WEBVTT - Peter Mallouk on Building a Powerhouse RIA 0:00:02.279 --> 0:00:06.439 This is Masters in Business with Barry Ridholts on Boomberg 0:00:06.559 --> 0:00:10.240 Radio this weekend on the podcast what Can I Say? 0:00:10.280 --> 0:00:13.720 This was a master class in how to build a 0:00:13.800 --> 0:00:18.439 powerhouse r i A. Peter Maluke has been with Creative 0:00:18.440 --> 0:00:21.880 Planning for twenty years. He kind of started as a 0:00:21.960 --> 0:00:27.280 junior person, eventually buying the firm um for on on 0:00:27.320 --> 0:00:30.360 a I guess an earned out basis when the then 0:00:30.680 --> 0:00:35.000 founder wanted to retire and took what was essentially a 0:00:35.120 --> 0:00:38.720 hundred and fifty million dollars or smaller firm and built 0:00:38.760 --> 0:00:42.760 it up to a forty billion dollar powerhouse. If if 0:00:42.800 --> 0:00:45.760 you want to learn the right way to manage money, 0:00:45.800 --> 0:00:50.400 to deal with clients, to provide services, to grow a business, 0:00:50.880 --> 0:00:54.760 then strap yourself in. This is a master class with 0:00:54.920 --> 0:00:59.720 no further ado. My conversation with Creative Plannings Peter Maluke. 0:01:01.880 --> 0:01:06.480 This is Masters in Business with Barry Ridholtz on Boomberg Radio. 0:01:07.040 --> 0:01:10.399 My extra special guest this week is Peter Maluke. He 0:01:10.600 --> 0:01:14.600 is the president and chief investment officer of Creative Planning, 0:01:15.200 --> 0:01:19.040 affirm that manages about forty five billion dollars in assets 0:01:19.120 --> 0:01:24.240 under management across nearly a hundred thousand client accounts. He 0:01:24.440 --> 0:01:27.920 is the only person on Worth's list of one hundred 0:01:27.920 --> 0:01:32.720 most Powerful people in global finance who actually advised clients. 0:01:32.760 --> 0:01:35.360 He was listed number one on the Baron's Top one 0:01:35.400 --> 0:01:39.720 hundred Independent Advisors for three consecutive years, and he is 0:01:39.760 --> 0:01:42.959 the author of the book The Five Mistakes Every Investor 0:01:43.040 --> 0:01:46.840 Makes and How to Avoid Them. Peter Maluke, Welcome to Bloomberg. 0:01:46.880 --> 0:01:48.880 It's great to be here. Good to see again, Barry Uh. 0:01:49.120 --> 0:01:52.000 I've been looking forward to having this conversation with you. 0:01:52.080 --> 0:01:55.280 We spoke briefly at a conference in September, but that 0:01:55.360 --> 0:01:58.200 was so short. Twenty minutes. A half hour just doesn't 0:01:58.600 --> 0:02:01.160 get it done. And we should be able to wrap 0:02:01.200 --> 0:02:04.440 this up by dinner time and I'll get to every 0:02:04.480 --> 0:02:07.080 question I have for you. I have to start with 0:02:07.120 --> 0:02:09.600 your career because it's a little unusual. You get a 0:02:09.720 --> 0:02:12.480 j d, m b A so a legal degree and 0:02:12.480 --> 0:02:17.280 a business degree from the University of Kansas in what 0:02:17.280 --> 0:02:19.200 what was your career plans? Where did you think you 0:02:19.200 --> 0:02:21.280 would go with that? So? I didn't have any career plans. 0:02:21.320 --> 0:02:23.840 A lot of people look at my college education history 0:02:23.880 --> 0:02:27.120 and think there was some master master plan, or I 0:02:27.120 --> 0:02:30.120 think I've perceived as as a strategic planner when it 0:02:30.160 --> 0:02:33.360 comes to business, and the amount of just good fortune 0:02:33.440 --> 0:02:36.640 and luck along the way is tremendously underestimated. I for sure, 0:02:36.720 --> 0:02:39.520 when I was doing UH an undergrad I just took business, 0:02:39.800 --> 0:02:42.920 just took business because I thought I liked business, and 0:02:42.960 --> 0:02:45.320 I added other majors that were interesting to me. And 0:02:45.360 --> 0:02:47.519 then I got an MBA because I wasn't sure what 0:02:47.560 --> 0:02:48.799 I wanted to do. And the same thing with the 0:02:48.840 --> 0:02:51.160 law degree. There was a joint program at University of 0:02:51.200 --> 0:02:53.000 Kansas where I went, and so I did both. So 0:02:53.040 --> 0:02:54.800 I came out of college with a bunch of degrees. 0:02:55.240 --> 0:03:00.360 But I still, even leaving campus and heading back by COMB, 0:03:00.760 --> 0:03:02.480 I had no idea what I was gonna do. And 0:03:02.480 --> 0:03:06.360 and somewhere along the lines, you were involved with used 0:03:06.360 --> 0:03:09.760 record stores. Tell me about that, because in my misspent 0:03:09.840 --> 0:03:13.120 youth I used to haunt you c D stores looking 0:03:13.160 --> 0:03:17.640 for cheap albums and discs um that were used. What 0:03:17.639 --> 0:03:19.960 what brought you to that space? So you know, I 0:03:20.000 --> 0:03:23.160 don't know where this entrepreneurial thing came from. I know 0:03:23.280 --> 0:03:25.680 my mom really encouraged it when I was younger, and 0:03:25.680 --> 0:03:29.519 I remember UH always having a paper route, which meant 0:03:29.600 --> 0:03:31.160 you know, I couldn't drive a car when I had it. 0:03:31.160 --> 0:03:34.000 I was twelve. So my my dad, you know, drove 0:03:34.040 --> 0:03:36.080 the paper out and I threw the You weren't on 0:03:36.120 --> 0:03:39.720 the back of a bike, that's how. That's how so 0:03:39.880 --> 0:03:42.440 in suburban New York, that's how you When I had 0:03:42.440 --> 0:03:45.040 a paper out, it was a bike with you would 0:03:45.080 --> 0:03:46.680 put a bunch of baskets on and you would go 0:03:46.720 --> 0:03:49.200 down the street flinging papers both ways. I thought they 0:03:49.240 --> 0:03:51.320 only did that in movies. No, not all that was real. 0:03:51.720 --> 0:03:54.320 But that's when you're in a tight suburban neighborhood. You 0:03:54.320 --> 0:03:56.200 sound like you were in a little more spread out 0:03:56.360 --> 0:04:00.240 spread I mean in Kansas, spread out suburban neighborhood house 0:04:00.280 --> 0:04:02.160 to another, you'd get you to get worn out sometimes. 0:04:02.200 --> 0:04:04.400 And so I just set out the back of a 0:04:04.440 --> 0:04:07.800 station wagon and throw and throw the newspapers. Uh. Then 0:04:07.840 --> 0:04:09.720 I had a lawnmowing business, and then I had a 0:04:09.800 --> 0:04:13.680 DJ business. I loved music, um but the music stores 0:04:13.800 --> 0:04:16.320 was probably the thing that was the biggest manifestation of 0:04:16.360 --> 0:04:19.000 what I really enjoyed and having a business. And I 0:04:19.000 --> 0:04:20.960 had started that while I was in college, and it had, 0:04:21.120 --> 0:04:23.000 you know, but pretty much gone bankrupt by the time 0:04:23.000 --> 0:04:26.400 I got out, So you really begin your career at 0:04:26.480 --> 0:04:30.800 Creative Planning in what capacity did you join the firm? 0:04:31.000 --> 0:04:33.280 And this was, by the way, a much much smaller 0:04:33.279 --> 0:04:36.679 firm at the time. Right they was had been started 0:04:36.720 --> 0:04:39.600 by three guys in the insurance business, and they had 0:04:39.600 --> 0:04:42.800 an insurance arm and they mainly did disability insurance for physicians. 0:04:42.839 --> 0:04:45.599 And one of them was really into investing all the 0:04:45.600 --> 0:04:47.080 way back in the early eighties, you know, when I 0:04:47.160 --> 0:04:50.760 was in grade school and he um so he started 0:04:50.800 --> 0:04:52.960 Creative Planning as a sister company had you know, maybe 0:04:53.000 --> 0:04:57.880 a few dozen clients basically using American funds, mutual funds 0:04:57.880 --> 0:05:01.840 and and doing planning with with you know, by hand. 0:05:01.920 --> 0:05:03.240 You know, I don't remember I took over. I look 0:05:03.240 --> 0:05:05.240 at looking at the plans. I mean there was no 0:05:06.160 --> 0:05:09.280 Internet back then. And in great technology we we take 0:05:09.320 --> 0:05:13.159 things like money Guide pro for granted today really lets 0:05:13.200 --> 0:05:15.600 you dig deep and and come up with a lot 0:05:15.640 --> 0:05:18.559 of options. Yeah, I mean technology literally lets you scale 0:05:18.600 --> 0:05:20.080 in the way you never could before in every in 0:05:20.080 --> 0:05:23.120 every business, but just being born and now you could 0:05:23.120 --> 0:05:24.800 do all these things that you could have never done 0:05:24.800 --> 0:05:26.440 a long time ago, no matter how brilliant you were, 0:05:27.080 --> 0:05:30.800 and uh. I had worked for somebody for two years 0:05:30.839 --> 0:05:34.120 just advising this physician and his practice. And at the 0:05:34.160 --> 0:05:37.440 same time, a couple of years after that, I started 0:05:37.440 --> 0:05:41.839 working with advisors, doing wills and trusts and that sort 0:05:41.880 --> 0:05:44.679 of advice for them, putting putting that legal degree to work. 0:05:44.800 --> 0:05:48.240 That's right. So never been in a courtroom for for 0:05:48.279 --> 0:05:51.400 anything ever with the practice of law, but I enjoyed 0:05:51.400 --> 0:05:54.000 helping people. Hey, you've you've got this problem. You want 0:05:54.000 --> 0:05:56.279 to fix it. You you probably hate dealing with lawyers. 0:05:56.320 --> 0:05:58.320 I'm gonna make this easy. It's gonna take a few days, 0:05:58.360 --> 0:06:00.040 it's gonna be a flat fee. I'm gonna explain it 0:06:00.040 --> 0:06:02.200 in English. And that really took off. A lot of 0:06:02.240 --> 0:06:04.599 advisors started to use me. I really learned a lot 0:06:04.680 --> 0:06:06.200 from a lot of those advisors. A lot of them 0:06:06.240 --> 0:06:08.280 were amazing, a lot of them were terrible. Um, a 0:06:08.279 --> 0:06:09.920 lot of them were brilliant but did the wrong thing 0:06:09.960 --> 0:06:12.760 and and a lot of them always did the right thing. Um. 0:06:12.800 --> 0:06:15.960 And then creative planning. At the same time, their financial 0:06:15.960 --> 0:06:18.200 planning team had left to start their own firm. They 0:06:18.200 --> 0:06:20.560 asked me to come in. And when I take on 0:06:20.640 --> 0:06:22.320 that department, I looked at it and thought you know, 0:06:22.360 --> 0:06:24.279 I can do this and two days a week. It 0:06:24.360 --> 0:06:28.520 was pretty straightforward. So I was doing that from and 0:06:28.600 --> 0:06:32.599 at the same time, I was taken care of maybe 0:06:32.600 --> 0:06:36.400 a hundred other advisors clients doing estate planning. So now 0:06:36.440 --> 0:06:40.360 it's two thousand four and you say I have an idea, Yeah, 0:06:40.520 --> 0:06:44.120 let's buy the firm. So first question is what what 0:06:44.240 --> 0:06:48.200 motivated that blight bulbin? Oh four? By the way, before 0:06:48.240 --> 0:06:50.960 the financial crisis, but not too long after the dot 0:06:51.000 --> 0:06:53.800 com implosion? Right, you know the markets had only bottom 0:06:53.839 --> 0:06:56.680 let's call it October two and then March oh three, right, 0:06:56.720 --> 0:06:59.120 I mean I'd come right into the industry basically when 0:06:59.160 --> 0:07:03.120 I was running creative plannings a few dozen clients. During 0:07:03.160 --> 0:07:06.480 that period, you had the tech bubble and you had 0:07:06.600 --> 0:07:09.000 nine eleven. So the markets were just, you know, a 0:07:09.040 --> 0:07:13.160 disaster um during that period and the lightbulb going off. 0:07:13.160 --> 0:07:14.920 Would you really think about it? Here I am for 0:07:14.960 --> 0:07:18.280 six years, I'm doing financial planning and investments for some people, 0:07:18.960 --> 0:07:21.239 and I'm doing a state and tax advice for other people, 0:07:21.760 --> 0:07:23.360 And you would think the light bulb would have gone 0:07:23.400 --> 0:07:26.640 off sooner, right that Hey, maybe people would like this 0:07:26.680 --> 0:07:29.800 if it was all together, right, And so I knew 0:07:30.040 --> 0:07:33.040 three things. I knew I wanted to be an independent advisor, 0:07:33.160 --> 0:07:36.240 and I knew that I was not comfortable with dual registration. 0:07:36.440 --> 0:07:38.520 Creative planning was duly registered at the time, and back 0:07:38.560 --> 0:07:41.040 then that was very normal, and that was Hey listen, 0:07:41.080 --> 0:07:45.360 back then r s were relatively that was and people 0:07:45.360 --> 0:07:47.600 were just adding it to brokerage firm says, oh, let's 0:07:47.640 --> 0:07:49.480 well for these services. Exactly right. I mean it was 0:07:49.520 --> 0:07:51.400 innovative to even be an r A at all at 0:07:51.440 --> 0:07:54.840 that point. Um. And I was very uncomfortable as an 0:07:54.880 --> 0:07:57.920 attorney built maybe a complex of state plan with charitable 0:07:57.920 --> 0:08:00.920 trust there bublble trust, and then find out and annuity 0:08:01.000 --> 0:08:03.360 was in there that wasn't the right kind or shouldn't 0:08:03.360 --> 0:08:06.360 be there at all. But they have a giant commission built, right, 0:08:06.440 --> 0:08:08.360 and that's where they get sold. And so you go 0:08:08.400 --> 0:08:10.240 and you do the legal. Then that advisor might do 0:08:10.280 --> 0:08:12.080 things that aren't ideal. So I I wanted to a 0:08:12.160 --> 0:08:15.560 firm that was independent, didn't sell its own products, was 0:08:15.600 --> 0:08:17.920 able to combine all those things in one place, and 0:08:18.000 --> 0:08:20.760 most importantly, could take each client and and change the 0:08:20.760 --> 0:08:24.200 portfolio per their situation. And so I went to all 0:08:24.200 --> 0:08:27.080 my clients, including Creative Planning and said, you know, I'm 0:08:27.080 --> 0:08:28.560 going this is what I want to do. And the 0:08:28.560 --> 0:08:31.000 owner of Creative Planning was basically like he had had 0:08:31.000 --> 0:08:33.679 those two former partners. One had died very young, one 0:08:33.720 --> 0:08:35.400 became disabled very young, and he said, you know what, 0:08:35.440 --> 0:08:37.120 I've had enough of this. You know, if you want 0:08:37.120 --> 0:08:39.280 to buy, if you want to take over Creative Planning, 0:08:39.280 --> 0:08:41.360 go ahead. So did you do this yourself? Did you 0:08:41.400 --> 0:08:43.959 bring in partners? Did you bootstrap it? How? How did 0:08:43.960 --> 0:08:45.920 this transaction? I mean, we're talking about a firm that 0:08:45.960 --> 0:08:47.920 had a couple hundred thousand of revenue. There wasn't I 0:08:47.960 --> 0:08:50.600 mean it was so it wasn't a multimillion. I mean, 0:08:50.600 --> 0:08:53.880 we're there and basically made monthly payments for a few 0:08:53.920 --> 0:08:56.640 years and it was over. It was not We're talking 0:08:56.640 --> 0:08:58.360 about a few dozen clients, and so what it was 0:08:58.400 --> 0:09:01.080 really the advantage for me was I didn't have to 0:09:01.080 --> 0:09:04.040 go create from al a from scratch. There was one there. 0:09:04.040 --> 0:09:07.080 I already knew those those clients, and so I could 0:09:07.160 --> 0:09:09.600 skip this like six month period of figuring all that 0:09:09.640 --> 0:09:12.040 out and get on with it. Even even more, it's 0:09:12.080 --> 0:09:14.520 like eighteen months by the time you're done with everything. 0:09:14.840 --> 0:09:17.800 We did hours from scratching, you find yourself spending a 0:09:17.960 --> 0:09:21.120 one amount of time with lawyers and accountants and compliance 0:09:21.160 --> 0:09:24.679 people just to launch the farm, right, so you bypass that. 0:09:25.800 --> 0:09:28.640 So now it's oh, four oh five, you're a hundred 0:09:28.720 --> 0:09:32.120 million dollars in assets. When do things really start to 0:09:32.200 --> 0:09:36.560 scale up? You're now forty five billion. That's a big jump, 0:09:36.920 --> 0:09:39.920 you know it was. It was really instant in terms 0:09:39.920 --> 0:09:42.800 of percentage growth. I mean every year it seemed it 0:09:42.880 --> 0:09:47.880 was thirty or thirty growth, and it's never really stopped. 0:09:47.880 --> 0:09:49.440 I mean they've been a couple of little more than 0:09:49.440 --> 0:09:50.920 that in a couple of years, a little below that. 0:09:51.320 --> 0:09:53.600 I mean the numbers change obviously, you know three years 0:09:53.600 --> 0:09:56.160 ago where at eighteen billion, and now we're at almost 0:09:56.160 --> 0:09:59.840 forty five. That seems crazy, but it might even be 0:09:59.880 --> 0:10:02.319 a slower growth rate than when we went from a 0:10:02.440 --> 0:10:05.680 hundred to five hundred. I think what we were doing 0:10:05.679 --> 0:10:08.600 in the beginning was very innovative, and it doesn't sound 0:10:08.600 --> 0:10:10.760 like it today to have a firm that was, you know, 0:10:10.840 --> 0:10:13.560 dropping its dual registration, was totally independent. We were using 0:10:13.600 --> 0:10:16.760 e t F. So I remember hearing from Van Vanguard 0:10:16.760 --> 0:10:20.520 rep that we had larger holding of indexes than any 0:10:20.640 --> 0:10:22.880 independent r A A. I'm hearing that No. Nine or 0:10:23.720 --> 0:10:25.360 I remember having to explain when E T F was 0:10:25.360 --> 0:10:29.679 two clients what pastive investing was. And then we were 0:10:29.720 --> 0:10:31.679 doing the legal and tax and all of that in 0:10:31.679 --> 0:10:34.439 one place. The way we delivered it was very efficient, 0:10:34.520 --> 0:10:37.559 and we we were doing including the planning without a 0:10:37.559 --> 0:10:40.160 separate feedback. Then if you're reading all the financial stuff, 0:10:40.160 --> 0:10:42.480 it said, this is stupid. No one will value it 0:10:42.480 --> 0:10:44.360 if you do it for free, and you always have 0:10:44.400 --> 0:10:46.680 to charge. And so there were just a maybe six 0:10:46.760 --> 0:10:48.520 or seven things we were doing that no one else 0:10:48.600 --> 0:10:51.520 was doing that. Today a lot of people are doing um. 0:10:51.559 --> 0:10:54.560 But the difference is today that's not enough. Today you 0:10:54.600 --> 0:10:57.080 have to be more specialized, you have to be faster, 0:10:57.160 --> 0:10:59.640 you have to cost less, you have to have much 0:10:59.800 --> 0:11:02.839 much more credential people. It's gotten way more competitive. You know, 0:11:02.840 --> 0:11:05.240 if I started this today, it wouldn't worked, right. I 0:11:05.240 --> 0:11:07.520 think that back then it was very unique. It was 0:11:07.559 --> 0:11:09.600 it was very on the front end of things, and 0:11:09.640 --> 0:11:11.880 it allowed us to build a lot of a lot 0:11:11.920 --> 0:11:14.840 of momentum. And you have a colleague that that sent 0:11:14.920 --> 0:11:18.640 me a wonderful article about cumulative advantage, which is you 0:11:18.679 --> 0:11:20.760 start to One of the things that people want in 0:11:20.800 --> 0:11:22.960 this business is they want to feel safe. You know, 0:11:23.000 --> 0:11:26.240 I mean you you if you're looking at hiring an advisor, 0:11:27.160 --> 0:11:29.360 it's sort of like a restaurant. You know, we're here 0:11:29.400 --> 0:11:30.959 in New York City. The way I picked where I 0:11:31.000 --> 0:11:32.680 was eating last night as I want to trip advisor. 0:11:33.040 --> 0:11:35.080 A trip advisor tell me where to eat last night, right, 0:11:35.080 --> 0:11:36.960 So part of it is probably going to go to 0:11:36.960 --> 0:11:39.319 a pretty good place, and the other part is I'm 0:11:39.360 --> 0:11:41.680 probably not going to throw up, right, probably probably not, 0:11:41.840 --> 0:11:43.920 probably not gonna be horrible. And I think people look 0:11:43.960 --> 0:11:47.080 at advisors the same way. I think they want to 0:11:47.240 --> 0:11:50.120 feel like, Okay, I'm at a place that's pretty safe. Okay, 0:11:50.440 --> 0:11:54.840 this place has lots of clients, big clients, pretty sophisticated, 0:11:54.920 --> 0:11:58.600 probably did a lot of due diligence. I feel safe there. 0:11:58.600 --> 0:12:01.920 I'm probably gonna do all right. I'm probably not gonna 0:12:01.920 --> 0:12:04.320 have a really bad outcome. It's just the way. So 0:12:04.360 --> 0:12:06.600 I think as you as we're sitting in this world today, 0:12:06.600 --> 0:12:08.480 people have been at nine eleven, the tech bubble, oh 0:12:08.520 --> 0:12:11.600 eight oh nine, Bertie made off. Just there's so much 0:12:11.960 --> 0:12:15.680 crap happening. Right. If you're an investor. You're really looking 0:12:15.720 --> 0:12:18.200 at at this landscape and going, you know what, the 0:12:18.240 --> 0:12:23.440 guy with two million dollars makes me a little nervous. Um. 0:12:23.520 --> 0:12:25.840 And now not everybody thinks that there's a path for 0:12:25.880 --> 0:12:28.040 the guy with two hundre million dollars, but there are 0:12:28.040 --> 0:12:31.120 gonna be some people that person encounters that goes you know, 0:12:32.040 --> 0:12:34.160 when you're bigger, or they might not use those words, 0:12:34.200 --> 0:12:36.440 but that's what I had a lot of people that 0:12:36.840 --> 0:12:39.200 didn't sign up with me in the first few years 0:12:39.200 --> 0:12:41.079 that signed on years later, like say, my mom and dad, 0:12:41.240 --> 0:12:44.319 I've been calling you president. Is that right? Good enough? Yeah? 0:12:44.520 --> 0:12:48.559 The bro chief investment officer, chairman? Is there a preferred title? 0:12:48.720 --> 0:12:52.360 Really it doesn't matter. But but you are the head 0:12:52.400 --> 0:12:56.880 Han show at Creative Plants, which is a billion? Can 0:12:56.920 --> 0:12:58.920 I call you forty five billion dollars? Is that? Are 0:12:58.960 --> 0:13:01.560 you just very close? Depends on I guess it depends 0:13:01.559 --> 0:13:03.800 on when this Brookt is going. That's right, depends on 0:13:03.840 --> 0:13:08.040 where the market closes. Um. So let's talk about those 0:13:08.160 --> 0:13:11.680 numbers because they're crazy. When you when you took over 0:13:11.679 --> 0:13:14.360 the firm and O four it was it was a 0:13:14.440 --> 0:13:17.079 hundred and change a hundred million dollars not a lot 0:13:17.120 --> 0:13:20.520 of firm funds. How do you scale up that a 0:13:20.760 --> 0:13:26.320 u M from a few million dollars to almost forty 0:13:26.600 --> 0:13:29.520 billion dollars. Well, I think you have to have a 0:13:29.520 --> 0:13:32.480 couple of different things. So I think that one, you 0:13:32.480 --> 0:13:35.440 have to have a sound investment philosophy that's kind of 0:13:35.440 --> 0:13:37.520 worked out for people. Right, You're not going to get 0:13:37.520 --> 0:13:40.439 through all of those things and have your clients referring 0:13:40.440 --> 0:13:42.640 other clients and aggregating their assets with you unless you 0:13:42.679 --> 0:13:45.640 deliver on your promises. As one, you have to have 0:13:46.440 --> 0:13:49.520 an investment approach that works. I think. Second, you have 0:13:49.559 --> 0:13:52.240 to have more than that, um and and so we 0:13:52.240 --> 0:13:55.000 we have more than that. We've been planning and legal 0:13:55.080 --> 0:13:58.040 and tax and trust services and institutional services and all 0:13:58.080 --> 0:14:01.640 of those things. UM. Third, you have to have the people. 0:14:01.920 --> 0:14:04.600 And I think this industry, and I've spoken about this 0:14:04.800 --> 0:14:07.640 a couple of times before with you, the people in 0:14:07.640 --> 0:14:12.120 this industry are tremendously underrated, and I think they're viewed 0:14:12.160 --> 0:14:15.400 as interchangeable. And if you watch the behavior of a 0:14:15.440 --> 0:14:18.640 lot of financial services firms, they view the people as interchangeable. 0:14:18.640 --> 0:14:21.000 Like you look at some of these firms now, there's 0:14:21.000 --> 0:14:23.440 a lot of press around them, preparing for the next recession. 0:14:23.440 --> 0:14:25.480 At low rates, they're not going to make as much 0:14:25.520 --> 0:14:27.400 money holding money, So what do they do. A lot 0:14:27.440 --> 0:14:30.520 of them aren't firing their bottom performers. They're firing their 0:14:30.560 --> 0:14:34.000 highest compensated people, which you know, presumably are their highest 0:14:34.000 --> 0:14:38.120 compensated people because they rose to levels the highest performers, 0:14:38.280 --> 0:14:39.680 and they go in and go, we're gonna fire all 0:14:39.720 --> 0:14:42.560 those people, which obviously the assumption is that other people 0:14:42.600 --> 0:14:45.720 will just naturally make that work out. I don't hold 0:14:45.760 --> 0:14:48.520 that view at all. I think that, you know, when 0:14:48.520 --> 0:14:53.000 I have a I'm looking for health care for someone 0:14:53.040 --> 0:14:55.080 in the family or myself, or I'm looking for a lawyer, 0:14:55.120 --> 0:14:59.040 I do not view all physicians are lawyers equally. But 0:14:59.240 --> 0:15:03.200 this industry really views people as equal, and I never have. 0:15:03.360 --> 0:15:06.320 I mean, from the very very first higher I knew 0:15:06.360 --> 0:15:09.800 the importance of people. And I've personally witnessed and received 0:15:09.840 --> 0:15:13.680 the consequences of mostly wonderful hiring and you know, a 0:15:13.720 --> 0:15:17.280 couple of really bad hires. And if you attribute almost 0:15:17.640 --> 0:15:20.240 a huge percentage of the success to getting the right 0:15:20.280 --> 0:15:22.560 type of people, and really the biggest grief I've had 0:15:22.560 --> 0:15:24.520 in my career to one or two people I hired 0:15:24.560 --> 0:15:27.560 that were mistakes. How many employees are you up to now? 0:15:27.720 --> 0:15:31.120 About six? So at a certain point you're no longer 0:15:31.200 --> 0:15:33.760 interviewing every single person, right, you know, I'm in I'm 0:15:33.760 --> 0:15:37.160 interviewing them all, but you're you're the final check off. Yeah, 0:15:37.280 --> 0:15:38.560 that's a better way to put it. I mean I'm 0:15:38.600 --> 0:15:40.720 not running that. I mean before they're getting to me, 0:15:40.760 --> 0:15:42.920 they've been through a background check at the blian's check, 0:15:42.960 --> 0:15:46.160 They've they've interviewed with a talent acquisition team, the head 0:15:46.160 --> 0:15:49.240 of their department, usually somebody else. Then they're coming to me. 0:15:49.320 --> 0:15:52.000 But I would say, you know, one and three is 0:15:52.040 --> 0:15:56.680 not getting past me after even after all of that. Um, 0:15:56.720 --> 0:16:00.920 it's just for I have a of the firm as 0:16:00.920 --> 0:16:05.800 a whole, um and I have you know, sometimes if 0:16:05.800 --> 0:16:07.480 you've got ahead of the department, they really have a 0:16:07.560 --> 0:16:10.800 need right that you you have this you want to 0:16:10.840 --> 0:16:12.920 fill it. Right. So you're interviewing somebody and you're looking 0:16:12.960 --> 0:16:16.280 for reasons to hire them, and I'm really looking for 0:16:16.360 --> 0:16:19.320 somebody in going if this doesn't work out a year 0:16:19.320 --> 0:16:21.480 from now, why is that? What is it about this 0:16:21.520 --> 0:16:25.400 person of interviewing that's not going to feel? Uh? That 0:16:25.480 --> 0:16:27.280 could be the reason for that, I'm gonna look at 0:16:27.280 --> 0:16:29.480 the investments the same way I'm looking at a DO investment. 0:16:29.520 --> 0:16:33.520 I'm saying, if this blows up in my face, right, 0:16:33.560 --> 0:16:35.800 I've got to explain this to clients a year from 0:16:35.840 --> 0:16:38.320 now or ten years from now. What what was the 0:16:38.360 --> 0:16:41.400 scenario that made that happen? And so I'm I'm trying 0:16:41.440 --> 0:16:45.280 to think my way through those sorts of things. Sometimes 0:16:45.320 --> 0:16:46.880 the person is a wonderful person, but I don't think 0:16:46.880 --> 0:16:50.160 they're gonna be satisfied in that role. They're taking their 0:16:50.200 --> 0:16:53.000 switching under the wrong circumstances. There was one person that 0:16:53.000 --> 0:16:55.520 interviewed with us from another firm, and he just so 0:16:55.640 --> 0:16:57.800 treated badly at the other firm. And I really am 0:16:57.840 --> 0:17:00.200 not want to hire somebody is leaving something when I 0:17:00.280 --> 0:17:01.880 are somebody that's coming to something. We ought to hiring 0:17:01.920 --> 0:17:05.080 him a couple of years later. But I'm looking at 0:17:05.080 --> 0:17:09.120 more of those things, and and that I am all 0:17:09.119 --> 0:17:11.240 the things have already been figured out by others. I've 0:17:11.240 --> 0:17:14.520 had a number of CEOs, both from within finance and 0:17:14.600 --> 0:17:18.720 from other industries, say hiring is the single hardest thing 0:17:18.720 --> 0:17:22.680 they do, and it feels sometimes like the outcome can 0:17:22.720 --> 0:17:25.920 be random people that all right, that person will work 0:17:25.920 --> 0:17:29.760 out and they're become a superstar or someone they're convinced 0:17:30.200 --> 0:17:31.600 is going to be perfect for the role and it 0:17:31.600 --> 0:17:35.679 doesn't work out. Do you think hiring is Is that 0:17:35.920 --> 0:17:39.640 challenging and that important? Well, that that important? You can't 0:17:39.720 --> 0:17:42.199 you really can't overstate how important it is and the 0:17:42.240 --> 0:17:46.879 positive and negative side of this business. On the randomness, 0:17:46.920 --> 0:17:49.359 I don't think it's random. I think you're gonna have 0:17:49.400 --> 0:17:53.000 some random, random outcomes. But I think our hiring process 0:17:53.119 --> 0:17:56.520 is probably more likely to have success than say another one, 0:17:56.560 --> 0:17:58.480 and there's probably somebody that is more likely to have 0:17:58.480 --> 0:18:00.919 success than we are. So I think there are certain 0:18:00.960 --> 0:18:05.040 things you can control that are gonna narrow the field 0:18:05.040 --> 0:18:07.880 of outcomes. I had a person who at the time 0:18:07.920 --> 0:18:11.000 had a bunch bigger firm than me, had said had 0:18:11.000 --> 0:18:13.240 told me about hiring that he looks at the world 0:18:13.320 --> 0:18:16.320 and he's there's a there's a a social curve out there. 0:18:16.840 --> 0:18:19.280 There's some crazy person that's going to script your firm. 0:18:19.280 --> 0:18:22.840 There's some malicious person, there's some psychopath, you know, whatever 0:18:22.880 --> 0:18:25.520 percentage of the population fits those things. And then there's 0:18:25.520 --> 0:18:27.920 all these wonderful people, but they're not bright. There's bright 0:18:27.960 --> 0:18:30.760 people that aren't wonderful. And he's like, I'm looking at 0:18:30.760 --> 0:18:33.399 this whole social curve and when and I'm trying to 0:18:33.560 --> 0:18:37.080 keep the bad part, that standard deviation that's way off 0:18:37.080 --> 0:18:39.320 on the I'm trying to keep that away from my firm, 0:18:39.359 --> 0:18:41.399 and I'm trying to get the other end. And I 0:18:41.400 --> 0:18:43.080 thought there was an interesting way to look at it. 0:18:43.119 --> 0:18:46.199 You hiring is not random, like just pulling somebody off 0:18:46.200 --> 0:18:48.560 the street. You can really do a lot of things 0:18:48.600 --> 0:18:51.600 that are objective and some that are subjective to really 0:18:51.800 --> 0:18:54.400 narrow the range of outcomes you're gonna have. There's still 0:18:54.400 --> 0:18:56.760 gonna be surprises, but I will tell you every year 0:18:56.800 --> 0:18:59.879 we have less surprises than we've had before. And I 0:19:00.080 --> 0:19:02.520 think we've just gotten better at identifying all those things 0:19:02.560 --> 0:19:06.160 that derail somebody. In part of it, there's every Every 0:19:06.160 --> 0:19:09.400 culture has something different. Our culture is a very rapid pace. 0:19:09.440 --> 0:19:13.840 It's a very high energy culture, um very high expectations. 0:19:14.160 --> 0:19:17.960 Sometimes you can have somebody that's brilliant and wonderful, but 0:19:18.040 --> 0:19:20.240 it's just not that's just not their style, right, So 0:19:20.320 --> 0:19:22.240 some of this is stylistic too. You can screen for 0:19:22.320 --> 0:19:25.960 some of that. So you mentioned you work with Vanguard. 0:19:25.960 --> 0:19:27.720 I think you also work with d f A. Is 0:19:27.720 --> 0:19:31.320 that correct? A black Rock State Street, so you basically 0:19:31.400 --> 0:19:34.679 we do the same thing. You basically have a bias 0:19:34.760 --> 0:19:38.880 towards passive but not purely passive. Is that fair? That's fair? 0:19:38.920 --> 0:19:40.680 And then we use a lot of alternatives for our 0:19:40.680 --> 0:19:42.680 clients that have five million or more. So that's a 0:19:42.800 --> 0:19:45.480 question I had for you later on, but we might 0:19:45.480 --> 0:19:48.560 as well talk about it now. Private equity is hot 0:19:48.560 --> 0:19:51.960 as a pistol. As we work our way towards some 0:19:52.160 --> 0:19:56.160 of the larger, more sophisticated family offices and ultra high 0:19:56.160 --> 0:20:00.359 net worth investors, they're very interested in alternatives. How do 0:20:00.440 --> 0:20:04.480 you reconcile? Hey, look, we're passive over here, but we're 0:20:04.520 --> 0:20:08.080 gonna put some money in with alternatives. They're a little pricey, 0:20:08.200 --> 0:20:12.680 and we don't exactly have a lot of transparency into things, 0:20:12.720 --> 0:20:14.800 but some of the returns have been really good. How 0:20:14.840 --> 0:20:17.040 how can you reconcile those two? Well? I don't, I 0:20:17.080 --> 0:20:19.280 don't think, I mean to me, it's I don't have 0:20:19.280 --> 0:20:21.360 to reconcile the bond market in the stock market. They're 0:20:21.359 --> 0:20:24.000 different markets, they have different outcomes, and so I don't 0:20:24.080 --> 0:20:27.800 view it as conflicted, you know whatsoever? I think that 0:20:28.000 --> 0:20:32.520 I believe that the US large market international markets are 0:20:32.800 --> 0:20:35.440 generally efficient or efficient enough that I'm not going to 0:20:35.520 --> 0:20:38.480 outsmart them. Right. I know your firm feels the same way. 0:20:38.520 --> 0:20:40.000 So I'm just not going to play that game, right, 0:20:40.000 --> 0:20:43.399 I'm gonna figure out what the client needs, what return 0:20:43.440 --> 0:20:45.680 they're trying to hit, how much volatility they can handle 0:20:45.720 --> 0:20:47.680 to get there, and I'm going to create some mix 0:20:47.760 --> 0:20:49.920 that I think has the highest probability of creating that outcome. 0:20:50.320 --> 0:20:52.520 And you know, when I add bonds, my expectation as 0:20:52.520 --> 0:20:55.680 the bonds are gonna underperform equity, right, So I mean, 0:20:56.359 --> 0:20:58.680 although we could point out that there have been long 0:20:58.720 --> 0:21:01.880 periods of time the past three decades where bonds did 0:21:02.040 --> 0:21:04.880 really well versus equity. Yeah, but in general, right, most 0:21:04.920 --> 0:21:09.159 of our clients, their their timeline is multidecade, and the 0:21:09.160 --> 0:21:12.120 odds they're gonna underperform with bonds are very high. Yet 0:21:12.440 --> 0:21:15.000 we introduce bonds into the portfolio. We do that because 0:21:15.040 --> 0:21:17.320 they might have short term income needs. We've got to 0:21:17.359 --> 0:21:19.159 make sure we can deliver that to them. Even if 0:21:19.160 --> 0:21:21.000 there's an O eight on nine crisis or tech bubble 0:21:21.080 --> 0:21:23.600 or at night eleven. It's not about you know, maximum 0:21:23.680 --> 0:21:27.120 performance to introduce the bonds you're you know, you're introducing 0:21:27.119 --> 0:21:30.240 something that will probably underperform in exchange for making sure 0:21:30.240 --> 0:21:32.720 we don't blow up the portfolio by withdrawing from stocks 0:21:32.720 --> 0:21:36.440 when they're down right. What about the behavioral side of 0:21:36.840 --> 0:21:42.360 I know a number of UM people who advocate equity portfolio, 0:21:42.520 --> 0:21:45.280 which in theory does well until you hit an O 0:21:45.400 --> 0:21:48.000 eight O nine where things get cut in half and 0:21:48.119 --> 0:21:51.000 people have a tendency to jettison stocks at the worst 0:21:51.000 --> 0:21:53.639 possible moment at the lows, and then they missed the 0:21:53.640 --> 0:21:57.560 whole recovery. How do bonds fit into the behavioral side 0:21:57.560 --> 0:22:00.719 of a portfolio? I really think the behavior most of 0:22:00.760 --> 0:22:04.639 it can be controlled through education and empowerment. So I 0:22:04.640 --> 0:22:07.280 think if you're a pure money manager, I think getting 0:22:07.320 --> 0:22:10.199 somebody to get through a drop is gonna gonna be 0:22:10.200 --> 0:22:12.560 pretty tough. But if you're seeing them throughout the year 0:22:12.600 --> 0:22:15.600 and you're educating them on hey, you you're stocks or 0:22:15.600 --> 0:22:17.920 you're nine stocks, if the market goes down fifty, you 0:22:17.960 --> 0:22:19.840 can expect to go down fifty maybe more, you know, 0:22:20.000 --> 0:22:23.320 depending on what other other asset classes we have subasset classes, 0:22:23.359 --> 0:22:27.240 whether it's international, emerging markets or small cap or whatever, um, 0:22:27.280 --> 0:22:29.320 And here's what's going to happen. And here is why 0:22:29.440 --> 0:22:31.320 the dividends are enough to meet your needs and so 0:22:31.359 --> 0:22:32.679 you don't need to worry about it. And here is 0:22:32.680 --> 0:22:35.359 historically what's happened. If you're having those discussions all the time, 0:22:35.800 --> 0:22:38.359 then when it happens, you're more likely to get through it. 0:22:38.680 --> 0:22:41.639 But I think the reality is most people can't afford that. 0:22:41.960 --> 0:22:44.520 So even if you're sitting with a couple and it's 0:22:44.720 --> 0:22:47.160 a doctor and he's sixty eight, he's got four million 0:22:47.160 --> 0:22:50.800 dollars because she and her husband have been saving for forever, 0:22:51.400 --> 0:22:54.000 and um, you know they need a couple year. They 0:22:54.040 --> 0:22:56.280 can't be all stocks because if the market goes down 0:22:56.440 --> 0:22:58.879 at half, the dividends are not enough to meet their needs. 0:22:59.160 --> 0:23:01.919 So almost everybody has to have bonds in their portfolio, 0:23:02.440 --> 0:23:04.480 you know, even the top one percent. And when you 0:23:04.520 --> 0:23:07.200 get to the top one one they don't need bonds 0:23:07.200 --> 0:23:10.840 in their portfolio, right. The dividends really are enough, and 0:23:11.160 --> 0:23:13.600 they are more focused on even tying it up more 0:23:13.600 --> 0:23:16.679 than markets with you know, things like alternatives. So for me, 0:23:16.720 --> 0:23:19.320 bonds are about how how much bonds do I need 0:23:19.359 --> 0:23:21.480 to meet their needs? If something goes wrong in the 0:23:21.520 --> 0:23:23.520 short run and then it stocks for the long run. 0:23:24.000 --> 0:23:26.800 And what about since you mentioned this in terms of 0:23:26.800 --> 0:23:30.120 of income, what about people who are living in high 0:23:30.119 --> 0:23:33.920 tax states where there is a fairly robust municipal bond 0:23:33.920 --> 0:23:37.720 market that can generate tax free income. Well, I think 0:23:37.720 --> 0:23:41.399 that the municipal bond markets completely distorted now because of 0:23:41.400 --> 0:23:44.720 what's pension plans having to allocate to bonds and the 0:23:44.800 --> 0:23:49.000 aging population of people that are in those pension plans. Uh, 0:23:49.040 --> 0:23:51.320 and the tax law really pushing money to bonds. And 0:23:51.400 --> 0:23:54.840 it's very hard to take a client today and say, 0:23:55.600 --> 0:23:59.199 let's go putt of your money and municipal bonds. Was 0:23:59.240 --> 0:24:02.800 that an option years ago? Absolutely? I think that. I 0:24:02.840 --> 0:24:05.440 think three years ago, you know what it was real 0:24:05.520 --> 0:24:07.400 it was, it was an option. I think that when 0:24:07.400 --> 0:24:10.440 you're now where you're at, it's it's just you can't 0:24:10.480 --> 0:24:14.680 justify it. You look at the dimdend on stocks and 0:24:14.680 --> 0:24:18.480 and you compare it to bond yields, and it's it's hard. 0:24:19.320 --> 0:24:22.920 You and I had a conversation over the summer about 0:24:23.000 --> 0:24:26.920 the acquisition space that I found fascinating and I wanted 0:24:27.000 --> 0:24:32.879 to um delve back into that because quote, it's the 0:24:32.920 --> 0:24:35.760 hottest that's ever been, and possibly the hottest that will 0:24:35.800 --> 0:24:38.840 ever be. It's just bonkers right now. I don't know 0:24:38.840 --> 0:24:41.080 where the top is, but it ain't gonna get a 0:24:41.080 --> 0:24:44.240 whole lot better than right here. I'm paraphrasing, but it's 0:24:44.240 --> 0:24:46.760 pretty close to what you said. Why is M and 0:24:46.800 --> 0:24:51.720 A in the registered investment advisory space so hot today? 0:24:51.720 --> 0:24:53.879 I think you have a lot of different things. So first, 0:24:53.920 --> 0:24:58.360 I think you see this rotation um institutional investors moving 0:24:58.400 --> 0:25:00.359 money out of hedge funds where they've looked at orically 0:25:00.400 --> 0:25:02.600 and said, hey, hedge funds haven't done that great for 0:25:02.640 --> 0:25:05.320 us for the last twenty years, but these other alternatives 0:25:05.359 --> 0:25:07.879 have in many cases outperformed the market for us, and 0:25:07.920 --> 0:25:09.720 so they're rotating to those. And one of those asset 0:25:09.760 --> 0:25:13.000 classes as private equity, So you have the big funds 0:25:13.560 --> 0:25:15.600 are bigger than ever. I mean just you can't go 0:25:15.640 --> 0:25:18.159 a month or even a week and not see about 0:25:18.600 --> 0:25:21.480 a big private equity family raising their biggest fund ever. 0:25:22.080 --> 0:25:24.480 So that's number one, the big In fact, Mackenzie, the 0:25:24.560 --> 0:25:27.960 data point I just was reading about. Mackenzie said, by 0:25:27.960 --> 0:25:32.440 the end of that calendar year, private equity had raised 0:25:32.440 --> 0:25:36.919 seven fifty billion in new funds, UH and Fresh Capital. 0:25:36.960 --> 0:25:38.919 That's a lot of months crazy, So the big have 0:25:38.960 --> 0:25:40.720 gotten bigger. The second is there's a lot more private 0:25:40.760 --> 0:25:43.280 equity funds. There's now over eight thousand private equity funds. 0:25:43.280 --> 0:25:47.000 There's way more private equity funds than there are stocks UM, 0:25:47.080 --> 0:25:49.680 so so we have more funds with more money. So 0:25:49.720 --> 0:25:51.480 that's number one, right, just a bunch of just this 0:25:51.640 --> 0:25:55.200 huge slash of liquidity out there. Second, we have very 0:25:55.320 --> 0:25:58.199 very low interest rates. And when private equity goes in 0:25:58.240 --> 0:26:00.359 and buys a business, they don't usually just write a check. 0:26:00.400 --> 0:26:02.880 They usually do the same thing a real estate fund 0:26:02.920 --> 0:26:05.320 when they does when they buy a property, they use leverage. 0:26:05.760 --> 0:26:09.240 So they're borrowing money to buy the firm, right that 0:26:09.359 --> 0:26:12.639 the company they're buying. And so if interest rates are lower, 0:26:12.640 --> 0:26:15.800 they can obviously pay more, just like your listeners can 0:26:16.040 --> 0:26:18.399 buy more house if the mortgage is lower. Right. So 0:26:18.440 --> 0:26:22.680 you have very low interest rates, more funds, bigger funds, UH, 0:26:22.760 --> 0:26:25.880 and high net worth investors are starting to move more 0:26:25.920 --> 0:26:28.640 to private equity too. So all there's all that money 0:26:28.640 --> 0:26:30.960 over there, Now, what do they want? They want to 0:26:31.000 --> 0:26:36.360 be in an industry that is growing fast, has recurring revenue, 0:26:36.840 --> 0:26:42.520 has built an inflation hedge, UM, where people are sticky, uh, 0:26:42.520 --> 0:26:45.439 and where there's a need for consolidation right where they 0:26:45.440 --> 0:26:47.639 can take you know, Mary over here, he's doing a 0:26:47.640 --> 0:26:49.440 pretty good job, and Joe over there, he's doing a 0:26:49.440 --> 0:26:51.720 pretty good job. But together, wow, they could really be 0:26:51.720 --> 0:26:53.480 impressive because Mary is good at this and Joe is 0:26:53.520 --> 0:26:55.920 good at that. Well, what checks the boxes on all 0:26:55.920 --> 0:26:59.479 of those things about are a space sure money is sticky, 0:26:59.600 --> 0:27:03.080 market goes up there as your inflation hedge, and uh, 0:27:03.080 --> 0:27:06.560 it's recurring quarterly revenue stream although I think UM a 0:27:06.560 --> 0:27:09.119 handful of places rannual, handful of places a monthly, but 0:27:09.440 --> 0:27:13.080 for the most part it's a quarterly UM invoice the right. 0:27:13.080 --> 0:27:14.920 And they compare that to all the other areas of 0:27:14.920 --> 0:27:18.040 the financial space where there's more client turnover and people leaving, 0:27:18.080 --> 0:27:19.520 and they're going, you know what, this is the space 0:27:19.520 --> 0:27:21.880 to be in and not what a coincidence. The space 0:27:21.920 --> 0:27:24.200 to be in is the space that's really in its 0:27:24.240 --> 0:27:26.439 early stages. You know, there's a lot of room to 0:27:26.640 --> 0:27:30.080 improve some of these places. So yeah, there's a huge 0:27:30.119 --> 0:27:33.280 loss of money with very low interest rates going into 0:27:34.160 --> 0:27:36.359 a space that is attractive for a bunch of you know, 0:27:36.400 --> 0:27:39.639 Fluke reasons, and all this timing comes together, and you 0:27:39.680 --> 0:27:43.440 now have private equity coming into this space um to 0:27:43.760 --> 0:27:45.919 buy up firms. And the other thing is they've been 0:27:46.000 --> 0:27:49.399 very successful at it, right, So somebody who's just built 0:27:49.440 --> 0:27:52.000 a five million dollar firm or a ten billion dollar 0:27:52.040 --> 0:27:56.040 firm is probably not the person usually right to run 0:27:56.560 --> 0:27:58.879 a much much bigger firm. And they know that and 0:27:58.880 --> 0:28:00.240 they don't want to do that. Like I know, I 0:28:00.280 --> 0:28:02.359 don't want to run a publicly traded company, right, So 0:28:02.400 --> 0:28:05.000 I've been approached several times about, hey, you guys should 0:28:05.000 --> 0:28:09.480 go public. That's never happening with me. I've got clients 0:28:09.520 --> 0:28:14.760 that are CEO CFOs of publicly traded companies that they 0:28:14.800 --> 0:28:18.600 are not happy no. And I am very focused on 0:28:18.720 --> 0:28:21.040 my quality of life, and I just I look at 0:28:21.080 --> 0:28:24.800 them and they just look like they're aging every every review, 0:28:24.880 --> 0:28:27.600 they're aging twice as fast as all other. So it's 0:28:27.680 --> 0:28:30.600 back up a sect because this is really a fascinating digression. 0:28:31.720 --> 0:28:34.320 Most companies, when they go public, they're going public for 0:28:34.359 --> 0:28:38.040 one of two reasons. Reason Number one, they need capital 0:28:38.160 --> 0:28:42.280 to either grow or make acquisitions or some other financial 0:28:42.280 --> 0:28:45.840 engineering that's part of their long term business plan or two, 0:28:46.560 --> 0:28:50.640 they end their staff and their outside investors, typically venture 0:28:50.680 --> 0:28:54.200 capitalists or whoever, are looking for an exit. Yeah, you 0:28:54.240 --> 0:28:56.520 don't seem to have either of those issues. No, I don't. 0:28:56.640 --> 0:28:58.640 So that's would be another reason I would I would 0:28:58.720 --> 0:29:02.400 never do that. So so, and you are still the 0:29:03.000 --> 0:29:06.680 main owner, the soul owner of Soul one today, Soul one. Really, 0:29:06.960 --> 0:29:09.560 at what point does that change? Because I know we 0:29:09.600 --> 0:29:12.080 went through a whole process of setting up a path 0:29:12.120 --> 0:29:14.680 to equity for employees. You guys have been growing so 0:29:14.800 --> 0:29:18.480 crazy fast for so long that that hasn't really come 0:29:18.560 --> 0:29:21.080 up to the four yet. No, I mean that's part 0:29:21.280 --> 0:29:22.800 of it. I have a lot of partners in our 0:29:22.840 --> 0:29:26.600 affiliated entities. So there I have partners with the law 0:29:26.680 --> 0:29:29.640 firm and the the benefits firm, and the forward K 0:29:29.840 --> 0:29:33.000 firm and the and the those are all separate corporate entities, 0:29:33.040 --> 0:29:36.160 all creative planning entities, all operating out of the same place, 0:29:36.200 --> 0:29:39.600 all helping the same clients. So once there's been stable growth, 0:29:39.680 --> 0:29:42.520 I've always had partners and favor them in those areas 0:29:42.520 --> 0:29:45.560 and creative planning. It's just been such rapid growth and 0:29:45.600 --> 0:29:49.400 it's required so much capital. I mean it, there's that's 0:29:49.440 --> 0:29:52.160 never made sense to do it. I don't know that 0:29:52.200 --> 0:29:55.720 anyone would have really enjoyed the ride um and what 0:29:55.840 --> 0:29:59.480 it was going to take, uh financially along the way 0:29:59.520 --> 0:30:01.240 to do to do the or the commitments or the 0:30:01.480 --> 0:30:05.640 deferral and the patients to do this um. But we 0:30:05.640 --> 0:30:07.920 we were are considering and have for a long time 0:30:08.000 --> 0:30:12.000 considered raising money by selling a minority stake to a 0:30:12.040 --> 0:30:15.560 private equity firm because I do think that valuations are high, 0:30:15.600 --> 0:30:18.680 and I do think that the world moves very very 0:30:18.800 --> 0:30:21.800 very fast, and you are going to need money to 0:30:21.840 --> 0:30:23.440 get through it. If you look at how these big 0:30:23.480 --> 0:30:27.400 financial firms are doing it, they're doing it by preemptive layoffs, right, 0:30:27.440 --> 0:30:30.160 That's that's what they're doing now. And I would like 0:30:30.240 --> 0:30:32.360 to do it by a preemptive pile of money sitting 0:30:32.400 --> 0:30:34.760 in the bank so that no matter what happens when 0:30:34.760 --> 0:30:37.959 there's a contraction, that we can go take advantage of that. 0:30:38.040 --> 0:30:39.760 And that that's what we did in O eight oh nine. 0:30:39.800 --> 0:30:43.280 We grew rapidly through that crisis, and I want to 0:30:43.320 --> 0:30:45.080 be able to grow rapidly through the next one, which 0:30:45.080 --> 0:30:46.880 means I not only want to keep my team enforced, 0:30:46.920 --> 0:30:49.440 I want to go find more talented people and focus 0:30:49.440 --> 0:30:53.360 on getting clients and not worry about about reserves. So 0:30:53.560 --> 0:30:57.080 you mentioned oh eight oh nine, Um, I have to ask, 0:30:57.360 --> 0:31:00.440 how do you grow in the middle of a rices 0:31:00.480 --> 0:31:03.560 where every time you buy equity a week later, or 0:31:03.640 --> 0:31:06.320 or a fund or an et F or anything a 0:31:06.400 --> 0:31:09.800 month later, it's down five or ten or fift How 0:31:09.800 --> 0:31:14.400 did you manage both existing clients and growth throughout the 0:31:14.440 --> 0:31:16.560 Great Financial Crisis? So back then there were only a 0:31:16.560 --> 0:31:19.200 few of us, and so I was in every single 0:31:19.280 --> 0:31:23.520 client meeting of every client of creative planning back then. 0:31:24.040 --> 0:31:26.840 And a very very big part of this was education. 0:31:26.920 --> 0:31:30.680 So when you're doing needs based investing instead of risk 0:31:30.720 --> 0:31:33.040 based investing, so most places are like, well, this is 0:31:33.040 --> 0:31:35.880 your risk tolerance, and here's your portfolio for for you 0:31:36.000 --> 0:31:39.040 or your this age. Here's your portfolio. Have five models, 0:31:39.040 --> 0:31:41.440 you go to the closest model. We've never done that, 0:31:41.520 --> 0:31:43.480 even on day one, and we don't do it today. 0:31:43.520 --> 0:31:45.920 We've really said, you know you've got real estate, We're 0:31:45.920 --> 0:31:49.160 going to leave that out here. You you your belief 0:31:49.160 --> 0:31:51.120 system doesn't match these, will leave them out. You want 0:31:51.160 --> 0:31:53.920 more of that. It does work for your situation. But 0:31:54.040 --> 0:31:55.560 here's how we're gonna cover your short run in your 0:31:55.560 --> 0:31:57.360 long run, and here's all the horrible things that are 0:31:57.360 --> 0:32:00.600 probably gonna happen in the investment world with your life. Well, 0:32:00.640 --> 0:32:03.800 when you're going through that with people um over and 0:32:03.840 --> 0:32:06.840 over again, they're sticky. And we were we were doing 0:32:06.880 --> 0:32:08.360 their planning, we were doing there, we were doing a 0:32:08.360 --> 0:32:10.440 lot of different things for them, and so when they 0:32:10.440 --> 0:32:12.760 were going through this crisis, they were not surprised. I 0:32:12.800 --> 0:32:17.520 think people panic when things are not aligned with their expectations, 0:32:18.120 --> 0:32:19.960 and so it was a big shake up and a 0:32:19.960 --> 0:32:21.920 lot of people were leaving their advisors, and our clients 0:32:21.920 --> 0:32:23.880 were referring people to us. Now, there were a couple 0:32:23.920 --> 0:32:26.760 of things we were doing too, but I think we're 0:32:26.840 --> 0:32:29.480 very proven out, very quickly, very very basic things. So 0:32:29.840 --> 0:32:32.080 we were tax harvesting, for example, which you didn't hear 0:32:32.080 --> 0:32:34.440 a lot about back then. And the other thing we 0:32:34.480 --> 0:32:36.200 did is we we we have a feeling we don't 0:32:36.240 --> 0:32:38.240 balance at the end of the year. We don't balance 0:32:38.240 --> 0:32:41.480 every quarter. We balanced on sharp market drops. So let's 0:32:41.520 --> 0:32:43.360 just take the O eight crisis that you brought up. 0:32:43.840 --> 0:32:47.280 It bottomed in the beginning of it bottomed around March 0:32:47.440 --> 0:32:50.760 nine of oh nine, and the market just those nine 0:32:50.840 --> 0:32:54.840 days of March had dropped about we're buying, right, So 0:32:54.880 --> 0:32:57.480 we're calling our clients and we're buying and we're harvesting. 0:32:57.920 --> 0:33:00.000 By the end of that month, the market had recovered 0:33:00.440 --> 0:33:02.800 all of the losses for OH nine, not all all 0:33:02.880 --> 0:33:05.560 from OH eight, It was just up thirty plus percent. 0:33:06.400 --> 0:33:09.000 So if you take just a seventy thirty portfolio and 0:33:09.040 --> 0:33:11.120 you're buying not at the end of the quarter a year, 0:33:11.200 --> 0:33:14.160 but on when it's dropping and you're harvesting, what do 0:33:14.200 --> 0:33:16.560 you get. You're not breaking even when the market does 0:33:16.840 --> 0:33:19.120 four or five years later, you're breaking even. You take 0:33:19.160 --> 0:33:20.640 a take and a half the time to get to 0:33:20.640 --> 0:33:23.120 break even, and you have losses on your tax return, 0:33:23.720 --> 0:33:27.560 and that creates advocacy, right. And so that was really 0:33:27.600 --> 0:33:32.480 the explosion for creative planning was those clients going, you 0:33:32.520 --> 0:33:34.800 know what, I feel confident to tell my friends. I 0:33:34.880 --> 0:33:36.480 think there's a lot of people that are happy with 0:33:36.520 --> 0:33:38.719 their lawyer or their c p A, or their financial 0:33:38.720 --> 0:33:43.120 advisor or their doctor, but they're not positive that they're 0:33:43.160 --> 0:33:46.360 going to look good if they refer somebody to you, right, 0:33:46.880 --> 0:33:49.120 And I think that what you do through a crisis 0:33:49.240 --> 0:33:51.640 is you get a chance to prove yourself. So I 0:33:51.920 --> 0:33:55.760 really view all of those as tremendous opportunities of Hey, 0:33:55.840 --> 0:33:57.960 we told you this is the scenario that would happen. 0:33:57.960 --> 0:34:00.520 Here's why you're okay, here's exactly what we're gonna do. 0:34:01.040 --> 0:34:03.320 And then they see the outcome. They but they go 0:34:03.480 --> 0:34:07.720 from clients to advocates. And that was the turning point 0:34:08.200 --> 0:34:10.160 for us. And so you know, you talk about the 0:34:10.480 --> 0:34:15.600 the power of luck and all of this, and I 0:34:15.600 --> 0:34:17.359 don't want to say I would root for another oh 0:34:17.360 --> 0:34:19.479 eight o nine. I mean, it's painful to go through 0:34:19.560 --> 0:34:22.480 and long hours and a lot of stress, and not 0:34:22.560 --> 0:34:27.680 everybody's not every clients like hooray. I get the opportunity here, UM, 0:34:27.719 --> 0:34:30.319 but there's no question that without it, creative planning is 0:34:30.320 --> 0:34:33.879 not what it is today. Quite quite fascinating. One last 0:34:33.960 --> 0:34:37.200 question I have to ask about acquisitions because it circles 0:34:37.239 --> 0:34:40.440 back to um your reference that it's the hottest it's 0:34:40.480 --> 0:34:44.640 ever been. We met with a bunch of consultants early on, 0:34:44.719 --> 0:34:49.160 and pretty much the number everybody uses is two x 0:34:49.239 --> 0:34:53.280 trailing years revenue or two point two times trailing twelve. 0:34:53.440 --> 0:34:56.960 And that was, you know, six seven years ago, you 0:34:57.000 --> 0:35:00.120 and I had discussed the numbers today that are being 0:35:00.280 --> 0:35:04.240 used for acquisitions. They don't even remotely resemble that anymore. 0:35:04.239 --> 0:35:06.120 I do that, No, I mean I think that. What's 0:35:07.120 --> 0:35:10.839 I think what people have figured out is we've now 0:35:10.920 --> 0:35:12.480 moved to a level where a lot of these are 0:35:12.560 --> 0:35:15.600 enterprises and all anyone cares about now is the future 0:35:15.640 --> 0:35:18.759 earnings of these businesses. And so you can have a 0:35:18.800 --> 0:35:21.920 five million dollar firm that's running on a ten percent 0:35:22.000 --> 0:35:23.640 margin and you can have a five d million dollar 0:35:23.680 --> 0:35:26.160 firm that's running on a thirty five percent margin. They're 0:35:26.160 --> 0:35:32.279 going to have wildly different valuations um when a strategic buyer, 0:35:32.320 --> 0:35:35.520 a private equity buyer comes in. That that's definitely changed 0:35:36.000 --> 0:35:38.040 a lot in the last few years. So so what 0:35:38.160 --> 0:35:41.279 sort of multiple are you looking at for Let's take 0:35:41.400 --> 0:35:45.200 the average one percent firm, which is now probably a 0:35:45.280 --> 0:35:48.560 high fee. We were playing with numbers the other day 0:35:48.560 --> 0:35:53.719 and we were about sixty two bits on average across everything, um. 0:35:53.760 --> 0:35:57.960 But the typical firm is one percent or so, and 0:35:58.320 --> 0:36:02.560 their overhead is primarily either technology, their rent and their employees. 0:36:03.280 --> 0:36:07.080 What's the reasonable multiple for the average farm on either 0:36:07.160 --> 0:36:11.200 revenue or profits? Well, revenue is I don't have no one, 0:36:11.239 --> 0:36:12.920 but yeah, that no one would pay attention to that. 0:36:12.960 --> 0:36:16.080 I mean it's a great example, is well. I mean 0:36:16.280 --> 0:36:19.800 the expenses of those places could be wildly different depending 0:36:19.840 --> 0:36:22.600 on where their rent is and how do their employees 0:36:22.680 --> 0:36:26.919 produce on their own and get bigger payouts, or it's very, 0:36:27.000 --> 0:36:29.480 very wildly different. I'd say if you look, you're looking 0:36:29.480 --> 0:36:34.640 at these five million dollar firms, um, the multiples could 0:36:34.680 --> 0:36:37.520 be as low as five and as high as seven 0:36:37.640 --> 0:36:40.880 or eight or sometimes profits at times profits, And I 0:36:40.920 --> 0:36:45.040 think that people are looking at even the profits isn't enough. 0:36:45.160 --> 0:36:48.279 Like if the average client is seventy eight and there's 0:36:48.320 --> 0:36:52.640 no new clients coming in, you're looking at declining earnings, right, 0:36:52.680 --> 0:36:54.520 So you would have somebody say I'm not gonna buy 0:36:54.560 --> 0:36:56.760 this at all, or it's going to be two times 0:36:56.840 --> 0:36:59.800 or three times filings. You could have a firm like yours. 0:37:00.440 --> 0:37:03.040 You know where you're growing, but there's a mojo factor, right, 0:37:03.120 --> 0:37:07.480 Like there's a there's something that that could really spark 0:37:07.680 --> 0:37:10.800 great greater growth. A different buyer might look at it 0:37:10.840 --> 0:37:13.000 and go, there might be more risk here, right, And 0:37:13.040 --> 0:37:15.960 so I think that you've got that is a very 0:37:16.000 --> 0:37:18.319 big factor, especially when you're looking at these firms that 0:37:18.320 --> 0:37:21.680 are three millions eight hundred million, Where is it's totally 0:37:21.680 --> 0:37:25.200 dependent on one person, or are people tied to other people? 0:37:25.360 --> 0:37:28.400 What's the average age our accounts growing, or people referring 0:37:28.480 --> 0:37:30.319 or they're not referring. So you really need to look 0:37:30.320 --> 0:37:31.799 through all that. But you're getting to the mid the 0:37:31.800 --> 0:37:33.760 mid range. You know, when you get up to firms 0:37:34.200 --> 0:37:37.000 your size where you're billion more, you could be talking 0:37:37.040 --> 0:37:40.960 double digits um, and you get to the very large firm, 0:37:40.960 --> 0:37:43.480 you're definitely in the in the double dish. So it's 0:37:43.520 --> 0:37:46.320 it's much more complicated than we tend to see in 0:37:46.360 --> 0:37:48.880 the headway because do you see oh, so and so, 0:37:49.000 --> 0:37:51.440 but it's such a company, or here's the fifth acquisition 0:37:51.800 --> 0:37:54.239 done by this company, and they kind of make it, oh, 0:37:54.280 --> 0:37:57.560 there's this much revenue, here's the multiple, and this is 0:37:57.560 --> 0:37:59.880 their seventh acquisition this month. I don't think that ever, 0:38:00.280 --> 0:38:02.840 that ever happens where where someone looks at the revenue 0:38:02.840 --> 0:38:05.560 anymore and makes a decision based off of that. Let's 0:38:05.600 --> 0:38:09.759 talk a little bit about investor expectations. Ten year bond 0:38:09.840 --> 0:38:13.399 yields are but under two percent. It's hard to look 0:38:13.440 --> 0:38:16.360 at US stocks and not say they're let's call it 0:38:16.440 --> 0:38:18.840 fully valued, richly valued. I don't know, I don't know 0:38:18.880 --> 0:38:21.880 what phrase you want to use. What sort of future 0:38:21.960 --> 0:38:26.799 expected returns should investors have today? Well, I think what 0:38:27.080 --> 0:38:29.200 you can never figure out the stock market completely, but 0:38:29.200 --> 0:38:31.880 the bond market is largely math, right, so we we 0:38:31.960 --> 0:38:34.480 know we can't replicate in the next thirty years what 0:38:34.520 --> 0:38:37.319 the bond market did in the last thirty years. So 0:38:38.040 --> 0:38:40.960 since it's all a function of of where the yield is, 0:38:41.000 --> 0:38:43.120 I think when you look at the treasury, it sets 0:38:43.160 --> 0:38:45.239 the tone for everything else. Right, If the treasury is 0:38:45.640 --> 0:38:47.799 under two and corporates are a little bit higher than are, 0:38:47.800 --> 0:38:50.879 expected return for large stocks is a little higher, some 0:38:50.920 --> 0:38:53.240 would argue for small stocks might be a little higher, 0:38:53.360 --> 0:38:56.439 or maybe emerging markets, and you you go out that way. 0:38:56.480 --> 0:38:58.320 So you've gotta get rid of this double digit return 0:38:58.400 --> 0:39:02.600 expectation and move yourself into the squarely into the single 0:39:02.640 --> 0:39:05.960 digit range, somewhere in the mid to hire single digits, 0:39:06.000 --> 0:39:09.080 depending on your allocation of bonds and your beliefs around 0:39:09.680 --> 0:39:12.720 uh markets that are certainly not overvalued, like emerging markets, 0:39:12.760 --> 0:39:15.319 are small, kept international, and do you believe that they're 0:39:15.360 --> 0:39:18.080 low valued at a low price now, because it's just 0:39:18.239 --> 0:39:21.239 gone and it's never going to recover or or or 0:39:21.280 --> 0:39:23.919 do you think they're at a low price because things 0:39:23.960 --> 0:39:25.560 are a little messy and they're gonna get worked out 0:39:25.560 --> 0:39:27.799 like they did in the in the US UM. So 0:39:27.960 --> 0:39:29.920 you can make your argument, but it's very hard to 0:39:29.920 --> 0:39:32.919 make an argument for the double digit returns that people 0:39:32.920 --> 0:39:36.400 were making in the nineties. So a blended portfolio seventy 0:39:36.440 --> 0:39:41.800 thirty including exposure to international and emerging markets five six 0:39:41.840 --> 0:39:44.439 seven percent is that a reasonable in our projections, we're 0:39:44.520 --> 0:39:47.440 using a four percent real return. These six percent return 0:39:47.520 --> 0:39:51.279 subtract inflation, and we feel pretty comfortable with that. So 0:39:51.640 --> 0:39:54.520 that brings up the issue we briefly talked about earlier, 0:39:54.560 --> 0:39:59.759 which is alternatives, most notably private equity. People have a 0:39:59.800 --> 0:40:02.560 h story of saying I'm not getting the sort of 0:40:02.560 --> 0:40:07.160 returns I want, so I'm gonna either look for something 0:40:07.200 --> 0:40:10.480 that perhaps has more risk um and try and achieve 0:40:10.520 --> 0:40:13.000 those returns. I don't get the sense you look at 0:40:13.040 --> 0:40:16.000 private equity that way, or am I am I oversimplified? No, 0:40:16.080 --> 0:40:17.520 you're right, and I think this is a point you 0:40:17.520 --> 0:40:20.560 know that we disagree on. Right. I think that that 0:40:20.680 --> 0:40:23.279 when when I look at the public markets, I don't 0:40:23.280 --> 0:40:25.719 think you're going to find a bigger advocate for that. 0:40:26.080 --> 0:40:28.840 Those markets are pretty efficient. My entire book Five Mistakes 0:40:28.920 --> 0:40:31.800 is basically about, here's all the evidence that you just 0:40:31.840 --> 0:40:34.879 gotta quit market time and quit six stock picking and 0:40:35.040 --> 0:40:37.680 focus on allocation and discipline. So, by the way, you 0:40:37.719 --> 0:40:41.319 and I completely sympatica with that. Let's see how much 0:40:41.360 --> 0:40:44.440 space is between us on venture capital, hedge funds, and 0:40:44.480 --> 0:40:46.799 private equity. Now vent your capital, I would put it. So, 0:40:46.880 --> 0:40:49.319 I think one of the problems with alternative investments is 0:40:49.320 --> 0:40:52.080 everyone talks about alternative investments like it's one thing, and 0:40:52.080 --> 0:40:55.239 it's it's not. It's it's not. So alternative investor investments 0:40:55.320 --> 0:40:58.000 is basically an alternative to anything that's not a publicly 0:40:58.000 --> 0:41:00.640 traded stock or in the real estate. Right. So you know, 0:41:00.680 --> 0:41:02.680 if you've got a listener that owns a duplex, that 0:41:02.719 --> 0:41:05.399 they're running out there in the alternative investment business, right. 0:41:05.440 --> 0:41:08.640 And so you own a farm and someone's actually farming it, 0:41:08.680 --> 0:41:11.640 that's welcome to the alternative investment, direct investment in real 0:41:11.760 --> 0:41:15.799 estate or something else exactly. And so now when you 0:41:15.840 --> 0:41:17.640 take alternate investments, we can divide them out into a 0:41:17.640 --> 0:41:19.520 couple of things. One area we agree on it I 0:41:19.560 --> 0:41:21.480 don't think hedge funds work. Now why do I not 0:41:21.600 --> 0:41:24.080 think they work? Is it because the evidence of the 0:41:24.160 --> 0:41:26.520 last twenty years? But it doesn't work? No, it's not 0:41:26.560 --> 0:41:29.680 really that. It's because there's evidence that the stock market 0:41:29.719 --> 0:41:32.240 is fairly efficient, and what is a hedge fund. Hedge 0:41:32.239 --> 0:41:36.760 fund is basically overpaying somebody to create even more negative 0:41:36.760 --> 0:41:41.080 tax consequences to trade within the stock market usually usually right, So, 0:41:41.480 --> 0:41:44.040 now we've got a market that's pretty efficient, and we're 0:41:44.080 --> 0:41:46.799 increasing the taxes and fees and somehow expect to beat 0:41:46.840 --> 0:41:49.880 that market. It doesn't surprise me, right, that that hasn't 0:41:49.880 --> 0:41:52.719 worked out well for the overwhelming majority of people that 0:41:52.800 --> 0:41:56.399 have invested in hedge funds. And you see institutions saying, hey, 0:41:56.440 --> 0:41:59.319 this doesn't work. Great, we're not doing this anymore, and 0:41:59.320 --> 0:42:01.800 they're taking their money and they're moving it to private 0:42:01.840 --> 0:42:04.920 real estate and private equity. Now, why are they doing that? 0:42:05.000 --> 0:42:07.920 Because there is evidence that private real estate and private 0:42:07.960 --> 0:42:10.319 equity has worked out. So the question is is it 0:42:10.360 --> 0:42:13.960 a fluke, is it an aberration, or is it sustainable? 0:42:14.719 --> 0:42:17.240 Now I think we now have eight thousand private equity 0:42:17.239 --> 0:42:20.239 funds instead of a few hundred, So it's you're going 0:42:20.280 --> 0:42:23.920 to have diminishing returns just with all this money chasing businesses. 0:42:24.520 --> 0:42:27.080 But I think what you're seeing as a fundamental shift 0:42:27.200 --> 0:42:30.719 in the way that the US economy is running. So 0:42:30.760 --> 0:42:34.239 I like, on Monday, I went to Los Angeles and 0:42:34.280 --> 0:42:37.680 I met two guys that started a keto diet food 0:42:38.480 --> 0:42:41.240 business and they just sold it for two and eighty million. 0:42:41.760 --> 0:42:43.719 Well they're getting to an eighty million, sold for much 0:42:43.760 --> 0:42:47.279 much more than that. Yesterday I was in Fargo and 0:42:47.320 --> 0:42:50.160 I met with somebody who was in the pharmaceutical business 0:42:50.160 --> 0:42:52.799 that's also getting a nine figure check. Who do they 0:42:52.800 --> 0:42:55.319 all sell to? And they sold a private equity. This 0:42:55.400 --> 0:42:57.640 is something that in my whole career has never happened, 0:42:57.960 --> 0:43:00.640 and in the last three years, it's happening like crazy. 0:43:00.680 --> 0:43:02.800 You brought up earlier how it's happening in our the space. 0:43:02.840 --> 0:43:04.799 We happen to be in the r A space, but 0:43:04.840 --> 0:43:07.000 it's really happening everywhere. And what you're seeing is these 0:43:07.000 --> 0:43:09.440 guys that are starting businesses, they get it to a 0:43:09.480 --> 0:43:12.439 certain size, and they're not the same person to take 0:43:12.440 --> 0:43:15.480 it to the next level. I believe that good private 0:43:15.480 --> 0:43:18.719 equity firms are better at taking those firms to the 0:43:18.719 --> 0:43:21.560 next level than they would be themselves. They know how 0:43:21.600 --> 0:43:24.200 to institutionalize, they know how to bring in a strong 0:43:24.280 --> 0:43:28.840 financial team. They have some sophistication around mergers and acquisitions. Uh, 0:43:28.960 --> 0:43:32.239 they have a lot more ways to exit. Uh. Good 0:43:32.280 --> 0:43:35.080 firm can take you public, they can sell you another sponsor. 0:43:35.239 --> 0:43:38.319 They can. I mean, that's what they do from when 0:43:38.320 --> 0:43:39.920 they get up in the morning, when they leave, is say, 0:43:39.920 --> 0:43:41.799 how do we take this business, this idea and help 0:43:41.840 --> 0:43:44.239 grow it? Are there bad apples out there? They go 0:43:44.280 --> 0:43:46.640 in and get the business and screw it up? And yes, 0:43:47.000 --> 0:43:49.799 are their complete idiots out there. Private equity running Private 0:43:49.800 --> 0:43:53.040 equity fun of course, But I don't view it like 0:43:53.120 --> 0:43:57.000 mutual fund managers, where if one mutual fund manager outperforms 0:43:57.040 --> 0:43:59.640 the other, it's probably but not always due to luck. 0:44:00.280 --> 0:44:02.560 I think when you see certain private equity funds with 0:44:02.600 --> 0:44:06.720 persistent outperformance, I do think the fact that private equity 0:44:06.760 --> 0:44:09.719 fund A has forty McKenzie consultants that have been doing 0:44:09.760 --> 0:44:12.239 it since the eighties is probably going to do better 0:44:12.680 --> 0:44:15.080 than the one that's, you know, four blocks away from 0:44:15.080 --> 0:44:17.520 my office. That's like two guys that opened up shop 0:44:17.560 --> 0:44:21.040 three years ago. They're not the same manager. Managers make 0:44:21.080 --> 0:44:23.120 a difference in the private equity space. So I think 0:44:23.160 --> 0:44:25.160 you can take that universe of private equity funds and 0:44:25.160 --> 0:44:29.919 go who's got the history, who's outperformed? Why have they outperformed? 0:44:30.719 --> 0:44:33.440 Is there is? There is the repeatable pattern here and 0:44:33.560 --> 0:44:36.600 my personal experience of watching my clients now I still 0:44:36.680 --> 0:44:40.719 am seeing clients. I see hundreds of clients and where 0:44:40.760 --> 0:44:43.480 I'm involved with our ultra fluent practice, that's mainly focused 0:44:43.520 --> 0:44:45.319 on people that have tens of millions or hundreds of 0:44:45.320 --> 0:44:48.160 millions or even more than that, and many, many, many 0:44:48.200 --> 0:44:51.000 of them got there because they built a business to 0:44:51.000 --> 0:44:52.480 a level and they sold a private equity fund. And 0:44:52.520 --> 0:44:54.520 let me tell you when their biggest payout was Barry. 0:44:54.640 --> 0:44:58.399 It wasn't their first buyout, it's their second. So what's 0:44:58.440 --> 0:45:01.600 happening is an equity fund is coming in and they're 0:45:01.600 --> 0:45:04.680 taking a stake, like the recent example I talked to 0:45:04.719 --> 0:45:07.399 you about with somebody had sold a majority interest, but 0:45:07.440 --> 0:45:10.360 the private equity funds want them in there because they 0:45:10.360 --> 0:45:12.359 want them engaged. You know, those people are the people 0:45:12.400 --> 0:45:14.359 that got the business at that level, and so they 0:45:14.360 --> 0:45:17.320 still have twenty percent or whatever the business. The second 0:45:17.320 --> 0:45:21.440 sale that's happening four or five years later, almost always, 0:45:21.440 --> 0:45:23.600 in my experience, is much much bigger than the first one, 0:45:23.920 --> 0:45:26.919 which is the proof that the private equity fund has 0:45:26.960 --> 0:45:28.960 more than doubled the value of that business when they 0:45:28.960 --> 0:45:32.520 stepped into it. Now, I've seen this and the restaurant business, 0:45:32.560 --> 0:45:35.640 and the consumer staples business, and the financial super over 0:45:35.760 --> 0:45:38.440 and over and over again. I've seen a couple of 0:45:38.480 --> 0:45:41.600 times where it's not worked out, But the overwhelming majority 0:45:41.600 --> 0:45:44.040 of the time, the client I'm sitting in front of 0:45:44.120 --> 0:45:47.360 that finds themselves worth million or a hundred and fifty 0:45:47.360 --> 0:45:50.480 million was never going to get there without the institutionalization 0:45:50.520 --> 0:45:52.719 of their practice. The private equity brought. Now does that 0:45:52.760 --> 0:45:56.279 translate into the private equity investor provacuity investors participating there? 0:45:56.560 --> 0:45:58.680 And I don't buy the fee thing either. Like when 0:45:58.680 --> 0:46:01.279 I look at the stock side and I look at 0:46:01.320 --> 0:46:03.719 the mutual funds. Yeah, if you divide out the world 0:46:03.760 --> 0:46:05.359 of mutual funds and take the ones that charge one 0:46:05.600 --> 0:46:07.960 more than one percent, they're in the bottom quartile of performers, 0:46:08.200 --> 0:46:10.600 and the ones that charge less than basis points or 0:46:10.600 --> 0:46:13.239 the top quartile. Because the market's pretty efficient. Fees matter 0:46:13.920 --> 0:46:15.960 of course, fees matter in the private equity space. If 0:46:15.960 --> 0:46:17.680 you can get the same performance and pay less, of 0:46:17.719 --> 0:46:20.399 course you would want that, but it's not the same thing. 0:46:20.480 --> 0:46:23.319 I mean the private equity firm. The good ones are 0:46:23.440 --> 0:46:26.279 involved in running the business. Now. The ones that are 0:46:26.280 --> 0:46:28.840 not so great, they just go put money in a 0:46:28.920 --> 0:46:31.200 firm and keep doing your thing, and we'll sell you 0:46:31.239 --> 0:46:33.960 three years later, no value added. I think that's thousands 0:46:34.000 --> 0:46:36.120 of private equity funds, all those, a lot of the 0:46:36.160 --> 0:46:38.279 small ones. That's what they do. So there's a lot 0:46:38.360 --> 0:46:42.360 less space between our views than you originally imagined. But 0:46:42.640 --> 0:46:46.160 for academic purposes, let me push back a little bit 0:46:46.719 --> 0:46:49.880 um And there's two things that stand out. The first 0:46:50.080 --> 0:46:54.400 is I heard very very similar things about hedge funds 0:46:54.400 --> 0:46:57.359 and to a lesser degree, venture capital um. We talked 0:46:57.360 --> 0:47:01.279 about cumulative advantage earlier. Hey, our guys are unique and 0:47:01.360 --> 0:47:04.040 special and because of our track record, we get to 0:47:04.080 --> 0:47:06.000 see the best deal flow, we get access to the 0:47:06.040 --> 0:47:09.400 best entrepreneurs. We get, we get, we get. And we 0:47:09.480 --> 0:47:13.160 heard that about vcs, we heard that about hedge funds, 0:47:13.360 --> 0:47:16.920 and it's still very much a fathead, long tailed distribution, 0:47:17.360 --> 0:47:20.279 a handful of giant winners, which if you have a 0:47:20.280 --> 0:47:22.200 couple of billion dollars come on in, We're happy to 0:47:22.239 --> 0:47:26.000 bring you aboard. Um. So, so that's pushback number one, 0:47:26.160 --> 0:47:30.000 and then pushback number two is sort of the soft 0:47:30.040 --> 0:47:32.919 bank vision fund idea. When you raise a hundred billion 0:47:32.920 --> 0:47:34.560 dollars and you have to put it to work quickly, 0:47:36.680 --> 0:47:40.400 you just distort the valuations in the space. We're watching 0:47:40.520 --> 0:47:44.359 private equity raise almost a trillion dollars a year, and 0:47:44.440 --> 0:47:47.000 you mentioned eight thousand. I guarantee you that will be 0:47:47.200 --> 0:47:51.440 nine and eleven thousand. So how does somebody who says, 0:47:52.000 --> 0:47:56.640 I appreciate the lack of volatility the non correlation um 0:47:56.680 --> 0:48:01.000 to equity, which private equity actually is much were much 0:48:01.080 --> 0:48:04.640 less correlated to stocks than venture capital or or hedge 0:48:04.640 --> 0:48:07.279 funds are. And I'm interested in this, But how do 0:48:07.320 --> 0:48:11.480 I pick out of these eight funds? And by the way, 0:48:11.520 --> 0:48:14.080 I don't have a billion dollars, I have five million 0:48:14.160 --> 0:48:17.360 or fifty million to put to work. Well, first of all, 0:48:17.360 --> 0:48:20.239 the hedge funds, they had that argument twenty years ago. 0:48:20.360 --> 0:48:22.960 We get, we're we're smarter and bigger, non correlated with 0:48:23.000 --> 0:48:24.719 this with that, but I mean twenty years ago, we 0:48:24.840 --> 0:48:27.480 had a lot of evidence that that markets were pretty efficient. 0:48:27.800 --> 0:48:29.560 I mean even in early in my career, we had 0:48:29.560 --> 0:48:31.840 that evidence, and I think all we're seeing is, you 0:48:31.840 --> 0:48:33.600 know that they've been called out that that that's just 0:48:33.640 --> 0:48:35.800 not true and that they can't beat the efficient markets. 0:48:36.040 --> 0:48:38.160 Well in the the argument is in the eighties and 0:48:38.280 --> 0:48:42.120 nineties they did, and then once there was this rush 0:48:42.360 --> 0:48:46.239 of capital and people to hedge funds space. It's you 0:48:46.239 --> 0:48:49.320 know the watchman called Jim Chandos has said, I'm always 0:48:49.360 --> 0:48:51.440 quoting him on this. Thirty years ago there were a 0:48:51.480 --> 0:48:53.520 hundred hedge funds, they all created alpha, and now there's 0:48:53.560 --> 0:48:56.960 eleven thousand. It's the same hundred hedge funds creating alpha. Yeah, 0:48:56.960 --> 0:48:58.480 I see a different I see a different reason. I 0:48:58.520 --> 0:49:00.840 think when you look at the eighties, there was no internet, 0:49:01.400 --> 0:49:04.080 so the market really wasn't efficient as efficient, right, I 0:49:04.239 --> 0:49:05.960 just I didn't. You can't buy the argument. In the 0:49:05.960 --> 0:49:08.560 eighties you could find mutual fund managers that would outperform 0:49:08.560 --> 0:49:11.000 and hedge fund managers that would outperform. When the market 0:49:11.040 --> 0:49:14.360 really became efficient and the two thousands, all of that 0:49:14.400 --> 0:49:16.279 stuff went away. I don't think as more hedge fund 0:49:16.280 --> 0:49:18.760 managers and mutual fund managers came into the space, Although 0:49:18.800 --> 0:49:21.440 that helps make a market more efficient, I think the 0:49:21.480 --> 0:49:24.080 reality is there's a kid in a garage and Malaysia 0:49:24.160 --> 0:49:26.359 that knows everything that that the hedge fund manager does, 0:49:26.400 --> 0:49:29.960 and so it's came over. Now, all this money going 0:49:29.960 --> 0:49:32.560 to the private equity space is going to dilute returns, 0:49:32.680 --> 0:49:34.399 just like all the money going to the real estate 0:49:34.440 --> 0:49:36.680 space is going to dilute returns. If you have a 0:49:36.680 --> 0:49:40.200 bunch more money changing the same amount of property, uh, 0:49:40.239 --> 0:49:44.520 you're going to have lower expected returns. More private equity 0:49:44.719 --> 0:49:49.200 um firms coming in to buy firms like yours, you 0:49:49.280 --> 0:49:51.319 now have higher valuations than you did a few years 0:49:51.360 --> 0:49:53.799 ago just because they're in the space, which means the 0:49:53.840 --> 0:49:58.360 competition has by definition created a lower expected return. Is 0:49:58.360 --> 0:50:01.160 there're only two private equity funds Chase r As, they 0:50:01.200 --> 0:50:02.880 wouldn't have to compete on price so much, they have 0:50:02.880 --> 0:50:05.879 a better expected return, but the return can still be 0:50:05.880 --> 0:50:07.719 better than the stock market And I think in the 0:50:07.760 --> 0:50:12.480 private equity space that you can find those firms more 0:50:12.520 --> 0:50:15.400 likely to outperform way easier than the stock market space. 0:50:15.440 --> 0:50:18.040 If you believe the space is not efficient, I believe 0:50:18.080 --> 0:50:20.920 the private space is not completely efficient. I believe if 0:50:20.960 --> 0:50:23.640 if I bought your firm, my expected return going forward. 0:50:23.840 --> 0:50:26.359 After I paid you some monstrous valuation that you would 0:50:26.360 --> 0:50:29.440 insist on, it would be I would have to advise 0:50:29.480 --> 0:50:31.759 you that that was insulted at what you would tell 0:50:31.800 --> 0:50:34.040 me for your price. But if we did that, my 0:50:34.080 --> 0:50:36.319 expectation would be I would have a better return than 0:50:36.360 --> 0:50:38.640 if I invest in this. And I just think that's 0:50:38.760 --> 0:50:40.359 that's the reality of it. And I think you think 0:50:40.400 --> 0:50:45.920 that um to some degree. I mean the the you 0:50:46.000 --> 0:50:49.080 talk about randomness and a little lock in things working 0:50:49.120 --> 0:50:51.960 out in the right place. I spent the first twenty 0:50:52.040 --> 0:50:54.799 years of my career turning money down, and then my 0:50:54.880 --> 0:50:57.759 epiphany was, all right, and I'm just sending people out 0:50:57.760 --> 0:51:01.520 to the wolves to be, you know, having their being shorn. 0:51:02.000 --> 0:51:04.160 We might as well do this. I'm telling them the 0:51:04.239 --> 0:51:05.760 right way to do it. I might as well execute 0:51:05.760 --> 0:51:10.839 it myself. That was quite the aha moment. And if 0:51:10.840 --> 0:51:12.719 you would have asked me five years ago, hey, you're 0:51:12.719 --> 0:51:15.120 gonna be a billion years and five billion dollars in 0:51:15.120 --> 0:51:18.440 five years, I would have laughed at you. But people 0:51:18.600 --> 0:51:21.600 respond to something that's a little different, a little outside 0:51:21.640 --> 0:51:24.399 of the box what you were offering in oh four 0:51:24.480 --> 0:51:28.000 or five or six, And through the financial crisis, nobody 0:51:28.000 --> 0:51:30.760 else was or very few people were talking in those 0:51:30.920 --> 0:51:34.640 terms and offering those services. So of course you're going 0:51:34.680 --> 0:51:38.160 to see faster growth and better returns. The big question 0:51:38.360 --> 0:51:42.120 that has to be on anybody's mind who's making investments 0:51:42.200 --> 0:51:45.080 in the r I A spaces How long can this 0:51:45.160 --> 0:51:49.400 continue to go for? Are we gonna see continuing consolidation. 0:51:49.520 --> 0:51:52.680 Can we continue to pay five and seven and nine 0:51:52.719 --> 0:51:56.720 times profits to these small companies and expect an above 0:51:56.760 --> 0:52:00.640 market return or at what point does that become, you know, 0:52:00.760 --> 0:52:04.880 just too pricey. Well, I think like, let's take a 0:52:04.960 --> 0:52:09.160 business and just assume you paid them ten times and 0:52:09.200 --> 0:52:12.120 they have a modest growth rate. That expected to return 0:52:12.160 --> 0:52:14.840 by itself is higher than people hundred right if you 0:52:14.520 --> 0:52:17.000 start to do the math um, so it just shows 0:52:17.040 --> 0:52:20.360 you that that it's not it's not totally crazy. Now 0:52:20.360 --> 0:52:22.799 it's the highest it's ever been. I don't think. I 0:52:22.840 --> 0:52:24.440 think there's a lot of things they're gonna make this 0:52:24.480 --> 0:52:27.960 party stop. One is there's gonna be fee compression in 0:52:28.000 --> 0:52:30.279 the industry still. It's ongoing and has been for a 0:52:30.320 --> 0:52:33.600 couple of years. I think creative planning has been the 0:52:33.680 --> 0:52:36.600 largest driver of the hidden fee compression in the industry, 0:52:36.600 --> 0:52:38.719 which is, which is, hey, we're not just going to 0:52:38.800 --> 0:52:41.560 manage your money for that fee. We're gonna charge you 0:52:41.560 --> 0:52:43.839 a little bit less than other places, and we're gonna 0:52:43.880 --> 0:52:47.439 do ten times more, and so we're that's a type 0:52:47.480 --> 0:52:49.120 of fee compression, right if so, in other words, you're 0:52:49.160 --> 0:52:52.440 doing planning and you're doing you're not charging additional for 0:52:52.440 --> 0:52:54.239 trust in the states, or or you have to pay 0:52:54.280 --> 0:52:56.480 those lawyers something so you know they'll come in and 0:52:56.520 --> 0:52:59.520 they'll get planning investment management. When we use alternatives, we 0:52:59.520 --> 0:53:01.240 don't have a upper fee, we don't have a pooled 0:53:01.239 --> 0:53:03.839 asset fee. That's all part of it. So now, how 0:53:03.880 --> 0:53:07.240 do you deal with the fact that these private equity 0:53:07.280 --> 0:53:12.040 firms tend to charge much more than financial planning firms charge. 0:53:12.080 --> 0:53:14.840 How does that fee another word, you're just passing along 0:53:14.880 --> 0:53:17.000 the fee or is it just goes straight through, straight 0:53:17.000 --> 0:53:19.040 through to the clo. It's passed through. You're not charging them, 0:53:19.920 --> 0:53:22.160 but you're not tacking anything on top. That's exactly right, 0:53:22.320 --> 0:53:24.719 and some sometimes we're able to negotiate breaks for them, 0:53:24.719 --> 0:53:27.000 but yeah, we're definitely not marking it up. So you're 0:53:27.040 --> 0:53:28.800 adding some complexity. We have to have a whole of 0:53:28.880 --> 0:53:31.799 their team. But we don't have a separate fee. We 0:53:31.880 --> 0:53:34.479 give legal advice and do trust funding without a separate fee. 0:53:34.480 --> 0:53:36.279 We give tax advice without a separate fee. We won't 0:53:36.560 --> 0:53:39.399 prepare a document some time with us severe and mean 0:53:39.480 --> 0:53:41.720 you don't you don't create the trust or the will 0:53:41.920 --> 0:53:43.759 that goes out to some No, we do. We do 0:53:43.800 --> 0:53:45.800 create them. We have a separate fee for it. Yeah, 0:53:45.800 --> 0:53:47.719 and there's a separate fee for that. So there's all 0:53:47.800 --> 0:53:51.360 of these all of this advice and and specialists that 0:53:51.440 --> 0:53:54.439 they can access. When our clients are trying to figure 0:53:54.480 --> 0:53:56.480 out they've retired and they're they're not a medicare yet, 0:53:56.480 --> 0:53:59.239 we have a team that does nothing but advise them 0:53:59.440 --> 0:54:01.839 on what health plan should they get and helping them 0:54:01.880 --> 0:54:03.879 implement it and all those things. So you have all 0:54:03.920 --> 0:54:07.480 of these different things that costs something, but we're not 0:54:07.560 --> 0:54:10.040 adding anything to the fee to the client. And that's 0:54:10.080 --> 0:54:14.320 what you mean by hidden fee compression. That's hidden feed compression. So, um, 0:54:14.320 --> 0:54:16.279 you know we're set up that way because that's what 0:54:16.320 --> 0:54:20.200 we philosophically believed in from the beginning. I'm super passionate 0:54:20.239 --> 0:54:22.360 about this business. I'm going to be in this business 0:54:22.520 --> 0:54:26.600 until they you know, I'm gonna die working in this business. 0:54:26.640 --> 0:54:28.920 I love this business. I love sitting down with a 0:54:28.920 --> 0:54:32.000 client and saying, here's where you are right now, and 0:54:32.400 --> 0:54:34.600 by the way, we can do these seven things and 0:54:34.640 --> 0:54:36.640 all those things you talked about that you're dreaming about, 0:54:36.640 --> 0:54:39.560 I can increase really a lot the chances all those 0:54:39.560 --> 0:54:42.000 things are going to happen for you. I love that. 0:54:42.000 --> 0:54:45.160 That's my favorite part of the of this whole thing. 0:54:45.680 --> 0:54:50.200 But that has different components to it. There's charitable components, 0:54:50.200 --> 0:54:53.360 there's legal components, there's tax components, there's investment components. That 0:54:53.480 --> 0:54:55.279 to me, is what the client values the most is 0:54:55.280 --> 0:54:58.360 getting that that advice delivered in a way that is 0:54:58.400 --> 0:55:00.759 actionable and make sense to them. That's the part that 0:55:00.800 --> 0:55:04.120 I'm most passionate about. But that's that if you look 0:55:04.160 --> 0:55:06.400 at the larger r A A s, we were the 0:55:06.440 --> 0:55:10.560 first to do that, and almost all of the other 0:55:10.640 --> 0:55:13.440 large r A s have changed what they're doing to 0:55:13.520 --> 0:55:16.680 try to put together some semblance of what we're doing, 0:55:17.400 --> 0:55:20.279 but they've done it too late. They've done it with 0:55:20.320 --> 0:55:22.640 private equity money, They've done it with people that are 0:55:22.640 --> 0:55:26.360 CEOs that have never been advisors or are not advisors today, 0:55:26.760 --> 0:55:29.200 and it's just clunkier, and so I think that's the 0:55:29.280 --> 0:55:33.440 competitive advantage we have today is from top to bottom, 0:55:33.480 --> 0:55:35.799 the president, the vice president of the CEO, all of 0:55:35.920 --> 0:55:40.440 us are planners. All of us are certified Financial Planner 0:55:41.040 --> 0:55:43.239 UH certificates. We all of us sit in front of 0:55:43.280 --> 0:55:46.400 clients UM, all the directors in the firm. Do we 0:55:46.520 --> 0:55:50.120 understand how that deliverable works? And that becomes a big, 0:55:50.600 --> 0:55:53.719 a big differentiator. And and that has created a lot 0:55:53.760 --> 0:55:55.799 of feed compression in the industry because for someone to 0:55:55.840 --> 0:55:58.799 compete with us, they've and on a large scale, they've 0:55:58.800 --> 0:56:01.560 had to start to add these things without changing their fee. Now, 0:56:01.600 --> 0:56:04.799 once that's done, what happens. Once that's done, The next 0:56:04.840 --> 0:56:07.400 wave happens and you've got a lower fees. And I 0:56:07.400 --> 0:56:08.719 think we're gonna be on the front end of that 0:56:08.800 --> 0:56:11.040 the second it could happen. We're gonna do what we 0:56:11.120 --> 0:56:14.959 can to push those down and and push our competitors out. 0:56:15.200 --> 0:56:18.000 Where do you think those fees dropped too? I think 0:56:18.040 --> 0:56:21.040 if you're a pure money manager, you're gonna start looking 0:56:21.040 --> 0:56:23.160 at fifty basis points. If you're a money manager with 0:56:23.200 --> 0:56:26.560 planning light, you're gonna look at sixty six five basis points. 0:56:26.560 --> 0:56:30.360 If you're a comprehensive wealth manager doing everything customized and 0:56:30.400 --> 0:56:32.719 needs based with a lot of other services. You can 0:56:32.719 --> 0:56:34.920 go a little bit higher than that, but that's you know, 0:56:35.080 --> 0:56:38.600 that's substitutive and um and I think it's gonna be quick. 0:56:38.840 --> 0:56:41.120 I think a lot of people think all this happens 0:56:41.160 --> 0:56:44.200 over twenty years and blah blah blah. That ten years 0:56:44.200 --> 0:56:47.000 into the feed compression at least, So maybe it is. 0:56:47.600 --> 0:56:49.960 Look what just happened with trading fees. So they went 0:56:49.960 --> 0:56:53.360 from twenty to ten to five. We're on this trend. 0:56:53.400 --> 0:56:55.680 It could be another ten years. Then Schwab goes to 0:56:55.760 --> 0:56:57.560 zero and the end of the day TV goes to 0:56:57.640 --> 0:56:59.640 zero and the next week Fidelity goes to zero. So 0:56:59.680 --> 0:57:02.320 you know how percent drop from five in a couple 0:57:02.440 --> 0:57:05.200 in a couple of days, right, So there will there 0:57:05.239 --> 0:57:07.360 is always a tipping point. We saw it with mutual 0:57:07.360 --> 0:57:11.040 funds where oh, commissions are fee only. Who cares? Then 0:57:11.080 --> 0:57:13.439 all of a sudden commissions were gone, right then high 0:57:13.480 --> 0:57:15.880 cost mutual funds. Who cares? The people? The prospective clients 0:57:15.880 --> 0:57:18.160 I met in oh seven or eight or nine, It 0:57:18.280 --> 0:57:20.439 was too easy if they're coming in they had five 0:57:20.520 --> 0:57:22.720 mutual funds they're gonna they're paying the mutual funds more 0:57:22.760 --> 0:57:24.480 than they're gonna pay us. I'm gonna do a lot more. 0:57:24.520 --> 0:57:27.000 I'm gonna lower their taxes. I mean, what's what's not 0:57:27.080 --> 0:57:29.600 to like now? All of that's out the window. E 0:57:29.720 --> 0:57:32.200 t F s Now, all of a sudden, five basis 0:57:32.240 --> 0:57:35.400 points for SP five hundred fund is crazy, ridiculous. It's 0:57:35.520 --> 0:57:37.840 free now, you know. And so you're we've seen that 0:57:37.880 --> 0:57:41.400 tipping point with everything else, and this is the one 0:57:41.520 --> 0:57:43.600 space that's left and we don't see it here yet 0:57:43.960 --> 0:57:47.120 because there's not a firm that has the scale to 0:57:47.240 --> 0:57:50.840 really to do it UM. And I think firms are 0:57:50.880 --> 0:57:54.800 emerging that have the scale and aren't entirely motivated by 0:57:54.800 --> 0:57:57.360 profits that might be the one to deliver it. And 0:57:57.360 --> 0:58:00.560 that just might be creative planning. So I have to 0:58:00.600 --> 0:58:03.440 ask you one follow up question on the die at 0:58:03.440 --> 0:58:07.880 my desk comment. We've seen Personal Capital get acquired, We've 0:58:07.920 --> 0:58:11.240 seen United Capital get acquired. We've seen a number of 0:58:11.440 --> 0:58:17.800 big firms, billion dollar firms get acquired by places UM 0:58:18.080 --> 0:58:22.200 like Goldman Sachs was one acquirer and Financial Engines was 0:58:22.240 --> 0:58:26.560 another requirer, and there's a handful both coincidentally publicly traded. 0:58:27.480 --> 0:58:30.680 What to prevent someone from coming along and making you 0:58:30.800 --> 0:58:33.520 an offer you can't refuse? Well, I think I've already 0:58:33.520 --> 0:58:36.520 seen that a couple of those offers where I've looked 0:58:36.560 --> 0:58:39.760 at them and said, you know, I, I really truly 0:58:39.800 --> 0:58:43.200 believe that I can double this business and five years 0:58:43.200 --> 0:58:45.800 from now not get that number. I think the I 0:58:45.840 --> 0:58:49.320 think the market's so insane now. But but I mean, 0:58:49.960 --> 0:58:54.240 so wait, you you're saying, hey, five years growing, I'll 0:58:54.360 --> 0:58:57.240 double the size. And even if I don't get that number, 0:58:57.400 --> 0:58:59.040 you don't care. I don't think i'll get that. I 0:58:59.080 --> 0:59:01.200 don't think i'll get that number. Finding I think rates 0:59:01.200 --> 0:59:03.360 will be different and private equity will be different, and 0:59:03.480 --> 0:59:04.840 you know, who know, it could be a recession. They're 0:59:05.040 --> 0:59:06.840 we could try. Who knows what's good? But there's too 0:59:06.880 --> 0:59:09.160 many things that are perfect right now, and I don't 0:59:09.160 --> 0:59:11.080 that I'm not confident are going to be perfect in 0:59:11.080 --> 0:59:13.120 in five years. I don't think there's any precedent for 0:59:13.200 --> 0:59:15.680 them to be. But you've never been tempted to take 0:59:15.680 --> 0:59:19.600 the money and run. No, because I really, um, what 0:59:19.640 --> 0:59:21.760 are you gonna do? No? I know what I would do. 0:59:21.800 --> 0:59:23.200 I still have a good time. I could be in 0:59:23.240 --> 0:59:25.480 this industry and have a great time. I don't have to, 0:59:26.000 --> 0:59:28.240 you know, do it on this scale and at this pace. 0:59:28.280 --> 0:59:32.640 But but I do enjoy it. I enjoy the clients, 0:59:32.760 --> 0:59:35.360 and I enjoy the team that I work with, and 0:59:35.520 --> 0:59:39.360 I don't It's easy for somebody who's worth millions of 0:59:39.440 --> 0:59:41.080 dollars to say they don't care about money. So I'm not. 0:59:41.120 --> 0:59:42.640 I'm not gonna say I don't care about money. I 0:59:42.640 --> 0:59:45.360 obviously do. I don't care about more money. I don't 0:59:45.360 --> 0:59:48.200 care about money. I just don't. And so I feel like, 0:59:48.760 --> 0:59:51.920 you know, I don't have to maximize, right, So but 0:59:52.000 --> 0:59:53.520 I'll tell you what. I'm sitting with clients and they 0:59:53.520 --> 0:59:56.000 tell me, I'm worn out. I've grown my business to 0:59:56.040 --> 0:59:58.880 this level. I got this, this offer from private equity. 0:59:58.880 --> 1:00:00.360 What should I do? I tell him, Look, it's a 1:00:00.400 --> 1:00:02.600 bit if you if you are not in love with 1:00:02.640 --> 1:00:06.040 what you're doing, take the money and run because this 1:00:06.120 --> 1:00:08.439 is really really good times right now, and we don't 1:00:08.440 --> 1:00:10.000 know what it's going to be like in four or 1:00:10.000 --> 1:00:12.960 five years. And you know so. But but for me, 1:00:13.080 --> 1:00:16.120 I mean, that's that's regret minimization. When I'm don't do 1:00:16.200 --> 1:00:18.560 it and this offer goes away, are you gonna feel 1:00:18.600 --> 1:00:20.600 worse than if you do do it and maybe you 1:00:20.680 --> 1:00:22.960 got a slightly better offer in five years, right, And 1:00:22.960 --> 1:00:25.840 I would have no regret minimization, because I just that's 1:00:25.840 --> 1:00:29.440 not what's motivating me. I want. I want to build 1:00:29.520 --> 1:00:31.240 the best offering. I want to be able to look 1:00:31.240 --> 1:00:33.960 back and go. Anybody that came to work for Creative 1:00:34.000 --> 1:00:37.360 Planning said, you know what, I was challenged. I learned something. Uh. 1:00:37.760 --> 1:00:39.560 You know, Peter never put anything in my way. In fact, 1:00:39.640 --> 1:00:41.320 there was an obstacle in my way. He removed it 1:00:41.520 --> 1:00:43.520 and I was able to achieve the very best I 1:00:43.520 --> 1:00:46.120 could there. That matters a lot to me. I want 1:00:46.440 --> 1:00:48.880 a client's when they're at our annual event and they're 1:00:48.880 --> 1:00:50.160 talking to each other, I want them to say, you 1:00:50.200 --> 1:00:52.360 know what, Creative Planning promise some things to me, and 1:00:52.400 --> 1:00:54.439 they delivered all those things, and I feel great about 1:00:54.480 --> 1:00:57.439 my decision to come there. I am very motivated by 1:00:57.760 --> 1:01:00.600 those things. Uh. It's great that we're in a business. 1:01:00.840 --> 1:01:03.720 Um that happens to be very hot right now. Um, 1:01:03.760 --> 1:01:07.200 but if it is half as hot five years from now, 1:01:07.480 --> 1:01:09.360 I'm gonna be fine. You know, you can only one 1:01:09.400 --> 1:01:13.040 steak stake then or at night and I feel like, um, 1:01:13.080 --> 1:01:15.920 I feel like I've already achieved that. I'm in my forties, 1:01:15.960 --> 1:01:19.800 and I'm just motivated by different things. So you mentioned 1:01:19.840 --> 1:01:22.760 earlier about being able to take advantage of the next 1:01:23.160 --> 1:01:26.360 financial crisis the way you did with the last financial crisis. 1:01:27.160 --> 1:01:29.280 What would you do to accumulate some sort of a 1:01:29.280 --> 1:01:33.080 war chest you you had hinted at that earlier. How 1:01:33.120 --> 1:01:35.920 does a firm put together a war chest to go 1:01:36.000 --> 1:01:40.120 out and make acquisitions when things are, let's say, less 1:01:40.200 --> 1:01:42.240 perfect than they are today. You have two choices. You 1:01:42.240 --> 1:01:44.040 can hope nothing happens in the next couple of years 1:01:44.040 --> 1:01:47.400 and wells and build it from cash flo or you 1:01:47.440 --> 1:01:50.960 can sell a minority steak where you still control everything. 1:01:51.040 --> 1:01:52.680 And you know, when you sell the minority steak, you 1:01:52.680 --> 1:01:55.919 don't get a full valuation, you get a discount. Right. Really, 1:01:56.080 --> 1:01:59.040 if somebody's gonna buy a minority steak in general, they're 1:01:59.040 --> 1:02:01.720 gonna pay you twenty five sent less. And they're gonna 1:02:01.760 --> 1:02:04.880 do that because they don't have any control. So they're 1:02:04.920 --> 1:02:07.680 really betting on you to continue to do a good 1:02:07.760 --> 1:02:11.080 job and not be an idiot about something strategic. Right. 1:02:11.080 --> 1:02:15.600 So I was halfway there, right, So I think that 1:02:15.720 --> 1:02:19.360 I think that because I'm not into the maximization of 1:02:19.400 --> 1:02:22.400 it that that fits. I think our needs where we 1:02:22.440 --> 1:02:28.000 could take you sell five somewhere in that range, raise 1:02:28.160 --> 1:02:30.920 enough money that when we're going to the next crisis, 1:02:31.360 --> 1:02:33.920 you know, at our annual meeting, I can say what 1:02:33.960 --> 1:02:35.920 I always did, which is, We're never ever going to 1:02:36.040 --> 1:02:37.760 let anybody go because of what's going on in the 1:02:37.760 --> 1:02:40.560 markets or with the economy. In fact, I'm going to 1:02:40.720 --> 1:02:43.720 keep doing what I've done every quarter of my entire career, 1:02:44.120 --> 1:02:47.760 which is fine, higher good people, and bring on new clients. 1:02:48.160 --> 1:02:51.000 You know, Creative Planning in its entire history has never 1:02:51.040 --> 1:02:56.000 had a month that didn't have positive flow. More even 1:02:56.040 --> 1:02:59.280 in the financial crisis. Even in the financial crisis, more 1:02:59.320 --> 1:03:02.000 money was come and the Creative Planning than leaving every 1:03:02.040 --> 1:03:05.320 single month from oh four to today. And we've never 1:03:05.400 --> 1:03:08.760 had a period of time of any significance where there 1:03:08.840 --> 1:03:12.480 wasn't a tremendous positive employee flow. Right. We are attracting 1:03:12.840 --> 1:03:14.640 clients and employees with our behavior, and I think a 1:03:14.640 --> 1:03:17.640 big part of that is the that they know that 1:03:17.720 --> 1:03:21.960 this is a place where, through thick and thin, uh, 1:03:22.040 --> 1:03:24.160 I'm gonna be with him, you know, to the end. 1:03:24.320 --> 1:03:26.080 I'm gonna be in the in the in the battle. Well, 1:03:26.120 --> 1:03:28.919 you you're the you know the old expression is fish 1:03:29.000 --> 1:03:31.680 rot from the head down. You set the tone as 1:03:31.720 --> 1:03:34.840 the leader of the firm, and that obviously permeates out 1:03:35.000 --> 1:03:37.960 to the rest of the six employees. So I have 1:03:38.040 --> 1:03:40.040 a ton more questions for you. Can you stick around 1:03:40.040 --> 1:03:43.720 a little bit? We have been speaking with Peter Malukey 1:03:43.800 --> 1:03:47.120 is the c i O and President of creative Planning 1:03:47.240 --> 1:03:51.880 of forty five billion dollar firm headquartered in Kansas City. 1:03:51.960 --> 1:03:55.000 Is right, um. If you enjoy this conversation, we'll be 1:03:55.040 --> 1:03:57.360 sure and come back for the podcast extras, where we 1:03:57.520 --> 1:04:01.680 keep the tape rolling and continue discussing all things are 1:04:01.720 --> 1:04:05.200 I A related. You can find that at Apple iTunes, 1:04:05.320 --> 1:04:10.520 Google Podcasts, Stitcher, Spotify, wherever your finer podcasts are found. 1:04:10.880 --> 1:04:14.040 We love your comments, feedback and suggestions right to us 1:04:14.120 --> 1:04:17.560 at m IB podcast at Bloomberg dot net. Give us 1:04:17.600 --> 1:04:21.120 a review on Apple iTunes. Check out my weekly column 1:04:21.120 --> 1:04:24.160 on Bloomberg dot com. Follow me on Twitter at Riolts. 1:04:24.600 --> 1:04:27.600 I'm Barry Hults. You're listening to Masters in Business on 1:04:27.720 --> 1:04:32.680 Bloomberg Radio. Welcome to the podcast, Peter, Thank you so 1:04:32.760 --> 1:04:35.120 much for doing this, and I'm just gonna share a 1:04:35.160 --> 1:04:38.960 little inside baseball. Um. You and I really met for 1:04:39.000 --> 1:04:42.400 the first time in September at the Wells Stacked conference 1:04:42.520 --> 1:04:47.080 that my firm is one of the hosts of. And 1:04:47.400 --> 1:04:49.960 I was fascinated to learn you don't do a lot 1:04:49.960 --> 1:04:54.680 of media. You don't go to that was your first conference. Um, 1:04:54.720 --> 1:04:57.360 And it's astonishing because here in New York, in the 1:04:57.400 --> 1:05:01.680 media center of the world, everybody has dying for some exposure. 1:05:02.200 --> 1:05:08.480 You guys really built this with practically no national news exposure. 1:05:08.520 --> 1:05:10.600 And I am i overstating that. I think you've got 1:05:10.600 --> 1:05:13.040 it right. We we tried for a long time to 1:05:13.080 --> 1:05:16.320 do nothing, you know, to have no exposure. And there 1:05:16.400 --> 1:05:19.520 was one industry publication that that had called, maybe for 1:05:19.520 --> 1:05:22.200 the third time, to do an interview, and I didn't respond, 1:05:22.200 --> 1:05:23.800 and I got an email from the reporter. He said, Hey, 1:05:23.800 --> 1:05:26.640 we're doing a story on creative planning, and right now 1:05:26.720 --> 1:05:28.720 we just have quotes from your competitors, So do you 1:05:28.720 --> 1:05:31.640 want to be interviewed or not? That's a smart smart 1:05:31.640 --> 1:05:34.600 And they made the headline was outing a reluctant star, 1:05:34.920 --> 1:05:36.800 and that was the beginning of that. That's a great 1:05:36.840 --> 1:05:39.880 headlining being totally under the radar that that was the 1:05:40.000 --> 1:05:42.520 end of that um and see I would have gone 1:05:42.520 --> 1:05:45.280 with the biggest firm you've never heard of. That that 1:05:45.280 --> 1:05:48.280 would have been my sounds cooler. So I you know, 1:05:48.320 --> 1:05:51.200 it's got it's a little edgier. But but outing a 1:05:51.280 --> 1:05:54.520 reluctant star is is pretty accurate because you guys have 1:05:54.600 --> 1:05:59.520 built something that's unique and you know, can I call 1:05:59.560 --> 1:06:03.520 it specially? Is it a special phase? Um? Well, you 1:06:03.600 --> 1:06:06.840 can't help but look at those growth numbers from oh 1:06:06.960 --> 1:06:10.240 four through eight oh nine and then from on nine 1:06:10.280 --> 1:06:13.040 forward for the past decade and not say, Wow, these 1:06:13.080 --> 1:06:16.120 guys have to be doing something right. You don't grow 1:06:16.240 --> 1:06:18.800 that fast. There are firms that have been around longer, 1:06:18.840 --> 1:06:21.760 and there are firms that have grounded out there that 1:06:21.840 --> 1:06:25.680 are just grinding out sales, the sales process. I don't 1:06:25.720 --> 1:06:28.960 get the sense that that's your your approach now. I 1:06:28.960 --> 1:06:31.480 think that I think that we've gotten a lot more 1:06:31.520 --> 1:06:35.480 attention now obviously as we've gotten to this size and 1:06:35.880 --> 1:06:37.640 we reached just a point where we either had to 1:06:37.640 --> 1:06:39.840 embrace it or it was not gonna go great is 1:06:39.840 --> 1:06:42.120 the word to the word to the embracing it, So 1:06:42.320 --> 1:06:44.400 that was my Actually, that's a question I didn't get to, 1:06:44.480 --> 1:06:48.080 but I wanted to. Why are you now finally saying, 1:06:48.120 --> 1:06:51.439 all right, I guess we have to participate in some 1:06:51.600 --> 1:06:56.880 selective conversation through the public media. Is it simply just 1:06:57.280 --> 1:06:59.680 it's unavoidable at this point? Well, you know, I had 1:06:59.720 --> 1:07:02.760 a I had a client that was NPR and she 1:07:02.960 --> 1:07:04.960 sat across from me at at an interview we had 1:07:05.000 --> 1:07:08.680 and she said, Peter, I've never seen a firm do 1:07:08.880 --> 1:07:11.160 so little with so much. And I said, what do 1:07:11.200 --> 1:07:12.600 you mean. She's like, you guys don't have You're not 1:07:12.600 --> 1:07:15.040 even on We were on social media, which is funny 1:07:15.040 --> 1:07:17.040 talking to you, because there's no firm as president on 1:07:17.080 --> 1:07:19.600 social media as yours in the space I mean, we 1:07:19.600 --> 1:07:23.040 we I mean I think my Facebook page was controlled 1:07:23.040 --> 1:07:25.360 by Russians literally, like you went to my Facebook page 1:07:25.840 --> 1:07:29.600 like yeah, um, And and she's like, you know, when 1:07:29.960 --> 1:07:33.040 people are looking at creative planning, they're googling, and they're 1:07:33.040 --> 1:07:36.520 going to the they're not seeing anything you're saying, right, 1:07:36.560 --> 1:07:38.840 They're just seeing what other people are saying, and so 1:07:39.360 --> 1:07:41.360 you should at least tell your story. And you know, 1:07:41.400 --> 1:07:44.520 it was kind of a lightbulb for me that you 1:07:44.600 --> 1:07:48.560 really can't. There is no under the radar. Yeah, and 1:07:48.640 --> 1:07:52.440 so uh if if you want people to learn, it 1:07:52.480 --> 1:07:54.560 would be nice if they at least heard your voice 1:07:55.240 --> 1:07:57.760 and you telling the story of what you're all about. 1:07:57.920 --> 1:07:59.960 And I mean she was right, and I all I 1:08:00.120 --> 1:08:03.240 back now as as probably being so under the radars 1:08:03.280 --> 1:08:06.080 for that time period was probably good. But that was 1:08:06.120 --> 1:08:07.920 probably the best piece of advice I've had in the 1:08:08.000 --> 1:08:12.360 last you know, three or four years. So um, there's 1:08:12.360 --> 1:08:15.600 really two types of communication. One is with the world 1:08:15.640 --> 1:08:20.280 at large and prospective clients, but the other communication is 1:08:20.320 --> 1:08:23.360 with your existing clients. How do you and you mentioned 1:08:23.840 --> 1:08:26.679 you really when you're building a plan, you're really drumming 1:08:26.680 --> 1:08:30.719 it into people's consciousness. Hey, markets go up and down. 1:08:30.920 --> 1:08:34.600 Expect uh correction or a crash at some point in 1:08:34.640 --> 1:08:39.000 the future. Recessions are cyclical. Everything isn't great all the time. 1:08:39.479 --> 1:08:44.160 But after the that initial review, how do you keep 1:08:44.200 --> 1:08:46.480 in touch with clients? How do you keep them informed 1:08:46.600 --> 1:08:50.040 about the state of the world, where we are in 1:08:50.080 --> 1:08:53.080 the market cycle, how the portfolio is doing. What what 1:08:53.200 --> 1:08:56.720 sort of client communications do you guys manage? So I 1:08:56.760 --> 1:09:00.200 write newsletters many times throughout the year and anytime there's 1:09:00.200 --> 1:09:02.120 a big event, you know, bregsit that night, they get it. 1:09:02.160 --> 1:09:04.400 They'll get a newsletter, you know, it is just instantly 1:09:04.439 --> 1:09:07.680 will send out a communication others in the firm right newsletters. 1:09:08.040 --> 1:09:10.400 We do several different podcasts that we share with our 1:09:10.880 --> 1:09:16.559 internally internally interesting we UM we UM have an annual 1:09:16.680 --> 1:09:18.800 symposium that we invite clients to. We had almost three 1:09:18.840 --> 1:09:22.479 thousand at our last one, really a great experience. We 1:09:22.520 --> 1:09:24.640 email the videos of the speakers that will allow us 1:09:24.680 --> 1:09:27.280 to send videos to our clients. And then for us, 1:09:27.320 --> 1:09:30.680 we see our clients in person beyond the onboarding, so 1:09:30.720 --> 1:09:33.439 they're coming in to do all kinds of stuff throughout 1:09:33.479 --> 1:09:34.800 the year, and then they do an your reviews with us, 1:09:34.840 --> 1:09:37.599 so they're seeing they're talking to their advisor and multiple 1:09:37.600 --> 1:09:40.559 people within creative planning, plus hearing the voice of the 1:09:40.600 --> 1:09:43.160 investment team and the firm. You know, many many different 1:09:43.200 --> 1:09:46.160 ways throughout the year. How do you keep that message consistent? 1:09:46.320 --> 1:09:49.240 So you have six hundred people were a fraction of that. 1:09:49.800 --> 1:09:52.720 One of my concerns is always we have a lot 1:09:52.760 --> 1:09:55.120 of people in the office who do research, who publish, 1:09:55.160 --> 1:09:59.080 who who write about different things. Philosophically, we're all more 1:09:59.200 --> 1:10:03.520 or less on the same page. So the message is consistent. 1:10:04.000 --> 1:10:07.120 But the concern is as you scale up and it's 1:10:07.160 --> 1:10:10.320 that many more people, does that become a challenge to 1:10:10.400 --> 1:10:15.040 keep the message the same across every advisor to every client. No. 1:10:15.240 --> 1:10:18.280 I think that we are definitely a one voice firm, 1:10:18.360 --> 1:10:21.360 and I think that that's a different firms have different decisions. 1:10:21.400 --> 1:10:23.360 We look at larger r A s. They tend not 1:10:23.400 --> 1:10:26.120 to be that way. They tend to look like a 1:10:26.160 --> 1:10:28.799 brokerage house. You know, you can go to Morgan Stanley 1:10:28.800 --> 1:10:30.479 and the guy in Office one might be a guy 1:10:30.520 --> 1:10:33.000 that does options for all his clients. In Office two 1:10:33.080 --> 1:10:34.839 is a guy who does bonds for all his clients. 1:10:35.439 --> 1:10:38.559 At Creative Planning, we it's the same thing. Every client 1:10:38.680 --> 1:10:41.680 is going through a planning process. It doesn't matter if 1:10:41.720 --> 1:10:44.479 they're on the Forbes List, which is somebody we started 1:10:44.520 --> 1:10:46.120 with a couple of weeks ago. It's going through the 1:10:46.160 --> 1:10:50.320 same process as somebody who's got five dollars. And we 1:10:50.439 --> 1:10:52.960 have that process in place because we know that in 1:10:53.040 --> 1:10:56.600 our we've developed a way that we think is the 1:10:56.640 --> 1:10:58.560 best way to get the information we need from the 1:10:58.600 --> 1:11:00.639 clients to figure out what their needs, their dreams, their 1:11:00.720 --> 1:11:03.360 vision are. It sounds cheesy, but sometimes your goals are 1:11:03.400 --> 1:11:05.519 not your dreams, right, So we want to know what 1:11:05.640 --> 1:11:09.160 they're really trying to accomplish and how feasible it all is. 1:11:09.479 --> 1:11:12.519 So everyone's going through that same process. And then we 1:11:12.600 --> 1:11:15.759 have a philosophy. So when we were talking earlier about 1:11:16.080 --> 1:11:18.479 we don't believe in hedge funds, but we I believe 1:11:18.520 --> 1:11:21.439 in in in private equity and alternatives, and I believe 1:11:21.479 --> 1:11:24.040 that the markets are fairly efficient, so we use indexing 1:11:24.080 --> 1:11:28.080 instead of most instead of large camp mutual funds. When 1:11:28.120 --> 1:11:30.720 I say that's what I believe, that's what creative believes. Right. 1:11:30.760 --> 1:11:33.479 So if you're coming and interviewing a creative planning, you're 1:11:33.520 --> 1:11:36.080 not coming to creative planning unless you believe that or 1:11:36.160 --> 1:11:38.559 close enough, and you're gonna you're going to believe you're 1:11:38.600 --> 1:11:43.000 really gonna act that way. There is no oh, by 1:11:43.040 --> 1:11:45.040 the way, we've got a hedge fund thing over here 1:11:45.120 --> 1:11:48.439 and the large camp mutual funds over there. It's one voice, 1:11:48.520 --> 1:11:52.479 one philosophy, consistent messaging. If a client gets a newsletter 1:11:52.520 --> 1:11:54.000 for me, they're not going, what the hell is this? 1:11:54.120 --> 1:11:56.560 You know, I'm in Los Angeles and my advisor is 1:11:56.600 --> 1:11:59.040 doing something completely different. That's not that's not happening. And 1:11:59.040 --> 1:12:01.680 what's great about that because we don't have to write right, 1:12:01.880 --> 1:12:05.720 vague garbage, right, we can be very specific about what 1:12:05.760 --> 1:12:07.560 we believe and what we're doing at any point in 1:12:07.560 --> 1:12:10.719 the market cycle, because everyone's going to read that and go, yeah, 1:12:10.720 --> 1:12:13.280 that's what I'm experiencing. So I don't remember if it 1:12:13.360 --> 1:12:16.639 was you or someone else who used the phrase Franken firms. Yeah, 1:12:16.800 --> 1:12:19.960 where that is you right where you have hedge funds 1:12:20.040 --> 1:12:23.320 over here, and covered coal options over there, and some 1:12:23.400 --> 1:12:28.160 wacky SMP sector rotation here, and affirm just becomes a 1:12:28.160 --> 1:12:33.040 conglomeration of ten small affirms and no conces in philosophy. 1:12:33.080 --> 1:12:35.560 Is that Is that a survivable model these days? No? 1:12:35.840 --> 1:12:37.720 I look at like some of these some of the 1:12:37.720 --> 1:12:40.600 private equity firms in this space. Um, they come in, 1:12:40.640 --> 1:12:42.720 they buy a one billion dollar or two billion dollar firm, 1:12:42.760 --> 1:12:45.080 they call it a platform, and then they take that 1:12:45.120 --> 1:12:46.840 firm and they go buy other firms and go, well, 1:12:46.880 --> 1:12:49.720 do your compliance and HR and financial stuff for you, 1:12:49.760 --> 1:12:51.880 and give you a big check. Come join us. Oh 1:12:52.040 --> 1:12:54.280 you use this software, Oh that's fine, and keep keep 1:12:54.360 --> 1:12:57.519 using it. Oh you you believe in you know exiting 1:12:57.560 --> 1:13:00.320 the market when your signals from your bond does say this, 1:13:00.360 --> 1:13:02.640 Oh yeah, you go ahead and keep doing that, and 1:13:02.680 --> 1:13:04.120 you wind up with a firm and it grows to 1:13:04.160 --> 1:13:07.440 ten billion, and it's really just twenty five small firms, 1:13:07.560 --> 1:13:12.560 uh that don't operate the same don't do the same things. Um, 1:13:12.600 --> 1:13:14.960 that's what I think of as a frankin firm. I 1:13:15.000 --> 1:13:17.400 think that buck is getting passed from one private equity 1:13:17.400 --> 1:13:20.679 firm to another and is going to explode in somebody's lap. 1:13:20.760 --> 1:13:23.120 And a lot of the larger firms, that's what they are. 1:13:23.880 --> 1:13:26.200 They're just an amount of amalgamation of a bunch of 1:13:26.240 --> 1:13:29.080 stuff that's not philosophically existent. I do think this is 1:13:29.120 --> 1:13:32.000 a one of the negatives of private equity is you 1:13:32.080 --> 1:13:34.960 have private equity come into a space like this. Let's 1:13:34.960 --> 1:13:37.120 say they want to exit in three years. You take 1:13:37.160 --> 1:13:39.280 a two billion dollar firm, you buy eight firms, you 1:13:39.320 --> 1:13:43.040 make it four billion, you you exit, you make everyone's 1:13:43.080 --> 1:13:46.719 high fiving. But somebody now has something that doesn't really 1:13:47.160 --> 1:13:50.240 probably isn't best for the client anymore, and probably isn't 1:13:50.280 --> 1:13:53.639 best for the employee anymore, and everyone can smell it right, 1:13:53.720 --> 1:13:57.599 and AND's eventually the smell will get bad enough that 1:13:57.640 --> 1:13:59.920 you'll lose employees, you'll lose clients. But by then the 1:14:00.320 --> 1:14:02.240 person who put it all together is long gone. So 1:14:02.439 --> 1:14:06.720 hot potato, so one of the Knox against private equity 1:14:06.880 --> 1:14:09.840 and R I a s years ago and I don't 1:14:10.040 --> 1:14:12.920 know if this is still true and is a gym 1:14:12.960 --> 1:14:15.200 in your office? And I had a cold conversation about this. 1:14:15.720 --> 1:14:17.680 Was in the old days, private equity would come in, 1:14:17.720 --> 1:14:22.040 they'd buy a firm. They basically loaded up with variable 1:14:22.040 --> 1:14:25.040 A nuities that have a giant commission on it and 1:14:25.600 --> 1:14:29.439 didn't work out for anybody except the pe guys and 1:14:29.479 --> 1:14:33.080 whoever sold the firm and exited. I'm getting the impression 1:14:33.400 --> 1:14:36.360 that that old school model, and maybe that's more than 1:14:36.400 --> 1:14:39.200 ten years ago, that that's not what we're talking about 1:14:39.240 --> 1:14:41.080 in this space. No, I don't think you're seeing that 1:14:41.200 --> 1:14:45.880 that's long gone. Now. It's sticky money, regular um revenue 1:14:46.160 --> 1:14:49.320 on a on an ongoing basis. That's the appeal of this. Yeah, 1:14:49.320 --> 1:14:51.080 I mean I see two two, Well, a couple of 1:14:51.080 --> 1:14:53.760 different things happening. One is you see someone comes in 1:14:53.880 --> 1:14:56.920 actually makes your place better and helps institutionalize it and 1:14:56.960 --> 1:14:59.840 grow it. H That's that's one group, and there's another 1:15:00.000 --> 1:15:02.160 groupe that's like, Hey, we're gonna come in, We're gonna 1:15:02.160 --> 1:15:03.599 buy it. We're gonna get rid of a bunch of people. 1:15:03.600 --> 1:15:05.400 We're gonna put in some new people. We're gonna go 1:15:05.439 --> 1:15:07.599 buy twenty three firms. We don't care what they look like. 1:15:08.320 --> 1:15:10.080 We're gonna put all this crap together, and we're gonna 1:15:10.080 --> 1:15:11.519 sell it to somebody else. Because there's a bunch of 1:15:11.520 --> 1:15:14.000 money slashing around and eventually someone's gonna get stuck, right, 1:15:14.000 --> 1:15:16.000 and when the music stops, you don't want to be 1:15:16.040 --> 1:15:18.439 that person, right. It's it's so, but but I think 1:15:18.439 --> 1:15:20.120 there's more of the good guys than the bad guys. 1:15:20.640 --> 1:15:22.719 So let's talk about a couple of things with creative 1:15:22.760 --> 1:15:25.519 planning that I wanted to ask you about that I 1:15:25.560 --> 1:15:29.920 didn't get to. Um you would previously mentioned four one ks, 1:15:30.080 --> 1:15:32.880 or less than ten percent of your practice. How do 1:15:32.920 --> 1:15:38.160 you grow that space? It's a very slow and sticky space, 1:15:38.760 --> 1:15:43.200 even when employees and management are not happy with their 1:15:43.200 --> 1:15:47.120 four O one K providers. Right, I think we probably 1:15:47.120 --> 1:15:49.840 have three four billion in four one KOs sets and 1:15:49.800 --> 1:15:53.200 it's growing very rapidly, and we're divided into two segments. 1:15:53.240 --> 1:15:57.240 One segment is takes care of bigger plans where employees 1:15:57.240 --> 1:15:59.000 want to sit down one and want when somebody learn 1:15:59.040 --> 1:16:03.880 a lot health help. Another one is very technology oriented 1:16:04.000 --> 1:16:09.880 startup plans um small plans where the economics of building 1:16:09.880 --> 1:16:12.320 a foreign K are very difficult for those folks. Maybe 1:16:12.320 --> 1:16:16.320 it's too two dentists starting a practice, but what we 1:16:16.400 --> 1:16:19.800 bring to our clients is almost always they're going from 1:16:19.840 --> 1:16:23.080 the traditional model of an insurance company providing it to 1:16:23.360 --> 1:16:26.240 a fiduciary providing it. And there's a lot of liability 1:16:26.280 --> 1:16:28.040 around foreign K plans now, so if you're on the 1:16:28.040 --> 1:16:30.519 board making decisions for foreign ks, you've got a liability. 1:16:30.520 --> 1:16:32.920 If you're an HR, if you're if you're the owner, 1:16:33.000 --> 1:16:35.640 you've got liability. So they love transferring that liability to 1:16:35.680 --> 1:16:39.599 a fiduciary, and we offer that full fiduciary service um. Second, 1:16:40.320 --> 1:16:43.440 almost every single time, we lower the fees very substantially. 1:16:43.960 --> 1:16:46.080 And the third we bring a common sense investment approach, 1:16:46.080 --> 1:16:49.880 you know, low cost index funds in the in the portfolio, 1:16:49.960 --> 1:16:52.559 along with ways where the client can choose the model 1:16:52.640 --> 1:16:54.840 and and get their money managed that way. And so 1:16:55.479 --> 1:16:58.040 we're seeing very fast growth in that space. It's just 1:16:58.600 --> 1:17:02.240 the private side is growing faster. But I think that 1:17:02.760 --> 1:17:06.440 the key in the foreign case space is to be competitive. 1:17:06.439 --> 1:17:08.639 You have to be able to drive fees way way 1:17:08.760 --> 1:17:11.840 way down. We found a way basis points how how 1:17:11.920 --> 1:17:14.320 low is low in four o one? I think like 1:17:14.360 --> 1:17:17.200 even a startup plan for US might pay a fee 1:17:17.200 --> 1:17:19.400 of thirty basis points. I mean, like, and you're talking 1:17:19.400 --> 1:17:22.360 about someone starting with zero assets. Now they still have 1:17:22.479 --> 1:17:25.200 their When you look at a foreign K plan, there's 1:17:25.240 --> 1:17:27.760 administration costs that you have to pay for the fund, 1:17:28.120 --> 1:17:31.639 record keeping, with all of it. They should be less 1:17:31.680 --> 1:17:34.840 than one one percent in the plan, appreciably less than Yeah, 1:17:35.000 --> 1:17:36.840 it should be appreciably less than one percent, And most 1:17:36.840 --> 1:17:38.960 plans are one and a half plus, and so it's 1:17:39.000 --> 1:17:42.280 kind of like very easy. I think if we your 1:17:42.280 --> 1:17:44.559 fuse in half, that's a huge win for everybody. Most 1:17:44.600 --> 1:17:46.040 of the time, when we're talking to somebody about a 1:17:46.040 --> 1:17:47.800 four one K, we're going to get that four one K. 1:17:48.080 --> 1:17:49.920 The issue is foreign cas are much harder than the 1:17:50.000 --> 1:17:53.400 private side because private side, somebody walks in and they're 1:17:53.400 --> 1:17:56.120 gonna make a decision with the four own K. Somebody 1:17:56.120 --> 1:17:58.000 walks in and they're the owner, but they've gotta there's 1:17:58.000 --> 1:18:00.640 a CFO, there's hr you're talking to HR protect. I mean, 1:18:00.640 --> 1:18:02.400 that's it's a process, and it should be a process. 1:18:02.600 --> 1:18:04.720 It's a big decision for the business. So in the 1:18:04.760 --> 1:18:08.160 old days, it was um, somebody's brother in law was 1:18:08.240 --> 1:18:10.519 one running the fore own cave. That those days are over. 1:18:10.560 --> 1:18:12.920 Now that's gone. I think on the private side, that's gone. 1:18:12.960 --> 1:18:15.720 It was very, very common where everyone just had their 1:18:15.720 --> 1:18:18.559 money with their with their buddy or their neighbor or whatever. 1:18:18.600 --> 1:18:20.840 That that stuff's gone. And I think that's another thing 1:18:21.400 --> 1:18:23.160 that oh eight oh nine and made Off and all 1:18:23.240 --> 1:18:25.360 that just got rid of that, and people are getting 1:18:25.520 --> 1:18:27.479 much more serious about who their advisor is. Let's let's 1:18:27.479 --> 1:18:30.400 talk about the institutional side, which has its own set 1:18:30.400 --> 1:18:35.559 of challenges. How do you deal with pension funds, foundations, um, 1:18:35.760 --> 1:18:39.800 larger entities, even family offices that might have a different 1:18:39.800 --> 1:18:44.920 set of needs and a different investment target than a 1:18:45.000 --> 1:18:47.519 family who has a portfolio with you. So this is 1:18:47.520 --> 1:18:49.880 the smallest part people that have family office as we 1:18:49.920 --> 1:18:52.439 manage a lot of money for those folks. Private family 1:18:52.479 --> 1:18:57.280 offices separate from endowments and instructions. But but institutional, as 1:18:57.320 --> 1:19:00.120 I think of it, like you do is endowments and 1:19:00.200 --> 1:19:03.519 universities and things like that. That that space we entered 1:19:03.520 --> 1:19:05.519 about five years ago. It is by far the smallest 1:19:05.560 --> 1:19:07.880 part of our business. And I would just take the 1:19:07.920 --> 1:19:10.679 foreign case space and make it even harder, a lot 1:19:10.680 --> 1:19:14.920 more decision makers and a lot lower fees. And you're 1:19:14.920 --> 1:19:18.720 seeing a very big migration away from alternatives towards you know, 1:19:18.760 --> 1:19:22.640 low cost passive investing complimented with certain alternatives. Seems to 1:19:22.680 --> 1:19:25.600 be where that space is heading. Quite quite interesting. And 1:19:26.400 --> 1:19:31.040 you have described the tears of your clients as private 1:19:31.040 --> 1:19:35.240 wealth group, ultra affluent, and emerging wealth. How do these 1:19:35.240 --> 1:19:38.240 segments different and do you offer different services to each 1:19:38.280 --> 1:19:40.439 of them. So we used to just call everything private wealth, 1:19:40.479 --> 1:19:42.320 and you went through the process. We built a portfolio. 1:19:42.360 --> 1:19:45.760 Artypical client was the multimillionaire next door um. You know, 1:19:45.840 --> 1:19:49.479 the doctor or dentist or lawyer that worked their entire career, 1:19:49.560 --> 1:19:51.840 the business owner or guy who made money in real estate. 1:19:52.240 --> 1:19:54.839 They put together a million dollars or twelve million dollars 1:19:54.880 --> 1:19:58.679 and they became a client of Creative Planning. About four 1:19:58.760 --> 1:20:02.160 years ago we set minute out Emerging Wealth Group. We 1:20:02.160 --> 1:20:05.320 had so many family members of clients and it. We 1:20:05.320 --> 1:20:07.160 didn't really have a great way to handle it. But 1:20:07.200 --> 1:20:09.000 it's very difficult to sit with somebody who's got seven 1:20:09.040 --> 1:20:10.880 million dollars and they've got three kids and their kids 1:20:10.920 --> 1:20:12.320 are all twenty eight and say we're not going to 1:20:12.400 --> 1:20:15.040 work with your kids. But they would wind up maybe 1:20:15.040 --> 1:20:17.920 with the wrong advisors, because the advisor working with somebody 1:20:17.920 --> 1:20:20.960 who has twelve million dollars at that point would be 1:20:20.960 --> 1:20:23.400 our most was our most sophisticated advisors, and they'll be 1:20:23.400 --> 1:20:25.880 working with somebody who had fifty. So we created Emerging 1:20:25.920 --> 1:20:28.400 Wealth Group to deal with that and open the doors 1:20:28.400 --> 1:20:30.000 to people who had less than half a million, and 1:20:30.000 --> 1:20:32.360 it exploded. I mean, the group has thousands of clients, 1:20:32.400 --> 1:20:36.840 about twenty employees, and interestingly has become one of the 1:20:36.840 --> 1:20:41.120 biggest lead sources for our ultra affluent practice, which is 1:20:41.320 --> 1:20:43.040 where we really try to day to only take on 1:20:43.080 --> 1:20:46.439 people at a twenty million million or more UM, like 1:20:46.479 --> 1:20:48.280 a few this week that came on had a hundred 1:20:48.280 --> 1:20:53.360 million or more UM. And there's a group that's probably 1:20:53.520 --> 1:20:56.440 our longest running group as a whole within the firm 1:20:56.479 --> 1:20:58.800 that's used to dealing with those kind of clients, and 1:20:58.840 --> 1:21:02.000 the there is a lot more sophistication needed. They're not 1:21:02.080 --> 1:21:05.280 necessarily for a large part of the portfolio, but for 1:21:05.320 --> 1:21:07.360 a small part of the portfolio. And from a legal 1:21:07.360 --> 1:21:09.800 and tax perspective, if you've got somebody who's got a 1:21:09.880 --> 1:21:12.760 hundred and fifty million dollars, all this debate we've been 1:21:12.800 --> 1:21:15.880 having about our stocks, canna do better than bonds? And 1:21:16.320 --> 1:21:18.639 do small to better than large? And will emerging markets 1:21:18.640 --> 1:21:20.000 to better than stocks? And we'll private ut when you 1:21:20.040 --> 1:21:23.280 do better. These are what I call one percent conversations. Right, 1:21:23.640 --> 1:21:25.080 we're going to move them on it. You know you're 1:21:25.080 --> 1:21:26.560 gonna make one percent more less. I you've got a 1:21:26.600 --> 1:21:28.720 hundred fifty billion dollars, you really don't care about that. 1:21:29.360 --> 1:21:32.280 You care about the fort of state tax. You care 1:21:32.320 --> 1:21:36.360 about the twelve percent state tax. You care about how 1:21:36.400 --> 1:21:37.760 your kids are going to get the money and is 1:21:37.760 --> 1:21:41.080 it going to screw them up? You care about asset protection. 1:21:41.520 --> 1:21:43.920 And these are very sophisticated concepts that most of the 1:21:43.920 --> 1:21:47.920 are a space is not equipped to handle. And we 1:21:48.000 --> 1:21:50.679 have a I think a very substantive group within creative 1:21:50.720 --> 1:21:53.120 Planning that's used to dealing with hundreds of those families, 1:21:53.600 --> 1:21:55.840 and I think we bring a very unique perspective there. 1:21:55.840 --> 1:21:58.439 And I think what's interesting is when they're comparing, it's 1:21:58.479 --> 1:22:00.240 it's always between us and say a place like a 1:22:00.320 --> 1:22:02.960 JP Morgan or a a Goldman Sachs, and the r A 1:22:03.160 --> 1:22:05.920 story resonates so much independent and we don't have our 1:22:05.960 --> 1:22:08.640 own products, but we also practice tax and law and 1:22:08.720 --> 1:22:11.799 they don't. And we're used to dealing with folks your size, 1:22:11.800 --> 1:22:14.920 and that's not something that I could say seven years ago, right, 1:22:15.240 --> 1:22:18.800 So it's it's allowed us to become very competitive and 1:22:18.800 --> 1:22:21.120 and the one of the fastest growing parts of our 1:22:21.120 --> 1:22:25.439 practice is that very very very large family. So one 1:22:25.479 --> 1:22:29.679 of the issues we've noticed amongst our i as, especially 1:22:29.680 --> 1:22:32.800 independent r A s, is that there's sort of a 1:22:32.920 --> 1:22:36.120 barbell across the age spectrum. You have a lot of 1:22:36.120 --> 1:22:40.240 advisors in their sixties, late fifties, and then a bunch 1:22:40.240 --> 1:22:43.360 of people in their twenties who were um you met 1:22:43.360 --> 1:22:48.840 at the conference, very social, very active, very um specialized 1:22:48.880 --> 1:22:52.880 in different areas. But there's this big gap across the middle. 1:22:53.439 --> 1:22:56.120 So question number one is what does this mean to 1:22:56.400 --> 1:23:00.280 your future growth? And question number two do we have 1:23:00.439 --> 1:23:03.639 enough young people coming into the r I A industry? 1:23:03.680 --> 1:23:05.599 You know, I read a lot about this and I 1:23:05.680 --> 1:23:09.720 view it very differently, so as running creative planning, our 1:23:09.800 --> 1:23:12.960 market share is your point O O O R to 1:23:13.240 --> 1:23:17.240 writer point oh no sce. So I don't to me, 1:23:17.720 --> 1:23:20.080 even if there were half the advisors I don't need 1:23:20.120 --> 1:23:24.040 to have. I'm not Merrill Lynch. I mean, so no 1:23:24.160 --> 1:23:28.439 thundering her and just I mean, I just need to 1:23:28.439 --> 1:23:31.599 find a few awesome people every quarter, and I'm always 1:23:31.600 --> 1:23:33.160 going to be able to find that, right, And so 1:23:33.240 --> 1:23:36.280 I just don't I lose I spend any time worrying 1:23:36.360 --> 1:23:40.200 about about that, and frankly about the industry. I think 1:23:40.400 --> 1:23:44.040 the industry could use less advisors. Really. Do you think 1:23:44.080 --> 1:23:48.680 the headspace compression like the few compression we've seen over 1:23:48.720 --> 1:23:51.400 the past ten years, does that continue well? I think 1:23:52.320 --> 1:23:54.840 I think that there are advisors that do a lot 1:23:54.920 --> 1:23:57.200 of good and there's a lot of advisors this is 1:23:57.200 --> 1:24:01.360 not fantastic. And I think having a bunch of really 1:24:01.400 --> 1:24:04.479 good advisors that survive is better than having a whole 1:24:04.520 --> 1:24:07.720 bunch of advisors. Uh. And so I don't see this 1:24:07.760 --> 1:24:11.000 as an industry crisis. I think if the industry contracts 1:24:11.000 --> 1:24:13.120 a little bit, that's just fine. We've got the technology 1:24:13.120 --> 1:24:15.800 for it to contract. I'm just focused on finding the 1:24:15.880 --> 1:24:18.880 right people for our little tiny, you know, section of 1:24:19.000 --> 1:24:23.519 your little tiny section of the wealth management industry. And 1:24:23.520 --> 1:24:26.280 and you know, it's funny, I was shocked to read 1:24:26.760 --> 1:24:30.639 about your little tiny firm. I think once you cross 1:24:30.720 --> 1:24:34.559 the billion dollar threshold and a u M that puts 1:24:34.560 --> 1:24:37.440 you in like the top eight percent or so advisors. 1:24:37.760 --> 1:24:41.920 It's really that their advisors mostly. I think someone else 1:24:41.960 --> 1:24:46.320 called it lifestyle practices. So so you have a unique 1:24:46.360 --> 1:24:50.639 perspective on what's going on. Um, what happens with those people? 1:24:50.720 --> 1:24:54.040 Is it just a massive consolidation or can you just 1:24:54.120 --> 1:24:58.240 have a very nice, little million dollar practice And that's fine, 1:24:58.479 --> 1:25:00.200 you know, I know there's a lot of people running around. 1:25:00.200 --> 1:25:02.000 All those guys are gonna get crushed, and I don't 1:25:02.080 --> 1:25:04.000 I don't necessarily agree. If you go to the conference, 1:25:04.640 --> 1:25:07.600 they're the same three people who coincidentally have been on 1:25:07.640 --> 1:25:11.200 an acquisition. So so maybe they're talking their books a 1:25:11.240 --> 1:25:14.320 little bit um. You know, I'm assuming, like us, you 1:25:14.320 --> 1:25:17.320 don't really buy into that. I don't buy into it totally. 1:25:17.439 --> 1:25:20.400 So I think that I think that most most five 1:25:20.720 --> 1:25:23.400 million dollar firms cannot compete at the level they used to. 1:25:23.640 --> 1:25:25.439 You know what, I'm hearing that from firms that call 1:25:25.560 --> 1:25:28.160 us to be acquired. I mean, they're just saying, look, 1:25:28.200 --> 1:25:29.719 I used to be able to grow, and it's gotten 1:25:29.760 --> 1:25:32.439 a little more intense, a little more competitive, and I 1:25:32.479 --> 1:25:35.320 feel like to bring on larger clients, I need to 1:25:35.360 --> 1:25:38.200 be in a larger firm. There's no question that's a force. 1:25:38.880 --> 1:25:40.960 But it reminds me of like when the robot advisors 1:25:40.960 --> 1:25:42.519 came out and everyone said, well, everything is going to 1:25:42.560 --> 1:25:45.559 go to the robos. Well everything didn't go to the robos, 1:25:45.600 --> 1:25:49.200 but but some did, right, So that came from somewhere, 1:25:49.280 --> 1:25:51.559 And you guys don't have a robot do We don't 1:25:51.680 --> 1:25:54.599 know any thoughts of setting up a robo for that 1:25:55.280 --> 1:26:01.680 sub two thousand dollar client who maybe eventually moves from 1:26:01.800 --> 1:26:04.960 um under a hundred thousand to emerging wealth to high 1:26:05.000 --> 1:26:06.800 net worth. You know, I've I've thought about it, and 1:26:06.880 --> 1:26:09.479 I just thought, you know, that's just not what we do. 1:26:09.880 --> 1:26:12.040 It's not our style. And I want one creative planning 1:26:12.040 --> 1:26:13.960 client to talk to another creative planning client and go, 1:26:14.479 --> 1:26:16.280 this is what they do for me, and I don't 1:26:16.280 --> 1:26:19.639 want anybody to go. I never saw a person ever, 1:26:19.880 --> 1:26:22.800 and everything was online, and I know there's people that 1:26:22.880 --> 1:26:25.559 want that, and that's totally fine. It's just not what 1:26:25.600 --> 1:26:28.040 we do. To me, It's just we don't sell ice 1:26:28.040 --> 1:26:31.559 cream either. It's just completely it's completely different. And then 1:26:31.680 --> 1:26:33.960 before I get to my favorite questions, I have one 1:26:34.680 --> 1:26:40.280 last um general question about the firm. You actually made 1:26:40.320 --> 1:26:43.600 your first acquisition this year, a five million dollar firm. 1:26:43.720 --> 1:26:45.720 Um that was part? Was that? Is that this year 1:26:45.800 --> 1:26:47.920 or last year? That was this year? And it was? 1:26:48.120 --> 1:26:51.799 It was amazing to me. This was really fascinating because 1:26:52.280 --> 1:26:55.160 I was very focused on building out all our services 1:26:55.280 --> 1:26:58.200 and building a culture. And you know, we we did 1:26:58.240 --> 1:27:01.519 that and really inan we moved to a headquarters, we 1:27:01.640 --> 1:27:03.760 made a bunch of shifts in technology, We finished our 1:27:04.000 --> 1:27:05.600 hiring push, got all the right people at all the 1:27:05.640 --> 1:27:09.080 right places, finished building out our trust company, institutional arm 1:27:09.120 --> 1:27:11.880 and so on, and really we're in a place where 1:27:11.920 --> 1:27:13.599 I could finally start to think about that a little bit. 1:27:13.600 --> 1:27:14.800 But I kind of put it on the shelf. Is 1:27:14.840 --> 1:27:17.880 not a priority. And uh, I got Brad Johnston gave 1:27:17.920 --> 1:27:20.120 me a call literally out of the blue and just said, hey, 1:27:20.160 --> 1:27:22.360 I've talked to all these firms. I thought, wait, wait, wait, wait, wait, 1:27:22.400 --> 1:27:24.920 Brad Johnson God, you don't know. I don't know him 1:27:24.920 --> 1:27:27.479 at all. Calls you, and Peter Muluke says, yeah, I'll 1:27:27.479 --> 1:27:30.320 take the call. So actually, I don't know. He winds 1:27:30.360 --> 1:27:33.280 up talking to Jim in office and Jim is like, 1:27:33.320 --> 1:27:35.519 you know, maybe you should talk to Brad, and I'm like, 1:27:35.560 --> 1:27:37.760 I don't know. I just we just got done with this. 1:27:37.840 --> 1:27:39.280 Let's give it a little time before we do a 1:27:39.320 --> 1:27:41.920 couple of acquisitions, so we'll just just have a conversation. 1:27:42.560 --> 1:27:44.799 So Brad comes to Kansas I want to come to Kancities, 1:27:44.800 --> 1:27:46.960 comes to Kansas City, brings an advisor. I find out 1:27:46.960 --> 1:27:49.160 the advisor as his son. So I'm like, well, maybe 1:27:49.160 --> 1:27:51.439 they're just kicking tires, but I really liked them there 1:27:51.439 --> 1:27:55.040 from Minnesota all this stuff, and says about it's true. 1:27:55.040 --> 1:27:59.000 I don't understand it, but I really liked him. Um, 1:27:59.120 --> 1:28:01.519 and you know, they left, and I told Jim's I 1:28:01.560 --> 1:28:04.000 kinda go. I really liked him, but you know, I 1:28:04.080 --> 1:28:07.280 think they just want to know what we're doing. And uh, anyway, 1:28:07.320 --> 1:28:09.000 you know, Brad calb me the next day and Study 1:28:09.080 --> 1:28:11.080 is interested in continuing dialogue. I think it was thirty 1:28:11.160 --> 1:28:13.479 days later. They were part of creat of planning really 1:28:13.520 --> 1:28:15.920 that fast. Yeah, and even though it was our first 1:28:15.960 --> 1:28:17.760 one and they didn't know what they were doing, we 1:28:17.760 --> 1:28:19.200 didn't know we were doing. You know, they've never been 1:28:19.200 --> 1:28:22.479 acquired before, we never acquired I have. It was wonderful 1:28:23.000 --> 1:28:25.000 and our and I looked at Minnesota and said, you know, 1:28:25.520 --> 1:28:27.920 we had a presence there. I might have been around 1:28:28.000 --> 1:28:30.080 half a billion. And now all of a sudden, we're 1:28:30.120 --> 1:28:33.680 about a billion dollar enterprise and uh, we've got some 1:28:33.720 --> 1:28:35.680 scale and we're gonna get noticed and we're in the 1:28:35.800 --> 1:28:38.000 just like you said, how many billion dollar firms are there? Right? 1:28:38.439 --> 1:28:40.480 So now all of a sudden we're in the conversation 1:28:40.560 --> 1:28:43.320 on cases we weren't before. And it got me looking 1:28:43.360 --> 1:28:46.360 at the whole country and saying, you know what, um 1:28:46.439 --> 1:28:50.320 in Dallas we manage about a billion UM. We were 1:28:50.360 --> 1:28:52.719 approached by a firm that has about six and or million. 1:28:53.320 --> 1:28:56.080 We're now having l o I with them, and so 1:28:56.080 --> 1:28:58.320 so you'll be close to two billion in Dallas and 1:28:58.360 --> 1:29:01.120 now you're a player there. Yeah. So I think that 1:29:01.120 --> 1:29:04.040 that what's happening now is the description I use is 1:29:04.960 --> 1:29:08.439 we have a very very strong tree trunk with very 1:29:08.479 --> 1:29:12.120 strong branches that we've built. We built them they're they're 1:29:12.439 --> 1:29:15.400 the creative planning DNA, and we could add leaves to 1:29:15.479 --> 1:29:19.679 that tree and have that tree flourish without damaging the tree. 1:29:20.280 --> 1:29:21.920 And so we're not a billion dollar firm where the 1:29:21.920 --> 1:29:24.320 whole trunk was put together by twenty five firms. Right, 1:29:24.680 --> 1:29:27.200 so when people come into Creative they know this is 1:29:27.240 --> 1:29:29.680 how it works, right, this is the culture, this is 1:29:29.720 --> 1:29:32.040 the investment philosophy, this is what the people are like. 1:29:32.600 --> 1:29:34.840 And it's not different from office to office because it's 1:29:34.840 --> 1:29:37.120 not twenty three different firms. So it's really open my 1:29:37.160 --> 1:29:39.160 mind to that we've now done two acquisitions. We have 1:29:39.200 --> 1:29:42.800 two other firms under l o I, and we don't 1:29:42.800 --> 1:29:45.760 have a merger's acquisitions team. You know, it's just someone 1:29:45.800 --> 1:29:47.680 has a conversation with Jim and then and then they 1:29:47.680 --> 1:29:50.080 meet me and and um we're off and and and 1:29:50.120 --> 1:29:52.519 if if they're philosophically a fit, and the look maybe 1:29:52.520 --> 1:29:55.240 one and ten times it is right. You've got to 1:29:55.240 --> 1:29:57.360 be philosophically a fit. You've got to like the people 1:29:57.360 --> 1:29:59.320 and all that. So you get to that ten percent. 1:30:00.040 --> 1:30:02.320 With that ten percent, it's happening pretty quickly. I think 1:30:02.360 --> 1:30:04.400 that we're finding there are a few people that are 1:30:04.439 --> 1:30:06.599 very like minded out there, and I think they're finding that, Hey, 1:30:06.640 --> 1:30:09.599 this is a firm that's kind of like me. It's 1:30:09.640 --> 1:30:12.120 not really an amalgamation of a bunch of stuff, and 1:30:12.160 --> 1:30:14.360 so they can they can be a part of something 1:30:14.400 --> 1:30:17.879 that's kind of what they were doing. But Turbocharged, that's fascinating. 1:30:17.920 --> 1:30:20.439 It's really interesting to hear you guys have have scaled 1:30:20.520 --> 1:30:23.400 that up, because that was one of the questions I had. 1:30:23.800 --> 1:30:25.400 How the hell do you get to be that big 1:30:25.560 --> 1:30:29.720 organically with no acquisitions? And imagine if they did acquisitions, 1:30:30.040 --> 1:30:31.840 you guys are gonna be a hundred billion dollars not 1:30:31.920 --> 1:30:35.000 too not too long from now. Yeah, it's a crazy industry. 1:30:35.040 --> 1:30:38.360 You can never predict what's going to happen. True, But 1:30:38.360 --> 1:30:43.200 but I feel like I feel very good about the 1:30:43.280 --> 1:30:45.840 offering that we have from the people, the process, and 1:30:45.840 --> 1:30:48.120 I think, um, you know what you have to be. 1:30:48.200 --> 1:30:50.360 You don't have to be the the fastest person in 1:30:50.360 --> 1:30:52.200 the world. You've got to be faster than the people 1:30:52.200 --> 1:30:54.040 you're racing against, right And I feel like we're in 1:30:54.040 --> 1:30:57.240 a good spot right now the that that makes perfect 1:30:57.280 --> 1:30:59.599 sense to me. I know I don't have you for 1:30:59.600 --> 1:31:02.599 for ever, So let me get to my favorite questions 1:31:02.640 --> 1:31:05.880 we ask all of our guests. These have been designed 1:31:06.320 --> 1:31:09.800 to be revealing about who you are. UM, let's start 1:31:09.840 --> 1:31:12.479 with the first car you ever owned. You're making model 1:31:14.040 --> 1:31:18.640 Ultimobile Omega crashed it, Uh, teaching my younger fourteen year 1:31:18.640 --> 1:31:21.960 old brother how to drive? Teaching it was not a 1:31:21.960 --> 1:31:24.160 good lesson. Where did you grow You don't start with 1:31:24.200 --> 1:31:27.400 a left turn. Were you in Kansas or Yeah, we 1:31:27.400 --> 1:31:30.479 were in Kansas. So to me, I'm the first question 1:31:30.520 --> 1:31:33.519 is how do you crash something in Kansas? Well, it's 1:31:33.560 --> 1:31:36.280 I mean, it's an actual city barrier. They're like million 1:31:36.360 --> 1:31:39.800 people there Kansas City. So you're in Kansas City and 1:31:40.720 --> 1:31:42.840 we're not in like a town of three hundred west. 1:31:43.920 --> 1:31:46.639 So easy enough to have because when I think Kansas, 1:31:46.720 --> 1:31:51.439 I'm thinking farms and ranches and lots of open space 1:31:52.360 --> 1:31:55.800 most of the Kansas Yes, Kansas City, No, got it. 1:31:55.840 --> 1:31:58.000 I didn't realize you grew up in Kansas City. That's 1:31:58.040 --> 1:32:01.879 a interesting Um. Who were some of your early mentors 1:32:01.920 --> 1:32:05.200 who affected the way you look at the world of 1:32:05.240 --> 1:32:09.880 investing in financial planning? Well, I would say that, Um, 1:32:10.520 --> 1:32:13.200 the person that owned creative Planning before me was just 1:32:13.240 --> 1:32:17.080 such an incredibly he's an incredibly positive person and was 1:32:17.280 --> 1:32:21.400 an incredible influence to watch. He treated people so well 1:32:21.400 --> 1:32:23.800 and he always had a positive attitude. He always looked 1:32:23.840 --> 1:32:26.400 on the bright side of things. And this is a 1:32:26.439 --> 1:32:30.160 business that that you you need to infuse. It's interesting 1:32:30.160 --> 1:32:33.080 because you need to be an optimistic person, but you 1:32:33.120 --> 1:32:35.400 have to take a pessimistic point of view when you're 1:32:35.400 --> 1:32:37.919 doing planning. You have to plan for the worst, right, 1:32:38.200 --> 1:32:42.800 So I really liked that kind of style that he had. 1:32:43.120 --> 1:32:45.920 But really the biggest influence it was very early. I 1:32:46.280 --> 1:32:48.880 had had a T shirt company and I made a 1:32:48.880 --> 1:32:52.040 bunch of money and and I was a few thousands 1:32:52.040 --> 1:32:55.360 of dollars and my dad said, I just put it 1:32:55.400 --> 1:32:57.799 in an index spud and I remember watching the Asian 1:32:57.800 --> 1:33:02.639 Contagion on TV. I cant remember what year was. Okay, alright, alright, 1:33:02.680 --> 1:33:06.680 well that's impressive and I can be wrong. And my 1:33:06.760 --> 1:33:09.720 Dad's like, hey, um, yeah, don't worry about it. It'll 1:33:09.840 --> 1:33:11.960 you know it, it'll all work itself out over five years. 1:33:12.720 --> 1:33:14.840 And that's interesting. And I went and read a bunch 1:33:14.840 --> 1:33:16.479 of books and found out he was right, and that 1:33:16.600 --> 1:33:18.880 probably wound up sending me on the trajectory. And are 1:33:18.880 --> 1:33:22.759 reading some Bogel books and Jeremy Siegal books and and 1:33:23.400 --> 1:33:25.719 the rest is history. So I'm gonna say Asian contagion 1:33:26.520 --> 1:33:30.120 long term capital management, but around both around the same 1:33:30.200 --> 1:33:35.400 time and and both with the same result. Temporary setback, um, 1:33:35.439 --> 1:33:37.720 which is what we tend to see all market YEP 1:33:37.760 --> 1:33:42.599 corrections are temporary. Even if they last from fifty four, 1:33:42.640 --> 1:33:47.080 it's still temporary. Hopefully you're not retiring went into that. Um, 1:33:47.200 --> 1:33:49.759 let's talk about books. Give us some of the favorite 1:33:49.760 --> 1:33:53.160 books that you like to read. Be they you mentioned Bogel? 1:33:53.200 --> 1:33:55.599 Who else? Who else? Uh? So I read a couple 1:33:55.640 --> 1:33:57.360 of books every week, but I can't get away from 1:33:57.400 --> 1:34:00.679 the same two books I think as being huper influential 1:34:00.720 --> 1:34:02.559 to me. One takes like twenty minutes to read. It's 1:34:02.560 --> 1:34:05.679 called how Full is Your Bucket? And it's basically just says, 1:34:05.720 --> 1:34:09.479 you know everybody you encounter, um, you leave feeling better 1:34:09.560 --> 1:34:12.400 or worse? Uh? And is somebody? Are you filling people's 1:34:12.439 --> 1:34:15.400 buckets up? Are you draining their buckets? It's really informed 1:34:15.439 --> 1:34:17.960 the way I interview, the who I work with, the 1:34:18.000 --> 1:34:20.439 way I get through a day, making sure that I'm 1:34:20.439 --> 1:34:22.680 in the right mind frame all the time. And it 1:34:22.760 --> 1:34:26.559 was so obvious, such a light, quick read, but it's 1:34:26.600 --> 1:34:29.720 really informed. How full is your bucket? Yeah, I don't 1:34:29.760 --> 1:34:31.360 know if I've ever heard of that. I'm gonna don't 1:34:31.400 --> 1:34:33.960 have to really short, really short book. I mean I 1:34:34.000 --> 1:34:35.240 got it for my kids, I got it for all 1:34:35.240 --> 1:34:38.080 our employees at the time. And and it's really interesting. 1:34:38.160 --> 1:34:40.320 I mean, like when you when you talk to that client, 1:34:40.360 --> 1:34:41.840 when you talk to a colleague, when you talk to 1:34:41.840 --> 1:34:45.840 a family member, are they leaving feeling better about themselves 1:34:45.840 --> 1:34:49.200 in their day or worse? And it and it's it's 1:34:49.200 --> 1:34:52.080 an interesting, pretty straightforward makes a lot of very very 1:34:52.080 --> 1:34:57.439 straightforward um. And then a book that really kind of 1:34:57.439 --> 1:34:59.880 transformed my thinking was Awareness by Demello and he was 1:35:00.479 --> 1:35:04.799 Jesuit priest to Awareness Awareness he was a Jesuit priest 1:35:04.920 --> 1:35:08.800 that um lived in the Far East. And so it's 1:35:08.800 --> 1:35:11.320 got a combination of all these things. But the basic 1:35:11.400 --> 1:35:14.240 message of the book is get over yourself. You know, 1:35:14.640 --> 1:35:17.200 you don't matter whatever you accomplish. A couple of years 1:35:17.200 --> 1:35:19.280 from now, no one's gonna know who you are. Uh, 1:35:19.320 --> 1:35:21.640 you know, we don't know who anybody from Mesopotamia is. 1:35:21.680 --> 1:35:23.640 You know, we might remember Abraham Lincoln, but you know, 1:35:24.640 --> 1:35:27.080 you go far up in the future, very very very 1:35:27.080 --> 1:35:30.599 little matters. It sounds like really horrible. What it does 1:35:30.680 --> 1:35:34.400 is it clarifies for you, Um, the high shouldn't be 1:35:34.400 --> 1:35:37.839 too high, the lows shouldn't be too low, and um, 1:35:37.960 --> 1:35:41.679 very solomonic in its wisdom. Yeah, and this two shall pass, 1:35:42.160 --> 1:35:44.960 this two shall pass, And it really if you start 1:35:45.000 --> 1:35:47.439 to take that attitude. For me, I'm not sure this 1:35:47.479 --> 1:35:49.560 is what the book was about, but it really crystallized. 1:35:50.160 --> 1:35:52.080 You know, if I look at like all the stuff 1:35:52.120 --> 1:35:54.080 that comes at you all day, everywhere, and all the 1:35:54.120 --> 1:35:59.120 stuff you encounter, the reality is it doesn't matter at all. 1:35:59.120 --> 1:36:02.360 It's ephemeral, right, just like investments, right, it's there's so 1:36:02.439 --> 1:36:05.200 much stuff out there. Part of being good at investments 1:36:05.240 --> 1:36:07.599 is to know the nine percent that doesn't matter at all, 1:36:07.960 --> 1:36:09.400 what you don't need to read, what you don't need 1:36:09.439 --> 1:36:10.920 to watch, what you don't need to care about, what 1:36:10.960 --> 1:36:12.320 you don't need to invest in, what you don't need 1:36:12.360 --> 1:36:15.400 to research, and then you get you carve away all 1:36:15.439 --> 1:36:17.720 that stone, you get the masterpiece, right, And I think 1:36:17.800 --> 1:36:21.640 that that that book for me really just changed my 1:36:21.680 --> 1:36:23.320 thinking of who do I want to be around, who 1:36:23.360 --> 1:36:25.960 do I want to spend my time? With what things matter, 1:36:26.000 --> 1:36:28.200 what things don't? How do I get everything that doesn't 1:36:28.200 --> 1:36:31.000 matter away from me and focus more on the things 1:36:31.040 --> 1:36:33.720 that do matter? And so I it was became an 1:36:33.720 --> 1:36:35.400 interesting time in my life to read that book. It's 1:36:35.439 --> 1:36:38.160 the only book I've read more than once. UM. I 1:36:38.240 --> 1:36:41.400 enjoyed it a lot. That that is quite fascinating. UM 1:36:41.479 --> 1:36:43.760 tell us about a time you've failed and what you 1:36:43.880 --> 1:36:47.280 learned from the experience. So I've I've failed many, many, 1:36:47.320 --> 1:36:50.280 many times. So I'll give you just some growing up experiences. 1:36:50.320 --> 1:36:55.040 So you know, I I UM started a lot mowing 1:36:55.080 --> 1:36:56.519 company with a friend, and I mean it was a 1:36:56.520 --> 1:36:58.800 real deal. We were making some good money. And back 1:36:58.840 --> 1:37:01.479 then you had to bag all the grass. And then 1:37:01.720 --> 1:37:04.840 some other people came along with these big machines and 1:37:04.840 --> 1:37:06.800 and you didn't need to bag grass. It turned out. 1:37:06.800 --> 1:37:08.439 It's turned out people thought you need to do but 1:37:08.479 --> 1:37:10.200 you didn't need to. It would take us like five 1:37:10.200 --> 1:37:11.439 hours to do a long they would do it in 1:37:11.479 --> 1:37:13.920 ten minutes. And you know, we were like, wow, we're 1:37:13.920 --> 1:37:15.640 out of business. That was super quick. You know, we 1:37:15.640 --> 1:37:18.679 didn't understand where this industry was going. I had an 1:37:18.720 --> 1:37:21.679 idea for a T shirt. It was against drunk driving. 1:37:21.720 --> 1:37:23.960 My school wouldn't let us do it. It was a 1:37:24.000 --> 1:37:26.320 Catholic school and it was a little racy. So we 1:37:26.360 --> 1:37:28.040 created the T shirt. I was we should just go 1:37:28.120 --> 1:37:30.120 make it. So I made it. Wound up selling like 1:37:30.160 --> 1:37:32.600 a hundred thousand of T shirt. What was the T 1:37:32.760 --> 1:37:34.880 shirts saying that the school wouldn't let you. On the 1:37:34.920 --> 1:37:37.439 front it said sed drink, Scenic drive, Sedic die, and 1:37:37.439 --> 1:37:39.600 on the back it said don't don't be you know, 1:37:40.080 --> 1:37:44.680 basically right. So so this winds up selling like a 1:37:44.760 --> 1:37:50.479 hundred thousand shirts Scenic Scenic drink, Scenic drive, Scenic give 1:37:50.560 --> 1:37:55.919 us the sceedic drink, Scenic Drives. I'm really regretting. I remember, 1:37:56.240 --> 1:37:59.320 I remember those shirts. I had no idea that was 1:37:59.400 --> 1:38:02.720 you those shirts until now, probably nobody did. I don't 1:38:02.720 --> 1:38:04.960 know why what door I've opened here, but I have 1:38:05.360 --> 1:38:08.920 found you can't find one online, thank god. So anyway, 1:38:09.720 --> 1:38:12.360 then the wound up creating like cedic smoke and all 1:38:12.560 --> 1:38:14.799 created a whole line around this, were you doing anything 1:38:14.800 --> 1:38:18.280 with the proceeds involving any drunk driving or mother's and 1:38:18.680 --> 1:38:20.880 a donation that went back to Sad and Mad And 1:38:20.960 --> 1:38:24.000 so this went on for you know, like two years, 1:38:24.000 --> 1:38:26.160 I'm like, hey, I'm I'm not even in college. Do 1:38:26.200 --> 1:38:28.320 I need to go to college? Well, here's what I 1:38:28.400 --> 1:38:31.080 learned about patents. So all of a sudden, the shirt 1:38:31.080 --> 1:38:32.840 went up all over the country. And I hadn't had 1:38:32.840 --> 1:38:34.080 a trade, and that was it. I was at a 1:38:34.080 --> 1:38:37.080 business trademark. People were just stealing it. The printer I 1:38:37.200 --> 1:38:40.920 used stole it, so they basically took the art my 1:38:41.000 --> 1:38:43.559 mama drawn and the sayings and then just copied the 1:38:43.560 --> 1:38:45.679 whole thing. And so that was a hell of a lesson. 1:38:46.760 --> 1:38:49.280 The biggest lesson though, was the music stores. You know, 1:38:49.280 --> 1:38:51.640 at one store, save the money out, got to to 1:38:51.800 --> 1:38:53.599 save the money, got to force save the money, got 1:38:53.600 --> 1:38:56.479 to eight, had three partners, bought out the three partners, 1:38:56.880 --> 1:38:58.880 was about to graduate from law school, and I'm like, 1:38:58.880 --> 1:39:01.639 you know what I might I bet if I stopped 1:39:01.640 --> 1:39:03.559 opening stores, I can make a hundred grand doing this. 1:39:03.720 --> 1:39:05.559 I'm not gonna work, you know, this is what I'm 1:39:05.560 --> 1:39:10.240 gonna do. Napster came out. I M telling I think 1:39:10.280 --> 1:39:12.559 it was a hundred days. Ever the last store was closed. 1:39:13.680 --> 1:39:17.320 My total take over my I think six years of 1:39:17.320 --> 1:39:19.960 of running these and buying out all my partners was 1:39:20.000 --> 1:39:23.720 eight thousand four hundred dollars. It calculated into cents per 1:39:23.760 --> 1:39:26.679 hour spent in the store. But but you know what, 1:39:26.800 --> 1:39:30.280 it was worth more than any college degree that I got. 1:39:30.400 --> 1:39:33.600 It was an incredibly valuable experience. But it taught me 1:39:33.640 --> 1:39:37.519 about how fast technology changes then And you can be 1:39:37.560 --> 1:39:40.120 growing and you can think your competition some music store 1:39:40.160 --> 1:39:43.960 across the street. Uh, it's not. It's something you're not 1:39:44.080 --> 1:39:47.120 even thinking about, right And I and I constantly look 1:39:47.160 --> 1:39:50.320 at creative planning and say, what am I not thinking about? 1:39:50.800 --> 1:39:52.720 What can I do better? How can I stay in 1:39:52.720 --> 1:39:55.719 front of somebody else? How can I be the better offering? 1:39:56.120 --> 1:39:58.960 How can I, you know, do more for less? All 1:39:59.040 --> 1:40:02.519 the time I'm asking question because I've been on the 1:40:02.520 --> 1:40:06.120 receiving end of capitalism. Capitalism is a death blow several 1:40:06.120 --> 1:40:08.479 timepsle of times. Well Andy Grove had it right, only 1:40:08.520 --> 1:40:11.559 the paranoid survivor. Um, what do you do for fun? 1:40:11.600 --> 1:40:13.639 What do you do when you're not helping people plan 1:40:13.760 --> 1:40:18.080 for their financial futures? So I I love UM short trips. 1:40:18.120 --> 1:40:19.880 It's probably my favorite thing where I can. If I'm 1:40:19.880 --> 1:40:22.439 going to see a client in Boston, I'll you know, 1:40:22.520 --> 1:40:24.479 take the whole family and I'll go make a weekend 1:40:24.520 --> 1:40:26.840 of it, and and I can kind of get Griswold 1:40:26.960 --> 1:40:28.760 about it. You know my kids. My kids are like, 1:40:28.920 --> 1:40:33.000 so I've you have to explain the European vacation reference. 1:40:33.400 --> 1:40:36.640 I find myself the problem with getting older isn't the 1:40:36.720 --> 1:40:40.679 body falling apart, it's all of your cultural references fail. 1:40:40.800 --> 1:40:43.080 With the younger generation, I try to cram too much 1:40:43.120 --> 1:40:44.800 trip in the two little types. So I've tried to 1:40:44.880 --> 1:40:46.519 lay off that and just go, look, I'm gonna going 1:40:46.560 --> 1:40:48.800 to a city. We're gonna do two or three things 1:40:48.800 --> 1:40:52.519 that are fun. But I think that America's amazing cities, 1:40:52.560 --> 1:40:54.120 and so we've tried to hit every city that has 1:40:54.280 --> 1:40:57.160 a baseball stadium where three force of the way done that. 1:40:57.280 --> 1:40:59.800 That's been a complete blast. And I try to cram 1:40:59.840 --> 1:41:02.320 that and wherever I possibly can, which is rare because 1:41:02.400 --> 1:41:04.200 I've got three kids that are teenagers and they all 1:41:04.200 --> 1:41:06.760 have like twenty seven sports. And have you seen the 1:41:06.800 --> 1:41:09.240 book thirty six Hours in I think it's the New 1:41:09.320 --> 1:41:11.880 York Times puts it out. I haven't. Oh, so this 1:41:11.960 --> 1:41:15.479 is basically every the top two hundred or four hundred 1:41:15.479 --> 1:41:18.360 cities in the country, you're gonna spend thirty six hours 1:41:18.360 --> 1:41:20.280 in the city. Here's what you need to see. Here's 1:41:20.280 --> 1:41:24.240 what man could use that book like eight years ago. Well, 1:41:24.240 --> 1:41:26.720 I'm sure you have some cities left, but it's uh, 1:41:26.920 --> 1:41:28.880 it's a really interesting books. You should look at it. 1:41:29.080 --> 1:41:31.720 Let's talk about the industry for a second. What are 1:41:31.760 --> 1:41:36.560 you most optimistic about within the financial services industry today 1:41:36.680 --> 1:41:39.599 and what might you be pessimistic about within that same industry. 1:41:39.680 --> 1:41:42.480 I think I'm optimistic about is I think the consumer 1:41:42.720 --> 1:41:45.760 is very close to finally getting what they deserve right. 1:41:45.800 --> 1:41:48.559 I mean taken long enough to take it a long, long, long, 1:41:48.680 --> 1:41:52.080 long time, and I think we're almost there. I think 1:41:52.080 --> 1:41:54.439 we're gonna get to a world someday where every advisor 1:41:54.479 --> 1:41:57.040 is a fiduciary, that the firm that's advising the client 1:41:57.120 --> 1:41:59.720 doesn't own their own products, that they get to know 1:41:59.800 --> 1:42:01.840 the line a little bit before they invest their money, 1:42:01.840 --> 1:42:03.599 and that they do all that at a reasonable price. 1:42:04.080 --> 1:42:06.920 I had taken a long, long, long time. I think 1:42:06.920 --> 1:42:08.800 we're well on our way there. That gives me a 1:42:08.800 --> 1:42:10.840 lot of optimism. I felt like the industry has been 1:42:10.840 --> 1:42:13.320 broken for a long time. Now we could be really 1:42:13.320 --> 1:42:14.960 close to there and have it not be fixed. You 1:42:14.960 --> 1:42:16.519 know by the time when you and I are still working, 1:42:16.560 --> 1:42:18.519 it might not be I still might not be fixed, 1:42:18.560 --> 1:42:22.040 but it's certainly on the path to getting closer. Even 1:42:22.080 --> 1:42:25.240 if the government decided not to embrace the fiduciary standard. 1:42:25.520 --> 1:42:28.400 It seems like the market is That's exactly right. I 1:42:28.400 --> 1:42:30.800 think the market is what's forcing most of this. The 1:42:30.840 --> 1:42:33.320 market is what has forced lower mutual fund fees and 1:42:33.360 --> 1:42:37.280 lower commissions and disclosing proprietary products, and all the markets 1:42:37.320 --> 1:42:39.960 pushing that. The government has done a phenomenally horrible job 1:42:40.880 --> 1:42:43.160 I think in this space. And so I think that 1:42:43.160 --> 1:42:46.599 that you're right. I think capitalism itself is forcing us 1:42:46.640 --> 1:42:49.840 to get where we need to be. Pessimistic. Um, I 1:42:49.920 --> 1:42:54.840 worry about two things. I think one, UM, I think 1:42:55.000 --> 1:42:57.679 there's going to be a cybersecurity attack on a major 1:42:57.680 --> 1:43:00.800 financial institution that succeeds that so point in the coming 1:43:00.840 --> 1:43:03.479 years that is horrifying. Is and and I don't think 1:43:03.800 --> 1:43:06.920 I don't I know institutions are worried about the very 1:43:06.920 --> 1:43:10.679 big institutions. I don't think we quite know what that's 1:43:10.720 --> 1:43:13.760 gonna do to the average American when that happens. Is 1:43:13.800 --> 1:43:18.719 everything going to be in mattresses? I mean, the post crisis, 1:43:18.760 --> 1:43:23.400 post cybersecurity, if we get a serious breach of a 1:43:23.560 --> 1:43:26.920 major institution, you know, a trillion plus institution, of which 1:43:26.920 --> 1:43:29.960 there are a whole bunch of them. Um, that is 1:43:30.120 --> 1:43:34.479 enough to freeze capitalism for a while, I think, And 1:43:34.520 --> 1:43:37.280 so I think it's gonna be very interesting to see 1:43:37.880 --> 1:43:42.000 if that can be prevented, uh, and if it happens, 1:43:42.560 --> 1:43:44.760 how our economy is going to react to it. The 1:43:44.760 --> 1:43:46.400 other thing I worry about is you look at what 1:43:46.520 --> 1:43:49.960 happened in Saudi Arabia or I think we're debating who 1:43:50.320 --> 1:43:54.040 who those those drones that went in and the oil 1:43:54.320 --> 1:43:56.759 up the oil fields right before they were going public. 1:43:57.560 --> 1:44:01.160 That's not brain surgery, right, And I think that we 1:44:01.200 --> 1:44:03.720 look at nine eleven as like an impossible You know, 1:44:03.840 --> 1:44:06.000 we've got all these measures in place to do all 1:44:06.120 --> 1:44:08.800 all these things to protect things, but at the end 1:44:08.840 --> 1:44:11.040 of the day, a kid in the garage with ten 1:44:11.120 --> 1:44:14.879 drones and the internet can cause a lot of damage. 1:44:15.479 --> 1:44:18.200 And I am I am concerned about that what it 1:44:18.280 --> 1:44:20.240 does to the way we live with each other, you know, 1:44:20.280 --> 1:44:22.879 from a personal level, you know, kind of your kids, grandkids, 1:44:22.920 --> 1:44:25.599 that kind of thinking, and from your specific question about 1:44:25.600 --> 1:44:28.439 the financial industry, what does it do to economics? Like 1:44:28.439 --> 1:44:30.479 if you remember after nine eleven, no one went to 1:44:30.520 --> 1:44:33.160 the movies, everything, no one went to the months, there 1:44:33.200 --> 1:44:36.160 was a cocoon effect for months. This to me would 1:44:36.160 --> 1:44:39.280 be much worse because people would be like, well, wait 1:44:39.280 --> 1:44:42.680 a second. You know nine eleven at least requires some 1:44:42.760 --> 1:44:47.240 strategicy and some breakdown and defenses. But and a physical event, 1:44:47.439 --> 1:44:49.760 not a cyber events. Right. If if we move into 1:44:49.800 --> 1:44:52.200 a world where there's a cyber event or you know, 1:44:52.720 --> 1:44:56.760 some teenager with drones causes havoc in Times square, I 1:44:56.800 --> 1:44:59.639 think that's going to be a cocooning effect that we're 1:44:59.680 --> 1:45:02.840 not we've never thought about, are prepared for. I think 1:45:02.880 --> 1:45:06.400 those are the real, the real threats to the economy 1:45:06.439 --> 1:45:08.400 that because you look at the economy is very resilient. 1:45:08.479 --> 1:45:10.960 It can get through everything. Bretto Uch pot is gonna 1:45:10.960 --> 1:45:12.639 cost more ten years from now than it does today, 1:45:12.800 --> 1:45:14.360 and like you, shoes are gonna cost more ten years 1:45:14.360 --> 1:45:15.880 from now than they do today. The market's going to 1:45:15.920 --> 1:45:17.960 go up into the right the way it always has. 1:45:17.960 --> 1:45:20.719 But these kind of things are the kind of things 1:45:20.720 --> 1:45:23.720 that can change that that narrative. And so those are 1:45:23.760 --> 1:45:25.559 the things that I think about when I think about 1:45:25.640 --> 1:45:30.120 existential threats to the norm. Huh. Fascinating. And our final 1:45:30.200 --> 1:45:33.400 two questions. A recent college grad comes to you and 1:45:33.439 --> 1:45:37.120 says they're interested in financial services as a career. What 1:45:37.240 --> 1:45:39.439 sort of advice do you give them? So first I'd say, 1:45:39.560 --> 1:45:41.040 you know, it's it's kind of like show me your friends. 1:45:41.040 --> 1:45:42.439 I'll show you who you are. You know, you give 1:45:42.640 --> 1:45:44.200 four people you hang out with the most. I don't 1:45:44.200 --> 1:45:45.760 need to meet you. I can pretty much tell you 1:45:46.240 --> 1:45:49.439 what what kind of guy you're like. Don't just go 1:45:49.520 --> 1:45:52.360 somewhere for experience. Try to get to a place that 1:45:52.640 --> 1:45:55.160 is aligned with the values that you're you're trying to 1:45:55.200 --> 1:45:57.640 do right, So try to get if you're focused on 1:45:57.680 --> 1:46:00.639 being a fiduciary and be based or you only get 1:46:00.640 --> 1:46:04.080 into an r a A. Just start there right, Try 1:46:04.080 --> 1:46:07.080 to get into the right environment to begin with. Second, 1:46:07.280 --> 1:46:10.880 create separation between you and other people. And I think 1:46:10.920 --> 1:46:12.719 there's a couple of things. One of the interview process. 1:46:12.720 --> 1:46:15.439 I'm always fascinating when somebody goes, well, I'm coming here 1:46:15.439 --> 1:46:17.439 for experience, or I'm coming here because I can think 1:46:17.439 --> 1:46:20.479 I learned this and that. Imagine, uh, somebody going to 1:46:20.520 --> 1:46:22.439 an NFL tryout and going I'm here because I want 1:46:22.439 --> 1:46:24.960 to learn to get to get better, and I want 1:46:25.800 --> 1:46:27.840 you want somebody who's gonna come. Here's how I can 1:46:27.880 --> 1:46:31.040 help you win. You know, here's what so talk about. 1:46:31.040 --> 1:46:32.920 How you can help the place that you're coming into 1:46:33.320 --> 1:46:37.960 now once you show up, Um, you can differentiate yourself 1:46:38.600 --> 1:46:41.439 by going the extra mile. This is an industry where 1:46:41.479 --> 1:46:43.320 it's very easy to go to the the extra mile. I mean, 1:46:43.320 --> 1:46:44.680 there's a lot of things you can do more for 1:46:44.720 --> 1:46:47.840 your client or your employer, and it's not hard to 1:46:47.880 --> 1:46:51.280 separate yourself from your peers if you are willing to 1:46:51.360 --> 1:46:53.640 stay a little later, or take on a project or 1:46:53.680 --> 1:46:57.120 offer your help. I mean, even with hundreds of people. 1:46:57.240 --> 1:46:59.719 I am very aware of the people within creative planning 1:46:59.720 --> 1:47:02.680 that do that, especially those that are starting out. And 1:47:02.760 --> 1:47:06.240 so you tend to get judged in the first thirty 1:47:06.320 --> 1:47:09.200 days when you're at work. The reality is we all 1:47:09.280 --> 1:47:11.080 judge each other in the first few seconds of seeing 1:47:11.080 --> 1:47:12.960 each other. There's a whole book about this called You've 1:47:12.960 --> 1:47:15.599 Got Three Seconds, and basically the ideas when you meet 1:47:15.640 --> 1:47:17.519 somebody in a few seconds, you've decided what you think 1:47:17.520 --> 1:47:19.040 of them, and it's up to them to dig themselves 1:47:19.080 --> 1:47:20.880 out of that hole or they're gonna go up or 1:47:20.920 --> 1:47:23.040 down later over time, but you've kind of put you 1:47:23.120 --> 1:47:25.439 put an anchor on them. The same thing happens when 1:47:25.479 --> 1:47:28.519 you're employed. Don't grow into it, come in hard, come 1:47:28.560 --> 1:47:30.360 in strong. If it's the ground running, it's the same 1:47:30.400 --> 1:47:31.920 thing I try to do with the client. I try 1:47:31.960 --> 1:47:34.800 to give that client as much value upfront as I can, 1:47:34.840 --> 1:47:38.080 so they're going, Wow, this is I made the right decision. 1:47:38.160 --> 1:47:40.880 You want the employer to feel the same way about you, huh. 1:47:41.240 --> 1:47:43.880 And our final question, what do you know about the 1:47:43.920 --> 1:47:47.840 world of investing and financial planning today? You wish you 1:47:47.920 --> 1:47:50.040 knew twenty five or so years ago when you were 1:47:50.040 --> 1:47:52.160 first getting started. Well, I mean it took all the 1:47:52.160 --> 1:47:55.960 way until, you know, from oh four until to put 1:47:56.000 --> 1:47:58.000 all the pieces together, and it was really like hearing 1:47:58.080 --> 1:48:00.600 from clients, Oh I need this, I need at and 1:48:00.640 --> 1:48:02.720 then going well, I need to build a service to 1:48:02.760 --> 1:48:04.400 do that. So I always had a very strong bias 1:48:04.439 --> 1:48:06.200 against product. I don't want to own anything where I 1:48:06.240 --> 1:48:09.160 make more money, and a very strong bias towards service 1:48:09.200 --> 1:48:12.280 and value. How do I deliver more services? I wish 1:48:12.560 --> 1:48:14.720 I had the vision and no four to go. These 1:48:14.720 --> 1:48:17.280 were all the services that were needed and really found 1:48:17.280 --> 1:48:19.960 a way to build it out all on day one 1:48:20.040 --> 1:48:23.160 instead of taking you know, fourteen years to build it. 1:48:23.200 --> 1:48:25.840 I I told our team at our last annual meeting 1:48:25.880 --> 1:48:27.320 that for the first time, I feel like I'm at 1:48:27.320 --> 1:48:30.760 the starting line. I feel like the first time I 1:48:30.840 --> 1:48:33.920 have an offense and a defense, and an offensive coordinator 1:48:33.960 --> 1:48:36.240 and a defensive coordinator. Up until now, we've been playing 1:48:36.240 --> 1:48:39.920 with an incomplete, incomplete team and complete coaching. We didn't 1:48:39.960 --> 1:48:42.240 have all the piece we have the special teams. We've 1:48:42.280 --> 1:48:44.800 got it all now. Um, and you know, I wish 1:48:44.800 --> 1:48:46.519 I had a time machine. I could go go have 1:48:46.600 --> 1:48:49.439 started that way. But to be fair, you have you 1:48:49.520 --> 1:48:52.559 were path dependent. You had to travel that route in 1:48:52.680 --> 1:48:55.400 order to figure out what all those pieces were. That's true, 1:48:55.600 --> 1:48:58.920 so but that's still still quite fascinating. Thank you, Peter 1:48:59.000 --> 1:49:00.840 for being so generous with your time. I've I've had 1:49:00.880 --> 1:49:03.599 you in here for two hours, and uh, most people 1:49:03.800 --> 1:49:06.760 fade by by sixty minutes. In fine, you were great. 1:49:06.800 --> 1:49:09.040 I really enjoyed it. Barry. We have been speaking with 1:49:09.040 --> 1:49:12.280 Peter Mluke. He is the c I O and President 1:49:12.479 --> 1:49:16.320 of Creative Planning. If you enjoy this conversation. Well, look 1:49:16.400 --> 1:49:18.640 up an intro, down an intron Apple iTunes and you 1:49:18.680 --> 1:49:22.840 can see any of our previous three hundred such conversations 1:49:22.880 --> 1:49:25.559 we've had over the past five years. Where has the 1:49:25.600 --> 1:49:29.160 time gone? Um? We love your comments, feedback and suggestions 1:49:29.560 --> 1:49:33.439 right to us at m IB podcast at Bloomberg dot net. 1:49:34.000 --> 1:49:37.080 Be sure and give us a delightful review on Apple iTunes. 1:49:37.560 --> 1:49:40.240 You can check out my weekly column on Bloomberg dot com. 1:49:40.280 --> 1:49:43.360 Sign up for the Daily Reads at Reholts dot com. 1:49:43.400 --> 1:49:45.280 I would be remiss if I did not thank the 1:49:45.320 --> 1:49:48.800 crack staff that helps me put together this podcast each week. 1:49:49.439 --> 1:49:53.000 Carolin O'Brien is our audio engineer, Michael Batnick is my 1:49:53.080 --> 1:49:57.000 head of research, and Michael Boyle is our producer. I'm 1:49:57.000 --> 1:50:00.080 Barry Riholts. You've been listening to Masters in Business on 1:50:00.200 --> 1:50:01.120 Bloomberg Radio.