WEBVTT - Standing at the Crossroads of Active and Passive 0:00:06.000 --> 0:00:08.880 Welcome to Trillians. I'm Joel Webber and I'm Eric bel Tunis. 0:00:10.560 --> 0:00:14.120 So we have a guest, Eric, we do you brought him? Yeah? 0:00:14.160 --> 0:00:16.120 I believe this is well. We've had an issue where 0:00:16.120 --> 0:00:19.319 on before, but this is our first big time, big 0:00:19.360 --> 0:00:22.080 company issuer. Kind of a big deal. Yeah, I mean 0:00:22.200 --> 0:00:25.959 everybody knows this company. Which company isn't Fidelity? And who 0:00:26.000 --> 0:00:30.440 is he? Matt Goolay who is E t F industry veteran. 0:00:31.080 --> 0:00:32.960 Remember when we did inside E t FS we talked 0:00:33.000 --> 0:00:35.879 to Brian Lake who was at JP Morgan, but he 0:00:35.920 --> 0:00:38.400 had been in other areas. There was a trend and 0:00:38.440 --> 0:00:40.919 it still goes on. A lot of companies that are 0:00:41.159 --> 0:00:43.560 massive mutual fund companies get into the et F space. 0:00:43.880 --> 0:00:45.440 They got to hire people who know what they're doing. 0:00:45.479 --> 0:00:47.400 So they go to Black Rock and State Street and 0:00:47.400 --> 0:00:50.239 they hire them away and they run. They start to 0:00:50.240 --> 0:00:52.560 build up their Brandon Matt is one of those guys 0:00:52.640 --> 0:00:55.200 who's like Fidelity guy. Yeah, he's kind of like the 0:00:55.200 --> 0:00:58.800 E t F entrepreneur inside this massive company that that 0:00:58.880 --> 0:01:01.240 everybody knows. And I think think there I mean a 0:01:01.240 --> 0:01:04.080 household name to say the least, people use it as 0:01:04.319 --> 0:01:07.400 their brokerage. Platform or they have funds. And I remember 0:01:07.480 --> 0:01:10.240 as a as a reporter when I first started out 0:01:10.319 --> 0:01:15.000 at Institutional Investor, covering mutual fund companies for fund Action, 0:01:15.040 --> 0:01:16.440 which is one of the news that ares at II. 0:01:16.560 --> 0:01:19.639 And back then, this is the late nineties mid nineties, 0:01:19.680 --> 0:01:22.360 Fidelity was the king of the hill. I mean, Vanguard 0:01:22.400 --> 0:01:25.880 was something you've covered occasionally. They've since grown big. Fidelity 0:01:25.959 --> 0:01:28.199 is still big. But now you have this new world 0:01:28.280 --> 0:01:31.840 where passive has risen up to a huge extent, right 0:01:31.840 --> 0:01:33.640 a lot of them, Almost all the money is going there, 0:01:34.000 --> 0:01:37.920 and you have firms like Fidelity making their imprint in 0:01:37.959 --> 0:01:40.440 this world. And I think not only they representative from 0:01:40.440 --> 0:01:44.160 an industry standpoint of it's almost like uh merging into 0:01:44.160 --> 0:01:48.520 this new technology, but from an investor standpoint, somebody who's 0:01:48.520 --> 0:01:51.840 worked in the et F industry works in Fidelity, and 0:01:51.880 --> 0:01:53.760 there's all these structures and a lot of them get 0:01:53.840 --> 0:01:56.760 used together. It's just an interesting way to look at Uh. 0:01:56.800 --> 0:01:58.680 He kind of sits at the crossroads of a couple 0:01:58.720 --> 0:02:00.960 of things happening at the same time. So he's like 0:02:01.560 --> 0:02:05.080 the little fish in a big pond making a big difference. Yeah, 0:02:05.120 --> 0:02:06.480 I was trying to think of another way to throw 0:02:06.480 --> 0:02:08.600 a big on there, but you gotta go with it. Yeah, 0:02:08.639 --> 0:02:16.600 you win this episode. Matt Gooley of Fidelity. All right, Matt, 0:02:16.639 --> 0:02:19.480 we just described you. How would you describe yourself? That 0:02:19.480 --> 0:02:22.400 that's a pretty lofty description and background you gave on me. Thanks. 0:02:22.440 --> 0:02:25.760 I remember ten years ago when Eric was the Bloomberg consultant. 0:02:25.840 --> 0:02:27.720 I was at spider et S and couldn't figure out 0:02:27.720 --> 0:02:29.400 how to turn on my computer and he was showing 0:02:29.400 --> 0:02:30.920 me how to use Bloomberg for the first time. So 0:02:31.040 --> 0:02:33.239 I guess we've come along. Did he help you turn 0:02:33.280 --> 0:02:36.040 on your computer? I told you I used to. I 0:02:36.120 --> 0:02:38.760 was the Walmart manager of the data and sometimes they 0:02:38.760 --> 0:02:43.639 send me to Aisle four to help Aisle four. Yeah, 0:02:43.880 --> 0:02:46.799 clean up on Aisle four. So my first job, Matt 0:02:46.800 --> 0:02:48.920 doesn't know how to log in this before AI, before 0:02:49.000 --> 0:02:51.840 robotics or anything like. My first job a spider Ets 0:02:51.919 --> 0:02:54.360 was aggregating news. We sent out a weekly email called 0:02:54.400 --> 0:02:56.720 the Chatterbox, and it was this big deal if if 0:02:56.760 --> 0:02:58.440 a blogger would talk about e t s and now 0:02:58.440 --> 0:03:00.280 you read about them in the Wall Street Journal. So 0:03:00.320 --> 0:03:03.960 how did you get that job at spider Luck chance 0:03:05.000 --> 0:03:06.920 fell into it? How did how did you find the 0:03:06.919 --> 0:03:10.240 e t F. I think growing up in Boston it 0:03:10.280 --> 0:03:12.680 was more of who are the major employers and financial services. 0:03:12.760 --> 0:03:15.320 Knew I wanted to do financial services. I remember getting 0:03:15.320 --> 0:03:17.200 a call from a family friend and saying, look, there's 0:03:17.240 --> 0:03:20.320 this small division within State Free Global Advisors that's working 0:03:20.320 --> 0:03:22.520 on E t S. Might be something worth it looking into. 0:03:22.600 --> 0:03:24.520 Got introduced to Dodd Kinsley, who I know, you know 0:03:24.680 --> 0:03:27.799 Eric and and the rest of history. I guess history 0:03:27.840 --> 0:03:30.520 already it was like a decade ago. Let me ask 0:03:30.560 --> 0:03:33.040 you this question because I remember when I covered ETS. 0:03:33.040 --> 0:03:35.240 We covered this a couple of weeks ago. There's like 0:03:35.240 --> 0:03:37.880 a light bulb moment where you're like, damn, this thing 0:03:38.000 --> 0:03:41.840 is like five evolutionary steps beyond other structures. It's going 0:03:41.880 --> 0:03:43.600 to be a big deal. Did you have that moment 0:03:43.640 --> 0:03:46.520 at Spider And how fast did it happened? Totally? It 0:03:46.560 --> 0:03:48.120 was probably year two or year three. I knew it 0:03:48.160 --> 0:03:50.280 was into something special and knew there was growth. And 0:03:50.280 --> 0:03:52.560 I think the big evolution for me in my career anyways, 0:03:52.640 --> 0:03:55.280 is that at the time we thought about financial advisors, 0:03:55.320 --> 0:03:57.280 we thought about institutions. It was it was really cool 0:03:57.280 --> 0:04:00.360 to think about hedge fund utilization and pension using e 0:04:00.400 --> 0:04:03.360 T s now in the seat I'm in working at Fidelity. 0:04:03.520 --> 0:04:05.320 I think the thing that excites me most is mainstream 0:04:05.360 --> 0:04:07.320 America like and we'll get into this a little bit 0:04:07.400 --> 0:04:10.040 later in the show, but but it's just very very 0:04:10.040 --> 0:04:13.000 early in terms of retail households using E T s. 0:04:13.040 --> 0:04:14.840 Were you at Spider when they launched g L D 0:04:16.040 --> 0:04:18.359 uh No, that was before. It was a couple of 0:04:18.360 --> 0:04:20.240 months before my time, but it was there for j 0:04:20.440 --> 0:04:22.440 n K and and a lot of the fixed income 0:04:22.839 --> 0:04:26.120 controversial j n K, what was the launch that made 0:04:26.120 --> 0:04:29.200 you go WHOA? It was probably some of the fixed income, 0:04:29.279 --> 0:04:30.600 It was some of the high yield, some of the 0:04:30.680 --> 0:04:33.440 municipal bond ETFs. There were two issuers at the same time, 0:04:33.520 --> 0:04:35.320 launching products a week apart, and it was a race 0:04:35.360 --> 0:04:37.600 to who could get to a hundred million first. But 0:04:38.040 --> 0:04:39.800 that was that was the time that felt real to me. 0:04:39.800 --> 0:04:41.320 And you mentioned g L D. I think those are 0:04:41.320 --> 0:04:43.359 the funniest phone calls we got in those days. Is 0:04:43.360 --> 0:04:44.800 is every other phone call you would get from the 0:04:44.800 --> 0:04:49.039 client was is the gold really in the vault? Is it? Though? 0:04:50.160 --> 0:04:52.520 I'm going to a vault. We we got to get in. 0:04:53.279 --> 0:04:55.400 We've been trying to get somebody in a vault uh 0:04:55.600 --> 0:04:57.840 to interview the gold for a couple of months now. 0:04:57.880 --> 0:04:59.520 So if anybody out there is listening, who can get 0:04:59.560 --> 0:05:02.640 us into there's like twenty gold funds at this point. Um, 0:05:02.680 --> 0:05:04.440 we're coming for you. Yeah, we we really want to 0:05:04.440 --> 0:05:06.560 get your goal. Yeah, we want to see the man 0:05:06.640 --> 0:05:08.840 with the machine gun guarding it. And it just Eric 0:05:08.920 --> 0:05:11.240 keeps saying that, I just want to see the goal. Yeah, 0:05:11.680 --> 0:05:13.440 I want to talk to the guard. They might put 0:05:13.440 --> 0:05:14.839 a mask over your head, you know when they drive. 0:05:14.880 --> 0:05:16.720 I'll do it. I'll do it. I'll put the bag 0:05:16.760 --> 0:05:19.159 over my head, drive me around the city. I don't 0:05:19.200 --> 0:05:21.560 care where I get out. Well, I mean, I want 0:05:21.560 --> 0:05:23.599 to come home. But I get that question. I'm not 0:05:23.640 --> 0:05:25.320 even I don't even work at Spider or any of 0:05:25.320 --> 0:05:27.080 the goal places. I get that question a lot when 0:05:27.120 --> 0:05:29.359 I go on on the road to do presentations. People 0:05:29.400 --> 0:05:31.120 want to know if the gold is really there. It's 0:05:31.120 --> 0:05:33.720 a top five question. So what are the top five 0:05:33.800 --> 0:05:36.960 questions that you get today in the current role, which 0:05:37.000 --> 0:05:38.760 is what, by the way, what's your job? So current 0:05:38.800 --> 0:05:41.360 job fidelity is is E T F guys Eric put 0:05:41.360 --> 0:05:42.960 it or one of you put it? But really it's 0:05:43.040 --> 0:05:46.039 educating our financial advisors on our platform and in the industry, 0:05:46.040 --> 0:05:47.640 and then retail investors on how to use e t 0:05:47.800 --> 0:05:49.600 F s. So in some ways we're running the same 0:05:49.600 --> 0:05:51.720 playbook we ran five years ago, ten years ago, e 0:05:51.800 --> 0:05:54.279 t F education, how to use them. That's really the 0:05:54.360 --> 0:05:56.440 role right now is is et F education and then 0:05:56.680 --> 0:05:59.039 the role of fidelity products in that right. So in 0:05:59.080 --> 0:06:02.000 the last four years, we've launched over twenty products. Every 0:06:02.000 --> 0:06:03.480 time we launch a new product, we spend a lot 0:06:03.520 --> 0:06:05.960 of time with our client facing teams educating them on 0:06:06.000 --> 0:06:08.080 the product, how it works. How many products have you 0:06:08.120 --> 0:06:13.680 sensed it if you've launched that many zero? Yeah, going 0:06:13.680 --> 0:06:16.040 back to the two three when we launched one queue, Um, 0:06:16.440 --> 0:06:19.039 we haven't closed in et F as of yet. So 0:06:19.360 --> 0:06:21.880 what's the number one question that people ask you number 0:06:21.880 --> 0:06:25.040 one question today? I think most of the questions we're 0:06:25.040 --> 0:06:28.240 still getting our around trading right best practices, and that's 0:06:28.240 --> 0:06:30.200 not just advisors, that's retail investors. So if you think 0:06:30.240 --> 0:06:32.600 about the client experience, the customer experience, that's something we're 0:06:32.600 --> 0:06:34.800 thinking about all the time. Is someone's interacting on fiddli 0:06:34.880 --> 0:06:36.640 dot com or on their treating portal, what does it 0:06:36.640 --> 0:06:39.279 look like and and you know this is et s 0:06:39.279 --> 0:06:41.480 still sit kind of within the stock framework. So you 0:06:41.560 --> 0:06:43.640 put up a trade ticket and will say market order 0:06:43.720 --> 0:06:45.880 versus limit order. For someone who's only ever bought a 0:06:45.960 --> 0:06:48.599 mutual fund, that can be something that you have to 0:06:48.600 --> 0:06:50.520 walk through with them. So that's probably the number one 0:06:50.600 --> 0:06:52.400 question we get in the retail spaces. How do you 0:06:52.400 --> 0:06:54.800 trade et s? What are best practices for trading et s? 0:06:54.880 --> 0:06:57.599 And how do you respond to that? We always encourage 0:06:57.600 --> 0:06:59.760 people to consider limit orders, right, so if if it 0:06:59.800 --> 0:07:02.520 needs YEF and you're putting a market order out there, uh, 0:07:02.680 --> 0:07:05.880 that can lead to to a suboptimal outcome for trading execution. 0:07:06.160 --> 0:07:08.400 So we encourage folks to look at limit orders, to 0:07:08.480 --> 0:07:10.960 think about what's trading the overall market, and and just 0:07:11.000 --> 0:07:13.480 to be thoughtful about their approach for trading ETFs. Let's 0:07:13.480 --> 0:07:15.120 just break this down, because I think there's some people 0:07:15.160 --> 0:07:17.240 who are like, what's a market limit order? Can you 0:07:17.280 --> 0:07:22.520 talk about? Break it down? Your DJ mix sound sounded 0:07:22.600 --> 0:07:26.080 your scratching sounded exactly like your squeaky wheel Squeaky Wheel 0:07:26.080 --> 0:07:28.840 at the supermar very very similar. You gotta work with 0:07:29.200 --> 0:07:33.160 their cousins. I take that one back to the moment. Okay, right, 0:07:34.200 --> 0:07:37.320 limit orders you know, as an analyst, were always told 0:07:37.320 --> 0:07:40.200 to just default to limit order, but you have you 0:07:40.240 --> 0:07:42.480 have access to some of the data that people are 0:07:42.560 --> 0:07:45.560 using on your platform. What's the breakdown between people using 0:07:45.600 --> 0:07:48.800 market orders and limit orders? And and it just go 0:07:48.920 --> 0:07:52.960 through what each is. Sure, So market order is the 0:07:53.000 --> 0:07:55.040 majority of the client orders we see, and I think 0:07:55.120 --> 0:07:57.440 most people in ETF space that could be alarming, right, 0:07:57.600 --> 0:07:59.960 and it's close to sevent our orders are market orders. 0:08:00.240 --> 0:08:02.200 But for the overwhelming majority of e t F to 0:08:02.240 --> 0:08:04.840 trade millions, if not billions of day a day, that's 0:08:04.920 --> 0:08:07.960 that's not a big problem. Limit orders are the minority. 0:08:08.160 --> 0:08:10.240 Limit order is you're setting a price, but you don't 0:08:10.280 --> 0:08:12.480 know at what time it will execute. Market orders a 0:08:12.480 --> 0:08:14.320 little bit of the inverse of that. So you want 0:08:14.320 --> 0:08:16.680 it executed now, you want it executed the best price 0:08:16.680 --> 0:08:20.239 available now, and you're willing to sacrifice price for time 0:08:20.480 --> 0:08:22.760 now in that case, right, let's say it's a big 0:08:22.760 --> 0:08:25.240 liquid one like I v V or J and K 0:08:25.440 --> 0:08:27.400 or something like we mentioned or g l D. Is 0:08:27.400 --> 0:08:29.320 there a case where market order just makes more sense 0:08:29.320 --> 0:08:31.280 because it's so liquid, it will just digest to order 0:08:31.320 --> 0:08:33.720 and you'll get a good deal. Is there a point 0:08:33.760 --> 0:08:36.360 where if it doesn't trade a certain amount, then you 0:08:36.360 --> 0:08:39.000 should go limit order because the spreads are wider and 0:08:39.040 --> 0:08:40.600 if you put a limit order and it's likely you 0:08:40.640 --> 0:08:43.240 could save a few basis points on that, right, how 0:08:43.400 --> 0:08:44.760 do you work that out? Yeah? It's kind of like 0:08:44.760 --> 0:08:46.480 when you're crossing the street of three young kids and 0:08:46.480 --> 0:08:48.280 you're tell them across the street and look both ways. 0:08:48.640 --> 0:08:50.600 When do you tell them to look both ways before 0:08:50.600 --> 0:08:52.160 they crossed the street. For us in the e t 0:08:52.240 --> 0:08:55.120 F market, it's probably of volume, right, if your trade 0:08:55.240 --> 0:08:57.760 order represents of what that e t F trades in 0:08:57.760 --> 0:08:59.679 a given day, you want to at least stop, look 0:08:59.720 --> 0:09:02.200 to the flock to the right, think about what you're doing. Uh. 0:09:02.280 --> 0:09:04.000 That's a general rule of thumb we use for for 0:09:04.080 --> 0:09:06.240 kind of trade order guidance. But let's say I'm trading 0:09:06.280 --> 0:09:08.560 one of your lesser liquid products, like the high dividend 0:09:08.760 --> 0:09:11.559 et F and it trades a five thousand shares a 0:09:11.600 --> 0:09:14.160 day or something. Would you tell me to put a 0:09:14.160 --> 0:09:17.520 limit order in always? Or can you do a market order? 0:09:17.800 --> 0:09:20.240 Not necessarily? I think if if you're a retail client 0:09:20.400 --> 0:09:22.600 and time is important to you, and you want that 0:09:22.600 --> 0:09:25.000 trade downe at ten am versus two pm in the afternoon, 0:09:25.400 --> 0:09:28.280 mark orders is your option. So one of the things though, 0:09:28.520 --> 0:09:31.240 in general about e t f s and the knock 0:09:31.360 --> 0:09:34.080 is that you know, they really facilitate trading, Right, I 0:09:34.080 --> 0:09:36.040 can sit there all day and just day trade, day trade, 0:09:36.120 --> 0:09:39.000 day trade as a retail investor, and maybe that's not 0:09:39.080 --> 0:09:41.679 the best thing for me, right, So how do you 0:09:41.720 --> 0:09:45.800 guys talk about that with clients? Yeah, I think that's 0:09:45.800 --> 0:09:47.360 that's a little bit of a myth out there. Certainly 0:09:47.400 --> 0:09:49.720 there's active traders, and out of the nine million households 0:09:49.720 --> 0:09:52.320 we have on the platform, uh that we have about 0:09:52.440 --> 0:09:54.640 one million of those nine million households they're using ets 0:09:54.640 --> 0:09:56.960 in some way, shape or form. Of that one million, 0:09:57.000 --> 0:09:59.400 it's a relatively small majority of of day trader as 0:09:59.400 --> 0:10:01.199 an active trade or as many of the people using 0:10:01.240 --> 0:10:03.839 ETFs now are buy and hold investors. We ran some 0:10:03.960 --> 0:10:05.719 analysis I think it was two years ago that looked 0:10:05.760 --> 0:10:07.800 at holding periods, and the holding periods were up close 0:10:07.880 --> 0:10:10.440 to two years for the average GTF position. And you 0:10:10.440 --> 0:10:12.560 think about we're launching new products as in the industry 0:10:12.559 --> 0:10:15.360 every day, the industry is growing. That holding period was 0:10:15.440 --> 0:10:17.160 roughly in line with what you see with mutual funds. 0:10:17.160 --> 0:10:18.720 And I don't have the data my fingertips, but the 0:10:18.760 --> 0:10:20.880 point is that it's not as if because we're giving 0:10:20.880 --> 0:10:22.680 people trading access into a day that they're trading and 0:10:22.679 --> 0:10:24.959 all the time. And you look back on a kind 0:10:24.960 --> 0:10:27.240 of historical basis if you might remember this, but four 0:10:27.320 --> 0:10:29.600 one ks used to be monthly, they weren't daily. And 0:10:29.679 --> 0:10:31.680 the question was, well, if you give people daily access 0:10:31.679 --> 0:10:34.040 to their four and case traded every day and the 0:10:34.040 --> 0:10:37.120 answer generally is no, people are belong buy and hold investors. 0:10:37.280 --> 0:10:40.600 Of that data you just talked about on households, is 0:10:40.640 --> 0:10:42.800 that regarding just your e t F s or all 0:10:42.840 --> 0:10:44.880 the e t F they could be. That's all the 0:10:44.880 --> 0:10:46.560 ETF And that's why it gets me so excited about 0:10:46.600 --> 0:10:48.560 the space. So when I gave those steps before, there's 0:10:48.600 --> 0:10:52.199 nine million households on the Fidelic brokerage platform, roughly about 0:10:52.240 --> 0:10:53.920 one million of them use any t F, not just 0:10:53.960 --> 0:10:56.200 to Fidelity ETF but any TF, so eleven percent of 0:10:56.200 --> 0:10:59.160 the population. But within that and we're going over your 0:10:59.160 --> 0:11:03.920 history before prior to Bloomberg right where Institutional Investors publication 0:11:04.080 --> 0:11:05.839 two jobs before that, but my first job out of 0:11:05.840 --> 0:11:08.480 school was Institutional Investors newsletter Division. So did you have 0:11:08.520 --> 0:11:11.960 the job up here? Then I did, Yeah, first job, 0:11:13.160 --> 0:11:14.880 I had my depth going hard. I was like a 0:11:14.920 --> 0:11:17.559 twenty one year old in New York City living in Manhattan. 0:11:18.040 --> 0:11:21.240 I mean, I'm still catching up on sleep. So I 0:11:21.280 --> 0:11:23.200 didn't mean to go down this path. But my point was, 0:11:23.200 --> 0:11:24.520 I presumed they paid you at the time, and I 0:11:24.559 --> 0:11:25.959 presumed you had a four one K and maybe you 0:11:26.080 --> 0:11:27.720 rolled it over into an I RA, and maybe that 0:11:27.760 --> 0:11:29.560 money just sat there forever and you didn't really play 0:11:29.600 --> 0:11:31.480 with it. And now you're making the big bucks at Bloomberg, 0:11:31.520 --> 0:11:34.320 so you're you're investing in other things. My point there 0:11:34.400 --> 0:11:37.880 is that if client accounts underneath a hundred thousand dollars, 0:11:37.920 --> 0:11:41.440 only eleven percent across the board on ets. But I 0:11:41.480 --> 0:11:43.400 started to look at client accounts that are over a 0:11:43.480 --> 0:11:45.360 hundred thousand dollars of people who are probably spending some 0:11:45.400 --> 0:11:47.080 time looking at their investments. And that's where it gets 0:11:47.080 --> 0:11:49.600 really interesting, is is on the whole of client accounts 0:11:49.640 --> 0:11:51.920 that are over a hundred thousand dollars, millennials are really 0:11:52.000 --> 0:11:55.480 driving us. Of millennial accounts with over hundred thousand dollars 0:11:55.480 --> 0:11:57.520 own an e t F that's much more than gen X, 0:11:57.559 --> 0:11:59.559 that's much more than baby boomers. They're going to be 0:11:59.559 --> 0:12:01.840 the ones that are driving this and of those millennials 0:12:01.840 --> 0:12:04.560 that hold ets on our platform. If you hold an ETF, 0:12:04.920 --> 0:12:08.600 it represents your assets. So I think as you see 0:12:08.880 --> 0:12:11.800 some of the baby boomers retire and do accumulate assets, 0:12:11.840 --> 0:12:14.520 millennials driving the growth the industry. That's what I'm really 0:12:14.520 --> 0:12:17.560 excited about. Are you a millennial? What's the cut off? 0:12:18.559 --> 0:12:21.160 It's it's kind of like one is sort of which 0:12:21.280 --> 0:12:23.960 I am. I am a millennial. Yeah, okay, he's got 0:12:24.000 --> 0:12:26.040 some gen X in them, though, I can just tell 0:12:26.160 --> 0:12:28.720 he's not full blown giving him permission. Yeah, look, I 0:12:28.760 --> 0:12:31.560 look like a gen xer. Do you remember when Nirvana 0:12:31.600 --> 0:12:34.280 came out? Yes, okay, well he can't's not you can't 0:12:34.280 --> 0:12:37.200 be full millennial if you have something full millennial. Yeah, 0:12:37.480 --> 0:12:41.079 so you're like you're like maybe half millennial, like like 0:12:41.280 --> 0:12:43.800 your millennial if your first rock band was like The Strokes. 0:12:45.480 --> 0:12:50.079 That's not me okay, okay, So why why is there 0:12:50.120 --> 0:12:54.199 so much enthusiasm with millennials From your perspective, I think 0:12:54.240 --> 0:12:55.839 they're still learning about it, but they view e t 0:12:56.160 --> 0:12:58.679 S as lower cost as more tax efficient. I think 0:12:58.720 --> 0:13:01.160 the interesting thing about ETFs, there's not one reason that 0:13:01.200 --> 0:13:04.080 someone buys an ETF. It's a whole host of reasons. 0:13:04.120 --> 0:13:06.000 It could be lower costs, could be in day trading, 0:13:06.440 --> 0:13:07.679 could be any of that. And I think they're being 0:13:07.720 --> 0:13:09.640 introduced to it by a lot of the robo advisors, 0:13:09.640 --> 0:13:11.680 by a lot of the digital platforms that are using ETF. 0:13:11.800 --> 0:13:14.040 So if an ETF shows up in your managed account, 0:13:14.080 --> 0:13:16.079 let's say that's going to be the first product that 0:13:16.120 --> 0:13:17.800 you kind of grow up using. And I think that's 0:13:17.800 --> 0:13:19.600 what a lot of millennials are using, is they're using 0:13:19.600 --> 0:13:22.840 different applications and different sources for investing. So you have 0:13:22.960 --> 0:13:26.160 one million of your nine million people using your platform 0:13:26.240 --> 0:13:30.160 that use ETFs in some way. I mean, are where 0:13:30.160 --> 0:13:33.200 are we looking at this number in say ten years, 0:13:33.520 --> 0:13:36.040 let's just even go twenty, because you're talking about bay 0:13:36.080 --> 0:13:40.440 Boomers eventually passing on assets and millennials clearly like this structure. 0:13:41.240 --> 0:13:43.280 I mean, have you done any projections? Is this going 0:13:43.360 --> 0:13:45.720 to be like seven out of nine or all nine? 0:13:45.800 --> 0:13:48.760 I mean one of your podcasts recently, somebody was projecting 0:13:48.760 --> 0:13:50.319 thirty trillion. I don't think i'd be that bold in 0:13:50.360 --> 0:13:52.320 the next ten years that might have been. That was 0:13:52.480 --> 0:13:56.480 a thirty by thirty, the thirty trillion by thirty. A 0:13:56.520 --> 0:13:59.320 lot of that is market cap accumulation of the stock markets, 0:13:59.360 --> 0:14:01.800 but it's still definitely ambitious. I mean, let's go back 0:14:01.800 --> 0:14:03.800 in time. I mean, I don't have any projections for you, 0:14:03.840 --> 0:14:06.439 but I think a historical perspective is interesting. Right, that 0:14:06.520 --> 0:14:09.960 was the time all the sound effects in the studio 0:14:09.960 --> 0:14:12.440 are great. Here. I just think he watched Police Academy 0:14:12.440 --> 0:14:15.040 way too much. Remember that sound effects guy. Yeah, he 0:14:15.480 --> 0:14:17.880 was highly inspired. Okay, so we went back in time. 0:14:17.960 --> 0:14:19.600 So we go back in time. We're in the eighties 0:14:19.640 --> 0:14:23.880 when the millennials are being born. Eric's like sweet spot. Yeah, 0:14:24.240 --> 0:14:26.720 cultural references glory. So I see, I looks at what 0:14:26.800 --> 0:14:28.880 percent of Americans held mutual funds every year, and they 0:14:28.920 --> 0:14:31.000 go back to the eighties, and you think about that's 0:14:31.040 --> 0:14:33.840 when mutual funds first start showing up in four one 0:14:33.920 --> 0:14:37.200 K plans, and the percent of American households that held 0:14:37.280 --> 0:14:41.120 mutual funds in the late nineteen eighties was about and 0:14:41.160 --> 0:14:43.000 that's kind of where we're at now, right, So I said, 0:14:43.040 --> 0:14:46.520 millennials on the moment, but in the masses it's about. 0:14:47.520 --> 0:14:49.360 So think about the growth of ets. We're kind of 0:14:49.360 --> 0:14:52.480 in the year seven in terms of the growth trajectory, 0:14:52.680 --> 0:14:55.080 and then think about how quickly mutual funds grew in 0:14:55.120 --> 0:14:57.040 the nineties, and that's what's ahead of us for e 0:14:57.080 --> 0:15:04.720 t S. Okay, So, Matt, one of the things I'm 0:15:04.760 --> 0:15:09.080 really interested about is how Fidelity, which really created its 0:15:09.160 --> 0:15:14.360 name through actively managed mutual funds, has in recent decades 0:15:14.400 --> 0:15:19.800 adopted ETFs. So what's that like culturally inside Fidelity? I 0:15:19.840 --> 0:15:21.880 think it's a really exciting time. If you think about 0:15:21.920 --> 0:15:26.120 the masses of investment professionals and analysts and portfolio managers 0:15:26.120 --> 0:15:29.000 we have, they're excited about the et F initiative. For us, 0:15:29.040 --> 0:15:31.360 it's just a different delivery mechanism. It's a different structure 0:15:31.400 --> 0:15:33.200 to do what we're already doing on a daily basis 0:15:33.200 --> 0:15:34.760 in a mutual fund or in a managed to counter 0:15:34.840 --> 0:15:36.560 or in a c I T And I'll give you 0:15:36.560 --> 0:15:39.560 an example. You know this, but two years ago we 0:15:39.640 --> 0:15:43.040 launched factory tfs. These are Fidelity ETFs that track of 0:15:43.080 --> 0:15:46.280 Fidelity index. That index was built by our product team 0:15:46.280 --> 0:15:49.600 and our quantitative team. That quant team sits with active 0:15:49.600 --> 0:15:52.480 portfolio managers on a daily basis, managing risk and helping 0:15:52.520 --> 0:15:55.400 pick stocks. So active is very much in our DNA. 0:15:55.520 --> 0:15:58.240 We believe in active management. It's just being built in 0:15:58.280 --> 0:16:01.400 a different structure and in a different every mechanism for consumers. 0:16:02.040 --> 0:16:04.480 So we talk a lot about these E t F 0:16:04.600 --> 0:16:06.680 and how to make a portfolio because ultimately that's what 0:16:06.680 --> 0:16:08.200 you're trying to do. These are the raw materials you 0:16:08.240 --> 0:16:12.600 put into a portfolio. Is the portfolio changing? Is it? 0:16:12.640 --> 0:16:15.080 Is it becoming more of like instead of having your 0:16:15.680 --> 0:16:18.480 core equity be a large cap growth funder or value 0:16:18.480 --> 0:16:21.840 fund or large cap blend, it's now like a cheap 0:16:22.080 --> 0:16:25.760 smp FI et F and then you keep your core 0:16:25.800 --> 0:16:28.320 real passive and cheap, and then you kind of go 0:16:28.360 --> 0:16:30.160 on the outside with your active Do you see a 0:16:30.240 --> 0:16:35.120 shift that the active manager will be much more on 0:16:35.160 --> 0:16:37.280 the outside, used, as we like to say, like hot 0:16:37.320 --> 0:16:41.239 sauce or spice on top to try to get some alpha, 0:16:41.360 --> 0:16:44.040 which would allow the investor more patients to hang in 0:16:44.080 --> 0:16:45.960 there with some underperformance. It would allow them to get 0:16:45.960 --> 0:16:48.400 more active share. Do you see a shift in what 0:16:48.560 --> 0:16:51.840 active is used for and how it's used in a portfolio? Maybe, 0:16:51.840 --> 0:16:53.720 I mean, certainly you've seen a number of factor products 0:16:53.760 --> 0:16:55.680 come into the marketplace, and that's a little bit of 0:16:55.760 --> 0:16:57.840 active but I don't necessarily see that. And I think 0:16:57.880 --> 0:17:00.200 a good example is is FBNDR Total Bond e t 0:17:00.320 --> 0:17:03.160 F that portfolio management team led by Ford O'Neil. They've 0:17:03.160 --> 0:17:05.240 been running a mutual fund version of that. It's not 0:17:05.280 --> 0:17:09.040 exactly a clone, but it's it's similar for years, and 0:17:09.119 --> 0:17:11.239 we're just delivering that in the ETF structure. But we're 0:17:11.320 --> 0:17:13.159 running it very similar to what we run in the 0:17:13.200 --> 0:17:16.280 mutual funds. We're not changing our fundamental investment process or 0:17:16.280 --> 0:17:19.000 bottoms up research. We're just delivering it in a different structure. 0:17:19.040 --> 0:17:20.640 So I don't know if I you know, that could 0:17:20.640 --> 0:17:24.120 be the case in certain areas, but it's not fundamentally 0:17:24.160 --> 0:17:27.399 changing the way we manage money. And what about how 0:17:27.480 --> 0:17:30.480 people are managing their own money, because I mean, we 0:17:30.480 --> 0:17:32.879 were just talking about the mutual fund growth from the 0:17:32.920 --> 0:17:36.119 eighties nineties, Like the one of the reasons that it 0:17:36.160 --> 0:17:39.399 took off was that, you know, you guys have a 0:17:39.480 --> 0:17:43.000 platform that is my four oh one K, and my 0:17:43.200 --> 0:17:47.920 four oh one K auto fills every pay period into 0:17:48.000 --> 0:17:50.440 that account, right, But yet e t f s are 0:17:50.520 --> 0:17:54.879 barely in that device yet right in the four So 0:17:55.359 --> 0:17:59.240 how do you guys see that evolving? Yeah, so specifically 0:17:59.240 --> 0:18:01.280 ets within four OW one case, you do see them 0:18:01.320 --> 0:18:02.960