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Speaker 1: This is Masters in Business with Barry Ridholts on Boomberg

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Speaker 1: Radio this weekend on the podcast what Can I Say?

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Speaker 1: This was a master class in how to build a

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Speaker 1: powerhouse r i A. Peter Maluke has been with Creative

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Speaker 1: Planning for twenty years. He kind of started as a

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Speaker 1: junior person, eventually buying the firm um for on on

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Speaker 1: a I guess an earned out basis when the then

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Speaker 1: founder wanted to retire and took what was essentially a

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Speaker 1: hundred and fifty million dollars or smaller firm and built

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Speaker 1: it up to a forty billion dollar powerhouse. If if

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Speaker 1: you want to learn the right way to manage money,

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Speaker 1: to deal with clients, to provide services, to grow a business,

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Speaker 1: then strap yourself in. This is a master class with

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Speaker 1: no further ado. My conversation with Creative Plannings Peter Maluke.

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Speaker 1: This is Masters in Business with Barry Ridholtz on Boomberg Radio.

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Speaker 1: My extra special guest this week is Peter Maluke. He

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Speaker 1: is the president and chief investment officer of Creative Planning,

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Speaker 1: affirm that manages about forty five billion dollars in assets

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Speaker 1: under management across nearly a hundred thousand client accounts. He

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Speaker 1: is the only person on Worth's list of one hundred

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Speaker 1: most Powerful people in global finance who actually advised clients.

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Speaker 1: He was listed number one on the Baron's Top one

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Speaker 1: hundred Independent Advisors for three consecutive years, and he is

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Speaker 1: the author of the book The Five Mistakes Every Investor

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Speaker 1: Makes and How to Avoid Them. Peter Maluke, Welcome to Bloomberg.

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Speaker 1: It's great to be here. Good to see again, Barry Uh.

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Speaker 1: I've been looking forward to having this conversation with you.

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Speaker 1: We spoke briefly at a conference in September, but that

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Speaker 1: was so short. Twenty minutes. A half hour just doesn't

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Speaker 1: get it done. And we should be able to wrap

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Speaker 1: this up by dinner time and I'll get to every

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Speaker 1: question I have for you. I have to start with

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Speaker 1: your career because it's a little unusual. You get a

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Speaker 1: j d, m b A so a legal degree and

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Speaker 1: a business degree from the University of Kansas in what

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Speaker 1: what was your career plans? Where did you think you

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Speaker 1: would go with that? So? I didn't have any career plans.

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Speaker 1: A lot of people look at my college education history

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Speaker 1: and think there was some master master plan, or I

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Speaker 1: think I've perceived as as a strategic planner when it

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Speaker 1: comes to business, and the amount of just good fortune

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Speaker 1: and luck along the way is tremendously underestimated. I for sure,

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Speaker 1: when I was doing UH an undergrad I just took business,

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Speaker 1: just took business because I thought I liked business, and

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Speaker 1: I added other majors that were interesting to me. And

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Speaker 1: then I got an MBA because I wasn't sure what

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Speaker 1: I wanted to do. And the same thing with the

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Speaker 1: law degree. There was a joint program at University of

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Speaker 1: Kansas where I went, and so I did both. So

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Speaker 1: I came out of college with a bunch of degrees.

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Speaker 1: But I still, even leaving campus and heading back by COMB,

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Speaker 1: I had no idea what I was gonna do. And

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Speaker 1: and somewhere along the lines, you were involved with used

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Speaker 1: record stores. Tell me about that, because in my misspent

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Speaker 1: youth I used to haunt you c D stores looking

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Speaker 1: for cheap albums and discs um that were used. What

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Speaker 1: what brought you to that space? So you know, I

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Speaker 1: don't know where this entrepreneurial thing came from. I know

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Speaker 1: my mom really encouraged it when I was younger, and

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Speaker 1: I remember UH always having a paper route, which meant

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Speaker 1: you know, I couldn't drive a car when I had it.

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Speaker 1: I was twelve. So my my dad, you know, drove

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Speaker 1: the paper out and I threw the You weren't on

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Speaker 1: the back of a bike, that's how. That's how so

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Speaker 1: in suburban New York, that's how you When I had

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Speaker 1: a paper out, it was a bike with you would

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Speaker 1: put a bunch of baskets on and you would go

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Speaker 1: down the street flinging papers both ways. I thought they

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Speaker 1: only did that in movies. No, not all that was real.

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Speaker 1: But that's when you're in a tight suburban neighborhood. You

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Speaker 1: sound like you were in a little more spread out

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Speaker 1: spread I mean in Kansas, spread out suburban neighborhood house

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Speaker 1: to another, you'd get you to get worn out sometimes.

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Speaker 1: And so I just set out the back of a

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Speaker 1: station wagon and throw and throw the newspapers. Uh. Then

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Speaker 1: I had a lawnmowing business, and then I had a

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Speaker 1: DJ business. I loved music, um but the music stores

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Speaker 1: was probably the thing that was the biggest manifestation of

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Speaker 1: what I really enjoyed and having a business. And I

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Speaker 1: had started that while I was in college, and it had,

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Speaker 1: you know, but pretty much gone bankrupt by the time

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Speaker 1: I got out, So you really begin your career at

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Speaker 1: Creative Planning in what capacity did you join the firm?

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Speaker 1: And this was, by the way, a much much smaller

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Speaker 1: firm at the time. Right they was had been started

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Speaker 1: by three guys in the insurance business, and they had

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Speaker 1: an insurance arm and they mainly did disability insurance for physicians.

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Speaker 1: And one of them was really into investing all the

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Speaker 1: way back in the early eighties, you know, when I

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Speaker 1: was in grade school and he um so he started

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Speaker 1: Creative Planning as a sister company had you know, maybe

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Speaker 1: a few dozen clients basically using American funds, mutual funds

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Speaker 1: and and doing planning with with you know, by hand.

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Speaker 1: You know, I don't remember I took over. I look

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Speaker 1: at looking at the plans. I mean there was no

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Speaker 1: Internet back then. And in great technology we we take

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Speaker 1: things like money Guide pro for granted today really lets

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Speaker 1: you dig deep and and come up with a lot

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Speaker 1: of options. Yeah, I mean technology literally lets you scale

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Speaker 1: in the way you never could before in every in

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Speaker 1: every business, but just being born and now you could

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Speaker 1: do all these things that you could have never done

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Speaker 1: a long time ago, no matter how brilliant you were,

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Speaker 1: and uh. I had worked for somebody for two years

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Speaker 1: just advising this physician and his practice. And at the

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Speaker 1: same time, a couple of years after that, I started

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Speaker 1: working with advisors, doing wills and trusts and that sort

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Speaker 1: of advice for them, putting putting that legal degree to work.

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Speaker 1: That's right. So never been in a courtroom for for

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Speaker 1: anything ever with the practice of law, but I enjoyed

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Speaker 1: helping people. Hey, you've you've got this problem. You want

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Speaker 1: to fix it. You you probably hate dealing with lawyers.

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Speaker 1: I'm gonna make this easy. It's gonna take a few days,

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Speaker 1: it's gonna be a flat fee. I'm gonna explain it

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Speaker 1: in English. And that really took off. A lot of

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Speaker 1: advisors started to use me. I really learned a lot

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Speaker 1: from a lot of those advisors. A lot of them

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Speaker 1: were amazing, a lot of them were terrible. Um, a

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Speaker 1: lot of them were brilliant but did the wrong thing

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Speaker 1: and and a lot of them always did the right thing. Um.

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Speaker 1: And then creative planning. At the same time, their financial

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Speaker 1: planning team had left to start their own firm. They

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Speaker 1: asked me to come in. And when I take on

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Speaker 1: that department, I looked at it and thought you know,

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Speaker 1: I can do this and two days a week. It

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Speaker 1: was pretty straightforward. So I was doing that from and

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Speaker 1: at the same time, I was taken care of maybe

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Speaker 1: a hundred other advisors clients doing estate planning. So now

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Speaker 1: it's two thousand four and you say I have an idea, Yeah,

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Speaker 1: let's buy the firm. So first question is what what

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Speaker 1: motivated that blight bulbin? Oh four? By the way, before

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Speaker 1: the financial crisis, but not too long after the dot

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Speaker 1: com implosion? Right, you know the markets had only bottom

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Speaker 1: let's call it October two and then March oh three, right,

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Speaker 1: I mean I'd come right into the industry basically when

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Speaker 1: I was running creative plannings a few dozen clients. During

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Speaker 1: that period, you had the tech bubble and you had

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Speaker 1: nine eleven. So the markets were just, you know, a

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Speaker 1: disaster um during that period and the lightbulb going off.

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Speaker 1: Would you really think about it? Here I am for

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Speaker 1: six years, I'm doing financial planning and investments for some people,

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Speaker 1: and I'm doing a state and tax advice for other people,

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Speaker 1: And you would think the light bulb would have gone

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Speaker 1: off sooner, right that Hey, maybe people would like this

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Speaker 1: if it was all together, right, And so I knew

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Speaker 1: three things. I knew I wanted to be an independent advisor,

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Speaker 1: and I knew that I was not comfortable with dual registration.

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Speaker 1: Creative planning was duly registered at the time, and back

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Speaker 1: then that was very normal, and that was Hey listen,

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Speaker 1: back then r s were relatively that was and people

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Speaker 1: were just adding it to brokerage firm says, oh, let's

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Speaker 1: well for these services. Exactly right. I mean it was

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Speaker 1: innovative to even be an r A at all at

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Speaker 1: that point. Um. And I was very uncomfortable as an

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Speaker 1: attorney built maybe a complex of state plan with charitable

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Speaker 1: trust there bublble trust, and then find out and annuity

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Speaker 1: was in there that wasn't the right kind or shouldn't

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Speaker 1: be there at all. But they have a giant commission built, right,

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Speaker 1: and that's where they get sold. And so you go

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Speaker 1: and you do the legal. Then that advisor might do

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Speaker 1: things that aren't ideal. So I I wanted to a

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Speaker 1: firm that was independent, didn't sell its own products, was

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Speaker 1: able to combine all those things in one place, and

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Speaker 1: most importantly, could take each client and and change the

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Speaker 1: portfolio per their situation. And so I went to all

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Speaker 1: my clients, including Creative Planning and said, you know, I'm

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Speaker 1: going this is what I want to do. And the

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Speaker 1: owner of Creative Planning was basically like he had had

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Speaker 1: those two former partners. One had died very young, one

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Speaker 1: became disabled very young, and he said, you know what,

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Speaker 1: I've had enough of this. You know, if you want

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Speaker 1: to buy, if you want to take over Creative Planning,

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Speaker 1: go ahead. So did you do this yourself? Did you

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Speaker 1: bring in partners? Did you bootstrap it? How? How did

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Speaker 1: this transaction? I mean, we're talking about a firm that

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Speaker 1: had a couple hundred thousand of revenue. There wasn't I

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Speaker 1: mean it was so it wasn't a multimillion. I mean,

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Speaker 1: we're there and basically made monthly payments for a few

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Speaker 1: years and it was over. It was not We're talking

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Speaker 1: about a few dozen clients, and so what it was

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Speaker 1: really the advantage for me was I didn't have to

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Speaker 1: go create from al a from scratch. There was one there.

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Speaker 1: I already knew those those clients, and so I could

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Speaker 1: skip this like six month period of figuring all that

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Speaker 1: out and get on with it. Even even more, it's

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Speaker 1: like eighteen months by the time you're done with everything.

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Speaker 1: We did hours from scratching, you find yourself spending a

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Speaker 1: one amount of time with lawyers and accountants and compliance

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Speaker 1: people just to launch the farm, right, so you bypass that.

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Speaker 1: So now it's oh, four oh five, you're a hundred

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Speaker 1: million dollars in assets. When do things really start to

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Speaker 1: scale up? You're now forty five billion. That's a big jump,

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Speaker 1: you know it was. It was really instant in terms

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Speaker 1: of percentage growth. I mean every year it seemed it

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Speaker 1: was thirty or thirty growth, and it's never really stopped.

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Speaker 1: I mean they've been a couple of little more than

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Speaker 1: that in a couple of years, a little below that.

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Speaker 1: I mean the numbers change obviously, you know three years

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Speaker 1: ago where at eighteen billion, and now we're at almost

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Speaker 1: forty five. That seems crazy, but it might even be

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Speaker 1: a slower growth rate than when we went from a

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Speaker 1: hundred to five hundred. I think what we were doing

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Speaker 1: in the beginning was very innovative, and it doesn't sound

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Speaker 1: like it today to have a firm that was, you know,

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Speaker 1: dropping its dual registration, was totally independent. We were using

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Speaker 1: e t F. So I remember hearing from Van Vanguard

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Speaker 1: rep that we had larger holding of indexes than any

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Speaker 1: independent r A A. I'm hearing that No. Nine or

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Speaker 1: I remember having to explain when E T F was

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Speaker 1: two clients what pastive investing was. And then we were

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Speaker 1: doing the legal and tax and all of that in

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Speaker 1: one place. The way we delivered it was very efficient,

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Speaker 1: and we we were doing including the planning without a

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Speaker 1: separate feedback. Then if you're reading all the financial stuff,

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Speaker 1: it said, this is stupid. No one will value it

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Speaker 1: if you do it for free, and you always have

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Speaker 1: to charge. And so there were just a maybe six

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Speaker 1: or seven things we were doing that no one else

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Speaker 1: was doing that. Today a lot of people are doing um.

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Speaker 1: But the difference is today that's not enough. Today you

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Speaker 1: have to be more specialized, you have to be faster,

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Speaker 1: you have to cost less, you have to have much

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Speaker 1: much more credential people. It's gotten way more competitive. You know,

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Speaker 1: if I started this today, it wouldn't worked, right. I

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Speaker 1: think that back then it was very unique. It was

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Speaker 1: it was very on the front end of things, and

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Speaker 1: it allowed us to build a lot of a lot

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Speaker 1: of momentum. And you have a colleague that that sent

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Speaker 1: me a wonderful article about cumulative advantage, which is you

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Speaker 1: start to One of the things that people want in

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Speaker 1: this business is they want to feel safe. You know,

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Speaker 1: I mean you you if you're looking at hiring an advisor,

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Speaker 1: it's sort of like a restaurant. You know, we're here

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Speaker 1: in New York City. The way I picked where I

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Speaker 1: was eating last night as I want to trip advisor.

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Speaker 1: A trip advisor tell me where to eat last night, right,

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Speaker 1: So part of it is probably going to go to

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Speaker 1: a pretty good place, and the other part is I'm

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Speaker 1: probably not going to throw up, right, probably probably not,

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Speaker 1: probably not gonna be horrible. And I think people look

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Speaker 1: at advisors the same way. I think they want to

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Speaker 1: feel like, Okay, I'm at a place that's pretty safe. Okay,

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Speaker 1: this place has lots of clients, big clients, pretty sophisticated,

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Speaker 1: probably did a lot of due diligence. I feel safe there.

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Speaker 1: I'm probably gonna do all right. I'm probably not gonna

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Speaker 1: have a really bad outcome. It's just the way. So

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Speaker 1: I think as you as we're sitting in this world today,

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Speaker 1: people have been at nine eleven, the tech bubble, oh

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Speaker 1: eight oh nine, Bertie made off. Just there's so much

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Speaker 1: crap happening. Right. If you're an investor. You're really looking

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Speaker 1: at at this landscape and going, you know what, the

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Speaker 1: guy with two million dollars makes me a little nervous. Um.

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Speaker 1: And now not everybody thinks that there's a path for

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Speaker 1: the guy with two hundre million dollars, but there are

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Speaker 1: gonna be some people that person encounters that goes you know,

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Speaker 1: when you're bigger, or they might not use those words,

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Speaker 1: but that's what I had a lot of people that

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Speaker 1: didn't sign up with me in the first few years

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Speaker 1: that signed on years later, like say, my mom and dad,

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Speaker 1: I've been calling you president. Is that right? Good enough? Yeah?

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Speaker 1: The bro chief investment officer, chairman? Is there a preferred title?

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Speaker 1: Really it doesn't matter. But but you are the head

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Speaker 1: Han show at Creative Plants, which is a billion? Can

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Speaker 1: I call you forty five billion dollars? Is that? Are

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Speaker 1: you just very close? Depends on I guess it depends

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Speaker 1: on when this Brookt is going. That's right, depends on

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Speaker 1: where the market closes. Um. So let's talk about those

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Speaker 1: numbers because they're crazy. When you when you took over

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Speaker 1: the firm and O four it was it was a

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Speaker 1: hundred and change a hundred million dollars not a lot

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Speaker 1: of firm funds. How do you scale up that a

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Speaker 1: u M from a few million dollars to almost forty

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Speaker 1: billion dollars. Well, I think you have to have a

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Speaker 1: couple of different things. So I think that one, you

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Speaker 1: have to have a sound investment philosophy that's kind of

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Speaker 1: worked out for people. Right, You're not going to get

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Speaker 1: through all of those things and have your clients referring

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Speaker 1: other clients and aggregating their assets with you unless you

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Speaker 1: deliver on your promises. As one, you have to have

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Speaker 1: an investment approach that works. I think. Second, you have

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Speaker 1: to have more than that, um and and so we

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Speaker 1: we have more than that. We've been planning and legal

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Speaker 1: and tax and trust services and institutional services and all

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Speaker 1: of those things. UM. Third, you have to have the people.

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Speaker 1: And I think this industry, and I've spoken about this

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Speaker 1: a couple of times before with you, the people in

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Speaker 1: this industry are tremendously underrated, and I think they're viewed

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Speaker 1: as interchangeable. And if you watch the behavior of a

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Speaker 1: lot of financial services firms, they view the people as interchangeable.

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Speaker 1: Like you look at some of these firms now, there's

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Speaker 1: a lot of press around them, preparing for the next recession.

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Speaker 1: At low rates, they're not going to make as much

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Speaker 1: money holding money, So what do they do. A lot

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Speaker 1: of them aren't firing their bottom performers. They're firing their

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Speaker 1: highest compensated people, which you know, presumably are their highest

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Speaker 1: compensated people because they rose to levels the highest performers,

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Speaker 1: and they go in and go, we're gonna fire all

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Speaker 1: those people, which obviously the assumption is that other people

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Speaker 1: will just naturally make that work out. I don't hold

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Speaker 1: that view at all. I think that, you know, when

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Speaker 1: I have a I'm looking for health care for someone

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Speaker 1: in the family or myself, or I'm looking for a lawyer,

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Speaker 1: I do not view all physicians are lawyers equally. But

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Speaker 1: this industry really views people as equal, and I never have.

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Speaker 1: I mean, from the very very first higher I knew

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Speaker 1: the importance of people. And I've personally witnessed and received

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Speaker 1: the consequences of mostly wonderful hiring and you know, a

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Speaker 1: couple of really bad hires. And if you attribute almost

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Speaker 1: a huge percentage of the success to getting the right

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Speaker 1: type of people, and really the biggest grief I've had

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Speaker 1: in my career to one or two people I hired

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Speaker 1: that were mistakes. How many employees are you up to now?

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Speaker 1: About six? So at a certain point you're no longer

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Speaker 1: interviewing every single person, right, you know, I'm in I'm

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Speaker 1: interviewing them all, but you're you're the final check off. Yeah,

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Speaker 1: that's a better way to put it. I mean I'm

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Speaker 1: not running that. I mean before they're getting to me,

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Speaker 1: they've been through a background check at the blian's check,

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Speaker 1: They've they've interviewed with a talent acquisition team, the head

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Speaker 1: of their department, usually somebody else. Then they're coming to me.

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Speaker 1: But I would say, you know, one and three is

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Speaker 1: not getting past me after even after all of that. Um,

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Speaker 1: it's just for I have a of the firm as

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Speaker 1: a whole, um and I have you know, sometimes if

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Speaker 1: you've got ahead of the department, they really have a

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Speaker 1: need right that you you have this you want to

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Speaker 1: fill it. Right. So you're interviewing somebody and you're looking

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Speaker 1: for reasons to hire them, and I'm really looking for

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Speaker 1: somebody in going if this doesn't work out a year

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Speaker 1: from now, why is that? What is it about this

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Speaker 1: person of interviewing that's not going to feel? Uh? That

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Speaker 1: could be the reason for that, I'm gonna look at

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Speaker 1: the investments the same way I'm looking at a DO investment.

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Speaker 1: I'm saying, if this blows up in my face, right,

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Speaker 1: I've got to explain this to clients a year from

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Speaker 1: now or ten years from now. What what was the

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Speaker 1: scenario that made that happen? And so I'm I'm trying

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Speaker 1: to think my way through those sorts of things. Sometimes

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Speaker 1: the person is a wonderful person, but I don't think

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Speaker 1: they're gonna be satisfied in that role. They're taking their

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Speaker 1: switching under the wrong circumstances. There was one person that

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Speaker 1: interviewed with us from another firm, and he just so

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Speaker 1: treated badly at the other firm. And I really am

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Speaker 1: not want to hire somebody is leaving something when I

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Speaker 1: are somebody that's coming to something. We ought to hiring

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Speaker 1: him a couple of years later. But I'm looking at

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Speaker 1: more of those things, and and that I am all

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Speaker 1: the things have already been figured out by others. I've

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Speaker 1: had a number of CEOs, both from within finance and

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Speaker 1: from other industries, say hiring is the single hardest thing

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Speaker 1: they do, and it feels sometimes like the outcome can

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Speaker 1: be random people that all right, that person will work

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Speaker 1: out and they're become a superstar or someone they're convinced

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Speaker 1: is going to be perfect for the role and it

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Speaker 1: doesn't work out. Do you think hiring is Is that

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Speaker 1: challenging and that important? Well, that that important? You can't

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Speaker 1: you really can't overstate how important it is and the

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Speaker 1: positive and negative side of this business. On the randomness,

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Speaker 1: I don't think it's random. I think you're gonna have

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Speaker 1: some random, random outcomes. But I think our hiring process

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Speaker 1: is probably more likely to have success than say another one,

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Speaker 1: and there's probably somebody that is more likely to have

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Speaker 1: success than we are. So I think there are certain

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Speaker 1: things you can control that are gonna narrow the field

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Speaker 1: of outcomes. I had a person who at the time

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Speaker 1: had a bunch bigger firm than me, had said had

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Speaker 1: told me about hiring that he looks at the world

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Speaker 1: and he's there's a there's a a social curve out there.

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Speaker 1: There's some crazy person that's going to script your firm.

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Speaker 1: There's some malicious person, there's some psychopath, you know, whatever

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Speaker 1: percentage of the population fits those things. And then there's

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Speaker 1: all these wonderful people, but they're not bright. There's bright

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Speaker 1: people that aren't wonderful. And he's like, I'm looking at

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Speaker 1: this whole social curve and when and I'm trying to

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Speaker 1: keep the bad part, that standard deviation that's way off

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Speaker 1: on the I'm trying to keep that away from my firm,

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Speaker 1: and I'm trying to get the other end. And I

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Speaker 1: thought there was an interesting way to look at it.

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Speaker 1: You hiring is not random, like just pulling somebody off

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Speaker 1: the street. You can really do a lot of things

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Speaker 1: that are objective and some that are subjective to really

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Speaker 1: narrow the range of outcomes you're gonna have. There's still

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Speaker 1: gonna be surprises, but I will tell you every year

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Speaker 1: we have less surprises than we've had before. And I

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Speaker 1: think we've just gotten better at identifying all those things

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Speaker 1: that derail somebody. In part of it, there's every Every

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Speaker 1: culture has something different. Our culture is a very rapid pace.

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Speaker 1: It's a very high energy culture, um very high expectations.

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Speaker 1: Sometimes you can have somebody that's brilliant and wonderful, but

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Speaker 1: it's just not that's just not their style, right, So

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Speaker 1: some of this is stylistic too. You can screen for

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Speaker 1: some of that. So you mentioned you work with Vanguard.

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Speaker 1: I think you also work with d f A. Is

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Speaker 1: that correct? A black Rock State Street, so you basically

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Speaker 1: we do the same thing. You basically have a bias

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Speaker 1: towards passive but not purely passive. Is that fair? That's fair?

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Speaker 1: And then we use a lot of alternatives for our

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Speaker 1: clients that have five million or more. So that's a

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Speaker 1: question I had for you later on, but we might

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Speaker 1: as well talk about it now. Private equity is hot

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Speaker 1: as a pistol. As we work our way towards some

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Speaker 1: of the larger, more sophisticated family offices and ultra high

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Speaker 1: net worth investors, they're very interested in alternatives. How do

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Speaker 1: you reconcile? Hey, look, we're passive over here, but we're

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Speaker 1: gonna put some money in with alternatives. They're a little pricey,

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Speaker 1: and we don't exactly have a lot of transparency into things,

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Speaker 1: but some of the returns have been really good. How

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Speaker 1: how can you reconcile those two? Well? I don't, I

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Speaker 1: don't think, I mean to me, it's I don't have

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Speaker 1: to reconcile the bond market in the stock market. They're

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Speaker 1: different markets, they have different outcomes, and so I don't

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Speaker 1: view it as conflicted, you know whatsoever? I think that

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Speaker 1: I believe that the US large market international markets are

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Speaker 1: generally efficient or efficient enough that I'm not going to

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Speaker 1: outsmart them. Right. I know your firm feels the same way.

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Speaker 1: So I'm just not going to play that game, right,

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Speaker 1: I'm gonna figure out what the client needs, what return

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Speaker 1: they're trying to hit, how much volatility they can handle

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Speaker 1: to get there, and I'm going to create some mix

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Speaker 1: that I think has the highest probability of creating that outcome.

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Speaker 1: And you know, when I add bonds, my expectation as

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Speaker 1: the bonds are gonna underperform equity, right, So I mean,

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Speaker 1: although we could point out that there have been long

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Speaker 1: periods of time the past three decades where bonds did

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Speaker 1: really well versus equity. Yeah, but in general, right, most

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Speaker 1: of our clients, their their timeline is multidecade, and the

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Speaker 1: odds they're gonna underperform with bonds are very high. Yet

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Speaker 1: we introduce bonds into the portfolio. We do that because

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Speaker 1: they might have short term income needs. We've got to

430
00:21:17,359 --> 00:21:19,159
Speaker 1: make sure we can deliver that to them. Even if

431
00:21:19,160 --> 00:21:21,000
Speaker 1: there's an O eight on nine crisis or tech bubble

432
00:21:21,080 --> 00:21:23,600
Speaker 1: or at night eleven. It's not about you know, maximum

433
00:21:23,680 --> 00:21:27,120
Speaker 1: performance to introduce the bonds you're you know, you're introducing

434
00:21:27,119 --> 00:21:30,240
Speaker 1: something that will probably underperform in exchange for making sure

435
00:21:30,240 --> 00:21:32,720
Speaker 1: we don't blow up the portfolio by withdrawing from stocks

436
00:21:32,720 --> 00:21:36,440
Speaker 1: when they're down right. What about the behavioral side of

437
00:21:36,840 --> 00:21:42,360
Speaker 1: I know a number of UM people who advocate equity portfolio,

438
00:21:42,520 --> 00:21:45,280
Speaker 1: which in theory does well until you hit an O

439
00:21:45,400 --> 00:21:48,000
Speaker 1: eight O nine where things get cut in half and

440
00:21:48,119 --> 00:21:51,000
Speaker 1: people have a tendency to jettison stocks at the worst

441
00:21:51,000 --> 00:21:53,639
Speaker 1: possible moment at the lows, and then they missed the

442
00:21:53,640 --> 00:21:57,560
Speaker 1: whole recovery. How do bonds fit into the behavioral side

443
00:21:57,560 --> 00:22:00,719
Speaker 1: of a portfolio? I really think the behavior most of

444
00:22:00,760 --> 00:22:04,639
Speaker 1: it can be controlled through education and empowerment. So I

445
00:22:04,640 --> 00:22:07,280
Speaker 1: think if you're a pure money manager, I think getting

446
00:22:07,320 --> 00:22:10,199
Speaker 1: somebody to get through a drop is gonna gonna be

447
00:22:10,200 --> 00:22:12,560
Speaker 1: pretty tough. But if you're seeing them throughout the year

448
00:22:12,600 --> 00:22:15,600
Speaker 1: and you're educating them on hey, you you're stocks or

449
00:22:15,600 --> 00:22:17,920
Speaker 1: you're nine stocks, if the market goes down fifty, you

450
00:22:17,960 --> 00:22:19,840
Speaker 1: can expect to go down fifty maybe more, you know,

451
00:22:20,000 --> 00:22:23,320
Speaker 1: depending on what other other asset classes we have subasset classes,

452
00:22:23,359 --> 00:22:27,240
Speaker 1: whether it's international, emerging markets or small cap or whatever, um,

453
00:22:27,280 --> 00:22:29,320
Speaker 1: And here's what's going to happen. And here is why

454
00:22:29,440 --> 00:22:31,320
Speaker 1: the dividends are enough to meet your needs and so

455
00:22:31,359 --> 00:22:32,679
Speaker 1: you don't need to worry about it. And here is

456
00:22:32,680 --> 00:22:35,359
Speaker 1: historically what's happened. If you're having those discussions all the time,

457
00:22:35,800 --> 00:22:38,359
Speaker 1: then when it happens, you're more likely to get through it.

458
00:22:38,680 --> 00:22:41,639
Speaker 1: But I think the reality is most people can't afford that.

459
00:22:41,960 --> 00:22:44,520
Speaker 1: So even if you're sitting with a couple and it's

460
00:22:44,720 --> 00:22:47,160
Speaker 1: a doctor and he's sixty eight, he's got four million

461
00:22:47,160 --> 00:22:50,800
Speaker 1: dollars because she and her husband have been saving for forever,

462
00:22:51,400 --> 00:22:54,000
Speaker 1: and um, you know they need a couple year. They

463
00:22:54,040 --> 00:22:56,280
Speaker 1: can't be all stocks because if the market goes down

464
00:22:56,440 --> 00:22:58,879
Speaker 1: at half, the dividends are not enough to meet their needs.

465
00:22:59,160 --> 00:23:01,919
Speaker 1: So almost everybody has to have bonds in their portfolio,

466
00:23:02,440 --> 00:23:04,480
Speaker 1: you know, even the top one percent. And when you

467
00:23:04,520 --> 00:23:07,200
Speaker 1: get to the top one one they don't need bonds

468
00:23:07,200 --> 00:23:10,840
Speaker 1: in their portfolio, right. The dividends really are enough, and

469
00:23:11,160 --> 00:23:13,600
Speaker 1: they are more focused on even tying it up more

470
00:23:13,600 --> 00:23:16,679
Speaker 1: than markets with you know, things like alternatives. So for me,

471
00:23:16,720 --> 00:23:19,320
Speaker 1: bonds are about how how much bonds do I need

472
00:23:19,359 --> 00:23:21,480
Speaker 1: to meet their needs? If something goes wrong in the

473
00:23:21,520 --> 00:23:23,520
Speaker 1: short run and then it stocks for the long run.

474
00:23:24,000 --> 00:23:26,800
Speaker 1: And what about since you mentioned this in terms of

475
00:23:26,800 --> 00:23:30,120
Speaker 1: of income, what about people who are living in high

476
00:23:30,119 --> 00:23:33,920
Speaker 1: tax states where there is a fairly robust municipal bond

477
00:23:33,920 --> 00:23:37,720
Speaker 1: market that can generate tax free income. Well, I think

478
00:23:37,720 --> 00:23:41,399
Speaker 1: that the municipal bond markets completely distorted now because of

479
00:23:41,400 --> 00:23:44,720
Speaker 1: what's pension plans having to allocate to bonds and the

480
00:23:44,800 --> 00:23:49,000
Speaker 1: aging population of people that are in those pension plans. Uh,

481
00:23:49,040 --> 00:23:51,320
Speaker 1: and the tax law really pushing money to bonds. And

482
00:23:51,400 --> 00:23:54,840
Speaker 1: it's very hard to take a client today and say,

483
00:23:55,600 --> 00:23:59,199
Speaker 1: let's go putt of your money and municipal bonds. Was

484
00:23:59,240 --> 00:24:02,800
Speaker 1: that an option years ago? Absolutely? I think that. I

485
00:24:02,840 --> 00:24:05,440
Speaker 1: think three years ago, you know what it was real

486
00:24:05,520 --> 00:24:07,400
Speaker 1: it was, it was an option. I think that when

487
00:24:07,400 --> 00:24:10,440
Speaker 1: you're now where you're at, it's it's just you can't

488
00:24:10,480 --> 00:24:14,680
Speaker 1: justify it. You look at the dimdend on stocks and

489
00:24:14,680 --> 00:24:18,480
Speaker 1: and you compare it to bond yields, and it's it's hard.

490
00:24:19,320 --> 00:24:22,920
Speaker 1: You and I had a conversation over the summer about

491
00:24:23,000 --> 00:24:26,920
Speaker 1: the acquisition space that I found fascinating and I wanted

492
00:24:27,000 --> 00:24:32,879
Speaker 1: to um delve back into that because quote, it's the

493
00:24:32,920 --> 00:24:35,760
Speaker 1: hottest that's ever been, and possibly the hottest that will

494
00:24:35,800 --> 00:24:38,840
Speaker 1: ever be. It's just bonkers right now. I don't know

495
00:24:38,840 --> 00:24:41,080
Speaker 1: where the top is, but it ain't gonna get a

496
00:24:41,080 --> 00:24:44,240
Speaker 1: whole lot better than right here. I'm paraphrasing, but it's

497
00:24:44,240 --> 00:24:46,760
Speaker 1: pretty close to what you said. Why is M and

498
00:24:46,800 --> 00:24:51,720
Speaker 1: A in the registered investment advisory space so hot today?

499
00:24:51,720 --> 00:24:53,879
Speaker 1: I think you have a lot of different things. So first,

500
00:24:53,920 --> 00:24:58,360
Speaker 1: I think you see this rotation um institutional investors moving

501
00:24:58,400 --> 00:25:00,359
Speaker 1: money out of hedge funds where they've looked at orically

502
00:25:00,400 --> 00:25:02,600
Speaker 1: and said, hey, hedge funds haven't done that great for

503
00:25:02,640 --> 00:25:05,320
Speaker 1: us for the last twenty years, but these other alternatives

504
00:25:05,359 --> 00:25:07,879
Speaker 1: have in many cases outperformed the market for us, and

505
00:25:07,920 --> 00:25:09,720
Speaker 1: so they're rotating to those. And one of those asset

506
00:25:09,760 --> 00:25:13,000
Speaker 1: classes as private equity, So you have the big funds

507
00:25:13,560 --> 00:25:15,600
Speaker 1: are bigger than ever. I mean just you can't go

508
00:25:15,640 --> 00:25:18,159
Speaker 1: a month or even a week and not see about

509
00:25:18,600 --> 00:25:21,480
Speaker 1: a big private equity family raising their biggest fund ever.

510
00:25:22,080 --> 00:25:24,480
Speaker 1: So that's number one, the big In fact, Mackenzie, the

511
00:25:24,560 --> 00:25:27,960
Speaker 1: data point I just was reading about. Mackenzie said, by

512
00:25:27,960 --> 00:25:32,440
Speaker 1: the end of that calendar year, private equity had raised

513
00:25:32,440 --> 00:25:36,919
Speaker 1: seven fifty billion in new funds, UH and Fresh Capital.

514
00:25:36,960 --> 00:25:38,919
Speaker 1: That's a lot of months crazy, So the big have

515
00:25:38,960 --> 00:25:40,720
Speaker 1: gotten bigger. The second is there's a lot more private

516
00:25:40,760 --> 00:25:43,280
Speaker 1: equity funds. There's now over eight thousand private equity funds.

517
00:25:43,280 --> 00:25:47,000
Speaker 1: There's way more private equity funds than there are stocks UM,

518
00:25:47,080 --> 00:25:49,680
Speaker 1: so so we have more funds with more money. So

519
00:25:49,720 --> 00:25:51,480
Speaker 1: that's number one, right, just a bunch of just this

520
00:25:51,640 --> 00:25:55,200
Speaker 1: huge slash of liquidity out there. Second, we have very

521
00:25:55,320 --> 00:25:58,199
Speaker 1: very low interest rates. And when private equity goes in

522
00:25:58,240 --> 00:26:00,359
Speaker 1: and buys a business, they don't usually just write a check.

523
00:26:00,400 --> 00:26:02,880
Speaker 1: They usually do the same thing a real estate fund

524
00:26:02,920 --> 00:26:05,320
Speaker 1: when they does when they buy a property, they use leverage.

525
00:26:05,760 --> 00:26:09,240
Speaker 1: So they're borrowing money to buy the firm, right that

526
00:26:09,359 --> 00:26:12,639
Speaker 1: the company they're buying. And so if interest rates are lower,

527
00:26:12,640 --> 00:26:15,800
Speaker 1: they can obviously pay more, just like your listeners can

528
00:26:16,040 --> 00:26:18,399
Speaker 1: buy more house if the mortgage is lower. Right. So

529
00:26:18,440 --> 00:26:22,680
Speaker 1: you have very low interest rates, more funds, bigger funds, UH,

530
00:26:22,760 --> 00:26:25,880
Speaker 1: and high net worth investors are starting to move more

531
00:26:25,920 --> 00:26:28,640
Speaker 1: to private equity too. So all there's all that money

532
00:26:28,640 --> 00:26:30,960
Speaker 1: over there, Now, what do they want? They want to

533
00:26:31,000 --> 00:26:36,360
Speaker 1: be in an industry that is growing fast, has recurring revenue,

534
00:26:36,840 --> 00:26:42,520
Speaker 1: has built an inflation hedge, UM, where people are sticky, uh,

535
00:26:42,520 --> 00:26:45,439
Speaker 1: and where there's a need for consolidation right where they

536
00:26:45,440 --> 00:26:47,639
Speaker 1: can take you know, Mary over here, he's doing a

537
00:26:47,640 --> 00:26:49,440
Speaker 1: pretty good job, and Joe over there, he's doing a

538
00:26:49,440 --> 00:26:51,720
Speaker 1: pretty good job. But together, wow, they could really be

539
00:26:51,720 --> 00:26:53,480
Speaker 1: impressive because Mary is good at this and Joe is

540
00:26:53,520 --> 00:26:55,920
Speaker 1: good at that. Well, what checks the boxes on all

541
00:26:55,920 --> 00:26:59,479
Speaker 1: of those things about are a space sure money is sticky,

542
00:26:59,600 --> 00:27:03,080
Speaker 1: market goes up there as your inflation hedge, and uh,

543
00:27:03,080 --> 00:27:06,560
Speaker 1: it's recurring quarterly revenue stream although I think UM a

544
00:27:06,560 --> 00:27:09,119
Speaker 1: handful of places rannual, handful of places a monthly, but

545
00:27:09,440 --> 00:27:13,080
Speaker 1: for the most part it's a quarterly UM invoice the right.

546
00:27:13,080 --> 00:27:14,920
Speaker 1: And they compare that to all the other areas of

547
00:27:14,920 --> 00:27:18,040
Speaker 1: the financial space where there's more client turnover and people leaving,

548
00:27:18,080 --> 00:27:19,520
Speaker 1: and they're going, you know what, this is the space

549
00:27:19,520 --> 00:27:21,880
Speaker 1: to be in and not what a coincidence. The space

550
00:27:21,920 --> 00:27:24,200
Speaker 1: to be in is the space that's really in its

551
00:27:24,240 --> 00:27:26,439
Speaker 1: early stages. You know, there's a lot of room to

552
00:27:26,640 --> 00:27:30,080
Speaker 1: improve some of these places. So yeah, there's a huge

553
00:27:30,119 --> 00:27:33,280
Speaker 1: loss of money with very low interest rates going into

554
00:27:34,160 --> 00:27:36,359
Speaker 1: a space that is attractive for a bunch of you know,

555
00:27:36,400 --> 00:27:39,639
Speaker 1: Fluke reasons, and all this timing comes together, and you

556
00:27:39,680 --> 00:27:43,440
Speaker 1: now have private equity coming into this space um to

557
00:27:43,760 --> 00:27:45,919
Speaker 1: buy up firms. And the other thing is they've been

558
00:27:46,000 --> 00:27:49,399
Speaker 1: very successful at it, right, So somebody who's just built

559
00:27:49,440 --> 00:27:52,000
Speaker 1: a five million dollar firm or a ten billion dollar

560
00:27:52,040 --> 00:27:56,040
Speaker 1: firm is probably not the person usually right to run

561
00:27:56,560 --> 00:27:58,879
Speaker 1: a much much bigger firm. And they know that and

562
00:27:58,880 --> 00:28:00,240
Speaker 1: they don't want to do that. Like I know, I

563
00:28:00,280 --> 00:28:02,359
Speaker 1: don't want to run a publicly traded company, right, So

564
00:28:02,400 --> 00:28:05,000
Speaker 1: I've been approached several times about, hey, you guys should

565
00:28:05,000 --> 00:28:09,480
Speaker 1: go public. That's never happening with me. I've got clients

566
00:28:09,520 --> 00:28:14,760
Speaker 1: that are CEO CFOs of publicly traded companies that they

567
00:28:14,800 --> 00:28:18,600
Speaker 1: are not happy no. And I am very focused on

568
00:28:18,720 --> 00:28:21,040
Speaker 1: my quality of life, and I just I look at

569
00:28:21,080 --> 00:28:24,800
Speaker 1: them and they just look like they're aging every every review,

570
00:28:24,880 --> 00:28:27,600
Speaker 1: they're aging twice as fast as all other. So it's

571
00:28:27,680 --> 00:28:30,600
Speaker 1: back up a sect because this is really a fascinating digression.

572
00:28:31,720 --> 00:28:34,320
Speaker 1: Most companies, when they go public, they're going public for

573
00:28:34,359 --> 00:28:38,040
Speaker 1: one of two reasons. Reason Number one, they need capital

574
00:28:38,160 --> 00:28:42,280
Speaker 1: to either grow or make acquisitions or some other financial

575
00:28:42,280 --> 00:28:45,840
Speaker 1: engineering that's part of their long term business plan or two,

576
00:28:46,560 --> 00:28:50,640
Speaker 1: they end their staff and their outside investors, typically venture

577
00:28:50,680 --> 00:28:54,200
Speaker 1: capitalists or whoever, are looking for an exit. Yeah, you

578
00:28:54,240 --> 00:28:56,520
Speaker 1: don't seem to have either of those issues. No, I don't.

579
00:28:56,640 --> 00:28:58,640
Speaker 1: So that's would be another reason I would I would

580
00:28:58,720 --> 00:29:02,400
Speaker 1: never do that. So so, and you are still the

581
00:29:03,000 --> 00:29:06,680
Speaker 1: main owner, the soul owner of Soul one today, Soul one. Really,

582
00:29:06,960 --> 00:29:09,560
Speaker 1: at what point does that change? Because I know we

583
00:29:09,600 --> 00:29:12,080
Speaker 1: went through a whole process of setting up a path

584
00:29:12,120 --> 00:29:14,680
Speaker 1: to equity for employees. You guys have been growing so

585
00:29:14,800 --> 00:29:18,480
Speaker 1: crazy fast for so long that that hasn't really come

586
00:29:18,560 --> 00:29:21,080
Speaker 1: up to the four yet. No, I mean that's part

587
00:29:21,280 --> 00:29:22,800
Speaker 1: of it. I have a lot of partners in our

588
00:29:22,840 --> 00:29:26,600
Speaker 1: affiliated entities. So there I have partners with the law

589
00:29:26,680 --> 00:29:29,640
Speaker 1: firm and the the benefits firm, and the forward K

590
00:29:29,840 --> 00:29:33,000
Speaker 1: firm and the and the those are all separate corporate entities,

591
00:29:33,040 --> 00:29:36,160
Speaker 1: all creative planning entities, all operating out of the same place,

592
00:29:36,200 --> 00:29:39,600
Speaker 1: all helping the same clients. So once there's been stable growth,

593
00:29:39,680 --> 00:29:42,520
Speaker 1: I've always had partners and favor them in those areas

594
00:29:42,520 --> 00:29:45,560
Speaker 1: and creative planning. It's just been such rapid growth and

595
00:29:45,600 --> 00:29:49,400
Speaker 1: it's required so much capital. I mean it, there's that's

596
00:29:49,440 --> 00:29:52,160
Speaker 1: never made sense to do it. I don't know that

597
00:29:52,200 --> 00:29:55,720
Speaker 1: anyone would have really enjoyed the ride um and what

598
00:29:55,840 --> 00:29:59,480
Speaker 1: it was going to take, uh financially along the way

599
00:29:59,520 --> 00:30:01,240
Speaker 1: to do to do the or the commitments or the

600
00:30:01,480 --> 00:30:05,640
Speaker 1: deferral and the patients to do this um. But we

601
00:30:05,640 --> 00:30:07,920
Speaker 1: we were are considering and have for a long time

602
00:30:08,000 --> 00:30:12,000
Speaker 1: considered raising money by selling a minority stake to a

603
00:30:12,040 --> 00:30:15,560
Speaker 1: private equity firm because I do think that valuations are high,

604
00:30:15,600 --> 00:30:18,680
Speaker 1: and I do think that the world moves very very

605
00:30:18,800 --> 00:30:21,800
Speaker 1: very fast, and you are going to need money to

606
00:30:21,840 --> 00:30:23,440
Speaker 1: get through it. If you look at how these big

607
00:30:23,480 --> 00:30:27,400
Speaker 1: financial firms are doing it, they're doing it by preemptive layoffs, right,

608
00:30:27,440 --> 00:30:30,160
Speaker 1: That's that's what they're doing now. And I would like

609
00:30:30,240 --> 00:30:32,360
Speaker 1: to do it by a preemptive pile of money sitting

610
00:30:32,400 --> 00:30:34,760
Speaker 1: in the bank so that no matter what happens when

611
00:30:34,760 --> 00:30:37,959
Speaker 1: there's a contraction, that we can go take advantage of that.

612
00:30:38,040 --> 00:30:39,760
Speaker 1: And that that's what we did in O eight oh nine.

613
00:30:39,800 --> 00:30:43,280
Speaker 1: We grew rapidly through that crisis, and I want to

614
00:30:43,320 --> 00:30:45,080
Speaker 1: be able to grow rapidly through the next one, which

615
00:30:45,080 --> 00:30:46,880
Speaker 1: means I not only want to keep my team enforced,

616
00:30:46,920 --> 00:30:49,440
Speaker 1: I want to go find more talented people and focus

617
00:30:49,440 --> 00:30:53,360
Speaker 1: on getting clients and not worry about about reserves. So

618
00:30:53,560 --> 00:30:57,080
Speaker 1: you mentioned oh eight oh nine, Um, I have to ask,

619
00:30:57,360 --> 00:31:00,440
Speaker 1: how do you grow in the middle of a rices

620
00:31:00,480 --> 00:31:03,560
Speaker 1: where every time you buy equity a week later, or

621
00:31:03,640 --> 00:31:06,320
Speaker 1: or a fund or an et F or anything a

622
00:31:06,400 --> 00:31:09,800
Speaker 1: month later, it's down five or ten or fift How

623
00:31:09,800 --> 00:31:14,400
Speaker 1: did you manage both existing clients and growth throughout the

624
00:31:14,440 --> 00:31:16,560
Speaker 1: Great Financial Crisis? So back then there were only a

625
00:31:16,560 --> 00:31:19,200
Speaker 1: few of us, and so I was in every single

626
00:31:19,280 --> 00:31:23,520
Speaker 1: client meeting of every client of creative planning back then.

627
00:31:24,040 --> 00:31:26,840
Speaker 1: And a very very big part of this was education.

628
00:31:26,920 --> 00:31:30,680
Speaker 1: So when you're doing needs based investing instead of risk

629
00:31:30,720 --> 00:31:33,040
Speaker 1: based investing, so most places are like, well, this is

630
00:31:33,040 --> 00:31:35,880
Speaker 1: your risk tolerance, and here's your portfolio for for you

631
00:31:36,000 --> 00:31:39,040
Speaker 1: or your this age. Here's your portfolio. Have five models,

632
00:31:39,040 --> 00:31:41,440
Speaker 1: you go to the closest model. We've never done that,

633
00:31:41,520 --> 00:31:43,480
Speaker 1: even on day one, and we don't do it today.

634
00:31:43,520 --> 00:31:45,920
Speaker 1: We've really said, you know you've got real estate, We're

635
00:31:45,920 --> 00:31:49,160
Speaker 1: going to leave that out here. You you your belief

636
00:31:49,160 --> 00:31:51,120
Speaker 1: system doesn't match these, will leave them out. You want

637
00:31:51,160 --> 00:31:53,920
Speaker 1: more of that. It does work for your situation. But

638
00:31:54,040 --> 00:31:55,560
Speaker 1: here's how we're gonna cover your short run in your

639
00:31:55,560 --> 00:31:57,360
Speaker 1: long run, and here's all the horrible things that are

640
00:31:57,360 --> 00:32:00,600
Speaker 1: probably gonna happen in the investment world with your life. Well,

641
00:32:00,640 --> 00:32:03,800
Speaker 1: when you're going through that with people um over and

642
00:32:03,840 --> 00:32:06,840
Speaker 1: over again, they're sticky. And we were we were doing

643
00:32:06,880 --> 00:32:08,360
Speaker 1: their planning, we were doing there, we were doing a

644
00:32:08,360 --> 00:32:10,440
Speaker 1: lot of different things for them, and so when they

645
00:32:10,440 --> 00:32:12,760
Speaker 1: were going through this crisis, they were not surprised. I

646
00:32:12,800 --> 00:32:17,520
Speaker 1: think people panic when things are not aligned with their expectations,

647
00:32:18,120 --> 00:32:19,960
Speaker 1: and so it was a big shake up and a

648
00:32:19,960 --> 00:32:21,920
Speaker 1: lot of people were leaving their advisors, and our clients

649
00:32:21,920 --> 00:32:23,880
Speaker 1: were referring people to us. Now, there were a couple

650
00:32:23,920 --> 00:32:26,760
Speaker 1: of things we were doing too, but I think we're

651
00:32:26,840 --> 00:32:29,480
Speaker 1: very proven out, very quickly, very very basic things. So

652
00:32:29,840 --> 00:32:32,080
Speaker 1: we were tax harvesting, for example, which you didn't hear

653
00:32:32,080 --> 00:32:34,440
Speaker 1: a lot about back then. And the other thing we

654
00:32:34,480 --> 00:32:36,200
Speaker 1: did is we we we have a feeling we don't

655
00:32:36,240 --> 00:32:38,240
Speaker 1: balance at the end of the year. We don't balance

656
00:32:38,240 --> 00:32:41,480
Speaker 1: every quarter. We balanced on sharp market drops. So let's

657
00:32:41,520 --> 00:32:43,360
Speaker 1: just take the O eight crisis that you brought up.

658
00:32:43,840 --> 00:32:47,280
Speaker 1: It bottomed in the beginning of it bottomed around March

659
00:32:47,440 --> 00:32:50,760
Speaker 1: nine of oh nine, and the market just those nine

660
00:32:50,840 --> 00:32:54,840
Speaker 1: days of March had dropped about we're buying, right, So

661
00:32:54,880 --> 00:32:57,480
Speaker 1: we're calling our clients and we're buying and we're harvesting.

662
00:32:57,920 --> 00:33:00,000
Speaker 1: By the end of that month, the market had recovered

663
00:33:00,440 --> 00:33:02,800
Speaker 1: all of the losses for OH nine, not all all

664
00:33:02,880 --> 00:33:05,560
Speaker 1: from OH eight, It was just up thirty plus percent.

665
00:33:06,400 --> 00:33:09,000
Speaker 1: So if you take just a seventy thirty portfolio and

666
00:33:09,040 --> 00:33:11,120
Speaker 1: you're buying not at the end of the quarter a year,

667
00:33:11,200 --> 00:33:14,160
Speaker 1: but on when it's dropping and you're harvesting, what do

668
00:33:14,200 --> 00:33:16,560
Speaker 1: you get. You're not breaking even when the market does

669
00:33:16,840 --> 00:33:19,120
Speaker 1: four or five years later, you're breaking even. You take

670
00:33:19,160 --> 00:33:20,640
Speaker 1: a take and a half the time to get to

671
00:33:20,640 --> 00:33:23,120
Speaker 1: break even, and you have losses on your tax return,

672
00:33:23,720 --> 00:33:27,560
Speaker 1: and that creates advocacy, right. And so that was really

673
00:33:27,600 --> 00:33:32,480
Speaker 1: the explosion for creative planning was those clients going, you

674
00:33:32,520 --> 00:33:34,800
Speaker 1: know what, I feel confident to tell my friends. I

675
00:33:34,880 --> 00:33:36,480
Speaker 1: think there's a lot of people that are happy with

676
00:33:36,520 --> 00:33:38,719
Speaker 1: their lawyer or their c p A, or their financial

677
00:33:38,720 --> 00:33:43,120
Speaker 1: advisor or their doctor, but they're not positive that they're

678
00:33:43,160 --> 00:33:46,360
Speaker 1: going to look good if they refer somebody to you, right,

679
00:33:46,880 --> 00:33:49,120
Speaker 1: And I think that what you do through a crisis

680
00:33:49,240 --> 00:33:51,640
Speaker 1: is you get a chance to prove yourself. So I

681
00:33:51,920 --> 00:33:55,760
Speaker 1: really view all of those as tremendous opportunities of Hey,

682
00:33:55,840 --> 00:33:57,960
Speaker 1: we told you this is the scenario that would happen.

683
00:33:57,960 --> 00:34:00,520
Speaker 1: Here's why you're okay, here's exactly what we're gonna do.

684
00:34:01,040 --> 00:34:03,320
Speaker 1: And then they see the outcome. They but they go

685
00:34:03,480 --> 00:34:07,720
Speaker 1: from clients to advocates. And that was the turning point

686
00:34:08,200 --> 00:34:10,160
Speaker 1: for us. And so you know, you talk about the

687
00:34:10,480 --> 00:34:15,600
Speaker 1: the power of luck and all of this, and I

688
00:34:15,600 --> 00:34:17,359
Speaker 1: don't want to say I would root for another oh

689
00:34:17,360 --> 00:34:19,479
Speaker 1: eight o nine. I mean, it's painful to go through

690
00:34:19,560 --> 00:34:22,480
Speaker 1: and long hours and a lot of stress, and not

691
00:34:22,560 --> 00:34:27,680
Speaker 1: everybody's not every clients like hooray. I get the opportunity here, UM,

692
00:34:27,719 --> 00:34:30,319
Speaker 1: but there's no question that without it, creative planning is

693
00:34:30,320 --> 00:34:33,879
Speaker 1: not what it is today. Quite quite fascinating. One last

694
00:34:33,960 --> 00:34:37,200
Speaker 1: question I have to ask about acquisitions because it circles

695
00:34:37,239 --> 00:34:40,440
Speaker 1: back to um your reference that it's the hottest it's

696
00:34:40,480 --> 00:34:44,640
Speaker 1: ever been. We met with a bunch of consultants early on,

697
00:34:44,719 --> 00:34:49,160
Speaker 1: and pretty much the number everybody uses is two x

698
00:34:49,239 --> 00:34:53,280
Speaker 1: trailing years revenue or two point two times trailing twelve.

699
00:34:53,440 --> 00:34:56,960
Speaker 1: And that was, you know, six seven years ago, you

700
00:34:57,000 --> 00:35:00,120
Speaker 1: and I had discussed the numbers today that are being

701
00:35:00,280 --> 00:35:04,240
Speaker 1: used for acquisitions. They don't even remotely resemble that anymore.

702
00:35:04,239 --> 00:35:06,120
Speaker 1: I do that, No, I mean I think that. What's

703
00:35:07,120 --> 00:35:10,839
Speaker 1: I think what people have figured out is we've now

704
00:35:10,920 --> 00:35:12,480
Speaker 1: moved to a level where a lot of these are

705
00:35:12,560 --> 00:35:15,600
Speaker 1: enterprises and all anyone cares about now is the future

706
00:35:15,640 --> 00:35:18,759
Speaker 1: earnings of these businesses. And so you can have a

707
00:35:18,800 --> 00:35:21,920
Speaker 1: five million dollar firm that's running on a ten percent

708
00:35:22,000 --> 00:35:23,640
Speaker 1: margin and you can have a five d million dollar

709
00:35:23,680 --> 00:35:26,160
Speaker 1: firm that's running on a thirty five percent margin. They're

710
00:35:26,160 --> 00:35:32,279
Speaker 1: going to have wildly different valuations um when a strategic buyer,

711
00:35:32,320 --> 00:35:35,520
Speaker 1: a private equity buyer comes in. That that's definitely changed

712
00:35:36,000 --> 00:35:38,040
Speaker 1: a lot in the last few years. So so what

713
00:35:38,160 --> 00:35:41,279
Speaker 1: sort of multiple are you looking at for Let's take

714
00:35:41,400 --> 00:35:45,200
Speaker 1: the average one percent firm, which is now probably a

715
00:35:45,280 --> 00:35:48,560
Speaker 1: high fee. We were playing with numbers the other day

716
00:35:48,560 --> 00:35:53,719
Speaker 1: and we were about sixty two bits on average across everything, um.

717
00:35:53,760 --> 00:35:57,960
Speaker 1: But the typical firm is one percent or so, and

718
00:35:58,320 --> 00:36:02,560
Speaker 1: their overhead is primarily either technology, their rent and their employees.

719
00:36:03,280 --> 00:36:07,080
Speaker 1: What's the reasonable multiple for the average farm on either

720
00:36:07,160 --> 00:36:11,200
Speaker 1: revenue or profits? Well, revenue is I don't have no one,

721
00:36:11,239 --> 00:36:12,920
Speaker 1: but yeah, that no one would pay attention to that.

722
00:36:12,960 --> 00:36:16,080
Speaker 1: I mean it's a great example, is well. I mean

723
00:36:16,280 --> 00:36:19,800
Speaker 1: the expenses of those places could be wildly different depending

724
00:36:19,840 --> 00:36:22,600
Speaker 1: on where their rent is and how do their employees

725
00:36:22,680 --> 00:36:26,919
Speaker 1: produce on their own and get bigger payouts, or it's very,

726
00:36:27,000 --> 00:36:29,480
Speaker 1: very wildly different. I'd say if you look, you're looking

727
00:36:29,480 --> 00:36:34,640
Speaker 1: at these five million dollar firms, um, the multiples could

728
00:36:34,680 --> 00:36:37,520
Speaker 1: be as low as five and as high as seven

729
00:36:37,640 --> 00:36:40,880
Speaker 1: or eight or sometimes profits at times profits, And I

730
00:36:40,920 --> 00:36:45,040
Speaker 1: think that people are looking at even the profits isn't enough.

731
00:36:45,160 --> 00:36:48,279
Speaker 1: Like if the average client is seventy eight and there's

732
00:36:48,320 --> 00:36:52,640
Speaker 1: no new clients coming in, you're looking at declining earnings, right,

733
00:36:52,680 --> 00:36:54,520
Speaker 1: So you would have somebody say I'm not gonna buy

734
00:36:54,560 --> 00:36:56,760
Speaker 1: this at all, or it's going to be two times

735
00:36:56,840 --> 00:36:59,800
Speaker 1: or three times filings. You could have a firm like yours.

736
00:37:00,440 --> 00:37:03,040
Speaker 1: You know where you're growing, but there's a mojo factor, right,

737
00:37:03,120 --> 00:37:07,480
Speaker 1: Like there's a there's something that that could really spark

738
00:37:07,680 --> 00:37:10,800
Speaker 1: great greater growth. A different buyer might look at it

739
00:37:10,840 --> 00:37:13,000
Speaker 1: and go, there might be more risk here, right, And

740
00:37:13,040 --> 00:37:15,960
Speaker 1: so I think that you've got that is a very

741
00:37:16,000 --> 00:37:18,319
Speaker 1: big factor, especially when you're looking at these firms that

742
00:37:18,320 --> 00:37:21,680
Speaker 1: are three millions eight hundred million, Where is it's totally

743
00:37:21,680 --> 00:37:25,200
Speaker 1: dependent on one person, or are people tied to other people?

744
00:37:25,360 --> 00:37:28,400
Speaker 1: What's the average age our accounts growing, or people referring

745
00:37:28,480 --> 00:37:30,319
Speaker 1: or they're not referring. So you really need to look

746
00:37:30,320 --> 00:37:31,799
Speaker 1: through all that. But you're getting to the mid the

747
00:37:31,800 --> 00:37:33,760
Speaker 1: mid range. You know, when you get up to firms

748
00:37:34,200 --> 00:37:37,000
Speaker 1: your size where you're billion more, you could be talking

749
00:37:37,040 --> 00:37:40,960
Speaker 1: double digits um, and you get to the very large firm,

750
00:37:40,960 --> 00:37:43,480
Speaker 1: you're definitely in the in the double dish. So it's

751
00:37:43,520 --> 00:37:46,320
Speaker 1: it's much more complicated than we tend to see in

752
00:37:46,360 --> 00:37:48,880
Speaker 1: the headway because do you see oh, so and so,

753
00:37:49,000 --> 00:37:51,440
Speaker 1: but it's such a company, or here's the fifth acquisition

754
00:37:51,800 --> 00:37:54,239
Speaker 1: done by this company, and they kind of make it, oh,

755
00:37:54,280 --> 00:37:57,560
Speaker 1: there's this much revenue, here's the multiple, and this is

756
00:37:57,560 --> 00:37:59,880
Speaker 1: their seventh acquisition this month. I don't think that ever,

757
00:38:00,280 --> 00:38:02,840
Speaker 1: that ever happens where where someone looks at the revenue

758
00:38:02,840 --> 00:38:05,560
Speaker 1: anymore and makes a decision based off of that. Let's

759
00:38:05,600 --> 00:38:09,759
Speaker 1: talk a little bit about investor expectations. Ten year bond

760
00:38:09,840 --> 00:38:13,399
Speaker 1: yields are but under two percent. It's hard to look

761
00:38:13,440 --> 00:38:16,360
Speaker 1: at US stocks and not say they're let's call it

762
00:38:16,440 --> 00:38:18,840
Speaker 1: fully valued, richly valued. I don't know, I don't know

763
00:38:18,880 --> 00:38:21,880
Speaker 1: what phrase you want to use. What sort of future

764
00:38:21,960 --> 00:38:26,799
Speaker 1: expected returns should investors have today? Well, I think what

765
00:38:27,080 --> 00:38:29,200
Speaker 1: you can never figure out the stock market completely, but

766
00:38:29,200 --> 00:38:31,880
Speaker 1: the bond market is largely math, right, so we we

767
00:38:31,960 --> 00:38:34,480
Speaker 1: know we can't replicate in the next thirty years what

768
00:38:34,520 --> 00:38:37,319
Speaker 1: the bond market did in the last thirty years. So

769
00:38:38,040 --> 00:38:40,960
Speaker 1: since it's all a function of of where the yield is,

770
00:38:41,000 --> 00:38:43,120
Speaker 1: I think when you look at the treasury, it sets

771
00:38:43,160 --> 00:38:45,239
Speaker 1: the tone for everything else. Right, If the treasury is

772
00:38:45,640 --> 00:38:47,799
Speaker 1: under two and corporates are a little bit higher than are,

773
00:38:47,800 --> 00:38:50,879
Speaker 1: expected return for large stocks is a little higher, some

774
00:38:50,920 --> 00:38:53,240
Speaker 1: would argue for small stocks might be a little higher,

775
00:38:53,360 --> 00:38:56,439
Speaker 1: or maybe emerging markets, and you you go out that way.

776
00:38:56,480 --> 00:38:58,320
Speaker 1: So you've gotta get rid of this double digit return

777
00:38:58,400 --> 00:39:02,600
Speaker 1: expectation and move yourself into the squarely into the single

778
00:39:02,640 --> 00:39:05,960
Speaker 1: digit range, somewhere in the mid to hire single digits,

779
00:39:06,000 --> 00:39:09,080
Speaker 1: depending on your allocation of bonds and your beliefs around

780
00:39:09,680 --> 00:39:12,720
Speaker 1: uh markets that are certainly not overvalued, like emerging markets,

781
00:39:12,760 --> 00:39:15,319
Speaker 1: are small, kept international, and do you believe that they're

782
00:39:15,360 --> 00:39:18,080
Speaker 1: low valued at a low price now, because it's just

783
00:39:18,239 --> 00:39:21,239
Speaker 1: gone and it's never going to recover or or or

784
00:39:21,280 --> 00:39:23,919
Speaker 1: do you think they're at a low price because things

785
00:39:23,960 --> 00:39:25,560
Speaker 1: are a little messy and they're gonna get worked out

786
00:39:25,560 --> 00:39:27,799
Speaker 1: like they did in the in the US UM. So

787
00:39:27,960 --> 00:39:29,920
Speaker 1: you can make your argument, but it's very hard to

788
00:39:29,920 --> 00:39:32,919
Speaker 1: make an argument for the double digit returns that people

789
00:39:32,920 --> 00:39:36,400
Speaker 1: were making in the nineties. So a blended portfolio seventy

790
00:39:36,440 --> 00:39:41,800
Speaker 1: thirty including exposure to international and emerging markets five six

791
00:39:41,840 --> 00:39:44,439
Speaker 1: seven percent is that a reasonable in our projections, we're

792
00:39:44,520 --> 00:39:47,440
Speaker 1: using a four percent real return. These six percent return

793
00:39:47,520 --> 00:39:51,279
Speaker 1: subtract inflation, and we feel pretty comfortable with that. So

794
00:39:51,640 --> 00:39:54,520
Speaker 1: that brings up the issue we briefly talked about earlier,

795
00:39:54,560 --> 00:39:59,759
Speaker 1: which is alternatives, most notably private equity. People have a

796
00:39:59,800 --> 00:40:02,560
Speaker 1: h story of saying I'm not getting the sort of

797
00:40:02,560 --> 00:40:07,160
Speaker 1: returns I want, so I'm gonna either look for something

798
00:40:07,200 --> 00:40:10,480
Speaker 1: that perhaps has more risk um and try and achieve

799
00:40:10,520 --> 00:40:13,000
Speaker 1: those returns. I don't get the sense you look at

800
00:40:13,040 --> 00:40:16,000
Speaker 1: private equity that way, or am I am I oversimplified? No,

801
00:40:16,080 --> 00:40:17,520
Speaker 1: you're right, and I think this is a point you

802
00:40:17,520 --> 00:40:20,560
Speaker 1: know that we disagree on. Right. I think that that

803
00:40:20,680 --> 00:40:23,279
Speaker 1: when when I look at the public markets, I don't

804
00:40:23,280 --> 00:40:25,719
Speaker 1: think you're going to find a bigger advocate for that.

805
00:40:26,080 --> 00:40:28,840
Speaker 1: Those markets are pretty efficient. My entire book Five Mistakes

806
00:40:28,920 --> 00:40:31,800
Speaker 1: is basically about, here's all the evidence that you just

807
00:40:31,840 --> 00:40:34,879
Speaker 1: gotta quit market time and quit six stock picking and

808
00:40:35,040 --> 00:40:37,680
Speaker 1: focus on allocation and discipline. So, by the way, you

809
00:40:37,719 --> 00:40:41,319
Speaker 1: and I completely sympatica with that. Let's see how much

810
00:40:41,360 --> 00:40:44,440
Speaker 1: space is between us on venture capital, hedge funds, and

811
00:40:44,480 --> 00:40:46,799
Speaker 1: private equity. Now vent your capital, I would put it. So,

812
00:40:46,880 --> 00:40:49,319
Speaker 1: I think one of the problems with alternative investments is

813
00:40:49,320 --> 00:40:52,080
Speaker 1: everyone talks about alternative investments like it's one thing, and

814
00:40:52,080 --> 00:40:55,239
Speaker 1: it's it's not. It's it's not. So alternative investor investments

815
00:40:55,320 --> 00:40:58,000
Speaker 1: is basically an alternative to anything that's not a publicly

816
00:40:58,000 --> 00:41:00,640
Speaker 1: traded stock or in the real estate. Right. So you know,

817
00:41:00,680 --> 00:41:02,680
Speaker 1: if you've got a listener that owns a duplex, that

818
00:41:02,719 --> 00:41:05,399
Speaker 1: they're running out there in the alternative investment business, right.

819
00:41:05,440 --> 00:41:08,640
Speaker 1: And so you own a farm and someone's actually farming it,

820
00:41:08,680 --> 00:41:11,640
Speaker 1: that's welcome to the alternative investment, direct investment in real

821
00:41:11,760 --> 00:41:15,799
Speaker 1: estate or something else exactly. And so now when you

822
00:41:15,840 --> 00:41:17,640
Speaker 1: take alternate investments, we can divide them out into a

823
00:41:17,640 --> 00:41:19,520
Speaker 1: couple of things. One area we agree on it I

824
00:41:19,560 --> 00:41:21,480
Speaker 1: don't think hedge funds work. Now why do I not

825
00:41:21,600 --> 00:41:24,080
Speaker 1: think they work? Is it because the evidence of the

826
00:41:24,160 --> 00:41:26,520
Speaker 1: last twenty years? But it doesn't work? No, it's not

827
00:41:26,560 --> 00:41:29,680
Speaker 1: really that. It's because there's evidence that the stock market

828
00:41:29,719 --> 00:41:32,240
Speaker 1: is fairly efficient, and what is a hedge fund. Hedge

829
00:41:32,239 --> 00:41:36,760
Speaker 1: fund is basically overpaying somebody to create even more negative

830
00:41:36,760 --> 00:41:41,080
Speaker 1: tax consequences to trade within the stock market usually usually right, So,

831
00:41:41,480 --> 00:41:44,040
Speaker 1: now we've got a market that's pretty efficient, and we're

832
00:41:44,080 --> 00:41:46,799
Speaker 1: increasing the taxes and fees and somehow expect to beat

833
00:41:46,840 --> 00:41:49,880
Speaker 1: that market. It doesn't surprise me, right, that that hasn't

834
00:41:49,880 --> 00:41:52,719
Speaker 1: worked out well for the overwhelming majority of people that

835
00:41:52,800 --> 00:41:56,399
Speaker 1: have invested in hedge funds. And you see institutions saying, hey,

836
00:41:56,440 --> 00:41:59,319
Speaker 1: this doesn't work. Great, we're not doing this anymore, and

837
00:41:59,320 --> 00:42:01,800
Speaker 1: they're taking their money and they're moving it to private

838
00:42:01,840 --> 00:42:04,920
Speaker 1: real estate and private equity. Now, why are they doing that?

839
00:42:05,000 --> 00:42:07,920
Speaker 1: Because there is evidence that private real estate and private

840
00:42:07,960 --> 00:42:10,319
Speaker 1: equity has worked out. So the question is is it

841
00:42:10,360 --> 00:42:13,960
Speaker 1: a fluke, is it an aberration, or is it sustainable?

842
00:42:14,719 --> 00:42:17,240
Speaker 1: Now I think we now have eight thousand private equity

843
00:42:17,239 --> 00:42:20,239
Speaker 1: funds instead of a few hundred, So it's you're going

844
00:42:20,280 --> 00:42:23,920
Speaker 1: to have diminishing returns just with all this money chasing businesses.

845
00:42:24,520 --> 00:42:27,080
Speaker 1: But I think what you're seeing as a fundamental shift

846
00:42:27,200 --> 00:42:30,719
Speaker 1: in the way that the US economy is running. So

847
00:42:30,760 --> 00:42:34,239
Speaker 1: I like, on Monday, I went to Los Angeles and

848
00:42:34,280 --> 00:42:37,680
Speaker 1: I met two guys that started a keto diet food

849
00:42:38,480 --> 00:42:41,240
Speaker 1: business and they just sold it for two and eighty million.

850
00:42:41,760 --> 00:42:43,719
Speaker 1: Well they're getting to an eighty million, sold for much

851
00:42:43,760 --> 00:42:47,279
Speaker 1: much more than that. Yesterday I was in Fargo and

852
00:42:47,320 --> 00:42:50,160
Speaker 1: I met with somebody who was in the pharmaceutical business

853
00:42:50,160 --> 00:42:52,799
Speaker 1: that's also getting a nine figure check. Who do they

854
00:42:52,800 --> 00:42:55,319
Speaker 1: all sell to? And they sold a private equity. This

855
00:42:55,400 --> 00:42:57,640
Speaker 1: is something that in my whole career has never happened,

856
00:42:57,960 --> 00:43:00,640
Speaker 1: and in the last three years, it's happening like crazy.

857
00:43:00,680 --> 00:43:02,800
Speaker 1: You brought up earlier how it's happening in our the space.

858
00:43:02,840 --> 00:43:04,799
Speaker 1: We happen to be in the r A space, but

859
00:43:04,840 --> 00:43:07,000
Speaker 1: it's really happening everywhere. And what you're seeing is these

860
00:43:07,000 --> 00:43:09,440
Speaker 1: guys that are starting businesses, they get it to a

861
00:43:09,480 --> 00:43:12,439
Speaker 1: certain size, and they're not the same person to take

862
00:43:12,440 --> 00:43:15,480
Speaker 1: it to the next level. I believe that good private

863
00:43:15,480 --> 00:43:18,719
Speaker 1: equity firms are better at taking those firms to the

864
00:43:18,719 --> 00:43:21,560
Speaker 1: next level than they would be themselves. They know how

865
00:43:21,600 --> 00:43:24,200
Speaker 1: to institutionalize, they know how to bring in a strong

866
00:43:24,280 --> 00:43:28,840
Speaker 1: financial team. They have some sophistication around mergers and acquisitions. Uh,

867
00:43:28,960 --> 00:43:32,239
Speaker 1: they have a lot more ways to exit. Uh. Good

868
00:43:32,280 --> 00:43:35,080
Speaker 1: firm can take you public, they can sell you another sponsor.

869
00:43:35,239 --> 00:43:38,319
Speaker 1: They can. I mean, that's what they do from when

870
00:43:38,320 --> 00:43:39,920
Speaker 1: they get up in the morning, when they leave, is say,

871
00:43:39,920 --> 00:43:41,799
Speaker 1: how do we take this business, this idea and help

872
00:43:41,840 --> 00:43:44,239
Speaker 1: grow it? Are there bad apples out there? They go

873
00:43:44,280 --> 00:43:46,640
Speaker 1: in and get the business and screw it up? And yes,

874
00:43:47,000 --> 00:43:49,799
Speaker 1: are their complete idiots out there. Private equity running Private

875
00:43:49,800 --> 00:43:53,040
Speaker 1: equity fun of course, But I don't view it like

876
00:43:53,120 --> 00:43:57,000
Speaker 1: mutual fund managers, where if one mutual fund manager outperforms

877
00:43:57,040 --> 00:43:59,640
Speaker 1: the other, it's probably but not always due to luck.

878
00:44:00,280 --> 00:44:02,560
Speaker 1: I think when you see certain private equity funds with

879
00:44:02,600 --> 00:44:06,720
Speaker 1: persistent outperformance, I do think the fact that private equity

880
00:44:06,760 --> 00:44:09,719
Speaker 1: fund A has forty McKenzie consultants that have been doing

881
00:44:09,760 --> 00:44:12,239
Speaker 1: it since the eighties is probably going to do better

882
00:44:12,680 --> 00:44:15,080
Speaker 1: than the one that's, you know, four blocks away from

883
00:44:15,080 --> 00:44:17,520
Speaker 1: my office. That's like two guys that opened up shop

884
00:44:17,560 --> 00:44:21,040
Speaker 1: three years ago. They're not the same manager. Managers make

885
00:44:21,080 --> 00:44:23,120
Speaker 1: a difference in the private equity space. So I think

886
00:44:23,160 --> 00:44:25,160
Speaker 1: you can take that universe of private equity funds and

887
00:44:25,160 --> 00:44:29,919
Speaker 1: go who's got the history, who's outperformed? Why have they outperformed?

888
00:44:30,719 --> 00:44:33,440
Speaker 1: Is there is? There is the repeatable pattern here and

889
00:44:33,560 --> 00:44:36,600
Speaker 1: my personal experience of watching my clients now I still

890
00:44:36,680 --> 00:44:40,719
Speaker 1: am seeing clients. I see hundreds of clients and where

891
00:44:40,760 --> 00:44:43,480
Speaker 1: I'm involved with our ultra fluent practice, that's mainly focused

892
00:44:43,520 --> 00:44:45,319
Speaker 1: on people that have tens of millions or hundreds of

893
00:44:45,320 --> 00:44:48,160
Speaker 1: millions or even more than that, and many, many, many

894
00:44:48,200 --> 00:44:51,000
Speaker 1: of them got there because they built a business to

895
00:44:51,000 --> 00:44:52,480
Speaker 1: a level and they sold a private equity fund. And

896
00:44:52,520 --> 00:44:54,520
Speaker 1: let me tell you when their biggest payout was Barry.

897
00:44:54,640 --> 00:44:58,399
Speaker 1: It wasn't their first buyout, it's their second. So what's

898
00:44:58,440 --> 00:45:01,600
Speaker 1: happening is an equity fund is coming in and they're

899
00:45:01,600 --> 00:45:04,680
Speaker 1: taking a stake, like the recent example I talked to

900
00:45:04,719 --> 00:45:07,399
Speaker 1: you about with somebody had sold a majority interest, but

901
00:45:07,440 --> 00:45:10,360
Speaker 1: the private equity funds want them in there because they

902
00:45:10,360 --> 00:45:12,359
Speaker 1: want them engaged. You know, those people are the people

903
00:45:12,400 --> 00:45:14,359
Speaker 1: that got the business at that level, and so they

904
00:45:14,360 --> 00:45:17,320
Speaker 1: still have twenty percent or whatever the business. The second

905
00:45:17,320 --> 00:45:21,440
Speaker 1: sale that's happening four or five years later, almost always,

906
00:45:21,440 --> 00:45:23,600
Speaker 1: in my experience, is much much bigger than the first one,

907
00:45:23,920 --> 00:45:26,919
Speaker 1: which is the proof that the private equity fund has

908
00:45:26,960 --> 00:45:28,960
Speaker 1: more than doubled the value of that business when they

909
00:45:28,960 --> 00:45:32,520
Speaker 1: stepped into it. Now, I've seen this and the restaurant business,

910
00:45:32,560 --> 00:45:35,640
Speaker 1: and the consumer staples business, and the financial super over

911
00:45:35,760 --> 00:45:38,440
Speaker 1: and over and over again. I've seen a couple of

912
00:45:38,480 --> 00:45:41,600
Speaker 1: times where it's not worked out, But the overwhelming majority

913
00:45:41,600 --> 00:45:44,040
Speaker 1: of the time, the client I'm sitting in front of

914
00:45:44,120 --> 00:45:47,360
Speaker 1: that finds themselves worth million or a hundred and fifty

915
00:45:47,360 --> 00:45:50,480
Speaker 1: million was never going to get there without the institutionalization

916
00:45:50,520 --> 00:45:52,719
Speaker 1: of their practice. The private equity brought. Now does that

917
00:45:52,760 --> 00:45:56,279
Speaker 1: translate into the private equity investor provacuity investors participating there?

918
00:45:56,560 --> 00:45:58,680
Speaker 1: And I don't buy the fee thing either. Like when

919
00:45:58,680 --> 00:46:01,279
Speaker 1: I look at the stock side and I look at

920
00:46:01,320 --> 00:46:03,719
Speaker 1: the mutual funds. Yeah, if you divide out the world

921
00:46:03,760 --> 00:46:05,359
Speaker 1: of mutual funds and take the ones that charge one

922
00:46:05,600 --> 00:46:07,960
Speaker 1: more than one percent, they're in the bottom quartile of performers,

923
00:46:08,200 --> 00:46:10,600
Speaker 1: and the ones that charge less than basis points or

924
00:46:10,600 --> 00:46:13,239
Speaker 1: the top quartile. Because the market's pretty efficient. Fees matter

925
00:46:13,920 --> 00:46:15,960
Speaker 1: of course, fees matter in the private equity space. If

926
00:46:15,960 --> 00:46:17,680
Speaker 1: you can get the same performance and pay less, of

927
00:46:17,719 --> 00:46:20,399
Speaker 1: course you would want that, but it's not the same thing.

928
00:46:20,480 --> 00:46:23,319
Speaker 1: I mean the private equity firm. The good ones are

929
00:46:23,440 --> 00:46:26,279
Speaker 1: involved in running the business. Now. The ones that are

930
00:46:26,280 --> 00:46:28,840
Speaker 1: not so great, they just go put money in a

931
00:46:28,920 --> 00:46:31,200
Speaker 1: firm and keep doing your thing, and we'll sell you

932
00:46:31,239 --> 00:46:33,960
Speaker 1: three years later, no value added. I think that's thousands

933
00:46:34,000 --> 00:46:36,120
Speaker 1: of private equity funds, all those, a lot of the

934
00:46:36,160 --> 00:46:38,279
Speaker 1: small ones. That's what they do. So there's a lot

935
00:46:38,360 --> 00:46:42,360
Speaker 1: less space between our views than you originally imagined. But

936
00:46:42,640 --> 00:46:46,160
Speaker 1: for academic purposes, let me push back a little bit

937
00:46:46,719 --> 00:46:49,880
Speaker 1: um And there's two things that stand out. The first

938
00:46:50,080 --> 00:46:54,400
Speaker 1: is I heard very very similar things about hedge funds

939
00:46:54,400 --> 00:46:57,359
Speaker 1: and to a lesser degree, venture capital um. We talked

940
00:46:57,360 --> 00:47:01,279
Speaker 1: about cumulative advantage earlier. Hey, our guys are unique and

941
00:47:01,360 --> 00:47:04,040
Speaker 1: special and because of our track record, we get to

942
00:47:04,080 --> 00:47:06,000
Speaker 1: see the best deal flow, we get access to the

943
00:47:06,040 --> 00:47:09,400
Speaker 1: best entrepreneurs. We get, we get, we get. And we

944
00:47:09,480 --> 00:47:13,160
Speaker 1: heard that about vcs, we heard that about hedge funds,

945
00:47:13,360 --> 00:47:16,920
Speaker 1: and it's still very much a fathead, long tailed distribution,

946
00:47:17,360 --> 00:47:20,279
Speaker 1: a handful of giant winners, which if you have a

947
00:47:20,280 --> 00:47:22,200
Speaker 1: couple of billion dollars come on in, We're happy to

948
00:47:22,239 --> 00:47:26,000
Speaker 1: bring you aboard. Um. So, so that's pushback number one,

949
00:47:26,160 --> 00:47:30,000
Speaker 1: and then pushback number two is sort of the soft

950
00:47:30,040 --> 00:47:32,919
Speaker 1: bank vision fund idea. When you raise a hundred billion

951
00:47:32,920 --> 00:47:34,560
Speaker 1: dollars and you have to put it to work quickly,

952
00:47:36,680 --> 00:47:40,400
Speaker 1: you just distort the valuations in the space. We're watching

953
00:47:40,520 --> 00:47:44,359
Speaker 1: private equity raise almost a trillion dollars a year, and

954
00:47:44,440 --> 00:47:47,000
Speaker 1: you mentioned eight thousand. I guarantee you that will be

955
00:47:47,200 --> 00:47:51,440
Speaker 1: nine and eleven thousand. So how does somebody who says,

956
00:47:52,000 --> 00:47:56,640
Speaker 1: I appreciate the lack of volatility the non correlation um

957
00:47:56,680 --> 00:48:01,000
Speaker 1: to equity, which private equity actually is much were much

958
00:48:01,080 --> 00:48:04,640
Speaker 1: less correlated to stocks than venture capital or or hedge

959
00:48:04,640 --> 00:48:07,279
Speaker 1: funds are. And I'm interested in this, But how do

960
00:48:07,320 --> 00:48:11,480
Speaker 1: I pick out of these eight funds? And by the way,

961
00:48:11,520 --> 00:48:14,080
Speaker 1: I don't have a billion dollars, I have five million

962
00:48:14,160 --> 00:48:17,360
Speaker 1: or fifty million to put to work. Well, first of all,

963
00:48:17,360 --> 00:48:20,239
Speaker 1: the hedge funds, they had that argument twenty years ago.

964
00:48:20,360 --> 00:48:22,960
Speaker 1: We get, we're we're smarter and bigger, non correlated with

965
00:48:23,000 --> 00:48:24,719
Speaker 1: this with that, but I mean twenty years ago, we

966
00:48:24,840 --> 00:48:27,480
Speaker 1: had a lot of evidence that that markets were pretty efficient.

967
00:48:27,800 --> 00:48:29,560
Speaker 1: I mean even in early in my career, we had

968
00:48:29,560 --> 00:48:31,840
Speaker 1: that evidence, and I think all we're seeing is, you

969
00:48:31,840 --> 00:48:33,600
Speaker 1: know that they've been called out that that that's just

970
00:48:33,640 --> 00:48:35,800
Speaker 1: not true and that they can't beat the efficient markets.

971
00:48:36,040 --> 00:48:38,160
Speaker 1: Well in the the argument is in the eighties and

972
00:48:38,280 --> 00:48:42,120
Speaker 1: nineties they did, and then once there was this rush

973
00:48:42,360 --> 00:48:46,239
Speaker 1: of capital and people to hedge funds space. It's you

974
00:48:46,239 --> 00:48:49,320
Speaker 1: know the watchman called Jim Chandos has said, I'm always

975
00:48:49,360 --> 00:48:51,440
Speaker 1: quoting him on this. Thirty years ago there were a

976
00:48:51,480 --> 00:48:53,520
Speaker 1: hundred hedge funds, they all created alpha, and now there's

977
00:48:53,560 --> 00:48:56,960
Speaker 1: eleven thousand. It's the same hundred hedge funds creating alpha. Yeah,

978
00:48:56,960 --> 00:48:58,480
Speaker 1: I see a different I see a different reason. I

979
00:48:58,520 --> 00:49:00,840
Speaker 1: think when you look at the eighties, there was no internet,

980
00:49:01,400 --> 00:49:04,080
Speaker 1: so the market really wasn't efficient as efficient, right, I

981
00:49:04,239 --> 00:49:05,960
Speaker 1: just I didn't. You can't buy the argument. In the

982
00:49:05,960 --> 00:49:08,560
Speaker 1: eighties you could find mutual fund managers that would outperform

983
00:49:08,560 --> 00:49:11,000
Speaker 1: and hedge fund managers that would outperform. When the market

984
00:49:11,040 --> 00:49:14,360
Speaker 1: really became efficient and the two thousands, all of that

985
00:49:14,400 --> 00:49:16,279
Speaker 1: stuff went away. I don't think as more hedge fund

986
00:49:16,280 --> 00:49:18,760
Speaker 1: managers and mutual fund managers came into the space, Although

987
00:49:18,800 --> 00:49:21,440
Speaker 1: that helps make a market more efficient, I think the

988
00:49:21,480 --> 00:49:24,080
Speaker 1: reality is there's a kid in a garage and Malaysia

989
00:49:24,160 --> 00:49:26,359
Speaker 1: that knows everything that that the hedge fund manager does,

990
00:49:26,400 --> 00:49:29,960
Speaker 1: and so it's came over. Now, all this money going

991
00:49:29,960 --> 00:49:32,560
Speaker 1: to the private equity space is going to dilute returns,

992
00:49:32,680 --> 00:49:34,399
Speaker 1: just like all the money going to the real estate

993
00:49:34,440 --> 00:49:36,680
Speaker 1: space is going to dilute returns. If you have a

994
00:49:36,680 --> 00:49:40,200
Speaker 1: bunch more money changing the same amount of property, uh,

995
00:49:40,239 --> 00:49:44,520
Speaker 1: you're going to have lower expected returns. More private equity

996
00:49:44,719 --> 00:49:49,200
Speaker 1: um firms coming in to buy firms like yours, you

997
00:49:49,280 --> 00:49:51,319
Speaker 1: now have higher valuations than you did a few years

998
00:49:51,360 --> 00:49:53,799
Speaker 1: ago just because they're in the space, which means the

999
00:49:53,840 --> 00:49:58,360
Speaker 1: competition has by definition created a lower expected return. Is

1000
00:49:58,360 --> 00:50:01,160
Speaker 1: there're only two private equity funds Chase r As, they

1001
00:50:01,200 --> 00:50:02,880
Speaker 1: wouldn't have to compete on price so much, they have

1002
00:50:02,880 --> 00:50:05,879
Speaker 1: a better expected return, but the return can still be

1003
00:50:05,880 --> 00:50:07,719
Speaker 1: better than the stock market And I think in the

1004
00:50:07,760 --> 00:50:12,480
Speaker 1: private equity space that you can find those firms more

1005
00:50:12,520 --> 00:50:15,400
Speaker 1: likely to outperform way easier than the stock market space.

1006
00:50:15,440 --> 00:50:18,040
Speaker 1: If you believe the space is not efficient, I believe

1007
00:50:18,080 --> 00:50:20,920
Speaker 1: the private space is not completely efficient. I believe if

1008
00:50:20,960 --> 00:50:23,640
Speaker 1: if I bought your firm, my expected return going forward.

1009
00:50:23,840 --> 00:50:26,359
Speaker 1: After I paid you some monstrous valuation that you would

1010
00:50:26,360 --> 00:50:29,440
Speaker 1: insist on, it would be I would have to advise

1011
00:50:29,480 --> 00:50:31,759
Speaker 1: you that that was insulted at what you would tell

1012
00:50:31,800 --> 00:50:34,040
Speaker 1: me for your price. But if we did that, my

1013
00:50:34,080 --> 00:50:36,319
Speaker 1: expectation would be I would have a better return than

1014
00:50:36,360 --> 00:50:38,640
Speaker 1: if I invest in this. And I just think that's

1015
00:50:38,760 --> 00:50:40,359
Speaker 1: that's the reality of it. And I think you think

1016
00:50:40,400 --> 00:50:45,920
Speaker 1: that um to some degree. I mean the the you

1017
00:50:46,000 --> 00:50:49,080
Speaker 1: talk about randomness and a little lock in things working

1018
00:50:49,120 --> 00:50:51,960
Speaker 1: out in the right place. I spent the first twenty

1019
00:50:52,040 --> 00:50:54,799
Speaker 1: years of my career turning money down, and then my

1020
00:50:54,880 --> 00:50:57,759
Speaker 1: epiphany was, all right, and I'm just sending people out

1021
00:50:57,760 --> 00:51:01,520
Speaker 1: to the wolves to be, you know, having their being shorn.

1022
00:51:02,000 --> 00:51:04,160
Speaker 1: We might as well do this. I'm telling them the

1023
00:51:04,239 --> 00:51:05,760
Speaker 1: right way to do it. I might as well execute

1024
00:51:05,760 --> 00:51:10,839
Speaker 1: it myself. That was quite the aha moment. And if

1025
00:51:10,840 --> 00:51:12,719
Speaker 1: you would have asked me five years ago, hey, you're

1026
00:51:12,719 --> 00:51:15,120
Speaker 1: gonna be a billion years and five billion dollars in

1027
00:51:15,120 --> 00:51:18,440
Speaker 1: five years, I would have laughed at you. But people

1028
00:51:18,600 --> 00:51:21,600
Speaker 1: respond to something that's a little different, a little outside

1029
00:51:21,640 --> 00:51:24,399
Speaker 1: of the box what you were offering in oh four

1030
00:51:24,480 --> 00:51:28,000
Speaker 1: or five or six, And through the financial crisis, nobody

1031
00:51:28,000 --> 00:51:30,760
Speaker 1: else was or very few people were talking in those

1032
00:51:30,920 --> 00:51:34,640
Speaker 1: terms and offering those services. So of course you're going

1033
00:51:34,680 --> 00:51:38,160
Speaker 1: to see faster growth and better returns. The big question

1034
00:51:38,360 --> 00:51:42,120
Speaker 1: that has to be on anybody's mind who's making investments

1035
00:51:42,200 --> 00:51:45,080
Speaker 1: in the r I A spaces How long can this

1036
00:51:45,160 --> 00:51:49,400
Speaker 1: continue to go for? Are we gonna see continuing consolidation.

1037
00:51:49,520 --> 00:51:52,680
Speaker 1: Can we continue to pay five and seven and nine

1038
00:51:52,719 --> 00:51:56,720
Speaker 1: times profits to these small companies and expect an above

1039
00:51:56,760 --> 00:52:00,640
Speaker 1: market return or at what point does that become, you know,

1040
00:52:00,760 --> 00:52:04,880
Speaker 1: just too pricey. Well, I think like, let's take a

1041
00:52:04,960 --> 00:52:09,160
Speaker 1: business and just assume you paid them ten times and

1042
00:52:09,200 --> 00:52:12,120
Speaker 1: they have a modest growth rate. That expected to return

1043
00:52:12,160 --> 00:52:14,840
Speaker 1: by itself is higher than people hundred right if you

1044
00:52:14,520 --> 00:52:17,000
Speaker 1: start to do the math um, so it just shows

1045
00:52:17,040 --> 00:52:20,360
Speaker 1: you that that it's not it's not totally crazy. Now

1046
00:52:20,360 --> 00:52:22,799
Speaker 1: it's the highest it's ever been. I don't think. I

1047
00:52:22,840 --> 00:52:24,440
Speaker 1: think there's a lot of things they're gonna make this

1048
00:52:24,480 --> 00:52:27,960
Speaker 1: party stop. One is there's gonna be fee compression in

1049
00:52:28,000 --> 00:52:30,279
Speaker 1: the industry still. It's ongoing and has been for a

1050
00:52:30,320 --> 00:52:33,600
Speaker 1: couple of years. I think creative planning has been the

1051
00:52:33,680 --> 00:52:36,600
Speaker 1: largest driver of the hidden fee compression in the industry,

1052
00:52:36,600 --> 00:52:38,719
Speaker 1: which is, which is, hey, we're not just going to

1053
00:52:38,800 --> 00:52:41,560
Speaker 1: manage your money for that fee. We're gonna charge you

1054
00:52:41,560 --> 00:52:43,839
Speaker 1: a little bit less than other places, and we're gonna

1055
00:52:43,880 --> 00:52:47,439
Speaker 1: do ten times more, and so we're that's a type

1056
00:52:47,480 --> 00:52:49,120
Speaker 1: of fee compression, right if so, in other words, you're

1057
00:52:49,160 --> 00:52:52,440
Speaker 1: doing planning and you're doing you're not charging additional for

1058
00:52:52,440 --> 00:52:54,239
Speaker 1: trust in the states, or or you have to pay

1059
00:52:54,280 --> 00:52:56,480
Speaker 1: those lawyers something so you know they'll come in and

1060
00:52:56,520 --> 00:52:59,520
Speaker 1: they'll get planning investment management. When we use alternatives, we

1061
00:52:59,520 --> 00:53:01,240
Speaker 1: don't have a upper fee, we don't have a pooled

1062
00:53:01,239 --> 00:53:03,839
Speaker 1: asset fee. That's all part of it. So now, how

1063
00:53:03,880 --> 00:53:07,240
Speaker 1: do you deal with the fact that these private equity

1064
00:53:07,280 --> 00:53:12,040
Speaker 1: firms tend to charge much more than financial planning firms charge.

1065
00:53:12,080 --> 00:53:14,840
Speaker 1: How does that fee another word, you're just passing along

1066
00:53:14,880 --> 00:53:17,000
Speaker 1: the fee or is it just goes straight through, straight

1067
00:53:17,000 --> 00:53:19,040
Speaker 1: through to the clo. It's passed through. You're not charging them,

1068
00:53:19,920 --> 00:53:22,160
Speaker 1: but you're not tacking anything on top. That's exactly right,

1069
00:53:22,320 --> 00:53:24,719
Speaker 1: and some sometimes we're able to negotiate breaks for them,

1070
00:53:24,719 --> 00:53:27,000
Speaker 1: but yeah, we're definitely not marking it up. So you're

1071
00:53:27,040 --> 00:53:28,800
Speaker 1: adding some complexity. We have to have a whole of

1072
00:53:28,880 --> 00:53:31,799
Speaker 1: their team. But we don't have a separate fee. We

1073
00:53:31,880 --> 00:53:34,479
Speaker 1: give legal advice and do trust funding without a separate fee.

1074
00:53:34,480 --> 00:53:36,279
Speaker 1: We give tax advice without a separate fee. We won't

1075
00:53:36,560 --> 00:53:39,399
Speaker 1: prepare a document some time with us severe and mean

1076
00:53:39,480 --> 00:53:41,720
Speaker 1: you don't you don't create the trust or the will

1077
00:53:41,920 --> 00:53:43,759
Speaker 1: that goes out to some No, we do. We do

1078
00:53:43,800 --> 00:53:45,800
Speaker 1: create them. We have a separate fee for it. Yeah,

1079
00:53:45,800 --> 00:53:47,719
Speaker 1: and there's a separate fee for that. So there's all

1080
00:53:47,800 --> 00:53:51,360
Speaker 1: of these all of this advice and and specialists that

1081
00:53:51,440 --> 00:53:54,439
Speaker 1: they can access. When our clients are trying to figure

1082
00:53:54,480 --> 00:53:56,480
Speaker 1: out they've retired and they're they're not a medicare yet,

1083
00:53:56,480 --> 00:53:59,239
Speaker 1: we have a team that does nothing but advise them

1084
00:53:59,440 --> 00:54:01,839
Speaker 1: on what health plan should they get and helping them

1085
00:54:01,880 --> 00:54:03,879
Speaker 1: implement it and all those things. So you have all

1086
00:54:03,920 --> 00:54:07,480
Speaker 1: of these different things that costs something, but we're not

1087
00:54:07,560 --> 00:54:10,040
Speaker 1: adding anything to the fee to the client. And that's

1088
00:54:10,080 --> 00:54:14,320
Speaker 1: what you mean by hidden fee compression. That's hidden feed compression. So, um,

1089
00:54:14,320 --> 00:54:16,279
Speaker 1: you know we're set up that way because that's what

1090
00:54:16,320 --> 00:54:20,200
Speaker 1: we philosophically believed in from the beginning. I'm super passionate

1091
00:54:20,239 --> 00:54:22,360
Speaker 1: about this business. I'm going to be in this business

1092
00:54:22,520 --> 00:54:26,600
Speaker 1: until they you know, I'm gonna die working in this business.

1093
00:54:26,640 --> 00:54:28,920
Speaker 1: I love this business. I love sitting down with a

1094
00:54:28,920 --> 00:54:32,000
Speaker 1: client and saying, here's where you are right now, and

1095
00:54:32,400 --> 00:54:34,600
Speaker 1: by the way, we can do these seven things and

1096
00:54:34,640 --> 00:54:36,640
Speaker 1: all those things you talked about that you're dreaming about,

1097
00:54:36,640 --> 00:54:39,560
Speaker 1: I can increase really a lot the chances all those

1098
00:54:39,560 --> 00:54:42,000
Speaker 1: things are going to happen for you. I love that.

1099
00:54:42,000 --> 00:54:45,160
Speaker 1: That's my favorite part of the of this whole thing.

1100
00:54:45,680 --> 00:54:50,200
Speaker 1: But that has different components to it. There's charitable components,

1101
00:54:50,200 --> 00:54:53,360
Speaker 1: there's legal components, there's tax components, there's investment components. That

1102
00:54:53,480 --> 00:54:55,279
Speaker 1: to me, is what the client values the most is

1103
00:54:55,280 --> 00:54:58,360
Speaker 1: getting that that advice delivered in a way that is

1104
00:54:58,400 --> 00:55:00,759
Speaker 1: actionable and make sense to them. That's the part that

1105
00:55:00,800 --> 00:55:04,120
Speaker 1: I'm most passionate about. But that's that if you look

1106
00:55:04,160 --> 00:55:06,400
Speaker 1: at the larger r A A s, we were the

1107
00:55:06,440 --> 00:55:10,560
Speaker 1: first to do that, and almost all of the other

1108
00:55:10,640 --> 00:55:13,440
Speaker 1: large r A s have changed what they're doing to

1109
00:55:13,520 --> 00:55:16,680
Speaker 1: try to put together some semblance of what we're doing,

1110
00:55:17,400 --> 00:55:20,279
Speaker 1: but they've done it too late. They've done it with

1111
00:55:20,320 --> 00:55:22,640
Speaker 1: private equity money, They've done it with people that are

1112
00:55:22,640 --> 00:55:26,360
Speaker 1: CEOs that have never been advisors or are not advisors today,

1113
00:55:26,760 --> 00:55:29,200
Speaker 1: and it's just clunkier, and so I think that's the

1114
00:55:29,280 --> 00:55:33,440
Speaker 1: competitive advantage we have today is from top to bottom,

1115
00:55:33,480 --> 00:55:35,799
Speaker 1: the president, the vice president of the CEO, all of

1116
00:55:35,920 --> 00:55:40,440
Speaker 1: us are planners. All of us are certified Financial Planner

1117
00:55:41,040 --> 00:55:43,239
Speaker 1: UH certificates. We all of us sit in front of

1118
00:55:43,280 --> 00:55:46,400
Speaker 1: clients UM, all the directors in the firm. Do we

1119
00:55:46,520 --> 00:55:50,120
Speaker 1: understand how that deliverable works? And that becomes a big,

1120
00:55:50,600 --> 00:55:53,719
Speaker 1: a big differentiator. And and that has created a lot

1121
00:55:53,760 --> 00:55:55,799
Speaker 1: of feed compression in the industry because for someone to

1122
00:55:55,840 --> 00:55:58,799
Speaker 1: compete with us, they've and on a large scale, they've

1123
00:55:58,800 --> 00:56:01,560
Speaker 1: had to start to add these things without changing their fee. Now,

1124
00:56:01,600 --> 00:56:04,799
Speaker 1: once that's done, what happens. Once that's done, The next

1125
00:56:04,840 --> 00:56:07,400
Speaker 1: wave happens and you've got a lower fees. And I

1126
00:56:07,400 --> 00:56:08,719
Speaker 1: think we're gonna be on the front end of that

1127
00:56:08,800 --> 00:56:11,040
Speaker 1: the second it could happen. We're gonna do what we

1128
00:56:11,120 --> 00:56:14,959
Speaker 1: can to push those down and and push our competitors out.

1129
00:56:15,200 --> 00:56:18,000
Speaker 1: Where do you think those fees dropped too? I think

1130
00:56:18,040 --> 00:56:21,040
Speaker 1: if you're a pure money manager, you're gonna start looking

1131
00:56:21,040 --> 00:56:23,160
Speaker 1: at fifty basis points. If you're a money manager with

1132
00:56:23,200 --> 00:56:26,560
Speaker 1: planning light, you're gonna look at sixty six five basis points.

1133
00:56:26,560 --> 00:56:30,360
Speaker 1: If you're a comprehensive wealth manager doing everything customized and

1134
00:56:30,400 --> 00:56:32,719
Speaker 1: needs based with a lot of other services. You can

1135
00:56:32,719 --> 00:56:34,920
Speaker 1: go a little bit higher than that, but that's you know,

1136
00:56:35,080 --> 00:56:38,600
Speaker 1: that's substitutive and um and I think it's gonna be quick.

1137
00:56:38,840 --> 00:56:41,120
Speaker 1: I think a lot of people think all this happens

1138
00:56:41,160 --> 00:56:44,200
Speaker 1: over twenty years and blah blah blah. That ten years

1139
00:56:44,200 --> 00:56:47,000
Speaker 1: into the feed compression at least, So maybe it is.

1140
00:56:47,600 --> 00:56:49,960
Speaker 1: Look what just happened with trading fees. So they went

1141
00:56:49,960 --> 00:56:53,360
Speaker 1: from twenty to ten to five. We're on this trend.

1142
00:56:53,400 --> 00:56:55,680
Speaker 1: It could be another ten years. Then Schwab goes to

1143
00:56:55,760 --> 00:56:57,560
Speaker 1: zero and the end of the day TV goes to

1144
00:56:57,640 --> 00:56:59,640
Speaker 1: zero and the next week Fidelity goes to zero. So

1145
00:56:59,680 --> 00:57:02,320
Speaker 1: you know how percent drop from five in a couple

1146
00:57:02,440 --> 00:57:05,200
Speaker 1: in a couple of days, right, So there will there

1147
00:57:05,239 --> 00:57:07,360
Speaker 1: is always a tipping point. We saw it with mutual

1148
00:57:07,360 --> 00:57:11,040
Speaker 1: funds where oh, commissions are fee only. Who cares? Then

1149
00:57:11,080 --> 00:57:13,439
Speaker 1: all of a sudden commissions were gone, right then high

1150
00:57:13,480 --> 00:57:15,880
Speaker 1: cost mutual funds. Who cares? The people? The prospective clients

1151
00:57:15,880 --> 00:57:18,160
Speaker 1: I met in oh seven or eight or nine, It

1152
00:57:18,280 --> 00:57:20,439
Speaker 1: was too easy if they're coming in they had five

1153
00:57:20,520 --> 00:57:22,720
Speaker 1: mutual funds they're gonna they're paying the mutual funds more

1154
00:57:22,760 --> 00:57:24,480
Speaker 1: than they're gonna pay us. I'm gonna do a lot more.

1155
00:57:24,520 --> 00:57:27,000
Speaker 1: I'm gonna lower their taxes. I mean, what's what's not

1156
00:57:27,080 --> 00:57:29,600
Speaker 1: to like now? All of that's out the window. E

1157
00:57:29,720 --> 00:57:32,200
Speaker 1: t F s Now, all of a sudden, five basis

1158
00:57:32,240 --> 00:57:35,400
Speaker 1: points for SP five hundred fund is crazy, ridiculous. It's

1159
00:57:35,520 --> 00:57:37,840
Speaker 1: free now, you know. And so you're we've seen that

1160
00:57:37,880 --> 00:57:41,400
Speaker 1: tipping point with everything else, and this is the one

1161
00:57:41,520 --> 00:57:43,600
Speaker 1: space that's left and we don't see it here yet

1162
00:57:43,960 --> 00:57:47,120
Speaker 1: because there's not a firm that has the scale to

1163
00:57:47,240 --> 00:57:50,840
Speaker 1: really to do it UM. And I think firms are

1164
00:57:50,880 --> 00:57:54,800
Speaker 1: emerging that have the scale and aren't entirely motivated by

1165
00:57:54,800 --> 00:57:57,360
Speaker 1: profits that might be the one to deliver it. And

1166
00:57:57,360 --> 00:58:00,560
Speaker 1: that just might be creative planning. So I have to

1167
00:58:00,600 --> 00:58:03,440
Speaker 1: ask you one follow up question on the die at

1168
00:58:03,440 --> 00:58:07,880
Speaker 1: my desk comment. We've seen Personal Capital get acquired, We've

1169
00:58:07,920 --> 00:58:11,240
Speaker 1: seen United Capital get acquired. We've seen a number of

1170
00:58:11,440 --> 00:58:17,800
Speaker 1: big firms, billion dollar firms get acquired by places UM

1171
00:58:18,080 --> 00:58:22,200
Speaker 1: like Goldman Sachs was one acquirer and Financial Engines was

1172
00:58:22,240 --> 00:58:26,560
Speaker 1: another requirer, and there's a handful both coincidentally publicly traded.

1173
00:58:27,480 --> 00:58:30,680
Speaker 1: What to prevent someone from coming along and making you

1174
00:58:30,800 --> 00:58:33,520
Speaker 1: an offer you can't refuse? Well, I think I've already

1175
00:58:33,520 --> 00:58:36,520
Speaker 1: seen that a couple of those offers where I've looked

1176
00:58:36,560 --> 00:58:39,760
Speaker 1: at them and said, you know, I, I really truly

1177
00:58:39,800 --> 00:58:43,200
Speaker 1: believe that I can double this business and five years

1178
00:58:43,200 --> 00:58:45,800
Speaker 1: from now not get that number. I think the I

1179
00:58:45,840 --> 00:58:49,320
Speaker 1: think the market's so insane now. But but I mean,

1180
00:58:49,960 --> 00:58:54,240
Speaker 1: so wait, you you're saying, hey, five years growing, I'll

1181
00:58:54,360 --> 00:58:57,240
Speaker 1: double the size. And even if I don't get that number,

1182
00:58:57,400 --> 00:58:59,040
Speaker 1: you don't care. I don't think i'll get that. I

1183
00:58:59,080 --> 00:59:01,200
Speaker 1: don't think i'll get that number. Finding I think rates

1184
00:59:01,200 --> 00:59:03,360
Speaker 1: will be different and private equity will be different, and

1185
00:59:03,480 --> 00:59:04,840
Speaker 1: you know, who know, it could be a recession. They're

1186
00:59:05,040 --> 00:59:06,840
Speaker 1: we could try. Who knows what's good? But there's too

1187
00:59:06,880 --> 00:59:09,160
Speaker 1: many things that are perfect right now, and I don't

1188
00:59:09,160 --> 00:59:11,080
Speaker 1: that I'm not confident are going to be perfect in

1189
00:59:11,080 --> 00:59:13,120
Speaker 1: in five years. I don't think there's any precedent for

1190
00:59:13,200 --> 00:59:15,680
Speaker 1: them to be. But you've never been tempted to take

1191
00:59:15,680 --> 00:59:19,600
Speaker 1: the money and run. No, because I really, um, what

1192
00:59:19,640 --> 00:59:21,760
Speaker 1: are you gonna do? No? I know what I would do.

1193
00:59:21,800 --> 00:59:23,200
Speaker 1: I still have a good time. I could be in

1194
00:59:23,240 --> 00:59:25,480
Speaker 1: this industry and have a great time. I don't have to,

1195
00:59:26,000 --> 00:59:28,240
Speaker 1: you know, do it on this scale and at this pace.

1196
00:59:28,280 --> 00:59:32,640
Speaker 1: But but I do enjoy it. I enjoy the clients,

1197
00:59:32,760 --> 00:59:35,360
Speaker 1: and I enjoy the team that I work with, and

1198
00:59:35,520 --> 00:59:39,360
Speaker 1: I don't It's easy for somebody who's worth millions of

1199
00:59:39,440 --> 00:59:41,080
Speaker 1: dollars to say they don't care about money. So I'm not.

1200
00:59:41,120 --> 00:59:42,640
Speaker 1: I'm not gonna say I don't care about money. I

1201
00:59:42,640 --> 00:59:45,360
Speaker 1: obviously do. I don't care about more money. I don't

1202
00:59:45,360 --> 00:59:48,200
Speaker 1: care about money. I just don't. And so I feel like,

1203
00:59:48,760 --> 00:59:51,920
Speaker 1: you know, I don't have to maximize, right, So but

1204
00:59:52,000 --> 00:59:53,520
Speaker 1: I'll tell you what. I'm sitting with clients and they

1205
00:59:53,520 --> 00:59:56,000
Speaker 1: tell me, I'm worn out. I've grown my business to

1206
00:59:56,040 --> 00:59:58,880
Speaker 1: this level. I got this, this offer from private equity.

1207
00:59:58,880 --> 01:00:00,360
Speaker 1: What should I do? I tell him, Look, it's a

1208
01:00:00,400 --> 01:00:02,600
Speaker 1: bit if you if you are not in love with

1209
01:00:02,640 --> 01:00:06,040
Speaker 1: what you're doing, take the money and run because this

1210
01:00:06,120 --> 01:00:08,439
Speaker 1: is really really good times right now, and we don't

1211
01:00:08,440 --> 01:00:10,000
Speaker 1: know what it's going to be like in four or

1212
01:00:10,000 --> 01:00:12,960
Speaker 1: five years. And you know so. But but for me,

1213
01:00:13,080 --> 01:00:16,120
Speaker 1: I mean, that's that's regret minimization. When I'm don't do

1214
01:00:16,200 --> 01:00:18,560
Speaker 1: it and this offer goes away, are you gonna feel

1215
01:00:18,600 --> 01:00:20,600
Speaker 1: worse than if you do do it and maybe you

1216
01:00:20,680 --> 01:00:22,960
Speaker 1: got a slightly better offer in five years, right, And

1217
01:00:22,960 --> 01:00:25,840
Speaker 1: I would have no regret minimization, because I just that's

1218
01:00:25,840 --> 01:00:29,440
Speaker 1: not what's motivating me. I want. I want to build

1219
01:00:29,520 --> 01:00:31,240
Speaker 1: the best offering. I want to be able to look

1220
01:00:31,240 --> 01:00:33,960
Speaker 1: back and go. Anybody that came to work for Creative

1221
01:00:34,000 --> 01:00:37,360
Speaker 1: Planning said, you know what, I was challenged. I learned something. Uh.

1222
01:00:37,760 --> 01:00:39,560
Speaker 1: You know, Peter never put anything in my way. In fact,

1223
01:00:39,640 --> 01:00:41,320
Speaker 1: there was an obstacle in my way. He removed it

1224
01:00:41,520 --> 01:00:43,520
Speaker 1: and I was able to achieve the very best I

1225
01:00:43,520 --> 01:00:46,120
Speaker 1: could there. That matters a lot to me. I want

1226
01:00:46,440 --> 01:00:48,880
Speaker 1: a client's when they're at our annual event and they're

1227
01:00:48,880 --> 01:00:50,160
Speaker 1: talking to each other, I want them to say, you

1228
01:00:50,200 --> 01:00:52,360
Speaker 1: know what, Creative Planning promise some things to me, and

1229
01:00:52,400 --> 01:00:54,439
Speaker 1: they delivered all those things, and I feel great about

1230
01:00:54,480 --> 01:00:57,439
Speaker 1: my decision to come there. I am very motivated by

1231
01:00:57,760 --> 01:01:00,600
Speaker 1: those things. Uh. It's great that we're in a business.

1232
01:01:00,840 --> 01:01:03,720
Speaker 1: Um that happens to be very hot right now. Um,

1233
01:01:03,760 --> 01:01:07,200
Speaker 1: but if it is half as hot five years from now,

1234
01:01:07,480 --> 01:01:09,360
Speaker 1: I'm gonna be fine. You know, you can only one

1235
01:01:09,400 --> 01:01:13,040
Speaker 1: steak stake then or at night and I feel like, um,

1236
01:01:13,080 --> 01:01:15,920
Speaker 1: I feel like I've already achieved that. I'm in my forties,

1237
01:01:15,960 --> 01:01:19,800
Speaker 1: and I'm just motivated by different things. So you mentioned

1238
01:01:19,840 --> 01:01:22,760
Speaker 1: earlier about being able to take advantage of the next

1239
01:01:23,160 --> 01:01:26,360
Speaker 1: financial crisis the way you did with the last financial crisis.

1240
01:01:27,160 --> 01:01:29,280
Speaker 1: What would you do to accumulate some sort of a

1241
01:01:29,280 --> 01:01:33,080
Speaker 1: war chest you you had hinted at that earlier. How

1242
01:01:33,120 --> 01:01:35,920
Speaker 1: does a firm put together a war chest to go

1243
01:01:36,000 --> 01:01:40,120
Speaker 1: out and make acquisitions when things are, let's say, less

1244
01:01:40,200 --> 01:01:42,240
Speaker 1: perfect than they are today. You have two choices. You

1245
01:01:42,240 --> 01:01:44,040
Speaker 1: can hope nothing happens in the next couple of years

1246
01:01:44,040 --> 01:01:47,400
Speaker 1: and wells and build it from cash flo or you

1247
01:01:47,440 --> 01:01:50,960
Speaker 1: can sell a minority steak where you still control everything.

1248
01:01:51,040 --> 01:01:52,680
Speaker 1: And you know, when you sell the minority steak, you

1249
01:01:52,680 --> 01:01:55,919
Speaker 1: don't get a full valuation, you get a discount. Right. Really,

1250
01:01:56,080 --> 01:01:59,040
Speaker 1: if somebody's gonna buy a minority steak in general, they're

1251
01:01:59,040 --> 01:02:01,720
Speaker 1: gonna pay you twenty five sent less. And they're gonna

1252
01:02:01,760 --> 01:02:04,880
Speaker 1: do that because they don't have any control. So they're

1253
01:02:04,920 --> 01:02:07,680
Speaker 1: really betting on you to continue to do a good

1254
01:02:07,760 --> 01:02:11,080
Speaker 1: job and not be an idiot about something strategic. Right.

1255
01:02:11,080 --> 01:02:15,600
Speaker 1: So I was halfway there, right, So I think that

1256
01:02:15,720 --> 01:02:19,360
Speaker 1: I think that because I'm not into the maximization of

1257
01:02:19,400 --> 01:02:22,400
Speaker 1: it that that fits. I think our needs where we

1258
01:02:22,440 --> 01:02:28,000
Speaker 1: could take you sell five somewhere in that range, raise

1259
01:02:28,160 --> 01:02:30,920
Speaker 1: enough money that when we're going to the next crisis,

1260
01:02:31,360 --> 01:02:33,920
Speaker 1: you know, at our annual meeting, I can say what

1261
01:02:33,960 --> 01:02:35,920
Speaker 1: I always did, which is, We're never ever going to

1262
01:02:36,040 --> 01:02:37,760
Speaker 1: let anybody go because of what's going on in the

1263
01:02:37,760 --> 01:02:40,560
Speaker 1: markets or with the economy. In fact, I'm going to

1264
01:02:40,720 --> 01:02:43,720
Speaker 1: keep doing what I've done every quarter of my entire career,

1265
01:02:44,120 --> 01:02:47,760
Speaker 1: which is fine, higher good people, and bring on new clients.

1266
01:02:48,160 --> 01:02:51,000
Speaker 1: You know, Creative Planning in its entire history has never

1267
01:02:51,040 --> 01:02:56,000
Speaker 1: had a month that didn't have positive flow. More even

1268
01:02:56,040 --> 01:02:59,280
Speaker 1: in the financial crisis. Even in the financial crisis, more

1269
01:02:59,320 --> 01:03:02,000
Speaker 1: money was come and the Creative Planning than leaving every

1270
01:03:02,040 --> 01:03:05,320
Speaker 1: single month from oh four to today. And we've never

1271
01:03:05,400 --> 01:03:08,760
Speaker 1: had a period of time of any significance where there

1272
01:03:08,840 --> 01:03:12,480
Speaker 1: wasn't a tremendous positive employee flow. Right. We are attracting

1273
01:03:12,840 --> 01:03:14,640
Speaker 1: clients and employees with our behavior, and I think a

1274
01:03:14,640 --> 01:03:17,640
Speaker 1: big part of that is the that they know that

1275
01:03:17,720 --> 01:03:21,960
Speaker 1: this is a place where, through thick and thin, uh,

1276
01:03:22,040 --> 01:03:24,160
Speaker 1: I'm gonna be with him, you know, to the end.

1277
01:03:24,320 --> 01:03:26,080
Speaker 1: I'm gonna be in the in the in the battle. Well,

1278
01:03:26,120 --> 01:03:28,919
Speaker 1: you you're the you know the old expression is fish

1279
01:03:29,000 --> 01:03:31,680
Speaker 1: rot from the head down. You set the tone as

1280
01:03:31,720 --> 01:03:34,840
Speaker 1: the leader of the firm, and that obviously permeates out

1281
01:03:35,000 --> 01:03:37,960
Speaker 1: to the rest of the six employees. So I have

1282
01:03:38,040 --> 01:03:40,040
Speaker 1: a ton more questions for you. Can you stick around

1283
01:03:40,040 --> 01:03:43,720
Speaker 1: a little bit? We have been speaking with Peter Malukey

1284
01:03:43,800 --> 01:03:47,120
Speaker 1: is the c i O and President of creative Planning

1285
01:03:47,240 --> 01:03:51,880
Speaker 1: of forty five billion dollar firm headquartered in Kansas City.

1286
01:03:51,960 --> 01:03:55,000
Speaker 1: Is right, um. If you enjoy this conversation, we'll be

1287
01:03:55,040 --> 01:03:57,360
Speaker 1: sure and come back for the podcast extras, where we

1288
01:03:57,520 --> 01:04:01,680
Speaker 1: keep the tape rolling and continue discussing all things are

1289
01:04:01,720 --> 01:04:05,200
Speaker 1: I A related. You can find that at Apple iTunes,

1290
01:04:05,320 --> 01:04:10,520
Speaker 1: Google Podcasts, Stitcher, Spotify, wherever your finer podcasts are found.

1291
01:04:10,880 --> 01:04:14,040
Speaker 1: We love your comments, feedback and suggestions right to us

1292
01:04:14,120 --> 01:04:17,560
Speaker 1: at m IB podcast at Bloomberg dot net. Give us

1293
01:04:17,600 --> 01:04:21,120
Speaker 1: a review on Apple iTunes. Check out my weekly column

1294
01:04:21,120 --> 01:04:24,160
Speaker 1: on Bloomberg dot com. Follow me on Twitter at Riolts.

1295
01:04:24,600 --> 01:04:27,600
Speaker 1: I'm Barry Hults. You're listening to Masters in Business on

1296
01:04:27,720 --> 01:04:32,680
Speaker 1: Bloomberg Radio. Welcome to the podcast, Peter, Thank you so

1297
01:04:32,760 --> 01:04:35,120
Speaker 1: much for doing this, and I'm just gonna share a

1298
01:04:35,160 --> 01:04:38,960
Speaker 1: little inside baseball. Um. You and I really met for

1299
01:04:39,000 --> 01:04:42,400
Speaker 1: the first time in September at the Wells Stacked conference

1300
01:04:42,520 --> 01:04:47,080
Speaker 1: that my firm is one of the hosts of. And

1301
01:04:47,400 --> 01:04:49,960
Speaker 1: I was fascinated to learn you don't do a lot

1302
01:04:49,960 --> 01:04:54,680
Speaker 1: of media. You don't go to that was your first conference. Um,

1303
01:04:54,720 --> 01:04:57,360
Speaker 1: And it's astonishing because here in New York, in the

1304
01:04:57,400 --> 01:05:01,680
Speaker 1: media center of the world, everybody has dying for some exposure.

1305
01:05:02,200 --> 01:05:08,480
Speaker 1: You guys really built this with practically no national news exposure.

1306
01:05:08,520 --> 01:05:10,600
Speaker 1: And I am i overstating that. I think you've got

1307
01:05:10,600 --> 01:05:13,040
Speaker 1: it right. We we tried for a long time to

1308
01:05:13,080 --> 01:05:16,320
Speaker 1: do nothing, you know, to have no exposure. And there

1309
01:05:16,400 --> 01:05:19,520
Speaker 1: was one industry publication that that had called, maybe for

1310
01:05:19,520 --> 01:05:22,200
Speaker 1: the third time, to do an interview, and I didn't respond,

1311
01:05:22,200 --> 01:05:23,800
Speaker 1: and I got an email from the reporter. He said, Hey,

1312
01:05:23,800 --> 01:05:26,640
Speaker 1: we're doing a story on creative planning, and right now

1313
01:05:26,720 --> 01:05:28,720
Speaker 1: we just have quotes from your competitors, So do you

1314
01:05:28,720 --> 01:05:31,640
Speaker 1: want to be interviewed or not? That's a smart smart

1315
01:05:31,640 --> 01:05:34,600
Speaker 1: And they made the headline was outing a reluctant star,

1316
01:05:34,920 --> 01:05:36,800
Speaker 1: and that was the beginning of that. That's a great

1317
01:05:36,840 --> 01:05:39,880
Speaker 1: headlining being totally under the radar that that was the

1318
01:05:40,000 --> 01:05:42,520
Speaker 1: end of that um and see I would have gone

1319
01:05:42,520 --> 01:05:45,280
Speaker 1: with the biggest firm you've never heard of. That that

1320
01:05:45,280 --> 01:05:48,280
Speaker 1: would have been my sounds cooler. So I you know,

1321
01:05:48,320 --> 01:05:51,200
Speaker 1: it's got it's a little edgier. But but outing a

1322
01:05:51,280 --> 01:05:54,520
Speaker 1: reluctant star is is pretty accurate because you guys have

1323
01:05:54,600 --> 01:05:59,520
Speaker 1: built something that's unique and you know, can I call

1324
01:05:59,560 --> 01:06:03,520
Speaker 1: it specially? Is it a special phase? Um? Well, you

1325
01:06:03,600 --> 01:06:06,840
Speaker 1: can't help but look at those growth numbers from oh

1326
01:06:06,960 --> 01:06:10,240
Speaker 1: four through eight oh nine and then from on nine

1327
01:06:10,280 --> 01:06:13,040
Speaker 1: forward for the past decade and not say, Wow, these

1328
01:06:13,080 --> 01:06:16,120
Speaker 1: guys have to be doing something right. You don't grow

1329
01:06:16,240 --> 01:06:18,800
Speaker 1: that fast. There are firms that have been around longer,

1330
01:06:18,840 --> 01:06:21,760
Speaker 1: and there are firms that have grounded out there that

1331
01:06:21,840 --> 01:06:25,680
Speaker 1: are just grinding out sales, the sales process. I don't

1332
01:06:25,720 --> 01:06:28,960
Speaker 1: get the sense that that's your your approach now. I

1333
01:06:28,960 --> 01:06:31,480
Speaker 1: think that I think that we've gotten a lot more

1334
01:06:31,520 --> 01:06:35,480
Speaker 1: attention now obviously as we've gotten to this size and

1335
01:06:35,880 --> 01:06:37,640
Speaker 1: we reached just a point where we either had to

1336
01:06:37,640 --> 01:06:39,840
Speaker 1: embrace it or it was not gonna go great is

1337
01:06:39,840 --> 01:06:42,120
Speaker 1: the word to the word to the embracing it, So

1338
01:06:42,320 --> 01:06:44,400
Speaker 1: that was my Actually, that's a question I didn't get to,

1339
01:06:44,480 --> 01:06:48,080
Speaker 1: but I wanted to. Why are you now finally saying,

1340
01:06:48,120 --> 01:06:51,439
Speaker 1: all right, I guess we have to participate in some

1341
01:06:51,600 --> 01:06:56,880
Speaker 1: selective conversation through the public media. Is it simply just

1342
01:06:57,280 --> 01:06:59,680
Speaker 1: it's unavoidable at this point? Well, you know, I had

1343
01:06:59,720 --> 01:07:02,760
Speaker 1: a I had a client that was NPR and she

1344
01:07:02,960 --> 01:07:04,960
Speaker 1: sat across from me at at an interview we had

1345
01:07:05,000 --> 01:07:08,680
Speaker 1: and she said, Peter, I've never seen a firm do

1346
01:07:08,880 --> 01:07:11,160
Speaker 1: so little with so much. And I said, what do

1347
01:07:11,200 --> 01:07:12,600
Speaker 1: you mean. She's like, you guys don't have You're not

1348
01:07:12,600 --> 01:07:15,040
Speaker 1: even on We were on social media, which is funny

1349
01:07:15,040 --> 01:07:17,040
Speaker 1: talking to you, because there's no firm as president on

1350
01:07:17,080 --> 01:07:19,600
Speaker 1: social media as yours in the space I mean, we

1351
01:07:19,600 --> 01:07:23,040
Speaker 1: we I mean I think my Facebook page was controlled

1352
01:07:23,040 --> 01:07:25,360
Speaker 1: by Russians literally, like you went to my Facebook page

1353
01:07:25,840 --> 01:07:29,600
Speaker 1: like yeah, um, And and she's like, you know, when

1354
01:07:29,960 --> 01:07:33,040
Speaker 1: people are looking at creative planning, they're googling, and they're

1355
01:07:33,040 --> 01:07:36,520
Speaker 1: going to the they're not seeing anything you're saying, right,

1356
01:07:36,560 --> 01:07:38,840
Speaker 1: They're just seeing what other people are saying, and so

1357
01:07:39,360 --> 01:07:41,360
Speaker 1: you should at least tell your story. And you know,

1358
01:07:41,400 --> 01:07:44,520
Speaker 1: it was kind of a lightbulb for me that you

1359
01:07:44,600 --> 01:07:48,560
Speaker 1: really can't. There is no under the radar. Yeah, and

1360
01:07:48,640 --> 01:07:52,440
Speaker 1: so uh if if you want people to learn, it

1361
01:07:52,480 --> 01:07:54,560
Speaker 1: would be nice if they at least heard your voice

1362
01:07:55,240 --> 01:07:57,760
Speaker 1: and you telling the story of what you're all about.

1363
01:07:57,920 --> 01:07:59,960
Speaker 1: And I mean she was right, and I all I

1364
01:08:00,120 --> 01:08:03,240
Speaker 1: back now as as probably being so under the radars

1365
01:08:03,280 --> 01:08:06,080
Speaker 1: for that time period was probably good. But that was

1366
01:08:06,120 --> 01:08:07,920
Speaker 1: probably the best piece of advice I've had in the

1367
01:08:08,000 --> 01:08:12,360
Speaker 1: last you know, three or four years. So um, there's

1368
01:08:12,360 --> 01:08:15,600
Speaker 1: really two types of communication. One is with the world

1369
01:08:15,640 --> 01:08:20,280
Speaker 1: at large and prospective clients, but the other communication is

1370
01:08:20,320 --> 01:08:23,360
Speaker 1: with your existing clients. How do you and you mentioned

1371
01:08:23,840 --> 01:08:26,679
Speaker 1: you really when you're building a plan, you're really drumming

1372
01:08:26,680 --> 01:08:30,719
Speaker 1: it into people's consciousness. Hey, markets go up and down.

1373
01:08:30,920 --> 01:08:34,600
Speaker 1: Expect uh correction or a crash at some point in

1374
01:08:34,640 --> 01:08:39,000
Speaker 1: the future. Recessions are cyclical. Everything isn't great all the time.

1375
01:08:39,479 --> 01:08:44,160
Speaker 1: But after the that initial review, how do you keep

1376
01:08:44,200 --> 01:08:46,480
Speaker 1: in touch with clients? How do you keep them informed

1377
01:08:46,600 --> 01:08:50,040
Speaker 1: about the state of the world, where we are in

1378
01:08:50,080 --> 01:08:53,080
Speaker 1: the market cycle, how the portfolio is doing. What what

1379
01:08:53,200 --> 01:08:56,720
Speaker 1: sort of client communications do you guys manage? So I

1380
01:08:56,760 --> 01:09:00,200
Speaker 1: write newsletters many times throughout the year and anytime there's

1381
01:09:00,200 --> 01:09:02,120
Speaker 1: a big event, you know, bregsit that night, they get it.

1382
01:09:02,160 --> 01:09:04,400
Speaker 1: They'll get a newsletter, you know, it is just instantly

1383
01:09:04,439 --> 01:09:07,680
Speaker 1: will send out a communication others in the firm right newsletters.

1384
01:09:08,040 --> 01:09:10,400
Speaker 1: We do several different podcasts that we share with our

1385
01:09:10,880 --> 01:09:16,559
Speaker 1: internally internally interesting we UM we UM have an annual

1386
01:09:16,680 --> 01:09:18,800
Speaker 1: symposium that we invite clients to. We had almost three

1387
01:09:18,840 --> 01:09:22,479
Speaker 1: thousand at our last one, really a great experience. We

1388
01:09:22,520 --> 01:09:24,640
Speaker 1: email the videos of the speakers that will allow us

1389
01:09:24,680 --> 01:09:27,280
Speaker 1: to send videos to our clients. And then for us,

1390
01:09:27,320 --> 01:09:30,680
Speaker 1: we see our clients in person beyond the onboarding, so

1391
01:09:30,720 --> 01:09:33,439
Speaker 1: they're coming in to do all kinds of stuff throughout

1392
01:09:33,479 --> 01:09:34,800
Speaker 1: the year, and then they do an your reviews with us,

1393
01:09:34,840 --> 01:09:37,599
Speaker 1: so they're seeing they're talking to their advisor and multiple

1394
01:09:37,600 --> 01:09:40,559
Speaker 1: people within creative planning, plus hearing the voice of the

1395
01:09:40,600 --> 01:09:43,160
Speaker 1: investment team and the firm. You know, many many different

1396
01:09:43,200 --> 01:09:46,160
Speaker 1: ways throughout the year. How do you keep that message consistent?

1397
01:09:46,320 --> 01:09:49,240
Speaker 1: So you have six hundred people were a fraction of that.

1398
01:09:49,800 --> 01:09:52,720
Speaker 1: One of my concerns is always we have a lot

1399
01:09:52,760 --> 01:09:55,120
Speaker 1: of people in the office who do research, who publish,

1400
01:09:55,160 --> 01:09:59,080
Speaker 1: who who write about different things. Philosophically, we're all more

1401
01:09:59,200 --> 01:10:03,520
Speaker 1: or less on the same page. So the message is consistent.

1402
01:10:04,000 --> 01:10:07,120
Speaker 1: But the concern is as you scale up and it's

1403
01:10:07,160 --> 01:10:10,320
Speaker 1: that many more people, does that become a challenge to

1404
01:10:10,400 --> 01:10:15,040
Speaker 1: keep the message the same across every advisor to every client. No.

1405
01:10:15,240 --> 01:10:18,280
Speaker 1: I think that we are definitely a one voice firm,

1406
01:10:18,360 --> 01:10:21,360
Speaker 1: and I think that that's a different firms have different decisions.

1407
01:10:21,400 --> 01:10:23,360
Speaker 1: We look at larger r A s. They tend not

1408
01:10:23,400 --> 01:10:26,120
Speaker 1: to be that way. They tend to look like a

1409
01:10:26,160 --> 01:10:28,799
Speaker 1: brokerage house. You know, you can go to Morgan Stanley

1410
01:10:28,800 --> 01:10:30,479
Speaker 1: and the guy in Office one might be a guy

1411
01:10:30,520 --> 01:10:33,000
Speaker 1: that does options for all his clients. In Office two

1412
01:10:33,080 --> 01:10:34,839
Speaker 1: is a guy who does bonds for all his clients.

1413
01:10:35,439 --> 01:10:38,559
Speaker 1: At Creative Planning, we it's the same thing. Every client

1414
01:10:38,680 --> 01:10:41,680
Speaker 1: is going through a planning process. It doesn't matter if

1415
01:10:41,720 --> 01:10:44,479
Speaker 1: they're on the Forbes List, which is somebody we started

1416
01:10:44,520 --> 01:10:46,120
Speaker 1: with a couple of weeks ago. It's going through the

1417
01:10:46,160 --> 01:10:50,320
Speaker 1: same process as somebody who's got five dollars. And we

1418
01:10:50,439 --> 01:10:52,960
Speaker 1: have that process in place because we know that in

1419
01:10:53,040 --> 01:10:56,600
Speaker 1: our we've developed a way that we think is the

1420
01:10:56,640 --> 01:10:58,560
Speaker 1: best way to get the information we need from the

1421
01:10:58,600 --> 01:11:00,639
Speaker 1: clients to figure out what their needs, their dreams, their

1422
01:11:00,720 --> 01:11:03,360
Speaker 1: vision are. It sounds cheesy, but sometimes your goals are

1423
01:11:03,400 --> 01:11:05,519
Speaker 1: not your dreams, right, So we want to know what

1424
01:11:05,640 --> 01:11:09,160
Speaker 1: they're really trying to accomplish and how feasible it all is.

1425
01:11:09,479 --> 01:11:12,519
Speaker 1: So everyone's going through that same process. And then we

1426
01:11:12,600 --> 01:11:15,759
Speaker 1: have a philosophy. So when we were talking earlier about

1427
01:11:16,080 --> 01:11:18,479
Speaker 1: we don't believe in hedge funds, but we I believe

1428
01:11:18,520 --> 01:11:21,439
Speaker 1: in in in private equity and alternatives, and I believe

1429
01:11:21,479 --> 01:11:24,040
Speaker 1: that the markets are fairly efficient, so we use indexing

1430
01:11:24,080 --> 01:11:28,080
Speaker 1: instead of most instead of large camp mutual funds. When

1431
01:11:28,120 --> 01:11:30,720
Speaker 1: I say that's what I believe, that's what creative believes. Right.

1432
01:11:30,760 --> 01:11:33,479
Speaker 1: So if you're coming and interviewing a creative planning, you're

1433
01:11:33,520 --> 01:11:36,080
Speaker 1: not coming to creative planning unless you believe that or

1434
01:11:36,160 --> 01:11:38,559
Speaker 1: close enough, and you're gonna you're going to believe you're

1435
01:11:38,600 --> 01:11:43,000
Speaker 1: really gonna act that way. There is no oh, by

1436
01:11:43,040 --> 01:11:45,040
Speaker 1: the way, we've got a hedge fund thing over here

1437
01:11:45,120 --> 01:11:48,439
Speaker 1: and the large camp mutual funds over there. It's one voice,

1438
01:11:48,520 --> 01:11:52,479
Speaker 1: one philosophy, consistent messaging. If a client gets a newsletter

1439
01:11:52,520 --> 01:11:54,000
Speaker 1: for me, they're not going, what the hell is this?

1440
01:11:54,120 --> 01:11:56,560
Speaker 1: You know, I'm in Los Angeles and my advisor is

1441
01:11:56,600 --> 01:11:59,040
Speaker 1: doing something completely different. That's not that's not happening. And

1442
01:11:59,040 --> 01:12:01,680
Speaker 1: what's great about that because we don't have to write right,

1443
01:12:01,880 --> 01:12:05,720
Speaker 1: vague garbage, right, we can be very specific about what

1444
01:12:05,760 --> 01:12:07,560
Speaker 1: we believe and what we're doing at any point in

1445
01:12:07,560 --> 01:12:10,719
Speaker 1: the market cycle, because everyone's going to read that and go, yeah,

1446
01:12:10,720 --> 01:12:13,280
Speaker 1: that's what I'm experiencing. So I don't remember if it

1447
01:12:13,360 --> 01:12:16,639
Speaker 1: was you or someone else who used the phrase Franken firms. Yeah,

1448
01:12:16,800 --> 01:12:19,960
Speaker 1: where that is you right where you have hedge funds

1449
01:12:20,040 --> 01:12:23,320
Speaker 1: over here, and covered coal options over there, and some

1450
01:12:23,400 --> 01:12:28,160
Speaker 1: wacky SMP sector rotation here, and affirm just becomes a

1451
01:12:28,160 --> 01:12:33,040
Speaker 1: conglomeration of ten small affirms and no conces in philosophy.

1452
01:12:33,080 --> 01:12:35,560
Speaker 1: Is that Is that a survivable model these days? No?

1453
01:12:35,840 --> 01:12:37,720
Speaker 1: I look at like some of these some of the

1454
01:12:37,720 --> 01:12:40,600
Speaker 1: private equity firms in this space. Um, they come in,

1455
01:12:40,640 --> 01:12:42,720
Speaker 1: they buy a one billion dollar or two billion dollar firm,

1456
01:12:42,760 --> 01:12:45,080
Speaker 1: they call it a platform, and then they take that

1457
01:12:45,120 --> 01:12:46,840
Speaker 1: firm and they go buy other firms and go, well,

1458
01:12:46,880 --> 01:12:49,720
Speaker 1: do your compliance and HR and financial stuff for you,

1459
01:12:49,760 --> 01:12:51,880
Speaker 1: and give you a big check. Come join us. Oh

1460
01:12:52,040 --> 01:12:54,280
Speaker 1: you use this software, Oh that's fine, and keep keep

1461
01:12:54,360 --> 01:12:57,519
Speaker 1: using it. Oh you you believe in you know exiting

1462
01:12:57,560 --> 01:13:00,320
Speaker 1: the market when your signals from your bond does say this,

1463
01:13:00,360 --> 01:13:02,640
Speaker 1: Oh yeah, you go ahead and keep doing that, and

1464
01:13:02,680 --> 01:13:04,120
Speaker 1: you wind up with a firm and it grows to

1465
01:13:04,160 --> 01:13:07,440
Speaker 1: ten billion, and it's really just twenty five small firms,

1466
01:13:07,560 --> 01:13:12,560
Speaker 1: uh that don't operate the same don't do the same things. Um,

1467
01:13:12,600 --> 01:13:14,960
Speaker 1: that's what I think of as a frankin firm. I

1468
01:13:15,000 --> 01:13:17,400
Speaker 1: think that buck is getting passed from one private equity

1469
01:13:17,400 --> 01:13:20,679
Speaker 1: firm to another and is going to explode in somebody's lap.

1470
01:13:20,760 --> 01:13:23,120
Speaker 1: And a lot of the larger firms, that's what they are.

1471
01:13:23,880 --> 01:13:26,200
Speaker 1: They're just an amount of amalgamation of a bunch of

1472
01:13:26,240 --> 01:13:29,080
Speaker 1: stuff that's not philosophically existent. I do think this is

1473
01:13:29,120 --> 01:13:32,000
Speaker 1: a one of the negatives of private equity is you

1474
01:13:32,080 --> 01:13:34,960
Speaker 1: have private equity come into a space like this. Let's

1475
01:13:34,960 --> 01:13:37,120
Speaker 1: say they want to exit in three years. You take

1476
01:13:37,160 --> 01:13:39,280
Speaker 1: a two billion dollar firm, you buy eight firms, you

1477
01:13:39,320 --> 01:13:43,040
Speaker 1: make it four billion, you you exit, you make everyone's

1478
01:13:43,080 --> 01:13:46,719
Speaker 1: high fiving. But somebody now has something that doesn't really

1479
01:13:47,160 --> 01:13:50,240
Speaker 1: probably isn't best for the client anymore, and probably isn't

1480
01:13:50,280 --> 01:13:53,639
Speaker 1: best for the employee anymore, and everyone can smell it right,

1481
01:13:53,720 --> 01:13:57,599
Speaker 1: and AND's eventually the smell will get bad enough that

1482
01:13:57,640 --> 01:13:59,920
Speaker 1: you'll lose employees, you'll lose clients. But by then the

1483
01:14:00,320 --> 01:14:02,240
Speaker 1: person who put it all together is long gone. So

1484
01:14:02,439 --> 01:14:06,720
Speaker 1: hot potato, so one of the Knox against private equity

1485
01:14:06,880 --> 01:14:09,840
Speaker 1: and R I a s years ago and I don't

1486
01:14:10,040 --> 01:14:12,920
Speaker 1: know if this is still true and is a gym

1487
01:14:12,960 --> 01:14:15,200
Speaker 1: in your office? And I had a cold conversation about this.

1488
01:14:15,720 --> 01:14:17,680
Speaker 1: Was in the old days, private equity would come in,

1489
01:14:17,720 --> 01:14:22,040
Speaker 1: they'd buy a firm. They basically loaded up with variable

1490
01:14:22,040 --> 01:14:25,040
Speaker 1: A nuities that have a giant commission on it and

1491
01:14:25,600 --> 01:14:29,439
Speaker 1: didn't work out for anybody except the pe guys and

1492
01:14:29,479 --> 01:14:33,080
Speaker 1: whoever sold the firm and exited. I'm getting the impression

1493
01:14:33,400 --> 01:14:36,360
Speaker 1: that that old school model, and maybe that's more than

1494
01:14:36,400 --> 01:14:39,200
Speaker 1: ten years ago, that that's not what we're talking about

1495
01:14:39,240 --> 01:14:41,080
Speaker 1: in this space. No, I don't think you're seeing that

1496
01:14:41,200 --> 01:14:45,880
Speaker 1: that's long gone. Now. It's sticky money, regular um revenue

1497
01:14:46,160 --> 01:14:49,320
Speaker 1: on a on an ongoing basis. That's the appeal of this. Yeah,

1498
01:14:49,320 --> 01:14:51,080
Speaker 1: I mean I see two two, Well, a couple of

1499
01:14:51,080 --> 01:14:53,760
Speaker 1: different things happening. One is you see someone comes in

1500
01:14:53,880 --> 01:14:56,920
Speaker 1: actually makes your place better and helps institutionalize it and

1501
01:14:56,960 --> 01:14:59,840
Speaker 1: grow it. H That's that's one group, and there's another

1502
01:15:00,000 --> 01:15:02,160
Speaker 1: groupe that's like, Hey, we're gonna come in, We're gonna

1503
01:15:02,160 --> 01:15:03,599
Speaker 1: buy it. We're gonna get rid of a bunch of people.

1504
01:15:03,600 --> 01:15:05,400
Speaker 1: We're gonna put in some new people. We're gonna go

1505
01:15:05,439 --> 01:15:07,599
Speaker 1: buy twenty three firms. We don't care what they look like.

1506
01:15:08,320 --> 01:15:10,080
Speaker 1: We're gonna put all this crap together, and we're gonna

1507
01:15:10,080 --> 01:15:11,519
Speaker 1: sell it to somebody else. Because there's a bunch of

1508
01:15:11,520 --> 01:15:14,000
Speaker 1: money slashing around and eventually someone's gonna get stuck, right,

1509
01:15:14,000 --> 01:15:16,000
Speaker 1: and when the music stops, you don't want to be

1510
01:15:16,040 --> 01:15:18,439
Speaker 1: that person, right. It's it's so, but but I think

1511
01:15:18,439 --> 01:15:20,120
Speaker 1: there's more of the good guys than the bad guys.

1512
01:15:20,640 --> 01:15:22,719
Speaker 1: So let's talk about a couple of things with creative

1513
01:15:22,760 --> 01:15:25,519
Speaker 1: planning that I wanted to ask you about that I

1514
01:15:25,560 --> 01:15:29,920
Speaker 1: didn't get to. Um you would previously mentioned four one ks,

1515
01:15:30,080 --> 01:15:32,880
Speaker 1: or less than ten percent of your practice. How do

1516
01:15:32,920 --> 01:15:38,160
Speaker 1: you grow that space? It's a very slow and sticky space,

1517
01:15:38,760 --> 01:15:43,200
Speaker 1: even when employees and management are not happy with their

1518
01:15:43,200 --> 01:15:47,120
Speaker 1: four O one K providers. Right, I think we probably

1519
01:15:47,120 --> 01:15:49,840
Speaker 1: have three four billion in four one KOs sets and

1520
01:15:49,800 --> 01:15:53,200
Speaker 1: it's growing very rapidly, and we're divided into two segments.

1521
01:15:53,240 --> 01:15:57,240
Speaker 1: One segment is takes care of bigger plans where employees

1522
01:15:57,240 --> 01:15:59,000
Speaker 1: want to sit down one and want when somebody learn

1523
01:15:59,040 --> 01:16:03,880
Speaker 1: a lot health help. Another one is very technology oriented

1524
01:16:04,000 --> 01:16:09,880
Speaker 1: startup plans um small plans where the economics of building

1525
01:16:09,880 --> 01:16:12,320
Speaker 1: a foreign K are very difficult for those folks. Maybe

1526
01:16:12,320 --> 01:16:16,320
Speaker 1: it's too two dentists starting a practice, but what we

1527
01:16:16,400 --> 01:16:19,800
Speaker 1: bring to our clients is almost always they're going from

1528
01:16:19,840 --> 01:16:23,080
Speaker 1: the traditional model of an insurance company providing it to

1529
01:16:23,360 --> 01:16:26,240
Speaker 1: a fiduciary providing it. And there's a lot of liability

1530
01:16:26,280 --> 01:16:28,040
Speaker 1: around foreign K plans now, so if you're on the

1531
01:16:28,040 --> 01:16:30,519
Speaker 1: board making decisions for foreign ks, you've got a liability.

1532
01:16:30,520 --> 01:16:32,920
Speaker 1: If you're an HR, if you're if you're the owner,

1533
01:16:33,000 --> 01:16:35,640
Speaker 1: you've got liability. So they love transferring that liability to

1534
01:16:35,680 --> 01:16:39,599
Speaker 1: a fiduciary, and we offer that full fiduciary service um. Second,

1535
01:16:40,320 --> 01:16:43,440
Speaker 1: almost every single time, we lower the fees very substantially.

1536
01:16:43,960 --> 01:16:46,080
Speaker 1: And the third we bring a common sense investment approach,

1537
01:16:46,080 --> 01:16:49,880
Speaker 1: you know, low cost index funds in the in the portfolio,

1538
01:16:49,960 --> 01:16:52,559
Speaker 1: along with ways where the client can choose the model

1539
01:16:52,640 --> 01:16:54,840
Speaker 1: and and get their money managed that way. And so

1540
01:16:55,479 --> 01:16:58,040
Speaker 1: we're seeing very fast growth in that space. It's just

1541
01:16:58,600 --> 01:17:02,240
Speaker 1: the private side is growing faster. But I think that

1542
01:17:02,760 --> 01:17:06,440
Speaker 1: the key in the foreign case space is to be competitive.

1543
01:17:06,439 --> 01:17:08,639
Speaker 1: You have to be able to drive fees way way

1544
01:17:08,760 --> 01:17:11,840
Speaker 1: way down. We found a way basis points how how

1545
01:17:11,920 --> 01:17:14,320
Speaker 1: low is low in four o one? I think like

1546
01:17:14,360 --> 01:17:17,200
Speaker 1: even a startup plan for US might pay a fee

1547
01:17:17,200 --> 01:17:19,400
Speaker 1: of thirty basis points. I mean, like, and you're talking

1548
01:17:19,400 --> 01:17:22,360
Speaker 1: about someone starting with zero assets. Now they still have

1549
01:17:22,479 --> 01:17:25,200
Speaker 1: their When you look at a foreign K plan, there's

1550
01:17:25,240 --> 01:17:27,760
Speaker 1: administration costs that you have to pay for the fund,

1551
01:17:28,120 --> 01:17:31,639
Speaker 1: record keeping, with all of it. They should be less

1552
01:17:31,680 --> 01:17:34,840
Speaker 1: than one one percent in the plan, appreciably less than Yeah,

1553
01:17:35,000 --> 01:17:36,840
Speaker 1: it should be appreciably less than one percent, And most

1554
01:17:36,840 --> 01:17:38,960
Speaker 1: plans are one and a half plus, and so it's

1555
01:17:39,000 --> 01:17:42,280
Speaker 1: kind of like very easy. I think if we your

1556
01:17:42,280 --> 01:17:44,559
Speaker 1: fuse in half, that's a huge win for everybody. Most

1557
01:17:44,600 --> 01:17:46,040
Speaker 1: of the time, when we're talking to somebody about a

1558
01:17:46,040 --> 01:17:47,800
Speaker 1: four one K, we're going to get that four one K.

1559
01:17:48,080 --> 01:17:49,920
Speaker 1: The issue is foreign cas are much harder than the

1560
01:17:50,000 --> 01:17:53,400
Speaker 1: private side because private side, somebody walks in and they're

1561
01:17:53,400 --> 01:17:56,120
Speaker 1: gonna make a decision with the four own K. Somebody

1562
01:17:56,120 --> 01:17:58,000
Speaker 1: walks in and they're the owner, but they've gotta there's

1563
01:17:58,000 --> 01:18:00,640
Speaker 1: a CFO, there's hr you're talking to HR protect. I mean,

1564
01:18:00,640 --> 01:18:02,400
Speaker 1: that's it's a process, and it should be a process.

1565
01:18:02,600 --> 01:18:04,720
Speaker 1: It's a big decision for the business. So in the

1566
01:18:04,760 --> 01:18:08,160
Speaker 1: old days, it was um, somebody's brother in law was

1567
01:18:08,240 --> 01:18:10,519
Speaker 1: one running the fore own cave. That those days are over.

1568
01:18:10,560 --> 01:18:12,920
Speaker 1: Now that's gone. I think on the private side, that's gone.

1569
01:18:12,960 --> 01:18:15,720
Speaker 1: It was very, very common where everyone just had their

1570
01:18:15,720 --> 01:18:18,559
Speaker 1: money with their with their buddy or their neighbor or whatever.

1571
01:18:18,600 --> 01:18:20,840
Speaker 1: That that stuff's gone. And I think that's another thing

1572
01:18:21,400 --> 01:18:23,160
Speaker 1: that oh eight oh nine and made Off and all

1573
01:18:23,240 --> 01:18:25,360
Speaker 1: that just got rid of that, and people are getting

1574
01:18:25,520 --> 01:18:27,479
Speaker 1: much more serious about who their advisor is. Let's let's

1575
01:18:27,479 --> 01:18:30,400
Speaker 1: talk about the institutional side, which has its own set

1576
01:18:30,400 --> 01:18:35,559
Speaker 1: of challenges. How do you deal with pension funds, foundations, um,

1577
01:18:35,760 --> 01:18:39,800
Speaker 1: larger entities, even family offices that might have a different

1578
01:18:39,800 --> 01:18:44,920
Speaker 1: set of needs and a different investment target than a

1579
01:18:45,000 --> 01:18:47,519
Speaker 1: family who has a portfolio with you. So this is

1580
01:18:47,520 --> 01:18:49,880
Speaker 1: the smallest part people that have family office as we

1581
01:18:49,920 --> 01:18:52,439
Speaker 1: manage a lot of money for those folks. Private family

1582
01:18:52,479 --> 01:18:57,280
Speaker 1: offices separate from endowments and instructions. But but institutional, as

1583
01:18:57,320 --> 01:19:00,120
Speaker 1: I think of it, like you do is endowments and

1584
01:19:00,200 --> 01:19:03,519
Speaker 1: universities and things like that. That that space we entered

1585
01:19:03,520 --> 01:19:05,519
Speaker 1: about five years ago. It is by far the smallest

1586
01:19:05,560 --> 01:19:07,880
Speaker 1: part of our business. And I would just take the

1587
01:19:07,920 --> 01:19:10,679
Speaker 1: foreign case space and make it even harder, a lot

1588
01:19:10,680 --> 01:19:14,920
Speaker 1: more decision makers and a lot lower fees. And you're

1589
01:19:14,920 --> 01:19:18,720
Speaker 1: seeing a very big migration away from alternatives towards you know,

1590
01:19:18,760 --> 01:19:22,640
Speaker 1: low cost passive investing complimented with certain alternatives. Seems to

1591
01:19:22,680 --> 01:19:25,600
Speaker 1: be where that space is heading. Quite quite interesting. And

1592
01:19:26,400 --> 01:19:31,040
Speaker 1: you have described the tears of your clients as private

1593
01:19:31,040 --> 01:19:35,240
Speaker 1: wealth group, ultra affluent, and emerging wealth. How do these

1594
01:19:35,240 --> 01:19:38,240
Speaker 1: segments different and do you offer different services to each

1595
01:19:38,280 --> 01:19:40,439
Speaker 1: of them. So we used to just call everything private wealth,

1596
01:19:40,479 --> 01:19:42,320
Speaker 1: and you went through the process. We built a portfolio.

1597
01:19:42,360 --> 01:19:45,760
Speaker 1: Artypical client was the multimillionaire next door um. You know,

1598
01:19:45,840 --> 01:19:49,479
Speaker 1: the doctor or dentist or lawyer that worked their entire career,

1599
01:19:49,560 --> 01:19:51,840
Speaker 1: the business owner or guy who made money in real estate.

1600
01:19:52,240 --> 01:19:54,839
Speaker 1: They put together a million dollars or twelve million dollars

1601
01:19:54,880 --> 01:19:58,679
Speaker 1: and they became a client of Creative Planning. About four

1602
01:19:58,760 --> 01:20:02,160
Speaker 1: years ago we set minute out Emerging Wealth Group. We

1603
01:20:02,160 --> 01:20:05,320
Speaker 1: had so many family members of clients and it. We

1604
01:20:05,320 --> 01:20:07,160
Speaker 1: didn't really have a great way to handle it. But

1605
01:20:07,200 --> 01:20:09,000
Speaker 1: it's very difficult to sit with somebody who's got seven

1606
01:20:09,040 --> 01:20:10,880
Speaker 1: million dollars and they've got three kids and their kids

1607
01:20:10,920 --> 01:20:12,320
Speaker 1: are all twenty eight and say we're not going to

1608
01:20:12,400 --> 01:20:15,040
Speaker 1: work with your kids. But they would wind up maybe

1609
01:20:15,040 --> 01:20:17,920
Speaker 1: with the wrong advisors, because the advisor working with somebody

1610
01:20:17,920 --> 01:20:20,960
Speaker 1: who has twelve million dollars at that point would be

1611
01:20:20,960 --> 01:20:23,400
Speaker 1: our most was our most sophisticated advisors, and they'll be

1612
01:20:23,400 --> 01:20:25,880
Speaker 1: working with somebody who had fifty. So we created Emerging

1613
01:20:25,920 --> 01:20:28,400
Speaker 1: Wealth Group to deal with that and open the doors

1614
01:20:28,400 --> 01:20:30,000
Speaker 1: to people who had less than half a million, and

1615
01:20:30,000 --> 01:20:32,360
Speaker 1: it exploded. I mean, the group has thousands of clients,

1616
01:20:32,400 --> 01:20:36,840
Speaker 1: about twenty employees, and interestingly has become one of the

1617
01:20:36,840 --> 01:20:41,120
Speaker 1: biggest lead sources for our ultra affluent practice, which is

1618
01:20:41,320 --> 01:20:43,040
Speaker 1: where we really try to day to only take on

1619
01:20:43,080 --> 01:20:46,439
Speaker 1: people at a twenty million million or more UM, like

1620
01:20:46,479 --> 01:20:48,280
Speaker 1: a few this week that came on had a hundred

1621
01:20:48,280 --> 01:20:53,360
Speaker 1: million or more UM. And there's a group that's probably

1622
01:20:53,520 --> 01:20:56,440
Speaker 1: our longest running group as a whole within the firm

1623
01:20:56,479 --> 01:20:58,800
Speaker 1: that's used to dealing with those kind of clients, and

1624
01:20:58,840 --> 01:21:02,000
Speaker 1: the there is a lot more sophistication needed. They're not

1625
01:21:02,080 --> 01:21:05,280
Speaker 1: necessarily for a large part of the portfolio, but for

1626
01:21:05,320 --> 01:21:07,360
Speaker 1: a small part of the portfolio. And from a legal

1627
01:21:07,360 --> 01:21:09,800
Speaker 1: and tax perspective, if you've got somebody who's got a

1628
01:21:09,880 --> 01:21:12,760
Speaker 1: hundred and fifty million dollars, all this debate we've been

1629
01:21:12,800 --> 01:21:15,880
Speaker 1: having about our stocks, canna do better than bonds? And

1630
01:21:16,320 --> 01:21:18,639
Speaker 1: do small to better than large? And will emerging markets

1631
01:21:18,640 --> 01:21:20,000
Speaker 1: to better than stocks? And we'll private ut when you

1632
01:21:20,040 --> 01:21:23,280
Speaker 1: do better. These are what I call one percent conversations. Right,

1633
01:21:23,640 --> 01:21:25,080
Speaker 1: we're going to move them on it. You know you're

1634
01:21:25,080 --> 01:21:26,560
Speaker 1: gonna make one percent more less. I you've got a

1635
01:21:26,600 --> 01:21:28,720
Speaker 1: hundred fifty billion dollars, you really don't care about that.

1636
01:21:29,360 --> 01:21:32,280
Speaker 1: You care about the fort of state tax. You care

1637
01:21:32,320 --> 01:21:36,360
Speaker 1: about the twelve percent state tax. You care about how

1638
01:21:36,400 --> 01:21:37,760
Speaker 1: your kids are going to get the money and is

1639
01:21:37,760 --> 01:21:41,080
Speaker 1: it going to screw them up? You care about asset protection.

1640
01:21:41,520 --> 01:21:43,920
Speaker 1: And these are very sophisticated concepts that most of the

1641
01:21:43,920 --> 01:21:47,920
Speaker 1: are a space is not equipped to handle. And we

1642
01:21:48,000 --> 01:21:50,679
Speaker 1: have a I think a very substantive group within creative

1643
01:21:50,720 --> 01:21:53,120
Speaker 1: Planning that's used to dealing with hundreds of those families,

1644
01:21:53,600 --> 01:21:55,840
Speaker 1: and I think we bring a very unique perspective there.

1645
01:21:55,840 --> 01:21:58,439
Speaker 1: And I think what's interesting is when they're comparing, it's

1646
01:21:58,479 --> 01:22:00,240
Speaker 1: it's always between us and say a place like a

1647
01:22:00,320 --> 01:22:02,960
Speaker 1: JP Morgan or a a Goldman Sachs, and the r A

1648
01:22:03,160 --> 01:22:05,920
Speaker 1: story resonates so much independent and we don't have our

1649
01:22:05,960 --> 01:22:08,640
Speaker 1: own products, but we also practice tax and law and

1650
01:22:08,720 --> 01:22:11,799
Speaker 1: they don't. And we're used to dealing with folks your size,

1651
01:22:11,800 --> 01:22:14,920
Speaker 1: and that's not something that I could say seven years ago, right,

1652
01:22:15,240 --> 01:22:18,800
Speaker 1: So it's it's allowed us to become very competitive and

1653
01:22:18,800 --> 01:22:21,120
Speaker 1: and the one of the fastest growing parts of our

1654
01:22:21,120 --> 01:22:25,439
Speaker 1: practice is that very very very large family. So one

1655
01:22:25,479 --> 01:22:29,679
Speaker 1: of the issues we've noticed amongst our i as, especially

1656
01:22:29,680 --> 01:22:32,800
Speaker 1: independent r A s, is that there's sort of a

1657
01:22:32,920 --> 01:22:36,120
Speaker 1: barbell across the age spectrum. You have a lot of

1658
01:22:36,120 --> 01:22:40,240
Speaker 1: advisors in their sixties, late fifties, and then a bunch

1659
01:22:40,240 --> 01:22:43,360
Speaker 1: of people in their twenties who were um you met

1660
01:22:43,360 --> 01:22:48,840
Speaker 1: at the conference, very social, very active, very um specialized

1661
01:22:48,880 --> 01:22:52,880
Speaker 1: in different areas. But there's this big gap across the middle.

1662
01:22:53,439 --> 01:22:56,120
Speaker 1: So question number one is what does this mean to

1663
01:22:56,400 --> 01:23:00,280
Speaker 1: your future growth? And question number two do we have

1664
01:23:00,439 --> 01:23:03,639
Speaker 1: enough young people coming into the r I A industry?

1665
01:23:03,680 --> 01:23:05,599
Speaker 1: You know, I read a lot about this and I

1666
01:23:05,680 --> 01:23:09,720
Speaker 1: view it very differently, so as running creative planning, our

1667
01:23:09,800 --> 01:23:12,960
Speaker 1: market share is your point O O O R to

1668
01:23:13,240 --> 01:23:17,240
Speaker 1: writer point oh no sce. So I don't to me,

1669
01:23:17,720 --> 01:23:20,080
Speaker 1: even if there were half the advisors I don't need

1670
01:23:20,120 --> 01:23:24,040
Speaker 1: to have. I'm not Merrill Lynch. I mean, so no

1671
01:23:24,160 --> 01:23:28,439
Speaker 1: thundering her and just I mean, I just need to

1672
01:23:28,439 --> 01:23:31,599
Speaker 1: find a few awesome people every quarter, and I'm always

1673
01:23:31,600 --> 01:23:33,160
Speaker 1: going to be able to find that, right, And so

1674
01:23:33,240 --> 01:23:36,280
Speaker 1: I just don't I lose I spend any time worrying

1675
01:23:36,360 --> 01:23:40,200
Speaker 1: about about that, and frankly about the industry. I think

1676
01:23:40,400 --> 01:23:44,040
Speaker 1: the industry could use less advisors. Really. Do you think

1677
01:23:44,080 --> 01:23:48,680
Speaker 1: the headspace compression like the few compression we've seen over

1678
01:23:48,720 --> 01:23:51,400
Speaker 1: the past ten years, does that continue well? I think

1679
01:23:52,320 --> 01:23:54,840
Speaker 1: I think that there are advisors that do a lot

1680
01:23:54,920 --> 01:23:57,200
Speaker 1: of good and there's a lot of advisors this is

1681
01:23:57,200 --> 01:24:01,360
Speaker 1: not fantastic. And I think having a bunch of really

1682
01:24:01,400 --> 01:24:04,479
Speaker 1: good advisors that survive is better than having a whole

1683
01:24:04,520 --> 01:24:07,720
Speaker 1: bunch of advisors. Uh. And so I don't see this

1684
01:24:07,760 --> 01:24:11,000
Speaker 1: as an industry crisis. I think if the industry contracts

1685
01:24:11,000 --> 01:24:13,120
Speaker 1: a little bit, that's just fine. We've got the technology

1686
01:24:13,120 --> 01:24:15,800
Speaker 1: for it to contract. I'm just focused on finding the

1687
01:24:15,880 --> 01:24:18,880
Speaker 1: right people for our little tiny, you know, section of

1688
01:24:19,000 --> 01:24:23,519
Speaker 1: your little tiny section of the wealth management industry. And

1689
01:24:23,520 --> 01:24:26,280
Speaker 1: and you know, it's funny, I was shocked to read

1690
01:24:26,760 --> 01:24:30,639
Speaker 1: about your little tiny firm. I think once you cross

1691
01:24:30,720 --> 01:24:34,559
Speaker 1: the billion dollar threshold and a u M that puts

1692
01:24:34,560 --> 01:24:37,440
Speaker 1: you in like the top eight percent or so advisors.

1693
01:24:37,760 --> 01:24:41,920
Speaker 1: It's really that their advisors mostly. I think someone else

1694
01:24:41,960 --> 01:24:46,320
Speaker 1: called it lifestyle practices. So so you have a unique

1695
01:24:46,360 --> 01:24:50,639
Speaker 1: perspective on what's going on. Um, what happens with those people?

1696
01:24:50,720 --> 01:24:54,040
Speaker 1: Is it just a massive consolidation or can you just

1697
01:24:54,120 --> 01:24:58,240
Speaker 1: have a very nice, little million dollar practice And that's fine,

1698
01:24:58,479 --> 01:25:00,200
Speaker 1: you know, I know there's a lot of people running around.

1699
01:25:00,200 --> 01:25:02,000
Speaker 1: All those guys are gonna get crushed, and I don't

1700
01:25:02,080 --> 01:25:04,000
Speaker 1: I don't necessarily agree. If you go to the conference,

1701
01:25:04,640 --> 01:25:07,600
Speaker 1: they're the same three people who coincidentally have been on

1702
01:25:07,640 --> 01:25:11,200
Speaker 1: an acquisition. So so maybe they're talking their books a

1703
01:25:11,240 --> 01:25:14,320
Speaker 1: little bit um. You know, I'm assuming, like us, you

1704
01:25:14,320 --> 01:25:17,320
Speaker 1: don't really buy into that. I don't buy into it totally.

1705
01:25:17,439 --> 01:25:20,400
Speaker 1: So I think that I think that most most five

1706
01:25:20,720 --> 01:25:23,400
Speaker 1: million dollar firms cannot compete at the level they used to.

1707
01:25:23,640 --> 01:25:25,439
Speaker 1: You know what, I'm hearing that from firms that call

1708
01:25:25,560 --> 01:25:28,160
Speaker 1: us to be acquired. I mean, they're just saying, look,

1709
01:25:28,200 --> 01:25:29,719
Speaker 1: I used to be able to grow, and it's gotten

1710
01:25:29,760 --> 01:25:32,439
Speaker 1: a little more intense, a little more competitive, and I

1711
01:25:32,479 --> 01:25:35,320
Speaker 1: feel like to bring on larger clients, I need to

1712
01:25:35,360 --> 01:25:38,200
Speaker 1: be in a larger firm. There's no question that's a force.

1713
01:25:38,880 --> 01:25:40,960
Speaker 1: But it reminds me of like when the robot advisors

1714
01:25:40,960 --> 01:25:42,519
Speaker 1: came out and everyone said, well, everything is going to

1715
01:25:42,560 --> 01:25:45,559
Speaker 1: go to the robos. Well everything didn't go to the robos,

1716
01:25:45,600 --> 01:25:49,200
Speaker 1: but but some did, right, So that came from somewhere,

1717
01:25:49,280 --> 01:25:51,559
Speaker 1: And you guys don't have a robot do We don't

1718
01:25:51,680 --> 01:25:54,599
Speaker 1: know any thoughts of setting up a robo for that

1719
01:25:55,280 --> 01:26:01,680
Speaker 1: sub two thousand dollar client who maybe eventually moves from

1720
01:26:01,800 --> 01:26:04,960
Speaker 1: um under a hundred thousand to emerging wealth to high

1721
01:26:05,000 --> 01:26:06,800
Speaker 1: net worth. You know, I've I've thought about it, and

1722
01:26:06,880 --> 01:26:09,479
Speaker 1: I just thought, you know, that's just not what we do.

1723
01:26:09,880 --> 01:26:12,040
Speaker 1: It's not our style. And I want one creative planning

1724
01:26:12,040 --> 01:26:13,960
Speaker 1: client to talk to another creative planning client and go,

1725
01:26:14,479 --> 01:26:16,280
Speaker 1: this is what they do for me, and I don't

1726
01:26:16,280 --> 01:26:19,639
Speaker 1: want anybody to go. I never saw a person ever,

1727
01:26:19,880 --> 01:26:22,800
Speaker 1: and everything was online, and I know there's people that

1728
01:26:22,880 --> 01:26:25,559
Speaker 1: want that, and that's totally fine. It's just not what

1729
01:26:25,600 --> 01:26:28,040
Speaker 1: we do. To me, It's just we don't sell ice

1730
01:26:28,040 --> 01:26:31,559
Speaker 1: cream either. It's just completely it's completely different. And then

1731
01:26:31,680 --> 01:26:33,960
Speaker 1: before I get to my favorite questions, I have one

1732
01:26:34,680 --> 01:26:40,280
Speaker 1: last um general question about the firm. You actually made

1733
01:26:40,320 --> 01:26:43,600
Speaker 1: your first acquisition this year, a five million dollar firm.

1734
01:26:43,720 --> 01:26:45,720
Speaker 1: Um that was part? Was that? Is that this year

1735
01:26:45,800 --> 01:26:47,920
Speaker 1: or last year? That was this year? And it was?

1736
01:26:48,120 --> 01:26:51,799
Speaker 1: It was amazing to me. This was really fascinating because

1737
01:26:52,280 --> 01:26:55,160
Speaker 1: I was very focused on building out all our services

1738
01:26:55,280 --> 01:26:58,200
Speaker 1: and building a culture. And you know, we we did

1739
01:26:58,240 --> 01:27:01,519
Speaker 1: that and really inan we moved to a headquarters, we

1740
01:27:01,640 --> 01:27:03,760
Speaker 1: made a bunch of shifts in technology, We finished our

1741
01:27:04,000 --> 01:27:05,600
Speaker 1: hiring push, got all the right people at all the

1742
01:27:05,640 --> 01:27:09,080
Speaker 1: right places, finished building out our trust company, institutional arm

1743
01:27:09,120 --> 01:27:11,880
Speaker 1: and so on, and really we're in a place where

1744
01:27:11,920 --> 01:27:13,599
Speaker 1: I could finally start to think about that a little bit.

1745
01:27:13,600 --> 01:27:14,800
Speaker 1: But I kind of put it on the shelf. Is

1746
01:27:14,840 --> 01:27:17,880
Speaker 1: not a priority. And uh, I got Brad Johnston gave

1747
01:27:17,920 --> 01:27:20,120
Speaker 1: me a call literally out of the blue and just said, hey,

1748
01:27:20,160 --> 01:27:22,360
Speaker 1: I've talked to all these firms. I thought, wait, wait, wait, wait, wait,

1749
01:27:22,400 --> 01:27:24,920
Speaker 1: Brad Johnson God, you don't know. I don't know him

1750
01:27:24,920 --> 01:27:27,479
Speaker 1: at all. Calls you, and Peter Muluke says, yeah, I'll

1751
01:27:27,479 --> 01:27:30,320
Speaker 1: take the call. So actually, I don't know. He winds

1752
01:27:30,360 --> 01:27:33,280
Speaker 1: up talking to Jim in office and Jim is like,

1753
01:27:33,320 --> 01:27:35,519
Speaker 1: you know, maybe you should talk to Brad, and I'm like,

1754
01:27:35,560 --> 01:27:37,760
Speaker 1: I don't know. I just we just got done with this.

1755
01:27:37,840 --> 01:27:39,280
Speaker 1: Let's give it a little time before we do a

1756
01:27:39,320 --> 01:27:41,920
Speaker 1: couple of acquisitions, so we'll just just have a conversation.

1757
01:27:42,560 --> 01:27:44,799
Speaker 1: So Brad comes to Kansas I want to come to Kancities,

1758
01:27:44,800 --> 01:27:46,960
Speaker 1: comes to Kansas City, brings an advisor. I find out

1759
01:27:46,960 --> 01:27:49,160
Speaker 1: the advisor as his son. So I'm like, well, maybe

1760
01:27:49,160 --> 01:27:51,439
Speaker 1: they're just kicking tires, but I really liked them there

1761
01:27:51,439 --> 01:27:55,040
Speaker 1: from Minnesota all this stuff, and says about it's true.

1762
01:27:55,040 --> 01:27:59,000
Speaker 1: I don't understand it, but I really liked him. Um,

1763
01:27:59,120 --> 01:28:01,519
Speaker 1: and you know, they left, and I told Jim's I

1764
01:28:01,560 --> 01:28:04,000
Speaker 1: kinda go. I really liked him, but you know, I

1765
01:28:04,080 --> 01:28:07,280
Speaker 1: think they just want to know what we're doing. And uh, anyway,

1766
01:28:07,320 --> 01:28:09,000
Speaker 1: you know, Brad calb me the next day and Study

1767
01:28:09,080 --> 01:28:11,080
Speaker 1: is interested in continuing dialogue. I think it was thirty

1768
01:28:11,160 --> 01:28:13,479
Speaker 1: days later. They were part of creat of planning really

1769
01:28:13,520 --> 01:28:15,920
Speaker 1: that fast. Yeah, and even though it was our first

1770
01:28:15,960 --> 01:28:17,760
Speaker 1: one and they didn't know what they were doing, we

1771
01:28:17,760 --> 01:28:19,200
Speaker 1: didn't know we were doing. You know, they've never been

1772
01:28:19,200 --> 01:28:22,479
Speaker 1: acquired before, we never acquired I have. It was wonderful

1773
01:28:23,000 --> 01:28:25,000
Speaker 1: and our and I looked at Minnesota and said, you know,

1774
01:28:25,520 --> 01:28:27,920
Speaker 1: we had a presence there. I might have been around

1775
01:28:28,000 --> 01:28:30,080
Speaker 1: half a billion. And now all of a sudden, we're

1776
01:28:30,120 --> 01:28:33,680
Speaker 1: about a billion dollar enterprise and uh, we've got some

1777
01:28:33,720 --> 01:28:35,680
Speaker 1: scale and we're gonna get noticed and we're in the

1778
01:28:35,800 --> 01:28:38,000
Speaker 1: just like you said, how many billion dollar firms are there? Right?

1779
01:28:38,439 --> 01:28:40,480
Speaker 1: So now all of a sudden we're in the conversation

1780
01:28:40,560 --> 01:28:43,320
Speaker 1: on cases we weren't before. And it got me looking

1781
01:28:43,360 --> 01:28:46,360
Speaker 1: at the whole country and saying, you know what, um

1782
01:28:46,439 --> 01:28:50,320
Speaker 1: in Dallas we manage about a billion UM. We were

1783
01:28:50,360 --> 01:28:52,719
Speaker 1: approached by a firm that has about six and or million.

1784
01:28:53,320 --> 01:28:56,080
Speaker 1: We're now having l o I with them, and so

1785
01:28:56,080 --> 01:28:58,320
Speaker 1: so you'll be close to two billion in Dallas and

1786
01:28:58,360 --> 01:29:01,120
Speaker 1: now you're a player there. Yeah. So I think that

1787
01:29:01,120 --> 01:29:04,040
Speaker 1: that what's happening now is the description I use is

1788
01:29:04,960 --> 01:29:08,439
Speaker 1: we have a very very strong tree trunk with very

1789
01:29:08,479 --> 01:29:12,120
Speaker 1: strong branches that we've built. We built them they're they're

1790
01:29:12,439 --> 01:29:15,400
Speaker 1: the creative planning DNA, and we could add leaves to

1791
01:29:15,479 --> 01:29:19,679
Speaker 1: that tree and have that tree flourish without damaging the tree.

1792
01:29:20,280 --> 01:29:21,920
Speaker 1: And so we're not a billion dollar firm where the

1793
01:29:21,920 --> 01:29:24,320
Speaker 1: whole trunk was put together by twenty five firms. Right,

1794
01:29:24,680 --> 01:29:27,200
Speaker 1: so when people come into Creative they know this is

1795
01:29:27,240 --> 01:29:29,680
Speaker 1: how it works, right, this is the culture, this is

1796
01:29:29,720 --> 01:29:32,040
Speaker 1: the investment philosophy, this is what the people are like.

1797
01:29:32,600 --> 01:29:34,840
Speaker 1: And it's not different from office to office because it's

1798
01:29:34,840 --> 01:29:37,120
Speaker 1: not twenty three different firms. So it's really open my

1799
01:29:37,160 --> 01:29:39,160
Speaker 1: mind to that we've now done two acquisitions. We have

1800
01:29:39,200 --> 01:29:42,800
Speaker 1: two other firms under l o I, and we don't

1801
01:29:42,800 --> 01:29:45,760
Speaker 1: have a merger's acquisitions team. You know, it's just someone

1802
01:29:45,800 --> 01:29:47,680
Speaker 1: has a conversation with Jim and then and then they

1803
01:29:47,680 --> 01:29:50,080
Speaker 1: meet me and and um we're off and and and

1804
01:29:50,120 --> 01:29:52,519
Speaker 1: if if they're philosophically a fit, and the look maybe

1805
01:29:52,520 --> 01:29:55,240
Speaker 1: one and ten times it is right. You've got to

1806
01:29:55,240 --> 01:29:57,360
Speaker 1: be philosophically a fit. You've got to like the people

1807
01:29:57,360 --> 01:29:59,320
Speaker 1: and all that. So you get to that ten percent.

1808
01:30:00,040 --> 01:30:02,320
Speaker 1: With that ten percent, it's happening pretty quickly. I think

1809
01:30:02,360 --> 01:30:04,400
Speaker 1: that we're finding there are a few people that are

1810
01:30:04,439 --> 01:30:06,599
Speaker 1: very like minded out there, and I think they're finding that, Hey,

1811
01:30:06,640 --> 01:30:09,599
Speaker 1: this is a firm that's kind of like me. It's

1812
01:30:09,640 --> 01:30:12,120
Speaker 1: not really an amalgamation of a bunch of stuff, and

1813
01:30:12,160 --> 01:30:14,360
Speaker 1: so they can they can be a part of something

1814
01:30:14,400 --> 01:30:17,879
Speaker 1: that's kind of what they were doing. But Turbocharged, that's fascinating.

1815
01:30:17,920 --> 01:30:20,439
Speaker 1: It's really interesting to hear you guys have have scaled

1816
01:30:20,520 --> 01:30:23,400
Speaker 1: that up, because that was one of the questions I had.

1817
01:30:23,800 --> 01:30:25,400
Speaker 1: How the hell do you get to be that big

1818
01:30:25,560 --> 01:30:29,720
Speaker 1: organically with no acquisitions? And imagine if they did acquisitions,

1819
01:30:30,040 --> 01:30:31,840
Speaker 1: you guys are gonna be a hundred billion dollars not

1820
01:30:31,920 --> 01:30:35,000
Speaker 1: too not too long from now. Yeah, it's a crazy industry.

1821
01:30:35,040 --> 01:30:38,360
Speaker 1: You can never predict what's going to happen. True, But

1822
01:30:38,360 --> 01:30:43,200
Speaker 1: but I feel like I feel very good about the

1823
01:30:43,280 --> 01:30:45,840
Speaker 1: offering that we have from the people, the process, and

1824
01:30:45,840 --> 01:30:48,120
Speaker 1: I think, um, you know what you have to be.

1825
01:30:48,200 --> 01:30:50,360
Speaker 1: You don't have to be the the fastest person in

1826
01:30:50,360 --> 01:30:52,200
Speaker 1: the world. You've got to be faster than the people

1827
01:30:52,200 --> 01:30:54,040
Speaker 1: you're racing against, right And I feel like we're in

1828
01:30:54,040 --> 01:30:57,240
Speaker 1: a good spot right now the that that makes perfect

1829
01:30:57,280 --> 01:30:59,599
Speaker 1: sense to me. I know I don't have you for

1830
01:30:59,600 --> 01:31:02,599
Speaker 1: for ever, So let me get to my favorite questions

1831
01:31:02,640 --> 01:31:05,880
Speaker 1: we ask all of our guests. These have been designed

1832
01:31:06,320 --> 01:31:09,800
Speaker 1: to be revealing about who you are. UM, let's start

1833
01:31:09,840 --> 01:31:12,479
Speaker 1: with the first car you ever owned. You're making model

1834
01:31:14,040 --> 01:31:18,640
Speaker 1: Ultimobile Omega crashed it, Uh, teaching my younger fourteen year

1835
01:31:18,640 --> 01:31:21,960
Speaker 1: old brother how to drive? Teaching it was not a

1836
01:31:21,960 --> 01:31:24,160
Speaker 1: good lesson. Where did you grow You don't start with

1837
01:31:24,200 --> 01:31:27,400
Speaker 1: a left turn. Were you in Kansas or Yeah, we

1838
01:31:27,400 --> 01:31:30,479
Speaker 1: were in Kansas. So to me, I'm the first question

1839
01:31:30,520 --> 01:31:33,519
Speaker 1: is how do you crash something in Kansas? Well, it's

1840
01:31:33,560 --> 01:31:36,280
Speaker 1: I mean, it's an actual city barrier. They're like million

1841
01:31:36,360 --> 01:31:39,800
Speaker 1: people there Kansas City. So you're in Kansas City and

1842
01:31:40,720 --> 01:31:42,840
Speaker 1: we're not in like a town of three hundred west.

1843
01:31:43,920 --> 01:31:46,639
Speaker 1: So easy enough to have because when I think Kansas,

1844
01:31:46,720 --> 01:31:51,439
Speaker 1: I'm thinking farms and ranches and lots of open space

1845
01:31:52,360 --> 01:31:55,800
Speaker 1: most of the Kansas Yes, Kansas City, No, got it.

1846
01:31:55,840 --> 01:31:58,000
Speaker 1: I didn't realize you grew up in Kansas City. That's

1847
01:31:58,040 --> 01:32:01,879
Speaker 1: a interesting Um. Who were some of your early mentors

1848
01:32:01,920 --> 01:32:05,200
Speaker 1: who affected the way you look at the world of

1849
01:32:05,240 --> 01:32:09,880
Speaker 1: investing in financial planning? Well, I would say that, Um,

1850
01:32:10,520 --> 01:32:13,200
Speaker 1: the person that owned creative Planning before me was just

1851
01:32:13,240 --> 01:32:17,080
Speaker 1: such an incredibly he's an incredibly positive person and was

1852
01:32:17,280 --> 01:32:21,400
Speaker 1: an incredible influence to watch. He treated people so well

1853
01:32:21,400 --> 01:32:23,800
Speaker 1: and he always had a positive attitude. He always looked

1854
01:32:23,840 --> 01:32:26,400
Speaker 1: on the bright side of things. And this is a

1855
01:32:26,439 --> 01:32:30,160
Speaker 1: business that that you you need to infuse. It's interesting

1856
01:32:30,160 --> 01:32:33,080
Speaker 1: because you need to be an optimistic person, but you

1857
01:32:33,120 --> 01:32:35,400
Speaker 1: have to take a pessimistic point of view when you're

1858
01:32:35,400 --> 01:32:37,919
Speaker 1: doing planning. You have to plan for the worst, right,

1859
01:32:38,200 --> 01:32:42,800
Speaker 1: So I really liked that kind of style that he had.

1860
01:32:43,120 --> 01:32:45,920
Speaker 1: But really the biggest influence it was very early. I

1861
01:32:46,280 --> 01:32:48,880
Speaker 1: had had a T shirt company and I made a

1862
01:32:48,880 --> 01:32:52,040
Speaker 1: bunch of money and and I was a few thousands

1863
01:32:52,040 --> 01:32:55,360
Speaker 1: of dollars and my dad said, I just put it

1864
01:32:55,400 --> 01:32:57,799
Speaker 1: in an index spud and I remember watching the Asian

1865
01:32:57,800 --> 01:33:02,639
Speaker 1: Contagion on TV. I cant remember what year was. Okay, alright, alright,

1866
01:33:02,680 --> 01:33:06,680
Speaker 1: well that's impressive and I can be wrong. And my

1867
01:33:06,760 --> 01:33:09,720
Speaker 1: Dad's like, hey, um, yeah, don't worry about it. It'll

1868
01:33:09,840 --> 01:33:11,960
Speaker 1: you know it, it'll all work itself out over five years.

1869
01:33:12,720 --> 01:33:14,840
Speaker 1: And that's interesting. And I went and read a bunch

1870
01:33:14,840 --> 01:33:16,479
Speaker 1: of books and found out he was right, and that

1871
01:33:16,600 --> 01:33:18,880
Speaker 1: probably wound up sending me on the trajectory. And are

1872
01:33:18,880 --> 01:33:22,759
Speaker 1: reading some Bogel books and Jeremy Siegal books and and

1873
01:33:23,400 --> 01:33:25,719
Speaker 1: the rest is history. So I'm gonna say Asian contagion

1874
01:33:26,520 --> 01:33:30,120
Speaker 1: long term capital management, but around both around the same

1875
01:33:30,200 --> 01:33:35,400
Speaker 1: time and and both with the same result. Temporary setback, um,

1876
01:33:35,439 --> 01:33:37,720
Speaker 1: which is what we tend to see all market YEP

1877
01:33:37,760 --> 01:33:42,599
Speaker 1: corrections are temporary. Even if they last from fifty four,

1878
01:33:42,640 --> 01:33:47,080
Speaker 1: it's still temporary. Hopefully you're not retiring went into that. Um,

1879
01:33:47,200 --> 01:33:49,759
Speaker 1: let's talk about books. Give us some of the favorite

1880
01:33:49,760 --> 01:33:53,160
Speaker 1: books that you like to read. Be they you mentioned Bogel?

1881
01:33:53,200 --> 01:33:55,599
Speaker 1: Who else? Who else? Uh? So I read a couple

1882
01:33:55,640 --> 01:33:57,360
Speaker 1: of books every week, but I can't get away from

1883
01:33:57,400 --> 01:34:00,679
Speaker 1: the same two books I think as being huper influential

1884
01:34:00,720 --> 01:34:02,559
Speaker 1: to me. One takes like twenty minutes to read. It's

1885
01:34:02,560 --> 01:34:05,679
Speaker 1: called how Full is Your Bucket? And it's basically just says,

1886
01:34:05,720 --> 01:34:09,479
Speaker 1: you know everybody you encounter, um, you leave feeling better

1887
01:34:09,560 --> 01:34:12,400
Speaker 1: or worse? Uh? And is somebody? Are you filling people's

1888
01:34:12,439 --> 01:34:15,400
Speaker 1: buckets up? Are you draining their buckets? It's really informed

1889
01:34:15,439 --> 01:34:17,960
Speaker 1: the way I interview, the who I work with, the

1890
01:34:18,000 --> 01:34:20,439
Speaker 1: way I get through a day, making sure that I'm

1891
01:34:20,439 --> 01:34:22,680
Speaker 1: in the right mind frame all the time. And it

1892
01:34:22,760 --> 01:34:26,559
Speaker 1: was so obvious, such a light, quick read, but it's

1893
01:34:26,600 --> 01:34:29,720
Speaker 1: really informed. How full is your bucket? Yeah, I don't

1894
01:34:29,760 --> 01:34:31,360
Speaker 1: know if I've ever heard of that. I'm gonna don't

1895
01:34:31,400 --> 01:34:33,960
Speaker 1: have to really short, really short book. I mean I

1896
01:34:34,000 --> 01:34:35,240
Speaker 1: got it for my kids, I got it for all

1897
01:34:35,240 --> 01:34:38,080
Speaker 1: our employees at the time. And and it's really interesting.

1898
01:34:38,160 --> 01:34:40,320
Speaker 1: I mean, like when you when you talk to that client,

1899
01:34:40,360 --> 01:34:41,840
Speaker 1: when you talk to a colleague, when you talk to

1900
01:34:41,840 --> 01:34:45,840
Speaker 1: a family member, are they leaving feeling better about themselves

1901
01:34:45,840 --> 01:34:49,200
Speaker 1: in their day or worse? And it and it's it's

1902
01:34:49,200 --> 01:34:52,080
Speaker 1: an interesting, pretty straightforward makes a lot of very very

1903
01:34:52,080 --> 01:34:57,439
Speaker 1: straightforward um. And then a book that really kind of

1904
01:34:57,439 --> 01:34:59,880
Speaker 1: transformed my thinking was Awareness by Demello and he was

1905
01:35:00,479 --> 01:35:04,799
Speaker 1: Jesuit priest to Awareness Awareness he was a Jesuit priest

1906
01:35:04,920 --> 01:35:08,800
Speaker 1: that um lived in the Far East. And so it's

1907
01:35:08,800 --> 01:35:11,320
Speaker 1: got a combination of all these things. But the basic

1908
01:35:11,400 --> 01:35:14,240
Speaker 1: message of the book is get over yourself. You know,

1909
01:35:14,640 --> 01:35:17,200
Speaker 1: you don't matter whatever you accomplish. A couple of years

1910
01:35:17,200 --> 01:35:19,280
Speaker 1: from now, no one's gonna know who you are. Uh,

1911
01:35:19,320 --> 01:35:21,640
Speaker 1: you know, we don't know who anybody from Mesopotamia is.

1912
01:35:21,680 --> 01:35:23,640
Speaker 1: You know, we might remember Abraham Lincoln, but you know,

1913
01:35:24,640 --> 01:35:27,080
Speaker 1: you go far up in the future, very very very

1914
01:35:27,080 --> 01:35:30,599
Speaker 1: little matters. It sounds like really horrible. What it does

1915
01:35:30,680 --> 01:35:34,400
Speaker 1: is it clarifies for you, Um, the high shouldn't be

1916
01:35:34,400 --> 01:35:37,839
Speaker 1: too high, the lows shouldn't be too low, and um,

1917
01:35:37,960 --> 01:35:41,679
Speaker 1: very solomonic in its wisdom. Yeah, and this two shall pass,

1918
01:35:42,160 --> 01:35:44,960
Speaker 1: this two shall pass, And it really if you start

1919
01:35:45,000 --> 01:35:47,439
Speaker 1: to take that attitude. For me, I'm not sure this

1920
01:35:47,479 --> 01:35:49,560
Speaker 1: is what the book was about, but it really crystallized.

1921
01:35:50,160 --> 01:35:52,080
Speaker 1: You know, if I look at like all the stuff

1922
01:35:52,120 --> 01:35:54,080
Speaker 1: that comes at you all day, everywhere, and all the

1923
01:35:54,120 --> 01:35:59,120
Speaker 1: stuff you encounter, the reality is it doesn't matter at all.

1924
01:35:59,120 --> 01:36:02,360
Speaker 1: It's ephemeral, right, just like investments, right, it's there's so

1925
01:36:02,439 --> 01:36:05,200
Speaker 1: much stuff out there. Part of being good at investments

1926
01:36:05,240 --> 01:36:07,599
Speaker 1: is to know the nine percent that doesn't matter at all,

1927
01:36:07,960 --> 01:36:09,400
Speaker 1: what you don't need to read, what you don't need

1928
01:36:09,439 --> 01:36:10,920
Speaker 1: to watch, what you don't need to care about, what

1929
01:36:10,960 --> 01:36:12,320
Speaker 1: you don't need to invest in, what you don't need

1930
01:36:12,360 --> 01:36:15,400
Speaker 1: to research, and then you get you carve away all

1931
01:36:15,439 --> 01:36:17,720
Speaker 1: that stone, you get the masterpiece, right, And I think

1932
01:36:17,800 --> 01:36:21,640
Speaker 1: that that that book for me really just changed my

1933
01:36:21,680 --> 01:36:23,320
Speaker 1: thinking of who do I want to be around, who

1934
01:36:23,360 --> 01:36:25,960
Speaker 1: do I want to spend my time? With what things matter,

1935
01:36:26,000 --> 01:36:28,200
Speaker 1: what things don't? How do I get everything that doesn't

1936
01:36:28,200 --> 01:36:31,000
Speaker 1: matter away from me and focus more on the things

1937
01:36:31,040 --> 01:36:33,720
Speaker 1: that do matter? And so I it was became an

1938
01:36:33,720 --> 01:36:35,400
Speaker 1: interesting time in my life to read that book. It's

1939
01:36:35,439 --> 01:36:38,160
Speaker 1: the only book I've read more than once. UM. I

1940
01:36:38,240 --> 01:36:41,400
Speaker 1: enjoyed it a lot. That that is quite fascinating. UM

1941
01:36:41,479 --> 01:36:43,760
Speaker 1: tell us about a time you've failed and what you

1942
01:36:43,880 --> 01:36:47,280
Speaker 1: learned from the experience. So I've I've failed many, many,

1943
01:36:47,320 --> 01:36:50,280
Speaker 1: many times. So I'll give you just some growing up experiences.

1944
01:36:50,320 --> 01:36:55,040
Speaker 1: So you know, I I UM started a lot mowing

1945
01:36:55,080 --> 01:36:56,519
Speaker 1: company with a friend, and I mean it was a

1946
01:36:56,520 --> 01:36:58,800
Speaker 1: real deal. We were making some good money. And back

1947
01:36:58,840 --> 01:37:01,479
Speaker 1: then you had to bag all the grass. And then

1948
01:37:01,720 --> 01:37:04,840
Speaker 1: some other people came along with these big machines and

1949
01:37:04,840 --> 01:37:06,800
Speaker 1: and you didn't need to bag grass. It turned out.

1950
01:37:06,800 --> 01:37:08,439
Speaker 1: It's turned out people thought you need to do but

1951
01:37:08,479 --> 01:37:10,200
Speaker 1: you didn't need to. It would take us like five

1952
01:37:10,200 --> 01:37:11,439
Speaker 1: hours to do a long they would do it in

1953
01:37:11,479 --> 01:37:13,920
Speaker 1: ten minutes. And you know, we were like, wow, we're

1954
01:37:13,920 --> 01:37:15,640
Speaker 1: out of business. That was super quick. You know, we

1955
01:37:15,640 --> 01:37:18,679
Speaker 1: didn't understand where this industry was going. I had an

1956
01:37:18,720 --> 01:37:21,679
Speaker 1: idea for a T shirt. It was against drunk driving.

1957
01:37:21,720 --> 01:37:23,960
Speaker 1: My school wouldn't let us do it. It was a

1958
01:37:24,000 --> 01:37:26,320
Speaker 1: Catholic school and it was a little racy. So we

1959
01:37:26,360 --> 01:37:28,040
Speaker 1: created the T shirt. I was we should just go

1960
01:37:28,120 --> 01:37:30,120
Speaker 1: make it. So I made it. Wound up selling like

1961
01:37:30,160 --> 01:37:32,600
Speaker 1: a hundred thousand of T shirt. What was the T

1962
01:37:32,760 --> 01:37:34,880
Speaker 1: shirts saying that the school wouldn't let you. On the

1963
01:37:34,920 --> 01:37:37,439
Speaker 1: front it said sed drink, Scenic drive, Sedic die, and

1964
01:37:37,439 --> 01:37:39,600
Speaker 1: on the back it said don't don't be you know,

1965
01:37:40,080 --> 01:37:44,680
Speaker 1: basically right. So so this winds up selling like a

1966
01:37:44,760 --> 01:37:50,479
Speaker 1: hundred thousand shirts Scenic Scenic drink, Scenic drive, Scenic give

1967
01:37:50,560 --> 01:37:55,919
Speaker 1: us the sceedic drink, Scenic Drives. I'm really regretting. I remember,

1968
01:37:56,240 --> 01:37:59,320
Speaker 1: I remember those shirts. I had no idea that was

1969
01:37:59,400 --> 01:38:02,720
Speaker 1: you those shirts until now, probably nobody did. I don't

1970
01:38:02,720 --> 01:38:04,960
Speaker 1: know why what door I've opened here, but I have

1971
01:38:05,360 --> 01:38:08,920
Speaker 1: found you can't find one online, thank god. So anyway,

1972
01:38:09,720 --> 01:38:12,360
Speaker 1: then the wound up creating like cedic smoke and all

1973
01:38:12,560 --> 01:38:14,799
Speaker 1: created a whole line around this, were you doing anything

1974
01:38:14,800 --> 01:38:18,280
Speaker 1: with the proceeds involving any drunk driving or mother's and

1975
01:38:18,680 --> 01:38:20,880
Speaker 1: a donation that went back to Sad and Mad And

1976
01:38:20,960 --> 01:38:24,000
Speaker 1: so this went on for you know, like two years,

1977
01:38:24,000 --> 01:38:26,160
Speaker 1: I'm like, hey, I'm I'm not even in college. Do

1978
01:38:26,200 --> 01:38:28,320
Speaker 1: I need to go to college? Well, here's what I

1979
01:38:28,400 --> 01:38:31,080
Speaker 1: learned about patents. So all of a sudden, the shirt

1980
01:38:31,080 --> 01:38:32,840
Speaker 1: went up all over the country. And I hadn't had

1981
01:38:32,840 --> 01:38:34,080
Speaker 1: a trade, and that was it. I was at a

1982
01:38:34,080 --> 01:38:37,080
Speaker 1: business trademark. People were just stealing it. The printer I

1983
01:38:37,200 --> 01:38:40,920
Speaker 1: used stole it, so they basically took the art my

1984
01:38:41,000 --> 01:38:43,559
Speaker 1: mama drawn and the sayings and then just copied the

1985
01:38:43,560 --> 01:38:45,679
Speaker 1: whole thing. And so that was a hell of a lesson.

1986
01:38:46,760 --> 01:38:49,280
Speaker 1: The biggest lesson though, was the music stores. You know,

1987
01:38:49,280 --> 01:38:51,640
Speaker 1: at one store, save the money out, got to to

1988
01:38:51,800 --> 01:38:53,599
Speaker 1: save the money, got to force save the money, got

1989
01:38:53,600 --> 01:38:56,479
Speaker 1: to eight, had three partners, bought out the three partners,

1990
01:38:56,880 --> 01:38:58,880
Speaker 1: was about to graduate from law school, and I'm like,

1991
01:38:58,880 --> 01:39:01,639
Speaker 1: you know what I might I bet if I stopped

1992
01:39:01,640 --> 01:39:03,559
Speaker 1: opening stores, I can make a hundred grand doing this.

1993
01:39:03,720 --> 01:39:05,559
Speaker 1: I'm not gonna work, you know, this is what I'm

1994
01:39:05,560 --> 01:39:10,240
Speaker 1: gonna do. Napster came out. I M telling I think

1995
01:39:10,280 --> 01:39:12,559
Speaker 1: it was a hundred days. Ever the last store was closed.

1996
01:39:13,680 --> 01:39:17,320
Speaker 1: My total take over my I think six years of

1997
01:39:17,320 --> 01:39:19,960
Speaker 1: of running these and buying out all my partners was

1998
01:39:20,000 --> 01:39:23,720
Speaker 1: eight thousand four hundred dollars. It calculated into cents per

1999
01:39:23,760 --> 01:39:26,679
Speaker 1: hour spent in the store. But but you know what,

2000
01:39:26,800 --> 01:39:30,280
Speaker 1: it was worth more than any college degree that I got.

2001
01:39:30,400 --> 01:39:33,600
Speaker 1: It was an incredibly valuable experience. But it taught me

2002
01:39:33,640 --> 01:39:37,519
Speaker 1: about how fast technology changes then And you can be

2003
01:39:37,560 --> 01:39:40,120
Speaker 1: growing and you can think your competition some music store

2004
01:39:40,160 --> 01:39:43,960
Speaker 1: across the street. Uh, it's not. It's something you're not

2005
01:39:44,080 --> 01:39:47,120
Speaker 1: even thinking about, right And I and I constantly look

2006
01:39:47,160 --> 01:39:50,320
Speaker 1: at creative planning and say, what am I not thinking about?

2007
01:39:50,800 --> 01:39:52,720
Speaker 1: What can I do better? How can I stay in

2008
01:39:52,720 --> 01:39:55,719
Speaker 1: front of somebody else? How can I be the better offering?

2009
01:39:56,120 --> 01:39:58,960
Speaker 1: How can I, you know, do more for less? All

2010
01:39:59,040 --> 01:40:02,519
Speaker 1: the time I'm asking question because I've been on the

2011
01:40:02,520 --> 01:40:06,120
Speaker 1: receiving end of capitalism. Capitalism is a death blow several

2012
01:40:06,120 --> 01:40:08,479
Speaker 1: timepsle of times. Well Andy Grove had it right, only

2013
01:40:08,520 --> 01:40:11,559
Speaker 1: the paranoid survivor. Um, what do you do for fun?

2014
01:40:11,600 --> 01:40:13,639
Speaker 1: What do you do when you're not helping people plan

2015
01:40:13,760 --> 01:40:18,080
Speaker 1: for their financial futures? So I I love UM short trips.

2016
01:40:18,120 --> 01:40:19,880
Speaker 1: It's probably my favorite thing where I can. If I'm

2017
01:40:19,880 --> 01:40:22,439
Speaker 1: going to see a client in Boston, I'll you know,

2018
01:40:22,520 --> 01:40:24,479
Speaker 1: take the whole family and I'll go make a weekend

2019
01:40:24,520 --> 01:40:26,840
Speaker 1: of it, and and I can kind of get Griswold

2020
01:40:26,960 --> 01:40:28,760
Speaker 1: about it. You know my kids. My kids are like,

2021
01:40:28,920 --> 01:40:33,000
Speaker 1: so I've you have to explain the European vacation reference.

2022
01:40:33,400 --> 01:40:36,640
Speaker 1: I find myself the problem with getting older isn't the

2023
01:40:36,720 --> 01:40:40,679
Speaker 1: body falling apart, it's all of your cultural references fail.

2024
01:40:40,800 --> 01:40:43,080
Speaker 1: With the younger generation, I try to cram too much

2025
01:40:43,120 --> 01:40:44,800
Speaker 1: trip in the two little types. So I've tried to

2026
01:40:44,880 --> 01:40:46,519
Speaker 1: lay off that and just go, look, I'm gonna going

2027
01:40:46,560 --> 01:40:48,800
Speaker 1: to a city. We're gonna do two or three things

2028
01:40:48,800 --> 01:40:52,519
Speaker 1: that are fun. But I think that America's amazing cities,

2029
01:40:52,560 --> 01:40:54,120
Speaker 1: and so we've tried to hit every city that has

2030
01:40:54,280 --> 01:40:57,160
Speaker 1: a baseball stadium where three force of the way done that.

2031
01:40:57,280 --> 01:40:59,800
Speaker 1: That's been a complete blast. And I try to cram

2032
01:40:59,840 --> 01:41:02,320
Speaker 1: that and wherever I possibly can, which is rare because

2033
01:41:02,400 --> 01:41:04,200
Speaker 1: I've got three kids that are teenagers and they all

2034
01:41:04,200 --> 01:41:06,760
Speaker 1: have like twenty seven sports. And have you seen the

2035
01:41:06,800 --> 01:41:09,240
Speaker 1: book thirty six Hours in I think it's the New

2036
01:41:09,320 --> 01:41:11,880
Speaker 1: York Times puts it out. I haven't. Oh, so this

2037
01:41:11,960 --> 01:41:15,479
Speaker 1: is basically every the top two hundred or four hundred

2038
01:41:15,479 --> 01:41:18,360
Speaker 1: cities in the country, you're gonna spend thirty six hours

2039
01:41:18,360 --> 01:41:20,280
Speaker 1: in the city. Here's what you need to see. Here's

2040
01:41:20,280 --> 01:41:24,240
Speaker 1: what man could use that book like eight years ago. Well,

2041
01:41:24,240 --> 01:41:26,720
Speaker 1: I'm sure you have some cities left, but it's uh,

2042
01:41:26,920 --> 01:41:28,880
Speaker 1: it's a really interesting books. You should look at it.

2043
01:41:29,080 --> 01:41:31,720
Speaker 1: Let's talk about the industry for a second. What are

2044
01:41:31,760 --> 01:41:36,560
Speaker 1: you most optimistic about within the financial services industry today

2045
01:41:36,680 --> 01:41:39,599
Speaker 1: and what might you be pessimistic about within that same industry.

2046
01:41:39,680 --> 01:41:42,480
Speaker 1: I think I'm optimistic about is I think the consumer

2047
01:41:42,720 --> 01:41:45,760
Speaker 1: is very close to finally getting what they deserve right.

2048
01:41:45,800 --> 01:41:48,559
Speaker 1: I mean taken long enough to take it a long, long, long,

2049
01:41:48,680 --> 01:41:52,080
Speaker 1: long time, and I think we're almost there. I think

2050
01:41:52,080 --> 01:41:54,439
Speaker 1: we're gonna get to a world someday where every advisor

2051
01:41:54,479 --> 01:41:57,040
Speaker 1: is a fiduciary, that the firm that's advising the client

2052
01:41:57,120 --> 01:41:59,720
Speaker 1: doesn't own their own products, that they get to know

2053
01:41:59,800 --> 01:42:01,840
Speaker 1: the line a little bit before they invest their money,

2054
01:42:01,840 --> 01:42:03,599
Speaker 1: and that they do all that at a reasonable price.

2055
01:42:04,080 --> 01:42:06,920
Speaker 1: I had taken a long, long, long time. I think

2056
01:42:06,920 --> 01:42:08,800
Speaker 1: we're well on our way there. That gives me a

2057
01:42:08,800 --> 01:42:10,840
Speaker 1: lot of optimism. I felt like the industry has been

2058
01:42:10,840 --> 01:42:13,320
Speaker 1: broken for a long time. Now we could be really

2059
01:42:13,320 --> 01:42:14,960
Speaker 1: close to there and have it not be fixed. You

2060
01:42:14,960 --> 01:42:16,519
Speaker 1: know by the time when you and I are still working,

2061
01:42:16,560 --> 01:42:18,519
Speaker 1: it might not be I still might not be fixed,

2062
01:42:18,560 --> 01:42:22,040
Speaker 1: but it's certainly on the path to getting closer. Even

2063
01:42:22,080 --> 01:42:25,240
Speaker 1: if the government decided not to embrace the fiduciary standard.

2064
01:42:25,520 --> 01:42:28,400
Speaker 1: It seems like the market is That's exactly right. I

2065
01:42:28,400 --> 01:42:30,800
Speaker 1: think the market is what's forcing most of this. The

2066
01:42:30,840 --> 01:42:33,320
Speaker 1: market is what has forced lower mutual fund fees and

2067
01:42:33,360 --> 01:42:37,280
Speaker 1: lower commissions and disclosing proprietary products, and all the markets

2068
01:42:37,320 --> 01:42:39,960
Speaker 1: pushing that. The government has done a phenomenally horrible job

2069
01:42:40,880 --> 01:42:43,160
Speaker 1: I think in this space. And so I think that

2070
01:42:43,160 --> 01:42:46,599
Speaker 1: that you're right. I think capitalism itself is forcing us

2071
01:42:46,640 --> 01:42:49,840
Speaker 1: to get where we need to be. Pessimistic. Um, I

2072
01:42:49,920 --> 01:42:54,840
Speaker 1: worry about two things. I think one, UM, I think

2073
01:42:55,000 --> 01:42:57,679
Speaker 1: there's going to be a cybersecurity attack on a major

2074
01:42:57,680 --> 01:43:00,800
Speaker 1: financial institution that succeeds that so point in the coming

2075
01:43:00,840 --> 01:43:03,479
Speaker 1: years that is horrifying. Is and and I don't think

2076
01:43:03,800 --> 01:43:06,920
Speaker 1: I don't I know institutions are worried about the very

2077
01:43:06,920 --> 01:43:10,679
Speaker 1: big institutions. I don't think we quite know what that's

2078
01:43:10,720 --> 01:43:13,760
Speaker 1: gonna do to the average American when that happens. Is

2079
01:43:13,800 --> 01:43:18,719
Speaker 1: everything going to be in mattresses? I mean, the post crisis,

2080
01:43:18,760 --> 01:43:23,400
Speaker 1: post cybersecurity, if we get a serious breach of a

2081
01:43:23,560 --> 01:43:26,920
Speaker 1: major institution, you know, a trillion plus institution, of which

2082
01:43:26,920 --> 01:43:29,960
Speaker 1: there are a whole bunch of them. Um, that is

2083
01:43:30,120 --> 01:43:34,479
Speaker 1: enough to freeze capitalism for a while, I think, And

2084
01:43:34,520 --> 01:43:37,280
Speaker 1: so I think it's gonna be very interesting to see

2085
01:43:37,880 --> 01:43:42,000
Speaker 1: if that can be prevented, uh, and if it happens,

2086
01:43:42,560 --> 01:43:44,760
Speaker 1: how our economy is going to react to it. The

2087
01:43:44,760 --> 01:43:46,400
Speaker 1: other thing I worry about is you look at what

2088
01:43:46,520 --> 01:43:49,960
Speaker 1: happened in Saudi Arabia or I think we're debating who

2089
01:43:50,320 --> 01:43:54,040
Speaker 1: who those those drones that went in and the oil

2090
01:43:54,320 --> 01:43:56,759
Speaker 1: up the oil fields right before they were going public.

2091
01:43:57,560 --> 01:44:01,160
Speaker 1: That's not brain surgery, right, And I think that we

2092
01:44:01,200 --> 01:44:03,720
Speaker 1: look at nine eleven as like an impossible You know,

2093
01:44:03,840 --> 01:44:06,000
Speaker 1: we've got all these measures in place to do all

2094
01:44:06,120 --> 01:44:08,800
Speaker 1: all these things to protect things, but at the end

2095
01:44:08,840 --> 01:44:11,040
Speaker 1: of the day, a kid in the garage with ten

2096
01:44:11,120 --> 01:44:14,879
Speaker 1: drones and the internet can cause a lot of damage.

2097
01:44:15,479 --> 01:44:18,200
Speaker 1: And I am I am concerned about that what it

2098
01:44:18,280 --> 01:44:20,240
Speaker 1: does to the way we live with each other, you know,

2099
01:44:20,280 --> 01:44:22,879
Speaker 1: from a personal level, you know, kind of your kids, grandkids,

2100
01:44:22,920 --> 01:44:25,599
Speaker 1: that kind of thinking, and from your specific question about

2101
01:44:25,600 --> 01:44:28,439
Speaker 1: the financial industry, what does it do to economics? Like

2102
01:44:28,439 --> 01:44:30,479
Speaker 1: if you remember after nine eleven, no one went to

2103
01:44:30,520 --> 01:44:33,160
Speaker 1: the movies, everything, no one went to the months, there

2104
01:44:33,200 --> 01:44:36,160
Speaker 1: was a cocoon effect for months. This to me would

2105
01:44:36,160 --> 01:44:39,280
Speaker 1: be much worse because people would be like, well, wait

2106
01:44:39,280 --> 01:44:42,680
Speaker 1: a second. You know nine eleven at least requires some

2107
01:44:42,760 --> 01:44:47,240
Speaker 1: strategicy and some breakdown and defenses. But and a physical event,

2108
01:44:47,439 --> 01:44:49,760
Speaker 1: not a cyber events. Right. If if we move into

2109
01:44:49,800 --> 01:44:52,200
Speaker 1: a world where there's a cyber event or you know,

2110
01:44:52,720 --> 01:44:56,760
Speaker 1: some teenager with drones causes havoc in Times square, I

2111
01:44:56,800 --> 01:44:59,639
Speaker 1: think that's going to be a cocooning effect that we're

2112
01:44:59,680 --> 01:45:02,840
Speaker 1: not we've never thought about, are prepared for. I think

2113
01:45:02,880 --> 01:45:06,400
Speaker 1: those are the real, the real threats to the economy

2114
01:45:06,439 --> 01:45:08,400
Speaker 1: that because you look at the economy is very resilient.

2115
01:45:08,479 --> 01:45:10,960
Speaker 1: It can get through everything. Bretto Uch pot is gonna

2116
01:45:10,960 --> 01:45:12,639
Speaker 1: cost more ten years from now than it does today,

2117
01:45:12,800 --> 01:45:14,360
Speaker 1: and like you, shoes are gonna cost more ten years

2118
01:45:14,360 --> 01:45:15,880
Speaker 1: from now than they do today. The market's going to

2119
01:45:15,920 --> 01:45:17,960
Speaker 1: go up into the right the way it always has.

2120
01:45:17,960 --> 01:45:20,719
Speaker 1: But these kind of things are the kind of things

2121
01:45:20,720 --> 01:45:23,720
Speaker 1: that can change that that narrative. And so those are

2122
01:45:23,760 --> 01:45:25,559
Speaker 1: the things that I think about when I think about

2123
01:45:25,640 --> 01:45:30,120
Speaker 1: existential threats to the norm. Huh. Fascinating. And our final

2124
01:45:30,200 --> 01:45:33,400
Speaker 1: two questions. A recent college grad comes to you and

2125
01:45:33,439 --> 01:45:37,120
Speaker 1: says they're interested in financial services as a career. What

2126
01:45:37,240 --> 01:45:39,439
Speaker 1: sort of advice do you give them? So first I'd say,

2127
01:45:39,560 --> 01:45:41,040
Speaker 1: you know, it's it's kind of like show me your friends.

2128
01:45:41,040 --> 01:45:42,439
Speaker 1: I'll show you who you are. You know, you give

2129
01:45:42,640 --> 01:45:44,200
Speaker 1: four people you hang out with the most. I don't

2130
01:45:44,200 --> 01:45:45,760
Speaker 1: need to meet you. I can pretty much tell you

2131
01:45:46,240 --> 01:45:49,439
Speaker 1: what what kind of guy you're like. Don't just go

2132
01:45:49,520 --> 01:45:52,360
Speaker 1: somewhere for experience. Try to get to a place that

2133
01:45:52,640 --> 01:45:55,160
Speaker 1: is aligned with the values that you're you're trying to

2134
01:45:55,200 --> 01:45:57,640
Speaker 1: do right, So try to get if you're focused on

2135
01:45:57,680 --> 01:46:00,639
Speaker 1: being a fiduciary and be based or you only get

2136
01:46:00,640 --> 01:46:04,080
Speaker 1: into an r a A. Just start there right, Try

2137
01:46:04,080 --> 01:46:07,080
Speaker 1: to get into the right environment to begin with. Second,

2138
01:46:07,280 --> 01:46:10,880
Speaker 1: create separation between you and other people. And I think

2139
01:46:10,920 --> 01:46:12,719
Speaker 1: there's a couple of things. One of the interview process.

2140
01:46:12,720 --> 01:46:15,439
Speaker 1: I'm always fascinating when somebody goes, well, I'm coming here

2141
01:46:15,439 --> 01:46:17,439
Speaker 1: for experience, or I'm coming here because I can think

2142
01:46:17,439 --> 01:46:20,479
Speaker 1: I learned this and that. Imagine, uh, somebody going to

2143
01:46:20,520 --> 01:46:22,439
Speaker 1: an NFL tryout and going I'm here because I want

2144
01:46:22,439 --> 01:46:24,960
Speaker 1: to learn to get to get better, and I want

2145
01:46:25,800 --> 01:46:27,840
Speaker 1: you want somebody who's gonna come. Here's how I can

2146
01:46:27,880 --> 01:46:31,040
Speaker 1: help you win. You know, here's what so talk about.

2147
01:46:31,040 --> 01:46:32,920
Speaker 1: How you can help the place that you're coming into

2148
01:46:33,320 --> 01:46:37,960
Speaker 1: now once you show up, Um, you can differentiate yourself

2149
01:46:38,600 --> 01:46:41,439
Speaker 1: by going the extra mile. This is an industry where

2150
01:46:41,479 --> 01:46:43,320
Speaker 1: it's very easy to go to the the extra mile. I mean,

2151
01:46:43,320 --> 01:46:44,680
Speaker 1: there's a lot of things you can do more for

2152
01:46:44,720 --> 01:46:47,840
Speaker 1: your client or your employer, and it's not hard to

2153
01:46:47,880 --> 01:46:51,280
Speaker 1: separate yourself from your peers if you are willing to

2154
01:46:51,360 --> 01:46:53,640
Speaker 1: stay a little later, or take on a project or

2155
01:46:53,680 --> 01:46:57,120
Speaker 1: offer your help. I mean, even with hundreds of people.

2156
01:46:57,240 --> 01:46:59,719
Speaker 1: I am very aware of the people within creative planning

2157
01:46:59,720 --> 01:47:02,680
Speaker 1: that do that, especially those that are starting out. And

2158
01:47:02,760 --> 01:47:06,240
Speaker 1: so you tend to get judged in the first thirty

2159
01:47:06,320 --> 01:47:09,200
Speaker 1: days when you're at work. The reality is we all

2160
01:47:09,280 --> 01:47:11,080
Speaker 1: judge each other in the first few seconds of seeing

2161
01:47:11,080 --> 01:47:12,960
Speaker 1: each other. There's a whole book about this called You've

2162
01:47:12,960 --> 01:47:15,599
Speaker 1: Got Three Seconds, and basically the ideas when you meet

2163
01:47:15,640 --> 01:47:17,519
Speaker 1: somebody in a few seconds, you've decided what you think

2164
01:47:17,520 --> 01:47:19,040
Speaker 1: of them, and it's up to them to dig themselves

2165
01:47:19,080 --> 01:47:20,880
Speaker 1: out of that hole or they're gonna go up or

2166
01:47:20,920 --> 01:47:23,040
Speaker 1: down later over time, but you've kind of put you

2167
01:47:23,120 --> 01:47:25,439
Speaker 1: put an anchor on them. The same thing happens when

2168
01:47:25,479 --> 01:47:28,519
Speaker 1: you're employed. Don't grow into it, come in hard, come

2169
01:47:28,560 --> 01:47:30,360
Speaker 1: in strong. If it's the ground running, it's the same

2170
01:47:30,400 --> 01:47:31,920
Speaker 1: thing I try to do with the client. I try

2171
01:47:31,960 --> 01:47:34,800
Speaker 1: to give that client as much value upfront as I can,

2172
01:47:34,840 --> 01:47:38,080
Speaker 1: so they're going, Wow, this is I made the right decision.

2173
01:47:38,160 --> 01:47:40,880
Speaker 1: You want the employer to feel the same way about you, huh.

2174
01:47:41,240 --> 01:47:43,880
Speaker 1: And our final question, what do you know about the

2175
01:47:43,920 --> 01:47:47,840
Speaker 1: world of investing and financial planning today? You wish you

2176
01:47:47,920 --> 01:47:50,040
Speaker 1: knew twenty five or so years ago when you were

2177
01:47:50,040 --> 01:47:52,160
Speaker 1: first getting started. Well, I mean it took all the

2178
01:47:52,160 --> 01:47:55,960
Speaker 1: way until, you know, from oh four until to put

2179
01:47:56,000 --> 01:47:58,000
Speaker 1: all the pieces together, and it was really like hearing

2180
01:47:58,080 --> 01:48:00,600
Speaker 1: from clients, Oh I need this, I need at and

2181
01:48:00,640 --> 01:48:02,720
Speaker 1: then going well, I need to build a service to

2182
01:48:02,760 --> 01:48:04,400
Speaker 1: do that. So I always had a very strong bias

2183
01:48:04,439 --> 01:48:06,200
Speaker 1: against product. I don't want to own anything where I

2184
01:48:06,240 --> 01:48:09,160
Speaker 1: make more money, and a very strong bias towards service

2185
01:48:09,200 --> 01:48:12,280
Speaker 1: and value. How do I deliver more services? I wish

2186
01:48:12,560 --> 01:48:14,720
Speaker 1: I had the vision and no four to go. These

2187
01:48:14,720 --> 01:48:17,280
Speaker 1: were all the services that were needed and really found

2188
01:48:17,280 --> 01:48:19,960
Speaker 1: a way to build it out all on day one

2189
01:48:20,040 --> 01:48:23,160
Speaker 1: instead of taking you know, fourteen years to build it.

2190
01:48:23,200 --> 01:48:25,840
Speaker 1: I I told our team at our last annual meeting

2191
01:48:25,880 --> 01:48:27,320
Speaker 1: that for the first time, I feel like I'm at

2192
01:48:27,320 --> 01:48:30,760
Speaker 1: the starting line. I feel like the first time I

2193
01:48:30,840 --> 01:48:33,920
Speaker 1: have an offense and a defense, and an offensive coordinator

2194
01:48:33,960 --> 01:48:36,240
Speaker 1: and a defensive coordinator. Up until now, we've been playing

2195
01:48:36,240 --> 01:48:39,920
Speaker 1: with an incomplete, incomplete team and complete coaching. We didn't

2196
01:48:39,960 --> 01:48:42,240
Speaker 1: have all the piece we have the special teams. We've

2197
01:48:42,280 --> 01:48:44,800
Speaker 1: got it all now. Um, and you know, I wish

2198
01:48:44,800 --> 01:48:46,519
Speaker 1: I had a time machine. I could go go have

2199
01:48:46,600 --> 01:48:49,439
Speaker 1: started that way. But to be fair, you have you

2200
01:48:49,520 --> 01:48:52,559
Speaker 1: were path dependent. You had to travel that route in

2201
01:48:52,680 --> 01:48:55,400
Speaker 1: order to figure out what all those pieces were. That's true,

2202
01:48:55,600 --> 01:48:58,920
Speaker 1: so but that's still still quite fascinating. Thank you, Peter

2203
01:48:59,000 --> 01:49:00,840
Speaker 1: for being so generous with your time. I've I've had

2204
01:49:00,880 --> 01:49:03,599
Speaker 1: you in here for two hours, and uh, most people

2205
01:49:03,800 --> 01:49:06,760
Speaker 1: fade by by sixty minutes. In fine, you were great.

2206
01:49:06,800 --> 01:49:09,040
Speaker 1: I really enjoyed it. Barry. We have been speaking with

2207
01:49:09,040 --> 01:49:12,280
Speaker 1: Peter Mluke. He is the c I O and President

2208
01:49:12,479 --> 01:49:16,320
Speaker 1: of Creative Planning. If you enjoy this conversation. Well, look

2209
01:49:16,400 --> 01:49:18,640
Speaker 1: up an intro, down an intron Apple iTunes and you

2210
01:49:18,680 --> 01:49:22,840
Speaker 1: can see any of our previous three hundred such conversations

2211
01:49:22,880 --> 01:49:25,559
Speaker 1: we've had over the past five years. Where has the

2212
01:49:25,600 --> 01:49:29,160
Speaker 1: time gone? Um? We love your comments, feedback and suggestions

2213
01:49:29,560 --> 01:49:33,439
Speaker 1: right to us at m IB podcast at Bloomberg dot net.

2214
01:49:34,000 --> 01:49:37,080
Speaker 1: Be sure and give us a delightful review on Apple iTunes.

2215
01:49:37,560 --> 01:49:40,240
Speaker 1: You can check out my weekly column on Bloomberg dot com.

2216
01:49:40,280 --> 01:49:43,360
Speaker 1: Sign up for the Daily Reads at Reholts dot com.

2217
01:49:43,400 --> 01:49:45,280
Speaker 1: I would be remiss if I did not thank the

2218
01:49:45,320 --> 01:49:48,800
Speaker 1: crack staff that helps me put together this podcast each week.

2219
01:49:49,439 --> 01:49:53,000
Speaker 1: Carolin O'Brien is our audio engineer, Michael Batnick is my

2220
01:49:53,080 --> 01:49:57,000
Speaker 1: head of research, and Michael Boyle is our producer. I'm

2221
01:49:57,000 --> 01:50:00,080
Speaker 1: Barry Riholts. You've been listening to Masters in Business on

2222
01:50:00,200 --> 01:50:01,120
Speaker 1: Bloomberg Radio.