1 00:00:04,320 --> 00:00:13,120 Speaker 1: Problems, broblems, problems investors dealing with problems in the investment space. 2 00:00:13,200 --> 00:00:15,560 Speaker 1: Things do change, regulations change. We want to talk a 3 00:00:15,600 --> 00:00:18,560 Speaker 1: little bit about the retail alternative investment space. Our next 4 00:00:18,600 --> 00:00:20,959 Speaker 1: guest certainly has some thoughts on how to make it better. 5 00:00:21,280 --> 00:00:23,799 Speaker 1: Here with us is Steve Cantor. He's CEO at S 6 00:00:23,800 --> 00:00:27,840 Speaker 1: two K Financial that's a registered brooker dealer, wholesale distributor 7 00:00:27,840 --> 00:00:31,000 Speaker 1: of investment vehicles, also funds, and he joins us inter 8 00:00:31,080 --> 00:00:34,160 Speaker 1: Bloomberg eleven three oh studio on this Friday. Welcome Bloomberg Radio. 9 00:00:34,240 --> 00:00:35,800 Speaker 1: Thanks for having me tell them what you guys are 10 00:00:35,880 --> 00:00:37,840 Speaker 1: up to. Well, you know, we got in this business 11 00:00:37,840 --> 00:00:40,120 Speaker 1: about a year ago because we thought that the retail 12 00:00:40,159 --> 00:00:43,720 Speaker 1: investors needed some change. They were buying these products, these 13 00:00:43,840 --> 00:00:46,160 Speaker 1: non these non traded reachs, and they weren't making any money. 14 00:00:46,720 --> 00:00:48,479 Speaker 1: They couldn't get their money back, they weren't getting the 15 00:00:48,520 --> 00:00:50,400 Speaker 1: dividends they were promised. And we thought the product they'd 16 00:00:50,479 --> 00:00:53,280 Speaker 1: be better. And really simply put, we thought two things 17 00:00:53,280 --> 00:00:55,440 Speaker 1: needed to change. One, we thought you had to bring 18 00:00:55,520 --> 00:00:58,640 Speaker 1: better sponsors. And we don't even be better sponsors. People 19 00:00:58,680 --> 00:01:00,600 Speaker 1: that are institutional sponsors, like as you talking about on 20 00:01:00,640 --> 00:01:03,000 Speaker 1: Bloomberg every day. Those are the people we want, the 21 00:01:03,040 --> 00:01:04,520 Speaker 1: black stones of the world. They should be coming to 22 00:01:04,560 --> 00:01:07,280 Speaker 1: this marketplace. The second part is with thought. The structures 23 00:01:07,280 --> 00:01:09,800 Speaker 1: are flawed. We thought that there was no alignment of 24 00:01:09,840 --> 00:01:12,759 Speaker 1: interest between the investor and these sponsors. So we got 25 00:01:12,760 --> 00:01:15,720 Speaker 1: into this market to try to change that. Interesting um. 26 00:01:15,800 --> 00:01:20,520 Speaker 1: And since you've gotten in, what has changed? Well, regulations changed, 27 00:01:20,760 --> 00:01:24,800 Speaker 1: and actually regulation is coming to talk about and Rule two, 28 00:01:24,880 --> 00:01:28,240 Speaker 1: which which has transparency. We think they're great rules, right. 29 00:01:28,560 --> 00:01:32,119 Speaker 1: We believe people should always act as fiduciaries. Seems so simple, 30 00:01:32,200 --> 00:01:34,320 Speaker 1: It seems a given. Do you think so? It's funny 31 00:01:34,319 --> 00:01:37,520 Speaker 1: though I've talked to you know, financial advisors, good financial 32 00:01:37,520 --> 00:01:39,520 Speaker 1: advisors who are like, this is going to be really 33 00:01:39,560 --> 00:01:42,160 Speaker 1: problematic though to the smaller guys who can't really afford 34 00:01:42,200 --> 00:01:44,479 Speaker 1: to maybe kind of keep up with all of the 35 00:01:44,520 --> 00:01:47,560 Speaker 1: necessary new rules and regulations if you will. And he 36 00:01:47,560 --> 00:01:49,600 Speaker 1: says that most of the time, if you're a bad guy, 37 00:01:50,080 --> 00:01:51,400 Speaker 1: you may be around for a little bit, but you 38 00:01:51,440 --> 00:01:54,440 Speaker 1: don't last long because you end up running out of clients. 39 00:01:54,800 --> 00:01:57,400 Speaker 1: I think he's right. Actually, most of the people I've 40 00:01:57,400 --> 00:01:58,880 Speaker 1: met here in the Broken Deal were the good people. 41 00:01:59,120 --> 00:02:01,120 Speaker 1: They really want to do the best for their clients. 42 00:02:01,400 --> 00:02:03,800 Speaker 1: I think to some confusion, I think some people believe 43 00:02:03,840 --> 00:02:07,920 Speaker 1: fiduciary means suitability. It doesn't. Suitability is a portion of 44 00:02:07,960 --> 00:02:10,239 Speaker 1: being a fiduciary. But at the end of the day, 45 00:02:10,360 --> 00:02:12,120 Speaker 1: I always put it's a very simple test for me. 46 00:02:12,360 --> 00:02:14,360 Speaker 1: Would you put your mom and dad or your grandparents 47 00:02:14,360 --> 00:02:16,880 Speaker 1: in that investment? And if you would, could you explain 48 00:02:16,919 --> 00:02:19,000 Speaker 1: it to him? And if you really kind of played 49 00:02:19,000 --> 00:02:21,800 Speaker 1: by that rule, it really makes life simple. Yes, it 50 00:02:21,880 --> 00:02:23,440 Speaker 1: is not a perfect rule. I think it'll create a 51 00:02:23,440 --> 00:02:25,600 Speaker 1: lot of litigation that doesn't need to exist, But it 52 00:02:25,680 --> 00:02:27,680 Speaker 1: is a good rule that makes people refocus on being 53 00:02:27,680 --> 00:02:29,560 Speaker 1: a fiduciary. It's one more thing to kind of make 54 00:02:29,600 --> 00:02:32,640 Speaker 1: you maybe have a second thought correct before doing something. 55 00:02:32,680 --> 00:02:36,840 Speaker 1: The bigger change, honestly was fifteen. Well, that was transparency. 56 00:02:37,120 --> 00:02:39,120 Speaker 1: In the old days. You could buy one of these 57 00:02:39,160 --> 00:02:41,720 Speaker 1: products and you could pay ten dollars. They would take 58 00:02:41,760 --> 00:02:44,800 Speaker 1: twelve to sixteen percent of your money for expenses, so 59 00:02:44,840 --> 00:02:47,520 Speaker 1: that you'd only put four cents in the ground. But 60 00:02:47,560 --> 00:02:49,920 Speaker 1: when you got your statement, your statement would say ten dollars. 61 00:02:50,440 --> 00:02:53,000 Speaker 1: My thought was always wasn't just put twenty dollars? Is accurate? 62 00:02:52,960 --> 00:02:57,080 Speaker 1: As ten dollars. Now you've gotta adequately reflect exactly what 63 00:02:57,080 --> 00:02:59,240 Speaker 1: you're putting in the ground. Is it Is it also 64 00:02:59,320 --> 00:03:03,359 Speaker 1: happening just the marketplace where the kind of pushed towards 65 00:03:03,400 --> 00:03:07,040 Speaker 1: lower fees. There's so much pressure on that environment. Uh, 66 00:03:07,040 --> 00:03:11,000 Speaker 1: and there's a raise awareness that's that's a great question, absolutely, 67 00:03:11,280 --> 00:03:14,080 Speaker 1: right fees, Fees need to come down or be commensurate 68 00:03:14,080 --> 00:03:16,400 Speaker 1: with the investment. What do you know, there's an interesting 69 00:03:16,440 --> 00:03:19,640 Speaker 1: story um in Bloomberg Business Week this week by our 70 00:03:19,720 --> 00:03:22,640 Speaker 1: Hughson that's taking a look specifically at robo advisors. And 71 00:03:22,680 --> 00:03:26,280 Speaker 1: I guess there's certainly a perception out there that there's 72 00:03:26,320 --> 00:03:29,239 Speaker 1: algorithms and machine learning and certainly involved in there to 73 00:03:29,320 --> 00:03:31,920 Speaker 1: assess an investors risk, right, But I think there's an 74 00:03:31,919 --> 00:03:35,520 Speaker 1: assumption that there's a certain level of objectivity, right, that 75 00:03:35,560 --> 00:03:37,400 Speaker 1: you're really going to be matched up with what's best 76 00:03:37,480 --> 00:03:40,360 Speaker 1: for you. And now we're finding for better for worse. 77 00:03:40,920 --> 00:03:45,000 Speaker 1: That you know, there are fun families, if you will, 78 00:03:45,120 --> 00:03:52,480 Speaker 1: who are basically um wooing sending you know, um, you know, 79 00:03:52,480 --> 00:03:54,960 Speaker 1: putting people on junkets to kind of put their their 80 00:03:55,040 --> 00:03:58,760 Speaker 1: funds front and center. Is that okay? That to me 81 00:03:58,880 --> 00:04:02,520 Speaker 1: isn't transparency. It's it's not transparency. If you're accepting stuff, 82 00:04:02,520 --> 00:04:04,280 Speaker 1: you need to say it. And by the way, I 83 00:04:04,280 --> 00:04:07,520 Speaker 1: think ROBO's great is a part part of what goes on. 84 00:04:07,880 --> 00:04:10,160 Speaker 1: But the end of the day, no one knows anybody better. 85 00:04:10,360 --> 00:04:11,840 Speaker 1: You didn't know me before I sat here. When I 86 00:04:11,880 --> 00:04:13,680 Speaker 1: look at you in the eye, I can actually try 87 00:04:13,680 --> 00:04:15,280 Speaker 1: to get a feeling of what you want and what 88 00:04:15,360 --> 00:04:18,360 Speaker 1: you need. Robo works great in great markets, but if 89 00:04:18,400 --> 00:04:21,080 Speaker 1: everybody's following the market, when the market turns the other way, 90 00:04:21,120 --> 00:04:24,240 Speaker 1: guess what happens. It's a disaster. So E t F 91 00:04:24,320 --> 00:04:27,120 Speaker 1: S robo. There's a big issues going forward. I think, well, 92 00:04:27,160 --> 00:04:29,640 Speaker 1: that's interesting. Do you think that when we do get 93 00:04:29,720 --> 00:04:32,560 Speaker 1: some kind of undoing of the market. We've had some volatility, 94 00:04:32,600 --> 00:04:34,120 Speaker 1: but for the most part it's been on a pretty 95 00:04:34,120 --> 00:04:37,760 Speaker 1: clear trajectory, certainly the equity markets to the upside. Uh. 96 00:04:37,839 --> 00:04:40,760 Speaker 1: We'll see whether or not these robo advisors ultimately do work. 97 00:04:40,920 --> 00:04:43,159 Speaker 1: I actually they've been around for a while. Yeah, and 98 00:04:43,200 --> 00:04:45,960 Speaker 1: there's a portion right. Look, at the end of the day, 99 00:04:46,080 --> 00:04:49,880 Speaker 1: everybody should diversify in every way. I just think diversification 100 00:04:50,240 --> 00:04:52,600 Speaker 1: is the best investment strategy. So at the end of 101 00:04:52,640 --> 00:04:54,920 Speaker 1: the day, Yes, could you have somewhat robo. But if 102 00:04:54,920 --> 00:04:56,920 Speaker 1: you're going to take your whole portfolio and put it 103 00:04:56,920 --> 00:04:58,920 Speaker 1: in a robo, I think you're making a terrible mistake. 104 00:04:59,000 --> 00:05:01,560 Speaker 1: So what do you say to investors kind of eyes 105 00:05:01,600 --> 00:05:04,159 Speaker 1: wide open at this point, Well, I think you should 106 00:05:04,160 --> 00:05:06,719 Speaker 1: be very careful. You should understand where we are in 107 00:05:06,720 --> 00:05:09,080 Speaker 1: the game. You should what does that mean to understand 108 00:05:09,080 --> 00:05:11,160 Speaker 1: where we are in the game? Look, no one's gonna 109 00:05:11,200 --> 00:05:13,479 Speaker 1: say we're the if we if we use baseball terms 110 00:05:13,520 --> 00:05:15,360 Speaker 1: for one second, we're not in the first sinning of 111 00:05:15,360 --> 00:05:19,119 Speaker 1: a nine any game, right, So understand right, no one's 112 00:05:19,160 --> 00:05:22,359 Speaker 1: giving you this without taking risk. And so you always 113 00:05:22,400 --> 00:05:25,239 Speaker 1: have to measure risk and reward. What can you actually afford? 114 00:05:25,279 --> 00:05:26,719 Speaker 1: What kind of risk can you take to get the 115 00:05:26,760 --> 00:05:30,120 Speaker 1: reward you want? Understand you want liquidity in places you 116 00:05:30,120 --> 00:05:32,400 Speaker 1: pay for liquidity, So at the end of day, nothing 117 00:05:32,440 --> 00:05:35,920 Speaker 1: comes free. So just make sure that whatever you do, 118 00:05:36,000 --> 00:05:38,919 Speaker 1: you diversify your portfolio to a bunch of things and 119 00:05:39,680 --> 00:05:43,159 Speaker 1: get a bunch of opinions. I believe the biggest issue 120 00:05:43,160 --> 00:05:45,359 Speaker 1: out there is education of the consumer. At the end 121 00:05:45,400 --> 00:05:47,240 Speaker 1: of the day, to be a good consumer, the more 122 00:05:47,279 --> 00:05:49,200 Speaker 1: you know the better you are, So don't just take 123 00:05:49,240 --> 00:05:52,200 Speaker 1: somebody's word. Actually spend the time at your money, doing 124 00:05:52,240 --> 00:05:53,840 Speaker 1: the work and trying to figure out what is the 125 00:05:53,920 --> 00:05:55,560 Speaker 1: right thing for you. It is amazing that there are 126 00:05:55,600 --> 00:05:57,599 Speaker 1: investors who get into things without really looking at the 127 00:05:57,600 --> 00:05:59,320 Speaker 1: fine print. I mean, I know the fine print can 128 00:05:59,320 --> 00:06:02,760 Speaker 1: be quite umbersome. But that's your response to the foreigner 129 00:06:02,760 --> 00:06:05,000 Speaker 1: pages of perspectives. I mean, that's a tough fine friend. 130 00:06:05,160 --> 00:06:07,400 Speaker 1: All Right, we gotta run, Steve, Thank you so much. 131 00:06:07,400 --> 00:06:09,159 Speaker 1: Thanks for having me. Have a good weekend. Steve Knor, 132 00:06:09,279 --> 00:06:12,760 Speaker 1: chief executive officer of S two K Financial based in 133 00:06:12,800 --> 00:06:15,440 Speaker 1: New York, Based in New York, in our Bloomberg eleven 134 00:06:15,480 --> 00:06:17,680 Speaker 1: three year studio on this Friday, coming up, everybody another 135 00:06:17,720 --> 00:06:20,599 Speaker 1: check on trading Bloomberg Markets. I'm Carol Masser and this 136 00:06:20,800 --> 00:06:21,440 Speaker 1: is Bloomberg