WEBVTT - Financial Advisor Nick Murray: Masters in Business (Audio) 0:00:03.240 --> 0:00:07.560 This is Masters in Business with Barry Riddholds on Bloomberg Radio. 0:00:08.480 --> 0:00:11.400 This week we have a special and unusual guest on 0:00:11.440 --> 0:00:15.600 the podcast, somebody I'm pretty confident that most of you 0:00:16.239 --> 0:00:19.440 have never heard of. His name is Nick Murray. He 0:00:19.560 --> 0:00:24.680 is an author and consultants to the advisory industry. He's 0:00:24.720 --> 0:00:29.200 often been called an advisor's advisor. He's written eleven books, 0:00:29.240 --> 0:00:33.479 probably the most famous of which to the professional is 0:00:33.600 --> 0:00:37.120 Behavioral Investment Counseling UH. Some of the other books he's 0:00:37.120 --> 0:00:40.839 written have titles like Simple Wealth, Inevitable Wealth. He is 0:00:41.040 --> 0:00:44.920 an extremely insightful person who has been working in the 0:00:45.000 --> 0:00:49.800 financial services industry for nearly half a century. He began 0:00:49.840 --> 0:00:52.760 his career early on you'll hear at a number of 0:00:52.800 --> 0:00:56.800 well known brokerage firms, and found himself more and more 0:00:57.360 --> 0:01:02.720 offering advice to other advisors and brokers rather too specific 0:01:02.760 --> 0:01:08.200 individual clients, and that evolved, as he discusses, some thirty 0:01:08.240 --> 0:01:13.679 plus years ago, into a full time career working as 0:01:13.720 --> 0:01:18.840 an advisor to advisors. He has a very substantial and 0:01:18.959 --> 0:01:22.319 loyal following amongst a certain group of people in the 0:01:22.360 --> 0:01:27.520 financial industry. He preaches some very common sense things that 0:01:27.640 --> 0:01:31.240 are a little counterintuitive. You might be surprised to learn 0:01:31.720 --> 0:01:36.040 how important stock picking and market timing is to long 0:01:36.160 --> 0:01:40.840 term returns. Uh. The answer is going to rock you 0:01:40.920 --> 0:01:44.960 back on your heels. All those things matter much, much 0:01:45.080 --> 0:01:49.920 less than your own behavior as an investor and your 0:01:49.920 --> 0:01:55.640 own behavior as a financial advisor or broker. One of 0:01:55.680 --> 0:02:00.320 the things I find really fascinating about Nick Murray is 0:02:00.400 --> 0:02:05.400 that the average person has no idea who this guy is. 0:02:05.440 --> 0:02:07.480 In fact, I would go so far as to say 0:02:07.760 --> 0:02:10.920 the average investor has no idea that there is an 0:02:11.040 --> 0:02:17.160 industry that exists helping advisors do their job. And I 0:02:17.160 --> 0:02:21.440 don't just mean software and various mutual fund managers and 0:02:21.760 --> 0:02:26.560 product creators, but someone who actually facilitates the process of 0:02:26.639 --> 0:02:31.360 the ideal way, the optimal way for financial advisors to 0:02:31.560 --> 0:02:35.040 interact with their clients. A lot of this is kind 0:02:35.040 --> 0:02:37.400 of inside baseball. I suspect we're gonna have a lot 0:02:37.440 --> 0:02:41.320 of people in the financial services industry finding about out 0:02:41.360 --> 0:02:44.200 about this and listening to it. He speaks all over 0:02:44.240 --> 0:02:46.800 the country, probably gives fifty plus speeches a year, and 0:02:46.800 --> 0:02:50.320 commands a i um speaking fee because he is in 0:02:50.400 --> 0:02:53.080 such demands. UH. For those of you who want to 0:02:53.120 --> 0:02:56.400 know a little more about how the financial services industry works, 0:02:56.520 --> 0:02:58.360 or those of you who are just interested in the 0:02:58.400 --> 0:03:06.480 work that he does. Here is Nick Murray. This is 0:03:06.600 --> 0:03:11.760 Masters in Business with Barry Ridholts on Bloomberg Radio. My 0:03:11.880 --> 0:03:15.519 guest today is Nick Murray. You may not know who 0:03:15.560 --> 0:03:18.600 he is, but if you're in the financial services industry, 0:03:19.000 --> 0:03:23.200 you probably should. He is known as the Advisers Advisors, 0:03:23.520 --> 0:03:29.160 one of the industry's premier resources for registered investment advisors 0:03:29.240 --> 0:03:33.000 and others. He is the author of eleven books for 0:03:33.200 --> 0:03:39.200 financial services professional, most famously Simple Wealth Inevitable Wealth, which 0:03:39.240 --> 0:03:43.480 has been described as the most successful privately published book 0:03:43.880 --> 0:03:47.360 of the last fifteen years. In two thousand and seven, 0:03:47.600 --> 0:03:51.200 Nick was the recipient of the Malcolm S. Forbes Public 0:03:51.240 --> 0:03:57.360 Awareness Award for Excellence in advancing Financial Understanding. Nick, welcome 0:03:57.360 --> 0:04:00.200 to Bloomberg. It's very nice to be here. I would 0:04:00.200 --> 0:04:03.120 point out that I've never claimed that Simple Wealth was 0:04:03.200 --> 0:04:07.160 anything but one of the most successful privately published books 0:04:07.160 --> 0:04:09.640 of the last fifteen years. We don't want to start 0:04:09.760 --> 0:04:12.120 hyperbole this early in the Okay, we'll save it for 0:04:12.160 --> 0:04:16.360 the latter second hyperbole in segment five. A. Alright, so 0:04:16.440 --> 0:04:19.360 a little bit about your background. You went to Columbia 0:04:21.200 --> 0:04:23.880 years and years. I went to Columbia seven years of 0:04:24.000 --> 0:04:28.400 college wasted, just like Bluto, seven years of college down 0:04:28.440 --> 0:04:33.799 the drain um, but always not lost because my major 0:04:33.920 --> 0:04:37.440 was economics, and of course in the mid nineteen sixties 0:04:37.440 --> 0:04:40.440 they were teaching Kanzie and economics still do, which I 0:04:40.480 --> 0:04:43.560 would have had to go back and re learn all 0:04:43.600 --> 0:04:47.200 over again anyway. So it wasn't, as we say, a 0:04:47.200 --> 0:04:51.239 total loss. Okay. So so you come out of school 0:04:51.279 --> 0:04:53.800 in nineteen sixty seven, you go to E. F. Hutton 0:04:53.920 --> 0:04:57.520 and then you're at Shearson, ultimately ending up at Bear 0:04:57.560 --> 0:05:03.040 Stearns before saying to yourself, I'm in demand by advisors 0:05:03.080 --> 0:05:07.080 more so than anything else. Maybe that's the sort of 0:05:07.640 --> 0:05:10.680 area I should focus my attention on. How how did 0:05:10.680 --> 0:05:12.560 that transit? It was kind of it was kind of 0:05:12.560 --> 0:05:18.960 a half step. In nineteen um years ago, about twenty 0:05:19.000 --> 0:05:21.240 five years ago, now that you mentioned it, and now 0:05:21.279 --> 0:05:24.479 that you mentioned it, in August, I published the book 0:05:24.680 --> 0:05:28.599 called UM Serious Money, The Art of Marketing Mutual Funds 0:05:29.760 --> 0:05:32.919 UM because there was no other book on the subject, 0:05:33.279 --> 0:05:36.479 and you know, started to get a lot of requests 0:05:36.480 --> 0:05:40.040 to to come to firms other than Bear sterns and 0:05:40.080 --> 0:05:44.120 talk about this, and I it was just a collision 0:05:44.160 --> 0:05:47.800 course and so I kind of took myself off was 0:05:47.880 --> 0:05:53.760 an independent advisor, UM and also doing this whatever it 0:05:53.800 --> 0:05:56.120 is that I do now, and then at the end 0:05:56.160 --> 0:05:58.159 of the decade, at the turn of the century, I 0:05:58.279 --> 0:06:02.800 kind of said both, Yeah, you better do one or 0:06:02.839 --> 0:06:05.240 the other. So let me ask you a question. I've 0:06:05.240 --> 0:06:08.480 heard other people ask this, and I actually rarely asked 0:06:08.480 --> 0:06:11.840 this question, but for someone like yourself, it's a fascinating 0:06:11.880 --> 0:06:16.320 way to frame this. When people ask you what do 0:06:16.400 --> 0:06:20.040 you do? You know it's typical cocktail party chat or 0:06:20.240 --> 0:06:23.120 how do you answer that question? I say that I'm 0:06:23.160 --> 0:06:28.000 an advisor to other financial advisors, that I was for 0:06:28.080 --> 0:06:30.960 a quarter of a century or more a financial advisor, 0:06:31.640 --> 0:06:35.120 and now that I consult and and speak and write 0:06:35.160 --> 0:06:38.440 to other financial advisors. And if they don't go to 0:06:38.520 --> 0:06:42.160 completely to sleep, well, I'm still saying that. I just 0:06:42.440 --> 0:06:45.800 kind of walk away. That's UM. I find myself in 0:06:45.839 --> 0:06:48.480 an odd situation When people ask me what do I do? 0:06:49.080 --> 0:06:51.520 The answer is always, well, what day you I It's 0:06:51.560 --> 0:06:54.440 not like I have a nine to five. I can't 0:06:54.440 --> 0:06:57.360 just say I'm an accountant or a doctor. It's much 0:06:57.400 --> 0:07:01.520 more complicated, and once you see that glaze over the eyes, 0:07:01.600 --> 0:07:04.600 it's like, all right, I think I'm I'm boring them 0:07:04.640 --> 0:07:06.640 to death. My attitude is that's what you get for 0:07:06.720 --> 0:07:11.840 asking me. That's right. So so from the financial services 0:07:12.400 --> 0:07:18.000 industry as an advisor to actually helping advisors help their 0:07:18.040 --> 0:07:23.120 own clients. You know, what was the motivational drive of that? 0:07:23.160 --> 0:07:27.160 How did that come about? That? Was it strictly due 0:07:27.240 --> 0:07:30.240 to demand from advisors? What what makes you say? You know, 0:07:30.400 --> 0:07:32.440 I have a bunch of clients and I like them, 0:07:32.520 --> 0:07:35.520 but these other advisors they're they're kicking my door down. 0:07:35.560 --> 0:07:39.160 How do you make that transition? Well, first of all, 0:07:39.200 --> 0:07:42.480 a lot of it's just getting older and making choices. 0:07:42.520 --> 0:07:45.280 I mean, it's just you know, there come there came 0:07:45.440 --> 0:07:47.800 a point where I didn't think that I could do 0:07:47.960 --> 0:07:52.360 both with distinction. You couldn't be an advisor to clients 0:07:52.360 --> 0:07:54.920 and an advisor to traveling all over the country and 0:07:55.080 --> 0:07:59.280 writing in and doing all this other stuff. You speak frequently. 0:07:59.360 --> 0:08:02.840 How many events do you speak out a year? I 0:08:02.880 --> 0:08:06.560 guess it's running around four dozen. All right, so almost 0:08:06.640 --> 0:08:10.840 weekly you're on the road somewhere. It bunches, but yes, 0:08:10.920 --> 0:08:14.000 it averages out to once a week, and you have 0:08:14.600 --> 0:08:18.000 about thirty subscribers to your newsletter. And what I want 0:08:18.000 --> 0:08:22.240 to point out about your newsletter, Unlike just about every 0:08:22.280 --> 0:08:26.520 other newsletter I've ever seen, yours is described as having 0:08:27.160 --> 0:08:32.080 zero forecasts. Explain that, Um, it's funny. Nobody has ever 0:08:32.160 --> 0:08:36.000 said that. I don't know anything about other newsletters, and 0:08:36.040 --> 0:08:38.760 nobody's ever said that to me before. But I'll take 0:08:38.800 --> 0:08:42.600 you at your word. I UM, I don't know how 0:08:42.720 --> 0:08:50.240 anybody who's a counselor to advisors who are trying to 0:08:50.280 --> 0:08:54.959 get their clients to think and act long term would 0:08:55.040 --> 0:08:59.560 sully himself with a with a forecast of any kind. 0:08:59.679 --> 0:09:03.160 I think could just Hey, I'm not qualified to forecast. 0:09:03.840 --> 0:09:06.480 This doesn't bother me because no one else is either. 0:09:06.600 --> 0:09:09.040 That was my next question. So you don't think that 0:09:09.280 --> 0:09:11.199 the gold is going to five thousand this year? Is 0:09:11.240 --> 0:09:15.839 that we are at some point? It is at some point? 0:09:15.920 --> 0:09:19.800 But is that February? Is that Novary? When? Because that's 0:09:19.880 --> 0:09:22.160 my favorite forecast I've I've seen that for now for 0:09:22.280 --> 0:09:25.400 ten years. Gold goes up, gold goes down. The forecast 0:09:25.559 --> 0:09:30.640 never changes. My favorite forecast is DW five thousand, which 0:09:30.720 --> 0:09:33.520 you see about every ninety days from someone or other. 0:09:34.120 --> 0:09:36.760 I'm Barry Ridhults. You're listening to Masters in Business on 0:09:36.800 --> 0:09:41.120 Bloomberg Radio. My special guest today is Nick Murray. He 0:09:41.240 --> 0:09:44.720 is the advisor to Advisors. And one of the things 0:09:44.720 --> 0:09:49.120 that I really like about UM your various writings, especially 0:09:49.960 --> 0:09:55.960 your regular newsletter, is your emphasis on out performance and 0:09:56.040 --> 0:10:00.240 why we obsessively focus on it to our debt from it. 0:10:00.960 --> 0:10:03.640 Describe that if you would well, it covers a lot 0:10:03.640 --> 0:10:05.640 of ground. I mean it kind of depends on what 0:10:05.679 --> 0:10:08.880 you mean by out performance, if you mean alpha. Jore. 0:10:09.040 --> 0:10:15.079 My attitude is forget it. The the individual investor struggling 0:10:15.080 --> 0:10:17.200 with everything else. He's got a struggle in his life 0:10:17.880 --> 0:10:20.240 and and trying to make sense out of his long 0:10:20.360 --> 0:10:24.920 term investments. The best way and the easiest way, in 0:10:24.960 --> 0:10:27.320 the most fatal way that he can blow himself up 0:10:27.760 --> 0:10:32.439 and will blow himself up, is chasing alpha. Is mistaking 0:10:33.480 --> 0:10:37.280 out performance for a financial goal, which is not the 0:10:38.320 --> 0:10:44.200 great task of the individual investment advisor. To me and 0:10:44.200 --> 0:10:49.400 and particularly the holistic financial planner is keeping everybody on 0:10:49.679 --> 0:10:53.240 their long term plan. And I think you can do 0:10:53.360 --> 0:10:55.440 one or the other. You can sort of follow a 0:10:55.559 --> 0:10:58.800 plan or you can chase performance, but I don't think 0:10:58.800 --> 0:11:01.080 you can do both at the same time. One or 0:11:01.120 --> 0:11:05.080 the other will will take you over. And if alpha 0:11:05.240 --> 0:11:09.160 takes you over as opposed to outcomes, I think you're 0:11:10.440 --> 0:11:12.840 dead in the marketplace. So I have a few quotes 0:11:12.840 --> 0:11:14.439 of yours that I want to throw at you and 0:11:14.840 --> 0:11:20.679 have you, um respond to, one of which was investor 0:11:20.760 --> 0:11:25.600 behavior is far more important a determinant to someone's returns 0:11:25.960 --> 0:11:30.360 than either stock picking or market timing. Explain that I 0:11:30.400 --> 0:11:33.560 don't know that I ever said that, Um, Then no, no, 0:11:33.679 --> 0:11:37.640 But here's what what I've said is even stronger than that, 0:11:38.480 --> 0:11:46.480 which is word for word, the dominant determinant of long term, 0:11:46.840 --> 0:11:53.640 real life financial outcomes is not investment performance, it's invest 0:11:53.760 --> 0:11:57.720 or behavior. So so let's let's explore that a little bit. 0:11:58.120 --> 0:12:01.640 So the total arns that a person is getting from 0:12:01.679 --> 0:12:07.079 their portfolio matters less than what they do in response 0:12:07.120 --> 0:12:10.480 to various inputs. Is that a fair way to describe that? 0:12:10.679 --> 0:12:17.959 How How if at all they respond inappropriately to market stimuli. 0:12:18.240 --> 0:12:21.680 So give us a few examples of inappropriate responses you 0:12:21.679 --> 0:12:27.200 have of your portfolio and dot com. And we saw 0:12:27.280 --> 0:12:30.240 plenty of that, And we saw plenty of that and 0:12:30.320 --> 0:12:34.480 you have of your portfolio in gold and cash. In 0:12:34.520 --> 0:12:36.880 the spring of two thousand and nine, and we certainly 0:12:36.920 --> 0:12:39.040 saw a lot of people panicking out of the market 0:12:39.080 --> 0:12:41.640 in March o nine it was ever thus and and 0:12:41.679 --> 0:12:43.960 that's pretty much human behavior. There's not a whole lot 0:12:44.000 --> 0:12:49.920 of that's that's fairly perennial or or everlasting. That's the 0:12:50.000 --> 0:12:52.440 nature of how people react, isn't it. That's why the 0:12:52.480 --> 0:12:55.800 financial adviser was sent into the world by God, because 0:12:55.840 --> 0:13:01.199 it is essential to human nature. The the financial advisor 0:13:02.040 --> 0:13:06.320 doesn't manage money, he manages people. And again this is 0:13:06.320 --> 0:13:10.640 an either or choice. You you every advisor has to 0:13:11.240 --> 0:13:14.000 comes to that fork in the road, I think, and 0:13:14.040 --> 0:13:16.600 the good ones go down the road of of managing 0:13:16.679 --> 0:13:21.960 investor behavior and sort of letting the portfolio as as 0:13:22.000 --> 0:13:25.520 long as it's allocated to the right stuff in the 0:13:25.640 --> 0:13:29.960 long run, leaving the portfolio alone. I'm I'm a firm believer. 0:13:30.120 --> 0:13:33.440 This is a slightly different point, but it seems to 0:13:33.520 --> 0:13:37.040 want to come up. I'm a firm believer that the 0:13:37.200 --> 0:13:42.520 more often you change the portfolio for whatever reason, the 0:13:42.640 --> 0:13:47.120 lower your return will go. That turnover is absolutely correlated 0:13:47.160 --> 0:13:51.160 negatively too to return the way I heard that some 0:13:51.280 --> 0:13:55.400 years ago was don't just do something? Sit there very much, 0:13:55.480 --> 0:13:59.440 so I think it was Lewis rukais his last words. 0:13:59.480 --> 0:14:03.480 So there is um. You've written many books, one of 0:14:03.480 --> 0:14:08.560 which I have right here called Behavioral Investment Counseling, and 0:14:08.679 --> 0:14:12.440 there is there is a section in it that has 0:14:12.480 --> 0:14:14.840 some information that I had a double check because it 0:14:14.880 --> 0:14:17.760 was so outrageous when you first read it. You you 0:14:17.840 --> 0:14:19.880 have to say, let me make sure this is true. 0:14:19.920 --> 0:14:23.840 So I'm gonna read this data over twenty years, the 0:14:24.000 --> 0:14:28.080 average large cap equity mutual funds, and this is as 0:14:28.120 --> 0:14:31.880 of oh seven, so it's before the crisis and before 0:14:31.920 --> 0:14:37.479 the recovery, the average large cap mutual equity mutual funds, 0:14:37.640 --> 0:14:41.560 according to Lipper Analytics, has returned ten point eight one 0:14:42.880 --> 0:14:48.000 but the average investor in those funds have received only 0:14:48.240 --> 0:14:50.920 four point four eight percent of those In other words, 0:14:51.480 --> 0:14:54.720 they're retaining less than half of the gains of the 0:14:54.800 --> 0:14:59.760 funds they own. How is it possible to underperform your 0:15:00.040 --> 0:15:03.560 own investments by buying them and selling them at the 0:15:03.640 --> 0:15:08.120 wrong times? And how those data which which you're quoting 0:15:08.200 --> 0:15:11.320 from the book. That study is done every year and 0:15:11.360 --> 0:15:13.520 every year it comes out the same there's been no 0:15:13.600 --> 0:15:16.920 change post crisis, post recovery. By the way, the second 0:15:17.000 --> 0:15:20.000 number is from dal Bar, which actually dal Bar does 0:15:20.040 --> 0:15:22.840 the study. And that's my point that if you read 0:15:22.920 --> 0:15:29.880 the twenty annual dal Bar studies, they basically cluster around 0:15:29.920 --> 0:15:33.880 the same conclusion, which is that the average investor blows 0:15:33.920 --> 0:15:36.440 about half the return of either the market or the 0:15:36.480 --> 0:15:39.560 average fund. And that's not through picking this fund over 0:15:39.600 --> 0:15:43.560 that fund. It's through their own behavior, switching funds, switching 0:15:43.600 --> 0:15:45.480 from here to that. So they sell something at the 0:15:45.520 --> 0:15:48.680 wrong time and swap into something at the wrong time. Well, 0:15:48.840 --> 0:15:52.120 well sure, because what they do, what what I think 0:15:52.160 --> 0:15:56.520 everybody is inclined to do, is switch out of something 0:15:56.560 --> 0:16:00.880 that's gone cold into something that appears to be hot, 0:16:01.280 --> 0:16:06.520 and and again. I think that's a very fundamental human behavior. 0:16:06.640 --> 0:16:10.400 And if you stop for ten seconds, you realize that 0:16:10.440 --> 0:16:14.560 what they're doing again and again and again is selling 0:16:14.720 --> 0:16:18.920 low to buy high, which I read somewhere is about 0:16:19.000 --> 0:16:21.640 the opposite of what you're supposed to do. I think 0:16:21.680 --> 0:16:25.320 I've seen that as well, and it just it can 0:16:25.440 --> 0:16:30.920 have no other outcome, So mean reversion not really something 0:16:30.960 --> 0:16:34.680 that the average investor is thinking about. In other words, 0:16:34.800 --> 0:16:38.640 buying something that's dipped and selling something that's rallied, they're 0:16:38.640 --> 0:16:41.240 doing the opposite. They're left to their own devices that 0:16:41.280 --> 0:16:44.800 they're they're doing the opposite, which is why, in my experience, 0:16:44.960 --> 0:16:51.680 almost all of the great advisors are rebalancing annually. Hey, 0:16:51.720 --> 0:16:54.680 they're coming back to the original plan. But in the 0:16:54.720 --> 0:16:58.320 act of rebalancing, what you're doing is kicking out stuff 0:16:58.440 --> 0:17:02.200 that shot out the lights and redeploying it into stuff 0:17:02.240 --> 0:17:05.480 that's just waiting to go instead of the opposite, which 0:17:05.560 --> 0:17:07.560 is what everybody does if you leave them to their 0:17:07.560 --> 0:17:10.159 own device, And the research shows that's the closest thing 0:17:10.200 --> 0:17:13.240 to a free lunch on Wall Street. There's no risk, 0:17:13.359 --> 0:17:15.919 no cost, and you're actually adding a few basis points 0:17:15.920 --> 0:17:19.120 of performance over a long time. Total no brainer. You're 0:17:19.160 --> 0:17:22.400 listening to Masters in Business on Bloomberg Radio. My special 0:17:22.480 --> 0:17:25.119 guest today is Nick Murray. He is the author of 0:17:25.480 --> 0:17:30.240 eleven books on investing and how advisors should interact with clients. 0:17:30.600 --> 0:17:32.600 Let's talk a little bit about that. So, so you 0:17:32.680 --> 0:17:36.639 began in ninety seven. What was the role of the 0:17:36.680 --> 0:17:40.040 advisor back then? Was that a very different era or 0:17:40.119 --> 0:17:42.919 was it just the same thing? It was the it 0:17:43.000 --> 0:17:46.080 was the neanderthal he it was. It was stockpicking still 0:17:46.280 --> 0:17:52.680 just in seven, which was very very close to as 0:17:52.720 --> 0:17:55.920 you know, the top of the great post World War 0:17:56.000 --> 0:18:01.760 two bullmarket twenty years nifty fifty. Everybody was all excited 0:18:01.800 --> 0:18:08.120 and then had really become a garbage market, really become 0:18:08.119 --> 0:18:12.080 a garbage market. And it was it was really the 0:18:12.240 --> 0:18:20.119 first great outbreak of mass uh performance mania since the twenties, 0:18:21.240 --> 0:18:23.399 and no one had an adult memory of that, and 0:18:23.440 --> 0:18:26.560 no one knew what it was about. And the market 0:18:26.560 --> 0:18:30.200 had been going up for you know, two years, yeah, 0:18:30.320 --> 0:18:35.800 and and it was it was allegedly a stock pickers market. 0:18:35.920 --> 0:18:40.280 It was all about beating the market by individual stock selection. 0:18:41.080 --> 0:18:44.480 Heaven helpless and and around the same time, you know, 0:18:44.480 --> 0:18:46.680 you stop and think back to it. Yeah, you had 0:18:46.720 --> 0:18:50.000 these short little recessions in these short little market corrections 0:18:50.000 --> 0:18:53.520 in the fifties and early sixties, But overall, the long 0:18:53.640 --> 0:18:57.439 term returns for most of people's adult life at that 0:18:57.480 --> 0:18:59.720 point had been a one way trade, hadn't it be? 0:19:00.720 --> 0:19:03.800 And And so that was doubt kissed a thousand and 0:19:03.920 --> 0:19:07.119 nineteen sixty it did, and it wasn't over it on 0:19:07.119 --> 0:19:11.920 a permanent basis again until that is exactly correct. So, 0:19:11.920 --> 0:19:17.160 so how does somebody how does an advisor counsel clients three, 0:19:17.240 --> 0:19:18.919 four or five years into that it looks like the 0:19:18.960 --> 0:19:22.679 market is never going up again? Well, I hope that 0:19:23.240 --> 0:19:28.160 um an advisor is counseling clients to be buying with 0:19:28.160 --> 0:19:33.040 both hands, because that's when, that's when you're supposed to Now, 0:19:33.840 --> 0:19:35.920 isn't what a lot of people do. I don't think 0:19:35.920 --> 0:19:39.240 it is. But the narrow answer to the narrow question 0:19:40.080 --> 0:19:44.200 what should a what should an advisor be counseling people 0:19:44.200 --> 0:19:47.480 in a period like that, is is a continue to 0:19:47.520 --> 0:19:51.560 work your plan, be you're getting some kind of a 0:19:51.720 --> 0:19:56.960 big intermediate to longer term sale. You'll never see these 0:19:56.960 --> 0:20:02.479 prices again. You had to know, uh, you know, nine 0:20:02.720 --> 0:20:07.439 seventy four when the when the the pe was eight 0:20:07.760 --> 0:20:15.480 or something, because the bonds were risk free and the 0:20:15.600 --> 0:20:19.840 market had just fallen fifty from So so let me 0:20:20.880 --> 0:20:23.040 So you said that was a narrow question, let me 0:20:23.119 --> 0:20:27.960 ask this in a more general, broad set question. What 0:20:28.119 --> 0:20:34.280 makes a successful financial advisor somebody who can make a 0:20:34.480 --> 0:20:42.840 plan for his clients empathetically, bravely, smartly and keep them 0:20:42.840 --> 0:20:45.960 on it and regardless of the fads or fears of 0:20:46.000 --> 0:20:49.680 the moment, regardless of the fads or fears of the moment. 0:20:50.160 --> 0:20:54.000 This brings us back to the behavioral issue. How significant 0:20:54.280 --> 0:20:58.399 is what an advisor does in terms of managing the 0:20:58.480 --> 0:21:04.520 poor impulses and emotional instincts of the average investor. Again, 0:21:04.600 --> 0:21:06.400 that's what I think he was sent into the world 0:21:06.480 --> 0:21:09.440 to do. So now let's let me ask you a 0:21:09.880 --> 0:21:13.959 somewhat different question about that. What's the ideal client? Like, 0:21:14.119 --> 0:21:17.080 So you just described what the role of the advisor is. 0:21:17.119 --> 0:21:19.080 What's the role of the client in all this? The 0:21:19.200 --> 0:21:21.800 role of the client is to come to an advisor, 0:21:22.840 --> 0:21:29.520 realizing that he cannot make for himself a lifetime much 0:21:29.640 --> 0:21:36.600 less multi generational investment plan, much less financial plan, and 0:21:37.200 --> 0:21:40.200 find an advisor that he can trust, and sit down 0:21:40.240 --> 0:21:43.240 with that advisor and make that plan and ask the 0:21:43.280 --> 0:21:46.080 advisor to keep him on it even when he doesn't 0:21:46.240 --> 0:21:49.239 want to stay on it. That's what the ideal client is. 0:21:49.320 --> 0:21:52.360 It's somebody who I'm not going to tell my lawyer 0:21:52.960 --> 0:21:55.400 how to defend me. I'm not going to tell my 0:21:56.440 --> 0:22:01.640 accountant how to do my taxes, and I'm sure I'm 0:22:01.680 --> 0:22:04.879 not going to tell my doctor what to prescribe on 0:22:05.119 --> 0:22:09.919 what theory if you think that's rational. Does someone go 0:22:10.119 --> 0:22:14.280 to an investment advisor, much less a financial planner, and say, 0:22:14.320 --> 0:22:16.280 this is what I want to do. You go to 0:22:16.320 --> 0:22:18.560 a planet because you don't know what you want to do, 0:22:19.080 --> 0:22:21.679 or you suspect that what you want to do is 0:22:21.720 --> 0:22:24.320 wrong because you've tried it a bunch of times and 0:22:24.359 --> 0:22:28.040 it hasn't worked. So that's to me. The ideal client 0:22:28.200 --> 0:22:31.840 is the one who treats his financial planner the way 0:22:31.880 --> 0:22:35.520 he does his attorney and his accountant and his doctor. 0:22:35.640 --> 0:22:38.560 He goes and says, as nearly as I can tell, 0:22:38.960 --> 0:22:41.760 this is my problem, tell me how to fix it. 0:22:43.000 --> 0:22:46.720 That makes plenty sense. What about the client who goes 0:22:46.760 --> 0:22:49.520 to an advisor and says, I just saw this guy 0:22:49.560 --> 0:22:53.280 on TV and here's what he said. How should that 0:22:53.320 --> 0:22:56.399 be handled? If you think he's right, go do what 0:22:56.440 --> 0:22:59.360 he said. I'm Barry. What helps? You're listening to Master's 0:22:59.400 --> 0:23:03.840 in Business Bloomberg Radio. My special guest today is Nick Murray. 0:23:04.000 --> 0:23:07.560 He is the advisor to advisors and has spent the 0:23:07.840 --> 0:23:11.800 better part of his adult lifetime trying to teach advisors 0:23:12.280 --> 0:23:15.879 the proper way of interacting with their clients. And just 0:23:16.000 --> 0:23:20.240 before the break, we were discussing a very typical error 0:23:20.359 --> 0:23:26.320 that advisors make, which is placating clients when they're engaging 0:23:26.359 --> 0:23:31.240 in bad behavior. Discuss what what the problem is with that? Well, 0:23:31.240 --> 0:23:35.359 the problem is that you're taking money from people in 0:23:35.440 --> 0:23:38.719 exchange for enabling them to do things that you know 0:23:39.040 --> 0:23:42.720 are wrong. Hey, I think that's immoral. Be I don't 0:23:42.720 --> 0:23:45.080 know how you look at yourself in the mirror and 0:23:45.280 --> 0:23:48.680 see all you're doing is postponing the inevitable. If you're 0:23:48.720 --> 0:23:53.760 helping people do the bad things that they want to do, 0:23:54.480 --> 0:23:57.480 you're you're that's going to be a train wreck eventually. 0:23:57.600 --> 0:24:01.160 And when it is a train wreck, they'll turn around 0:24:01.160 --> 0:24:04.800 and blame you. I've seen it happen any number of 0:24:04.840 --> 0:24:10.040 times where where advisors, you know, kept trying to get 0:24:10.080 --> 0:24:13.359 the client on this on the straight and narrow, said Okay, 0:24:13.400 --> 0:24:15.480 I'll let him do this, I'll let him buy gold, 0:24:15.520 --> 0:24:17.800 I'll let him go to cash this, that and the 0:24:17.840 --> 0:24:22.719 other thing, because he saw the only alternative as losing 0:24:22.760 --> 0:24:26.439 the account, which he didn't realize what was what he 0:24:26.520 --> 0:24:30.720 really wanted. And and when the client hit the wall, 0:24:30.760 --> 0:24:33.160 he turned around and sued. The guy sued the advisor. 0:24:33.320 --> 0:24:35.399 So so let's back up and I know you're talking 0:24:35.440 --> 0:24:39.320 metaphorically and not any specific account, but you're a big 0:24:39.680 --> 0:24:43.679 advocate of where there's not a good fit between a 0:24:43.720 --> 0:24:47.760 client and an advisor, to terminate that relationship or fire 0:24:47.880 --> 0:24:51.920 the client. I'm I'm not actually, I'm I'm a big 0:24:51.960 --> 0:24:54.560 fan of not starting the relationship because you know in 0:24:54.600 --> 0:24:57.480 the first twenty minutes, so you should never get I 0:24:57.480 --> 0:25:00.760 don't think an advisor in a per efect world, and 0:25:00.800 --> 0:25:03.199 I know this is not a perfect world, but I 0:25:03.200 --> 0:25:05.359 don't think that the advisor should ever get to the 0:25:05.400 --> 0:25:07.840 point where he's gotta fire a guy because he knows 0:25:08.200 --> 0:25:11.359 he knew going in, you're going in. This is a 0:25:11.760 --> 0:25:14.800 absolutely in the first twenty minutes. So what happens in 0:25:14.840 --> 0:25:18.680 the real world where you think you're sympatico, you're you're 0:25:18.680 --> 0:25:23.320 you know, especially if you're not promoting yourself as a Look, 0:25:23.359 --> 0:25:25.400 I'm not a stock picker, I'm not a market time 0:25:25.480 --> 0:25:30.639 or I'm a long term asset allocator, even with the 0:25:30.680 --> 0:25:33.000 best of intentions, and where you think there's a fit 0:25:33.520 --> 0:25:36.120 when you're six or seven years into a long term 0:25:36.160 --> 0:25:41.560 bull market and people forget how they their buddies panicked 0:25:41.560 --> 0:25:44.000 out in the in the bottom you know, you look 0:25:44.040 --> 0:25:47.040 at their tenure returns. They're doing much much better than 0:25:47.080 --> 0:25:49.880 the guy who's chasing returns at the top and panicking 0:25:49.880 --> 0:25:52.639 out at the bottom. And now this guy discovers the 0:25:52.680 --> 0:25:59.080 next great thing, gold nanotechnology, Netflix, Facebook, you, you name it, 0:25:59.560 --> 0:26:02.159 whatever it is. How how do you deal with the 0:26:02.200 --> 0:26:05.320 client who suddenly says, hey, listen, I'd like to juice 0:26:05.400 --> 0:26:08.359 my returns. My neighbor told me that he bought the 0:26:08.440 --> 0:26:10.719 Facebook I p O and it's now almost a hundred. 0:26:10.920 --> 0:26:13.480 Why don't you get me the Facebook ip O. That's 0:26:13.480 --> 0:26:16.360