speaker 1: the eleventh thing. By the way, my favorite data point
Speaker 1: about Greece is it has the GDP of Alabama. Sounds
Speaker 1: about right that I heard Houston, But I guess it's
Speaker 1: the same difference. Yeah, No, Houston is a decent, big,
Speaker 1: decent sized city. I know I only have you for
Speaker 1: a few more minutes, so let me get to my
Speaker 1: my last few favorite questions before we put you on
Speaker 1: a plane. Um so you talked about Hiak and Siegel.
Speaker 1: What other investors might have impacted your your thinking? Not authors,
Speaker 1: but investors of course. Um So, wait, you have a
Speaker 1: thing for value and mart long term thinking? Is that?
Speaker 1: Those are among my many biases, you know. But um
Speaker 1: the relentless bullishness on the American economy, the realization, you know,
Speaker 1: which is so characteristic of him, and also just the
Speaker 1: plane down to earth countercyclicality of him. The opportunism in
Speaker 1: in terrible markets, you know, the the whole our favorite
Speaker 1: holding period is forever thing I find so attractive, refreshing
Speaker 1: even Yeah, don't you remember in the late nineties he's
Speaker 1: a dinosaur. He's done. Yes, absolutely, and and and I
Speaker 1: remember also, although I was not there his annual meeting
Speaker 1: in either, it must have been in were people were
Speaker 1: getting up and begging him to start a separate tech fund.
Speaker 1: They accepted his saying that he can't do tech that
Speaker 1: he doesn't understand it in the next breath begging him
Speaker 1: to to start a tech fund, and you know him saying,
Speaker 1: this is not gonna have lights out here. Um, so,
Speaker 1: what is some of the most significant changes that you
Speaker 1: see that's impacted the industry since you joined it, the
Speaker 1: financial services industry, Well, the rise of women certainly is
Speaker 1: I mean, since that's fascinating, is the single most um
Speaker 1: important and positive development in your You have to be
Speaker 1: familiar with the studies and data that essentially says women
Speaker 1: tend to outperfore men, that they don't suffer from testosterone
Speaker 1: poisoning or many of the same bravado that men stuffer from,
Speaker 1: and it ends up helping them do better in their
Speaker 1: portfolio management. I'm not familiar with any studies, but it's intuitive.
Speaker 1: And the other thing is from the financial stand financial
Speaker 1: planning standpoint, women relate to people and there and their
Speaker 1: hopes and their fears and their family concerns. I think
Speaker 1: somewhat better, if not much better than then men advisers
Speaker 1: tend to do. The man will focus on the portfolio
Speaker 1: and the woman will We'll focus on the family first,
Speaker 1: and the woman is always right, So you know, just
Speaker 1: the release of of all of that energy and and
Speaker 1: empathy and brain power. Uh you know you you in
Speaker 1: n you walked into Harry's at Hanover Square. No, there
Speaker 1: wasn't a woman in the place. There weren't even waitresses,
Speaker 1: you know what I'm saying. Sort and and you know
Speaker 1: to turn around now and and see the way it is.
Speaker 1: I mean, I can't imagine even technology has to take
Speaker 1: in my mind, uh second place to really that. That's fascinating.
Speaker 1: And I could tell you from personal experience trying to
Speaker 1: book women guests. The this industry still remains tremendously male dominated.
Speaker 1: And we've had huge, wonderful guests Sheila Bear and liz
Speaker 1: Anne Saunders and last week was Danbisa Moya, when we've
Speaker 1: had Michelle Myers from from Marrow Lynch. But you look
Speaker 1: around and you try and book high profile female guests
Speaker 1: to come in and speak, it's still a tremendously male
Speaker 1: dominated business. I would love, for the reasons you described,
Speaker 1: to hire a female CFP for our office. We put
Speaker 1: out the last time we advertised, and it was on LinkedIn,
Speaker 1: we advertised for wanted Certified Financial Planner, Competitive salary four
Speaker 1: oh one k healthcare blah, blah blah. We got over
Speaker 1: a hundred responses, not one female. It's amazing how skewed.
Speaker 1: The industry remains well, but it's changing and it's getting
Speaker 1: a little bit better. But it's my frame of reference. Well,
Speaker 1: when you started, so you have a few years I've
Speaker 1: been doing this. You've been doing this, what forties in
Speaker 1: coming up on fifty years, so you got me by
Speaker 1: just a couple of decades. I've watched it start to change,
Speaker 1: but it's been very slow and it's been been modest.
Speaker 1: When I began, most of the women were working in
Speaker 1: the back office and they started coming out either onto
Speaker 1: the sales desk. Right now, when you look at investment
Speaker 1: banking and research, there's many many women in the research division.
Speaker 1: That seems to be the the area that opens up
Speaker 1: most aggressively in first but when you look on the
Speaker 1: planning side there there are still a disproportionate number of men,
Speaker 1: and it seems to be changing really slowly. No argument.
Speaker 1: It's a that's fascinating you. The first person who's use
Speaker 1: that example as as um one of the things you've
Speaker 1: noticed changing. I'm fascinated by that. Um So now you
Speaker 1: mentioned that as a pass shift what's the next major
Speaker 1: shift you see coming. I don't. My mind doesn't work
Speaker 1: like that. You're not looking forward in terms of what
Speaker 1: might happen. You're looking at what. Actually, I mostly don't
Speaker 1: think about the industry. Really, Yeah, you're thinking about the
Speaker 1: client based my my client, the advisor and his clients
Speaker 1: the Americans. Do. Do I even need to ask you
Speaker 1: about the advantages of the fiduciary standard or is that
Speaker 1: just a no brainer? Well? I think I don't think
Speaker 1: it's a no brainer, depending on how you you define
Speaker 1: the fidu a sary standard. I don't know that. First
Speaker 1: of all, we're all supposed to be have been acting
Speaker 1: as acting like fiduciaries all along in the sense of
Speaker 1: what you and I know to be the fiduciary standard,
Speaker 1: which is that you that you you do what a
Speaker 1: reasonable person would do, and you you put your client's
Speaker 1: interest ahead of yours. Um, a federally mandated fiduciary standard
Speaker 1: can't possibly be that clean or that sane. If we
Speaker 1: get deep into a federally mandated regulatory fiduciary standard, you're
Speaker 1: going to get them saying things like you you have
Speaker 1: to provide the lowest cost product, or you have to
Speaker 1: provide the lowest cost um and sometimes it's not just
Speaker 1: the dollars, and it's got nothing to do with the
Speaker 1: fiduciary standard. Where where is it written the lowest cost
Speaker 1: product is the best for the client, or the lowest
Speaker 1: cost advice is the best for the client. The only
Speaker 1: thing that bothers me about the impending fiduciary standard, if
Speaker 1: indeed it is a impending, is the tendency of a
Speaker 1: nanny state, a really viciously anti capital, anti wealthy people,
Speaker 1: anti advisor state, which is the which is the state
Speaker 1: that we live in today, um from defining fiduciary in
Speaker 1: a way that none of us have ever heard of before.
Speaker 1: That's a valid criticism. When I look at fiduciary I'm
Speaker 1: looking at it from the other side of the coin,
Speaker 1: which is suitability is such a silly standard. Don't sell
Speaker 1: Grandma Facebook. I p o s at something that moves
Speaker 1: people towards. We all know that putting the client's interest
Speaker 1: first is the right thing to do, but when the
Speaker 1: vast majority of people in the industry don't have that standard,
Speaker 1: it creates all sorts of problems. And my concern is
Speaker 1: who's going to take care of these people, if they
Speaker 1: don't have money safe for retirement, or they've given up
Speaker 1: too much to high priced advice and I don't mean
Speaker 1: one percent, I mean suitability advice, They're not going to
Speaker 1: be left with enough money to retire on um. And
Speaker 1: I a sphere that ultimately it's going to come out
Speaker 1: of the taxpayers pocket left. Well, I don't think that's
Speaker 1: I think that's a reasonable concern. But I don't think
Speaker 1: that the presence or absence of the fiduciary standard has
Speaker 1: anything can do with the human nature has everything. Of course,
Speaker 1: uh one half of Americans and over when the sun
Speaker 1: came up this morning, we're living a hundred or sent
Speaker 1: on social Security and you ain't gonna fix that with
Speaker 1: a fiduciary standard. You ain't gonna fix that with anything regulatory.
Speaker 1: That's that's human nature. And are those as you know,
Speaker 1: social security tanks and and medicaid tanks are the are
Speaker 1: the taxpayer is going to end up um carrying a
Speaker 1: lot of that water. Sure they are. And that's and
Speaker 1: and and by the way, that will be back to
Speaker 1: your point about the pendulum. That will be a thing
Speaker 1: that sends the pendulum to the opposite streaming all right,
Speaker 1: so I know I only have you for the five
Speaker 1: more minutes. Let me get to the last two questions. Um,
Speaker 1: what sort of advice would you give to a millennial
Speaker 1: or someone just starting out their career today, whether it's
Speaker 1: in finance or elsewhere. Well, no, it's that's two different questions.
Speaker 1: A civilian miln neal, I would say, save ten percent
Speaker 1: of your pre tax earnings, inequity inequities and open your
Speaker 1: statement when you're seventy one years old, so just don't
Speaker 1: even know. Give it fifty years and you'll do okay.
Speaker 1: And now the second half of the question, what advice
Speaker 1: would you give to someone going into finance right out
Speaker 1: of school today? When again it depends on what you
Speaker 1: mean by finance if you if you mean what what
Speaker 1: my guys do personal financial advice? I would say, because
Speaker 1: the the this profession has aged terribly. It's almost like
Speaker 1: the thirties and forties where no young people came into
Speaker 1: the business after the thermonuclear and so what you ended
Speaker 1: up with in the nineteen fifties and early nineteen sixties
Speaker 1: was a very old profession and eating today it is
Speaker 1: repeating today. And what I would say to somebody who
Speaker 1: had the who was smart enough to come into the
Speaker 1: business now when it's deeply unfashionable to come into the business,
Speaker 1: or at least I hope it still is. Is go
Speaker 1: apprentice yourself to somebody, you know, sixty years old, somebody
Speaker 1: who's seen all the wars, who has fought all the wars,
Speaker 1: and just sit at his feet for ten years, and hey,
Speaker 1: you'll learn everything that that there is to learn, and
Speaker 1: be you'll inherit the business on some some basis or other.
Speaker 1: This has come up several times in our office, and
Speaker 1: that what what is your succession plan? Well, it's my
Speaker 1: name is on the door, but my partners fifteen years
Speaker 1: younger than me, and the next guy in line is
Speaker 1: five years younger than him, and everybody's capable of stepping
Speaker 1: into these roles. You don't really think about that under
Speaker 1: normal circumstances, but it's something that's significant because people want
Speaker 1: to know, Hey, if you are hit by a bus,
Speaker 1: is the farm going to continue? I think that's going
Speaker 1: to be an ongoing issue for these guys who don't
Speaker 1: have a junior at their feet who could pick up
Speaker 1: the ball and run with it. So it's already becoming
Speaker 1: a huge issue. That's amazing last question, because I know
Speaker 1: we've got to get you out to an airport. What
Speaker 1: do you know today that you wish you knew? And
Speaker 1: I'm going to change the question forty nine years ago
Speaker 1: when you began in this industry, well, not in a
Speaker 1: minute and a half, I mean the short answers. Ever,
Speaker 1: you take the next next plan with the short answers everything,
Speaker 1: but the long answer is the rationality of capital and
Speaker 1: the efficiency of markets in the long run. If you
Speaker 1: what I wish I had known as a beardless stock
Speaker 1: picker in a in a performance mad age, was that
Speaker 1: you didn't have to be a hero. I love that sentence.
Speaker 1: What I wish I knew as a beardless stock picker
Speaker 1: in a performance mad age, which is exactly what I was.
Speaker 1: You did not have to be a hero. How long
Speaker 1: did it take you to figure out that you were
Speaker 1: on the wrong path, Well, it was a series of epiphanies,
Speaker 1: and it took the total The total time was fifteen
Speaker 1: years and so fifth. That means for thirty thirty five years,
Speaker 1: you've been preaching pretty much the same story in books
Speaker 1: and newsletters and appearances and conferences and all sorts of
Speaker 1: other events. You're shaping a big swath of the investor community,
Speaker 1: who in turn are helping the investing public achieve long
Speaker 1: term success. Well, Nick, I can't thank you enough for
Speaker 1: your UM. I can't thank you enough for your time
Speaker 1: and and being so willing to sit here and answer
Speaker 1: my silly questions. It's been a pleasure. And I know
Speaker 1: for those of you who are still with us at
Speaker 1: the end, this is a little inside baseball if you're
Speaker 1: an investor, but I hope you learned something fascinating about
Speaker 1: how money has managed managed and how the business of
Speaker 1: asset management progresses. And for people who want to find
Speaker 1: more of your stuff, Nick Murray dot com and then
Speaker 1: Nick Murray newsletters dot com. Nick Murray dot com. Uh,
Speaker 1: thank you. UM. Mike Bannick is our head of research,
Speaker 1: Charlie Volmer is our producer, and Marx and Scalchi is
Speaker 1: our engineer. UH. Be sure and check out all our
Speaker 1: other interviews. You could look Up an Inch or Down
Speaker 1: an Inch on iTunes and see the other fifty two interviews.
Speaker 1: You've been listening to Masters in Business on Bloomberg Radio
Speaker 1: m HM