RPF0341-Matt_Hall

00:00:00.000 | Whether you're a donor, a doer, or a dedicated to learning more about research for moms,

00:00:04.880 | babies, and their families, from March of Dimes, it's ModCast, where you'll learn

00:00:08.520 | new ideas, find ways to get involved, or just be amazed.

00:00:12.000 | Move this one to the top of your playlist each and every month, and join the conversation

00:00:15.480 | with the best and brightest in the field.

00:00:17.840 | Listen to ModCast, March of Dimes' research podcast, today.

00:00:20.840 | Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge,

00:00:24.320 | skills, insight, and encouragement you need to live a rich and meaningful life now, while

00:00:29.580 | building a plan for financial freedom in 10 years or less.

00:00:33.720 | My guest today is Matt Hall.

00:00:35.600 | Matt is a financial advisor and author of the book, Odds On, The Making of an Evidence-Based

00:00:42.780 | Investor.

00:00:43.780 | Matt Hall, welcome to Radical Personal Finance.

00:00:46.360 | Matt Hall, Radical Personal Finance, Founder & Executive Director, ModCast.

00:00:47.360 | Glad to be here.

00:00:48.360 | Thank you.

00:00:49.360 | I've got in my hands here your brand new book called Odds On, The Making of an Evidence-Based

00:00:55.080 | Investor.

00:00:57.120 | You come highly recommended to me as a guest for the show, based upon the input of previous

00:01:02.440 | guests.

00:01:03.440 | So, I'm looking forward to our conversation.

00:01:04.720 | I'd love to start, though, with a little bit of your background and your story.

00:01:09.400 | What's been your journey through the world of finance that has resulted in your writing

00:01:14.560 | this book here?

00:01:15.560 | Oh, my gosh.

00:01:16.560 | So, there's so much that I want to tell you.

00:01:19.640 | I may meander and go down a path and rely on you to bring us back, but I'll start by

00:01:23.800 | saying I feel like I'm sort of accidentally in this industry.

00:01:29.960 | My parents are both educators, and when I was growing up, they talked about students.

00:01:35.580 | They didn't necessarily talk about clients or markets and that kind of stuff.

00:01:39.700 | And much of this is detailed in the book.

00:01:43.000 | I attempted to write a book that I thought needed to exist.

00:01:47.680 | I hadn't found anything like this where you buried all the wonky technical stuff inside

00:01:52.240 | of real-life stories.

00:01:53.680 | That's essentially what Odds On, the making of an evidence-based investor, is.

00:01:58.440 | It's the wonky buried into life stories to make it readable and sort of disguise the

00:02:03.840 | pain of learning a little bit about how I think markets work.

00:02:07.560 | But I'll tell you, I went to law school, and I had an advisor in law school who said to

00:02:14.480 | me, "You know, I'm tired of so many kids coming in here with the wrong idea of what being

00:02:19.260 | a lawyer is all about.

00:02:20.400 | I want you to go read this book, and this book will tell you what being a lawyer is

00:02:25.120 | all about."

00:02:26.120 | The book he gave me was later made into a movie called A Civil Action.

00:02:30.040 | And it's not necessarily an inspirational story.

00:02:33.320 | So I came back to him and I said, "Man, this makes me nervous.

00:02:35.400 | It makes me think I'm going to be $70,000 in debt."

00:02:39.520 | And we just had a guy come into the law school class and say, "If you're not in the top 10%

00:02:43.160 | of the class, you're going to be desperate for a job, and there aren't that many jobs."

00:02:46.840 | And so I just sort of started rethinking my plan.

00:02:50.960 | I had an important lunch with my dad, and I said, "Dad, I don't know what I'm going

00:02:55.840 | to do.

00:02:56.840 | What do you think I should do?"

00:02:57.840 | And he was like, "Well, I know you planned on going to law school, but you've always

00:03:02.660 | been interested in how financial markets work.

00:03:05.760 | And we don't have anyone in our family who's in that business, but I think you should get

00:03:08.800 | in that world and just kind of find your way.

00:03:11.420 | Get around smart people.

00:03:12.920 | You're an intellectually curious person.

00:03:15.080 | You'll find your way."

00:03:16.460 | And so after that lunch, I left law school and I got a job at a brokerage firm.

00:03:24.600 | And that's where I learned what not to do.

00:03:27.280 | At the time, I didn't know that I was going to learn.

00:03:32.520 | I was going to sort of see the nasty underbelly of the industry.

00:03:38.000 | But in many ways, it was a good experience because I saw all the kinds of traits, behaviors,

00:03:44.520 | and characters that I knew I did not want to emulate or become myself.

00:03:49.280 | What calendar year was that?

00:03:52.400 | This is 1999, and I'm in my 20s at the time.

00:03:57.960 | And so the whole first section of the book is about that experience, is about sort of

00:04:03.200 | a coming-of-age story and trying to figure out how this business works.

00:04:08.400 | How do other people help serious investors become wealthy, successful, have financial

00:04:15.280 | freedom?

00:04:16.280 | How do they do that?

00:04:17.280 | And I kept thinking there was a system, there was a process, there were like these servants

00:04:22.200 | who wanted to really help others.

00:04:23.840 | And what I found was just pure salesmanship and selfishness.

00:04:28.320 | And so the first section of the book is about what I would say, like, what's the problem?

00:04:32.720 | The middle section of the book is what I think is part of the solution.

00:04:35.840 | And then the last part is about sort of what I chose to do about it in my own life.

00:04:39.820 | So I'm deeply proud of this book and my own journey in this industry.

00:04:43.880 | But it took me about two years to write this book.

00:04:46.600 | And my desire was to make it highly readable, super relatable.

00:04:50.320 | And the feedback I've had from people is that we've accomplished that.

00:04:53.960 | So after the brokerage firm – and we'll talk about what's the problem, what's

00:04:57.640 | the solution, and what you do.

00:05:00.240 | But you stayed and you've worked at the brokerage firm for the last 17 years?

00:05:03.960 | Or where did you go from there?

00:05:05.640 | No, I didn't last very long actually.

00:05:07.600 | I lasted longer than many of my comrades.

00:05:09.840 | As you might know, the fail rate when they fill a class of like financial advisors in

00:05:15.680 | training, you've got about – they think two in 10 will survive.

00:05:21.080 | So I made it quite some time I'd say.

00:05:23.240 | I made it past the series seven, did all that stuff.

00:05:26.000 | And then just couldn't take it anymore.

00:05:29.520 | And there are lots of good stories around sort of what pushed me over the edge that

00:05:33.560 | are in the book.

00:05:34.760 | But about that time, I got super lucky.

00:05:39.720 | And this is probably – this is like one of my favorite stories from the book.

00:05:43.720 | She's now my wife, but my girlfriend at the time said, "Hey, let's take a trip

00:05:50.760 | to Las Vegas during March Madness."

00:05:53.600 | We go to Las Vegas and she goes, "Oh, I forgot to tell you.

00:05:56.640 | There are some people here who are from St. Louis that I want you to meet.

00:06:00.600 | We're going to have lunch with them."

00:06:02.800 | And their names are the Goldbergs.

00:06:05.200 | And they were like, I don't know, 25, 30 years older than us.

00:06:09.880 | And I said, "Man, it's March Madness.

00:06:12.520 | We're here with some family.

00:06:14.240 | We're betting on these basketball games.

00:06:16.000 | We're having a great time.

00:06:17.440 | Why do we want to go have lunch with some people that we could have lunch with in St.

00:06:22.360 | Louis?"

00:06:23.360 | And she said, "You know, these are just awesome folks and they're here and they have

00:06:26.000 | time and we have time.

00:06:27.000 | Let's meet them.

00:06:28.000 | Plus, Ed Goldberg works in financial services and you may find something interesting to

00:06:33.560 | talk about with him."

00:06:34.560 | Okay.

00:06:35.560 | We go to lunch.

00:06:36.560 | Ed is a very sort of mild-mannered person, not a salesman at all, opposite of what I

00:06:43.320 | had experienced at the brokerage firm.

00:06:44.840 | And at the end of our lunch, he sort of casually says, "Hey, a partner of mine just wrote

00:06:49.600 | a book and it's done okay and you might have an interest in reading about it if you

00:06:54.320 | love this industry."

00:06:55.320 | I said, "Well, I'm not sure I love the industry, but I'd love to read the book your

00:06:58.560 | partner wrote."

00:06:59.560 | He said, "Well, when I get back, I'll give you my copy."

00:07:02.120 | So when we got back to St. Louis after that trip, I didn't realize this, but the first

00:07:06.320 | 100 pages of that book, which is a book by a guy named Larry Swedro, it's called The

00:07:10.480 | Only Guide to a Winning Investment Strategy You'll Ever Need.

00:07:13.800 | The first 100 pages of that book changed my life.

00:07:17.120 | I said, "I have to go work at this firm because here's a firm that uses logic, data, and

00:07:22.200 | evidence to help real people.

00:07:24.560 | It's not all the salesmanship stuff.

00:07:27.100 | This is the good stuff.

00:07:28.880 | There's a system and a process here that is robust and repeatable and reliable.

00:07:33.560 | I love it.

00:07:34.560 | I got to get there."

00:07:36.460 | So I called this firm.

00:07:39.040 | It was just getting started.

00:07:40.040 | It was a tiny little firm at the time.

00:07:41.720 | Now it's much larger, but it's called Buckingham Asset Management.

00:07:45.600 | They're based here in St. Louis and the guy who wrote the book was here in town.

00:07:48.480 | I just beat on their door and pounded and pounded and pounded until they were willing

00:07:52.440 | to kind of let me in.

00:07:53.440 | They had no jobs.

00:07:54.440 | You kind of had to make a job.

00:07:55.640 | You had to convince them that you were so passionate about this approach that they would

00:07:58.840 | let you in.

00:07:59.840 | That's what I did.

00:08:01.400 | I fell in love with sort of an indexy, passive approach.

00:08:05.920 | I think there are additional layers to it.

00:08:09.240 | I've sort of evolved even beyond just like a simple index fund myself over the years,

00:08:14.400 | but I love the approach.

00:08:15.920 | I love the story.

00:08:16.920 | I love what the academic evidence said.

00:08:19.120 | It was such a contrast to what I had experienced in the brokerage firm.

00:08:24.280 | So let's talk through as a structure for our show the three parts.

00:08:30.240 | And first, what's the problem with the world of – I mean is it safe to call it mainstream?

00:08:38.480 | It's hard for me to know what's mainstream now and what's not mainstream in terms of

00:08:44.920 | actual practice because there's been such a change in the last decade.

00:08:50.000 | But what's the problem with traditional financial services?

00:08:53.680 | I would say – so the root of the problem from my perspective is just the model.

00:08:59.560 | There are good people trapped in a bad model, meaning the firm is on top and the client

00:09:05.000 | is on bottom.

00:09:06.000 | Obviously, there's been this huge shift of people becoming independent investment

00:09:10.920 | advisors and fiduciaries and all that stuff.

00:09:12.760 | And I would just say the nice thing about the model that I'm in and so many people

00:09:17.160 | seem to be transitioning to is you really can put the client on top and you're not

00:09:22.120 | sort of beholden to a mothership that uses words like production.

00:09:27.880 | Even though ultimately every business needs revenue to succeed, the culture and the focus

00:09:32.560 | is so very different.

00:09:33.960 | I mean I detail this story in the book, but there's one – my job every day while I

00:09:38.920 | was in training at this firm, the original brokerage firm, the place where I learned

00:09:43.920 | what not to do.

00:09:44.920 | One of my jobs was every day to create this – they called it the blotter.

00:09:49.400 | And I was supposed to cut out stories from all the big newspapers.

00:09:52.760 | But really no one read any of the top stories that you would put together.

00:09:57.160 | It was all about what was in the lower right-hand section of the paper, which was the day prior's

00:10:01.560 | production numbers.

00:10:03.560 | And that production mentality, that sort of self-orientation or selfishness that was like

00:10:09.800 | I am going to make money.

00:10:12.640 | If I happen to help the client along the way, that's a nice thing.

00:10:15.480 | That's a peripheral benefit.

00:10:17.280 | But that wasn't the focal point.

00:10:19.400 | And to me that is at the root of the problem.

00:10:24.200 | Not all regular people understand the term fiduciary.

00:10:28.600 | But from my point of view, it's a very important distinction.

00:10:31.360 | And culturally, I just have found that in the independent investment advisor world,

00:10:35.920 | no matter what your investment philosophy is, the aim is to help serve clients, not

00:10:41.640 | necessarily to sell products.

00:10:43.400 | Every day when I was at the brokerage firm at lunchtime, we had a mutual fund wholesaler

00:10:47.880 | who would come in, tell us how his fund was the best in the world, show us his three-year

00:10:52.320 | performance numbers, buy our lunch, and then leave.

00:10:55.440 | That was every day.

00:10:57.480 | And in my world now, that doesn't exist.

00:11:00.840 | No one tries to sell anyone else the flavor of the day or the fund of the month.

00:11:08.400 | That just doesn't exist.

00:11:10.360 | What's more, people in my world I feel like are talking about how they can really serve

00:11:15.440 | clients, what they can do to add value to their lives, what they can do to simplify

00:11:20.120 | and provide transparency.

00:11:21.640 | Man, in the old world, there was no transparency.

00:11:25.320 | In fact, opaque was the best way to be because no one could tell how much money you were

00:11:30.880 | making from people who sold bonds.

00:11:33.320 | And I think still to this day, one of the most opaque markets is the fixed income market.

00:11:37.840 | If you ask somebody, I meet people every day who say, "My broker does my bond trades for

00:11:42.680 | free."

00:11:43.680 | And nothing could be further from the truth.

00:11:45.120 | You just don't have the technology to know what they're charging you.

00:11:47.520 | You don't understand markups.

00:11:49.160 | And it's not the investor's fault.

00:11:51.040 | There's just no transparency.

00:11:53.440 | So I mean, beyond just selfishness, the transparency piece and the simplicity piece is really,

00:11:58.640 | I think it's getting better.

00:12:01.040 | This is the negative part of the discussion.

00:12:02.960 | I'd say I'm an optimist, so I think things are getting better.

00:12:05.920 | I think transparency and just this age of information is allowing people to become better

00:12:12.280 | informed, reducing the odds that someone could be taken advantage of.

00:12:17.440 | But I had heard someone say that there's a thing called, and I forget the guy's name

00:12:22.560 | who wrote this book, but the trust equation was basically credibility plus reliability

00:12:28.720 | plus intimacy, but all divided by self-orientation.

00:12:33.520 | So if you are credible, reliable, and could build intimacy, that's all good.

00:12:37.560 | But if you're a selfish pig, you can ruin everything on top.

00:12:41.040 | And from my perspective, that is at the root of what was wrong.

00:12:45.360 | The model didn't help people be anything other than selfish.

00:12:49.240 | And of course, there are exceptions.

00:12:50.800 | There are people doing great work inside of a yucky framework.

00:12:55.320 | But I think the migration to the independent space and to have a more sound investment

00:13:02.240 | approach for clients, I think that migration is just going to continue to happen.

00:13:05.640 | Okay.

00:13:06.640 | So let me categorize so I understand.

00:13:08.200 | Your book jacket says you're the co-founder and president of Hill Investment Group, an

00:13:11.720 | investment management firm.

00:13:12.720 | So is this an independent RIA that you founded?

00:13:16.040 | Yes.

00:13:17.040 | So 10 years ago, myself and one other person that worked at this firm called Buckingham

00:13:21.200 | Asset Management, we left and started our own firm in June of 2005.

00:13:24.520 | Okay.

00:13:25.520 | So as an RIA, you're a fee-only financial planning firm.

00:13:28.960 | Yes.

00:13:29.960 | And what type of clients are you working with?

00:13:32.440 | Well, we have 130 clients.

00:13:36.440 | Half are from somewhere outside of St. Louis, Missouri.

00:13:40.080 | We have an office in Houston, Texas.

00:13:42.000 | I would say most of the clients are corporate executives or entrepreneurs, people who have

00:13:48.800 | been successful.

00:13:50.840 | And then some are new professionals, an orthodontist, a lawyer, a professional who is really a serious

00:13:59.280 | investor, meaning that they're saving a significant portion of money that they don't need to live

00:14:05.240 | off of.

00:14:06.440 | So we have a good broad mix, but we have a small number of clients.

00:14:10.400 | We have about, I don't know, 500 million under management.

00:14:14.560 | And we're very careful about how many clients we add because we care deeply about our service

00:14:18.200 | levels and volume, in my opinion, is the enemy of service.

00:14:21.080 | If you have a bazillion clients, you can't know them.

00:14:23.960 | And knowing them, I think, is central to actually adding some value.

00:14:27.280 | And do you charge fees purely based upon AU assets under management or do you charge fees

00:14:33.440 | for planning?

00:14:34.440 | Do you charge hourly fees?

00:14:35.440 | How are your fees structured?

00:14:36.440 | Yeah, that's a good question.

00:14:37.480 | I mean, we charge a simple fee schedule, like a flat fee schedule, 75 basis points on assets

00:14:43.560 | we manage.

00:14:44.560 | I don't necessarily even think that's perfect.

00:14:46.000 | Like I do think we should probably modify it.

00:14:48.620 | But in the spirit of true simplicity to the extreme, it's the easiest thing I have found.

00:14:55.320 | So like we say, we want our clients to know fees, returns, and allocation.

00:15:00.360 | Like if you know those three things, irrespective of your investment philosophy, they're like

00:15:03.900 | your vital signs.

00:15:04.900 | You'll feel a greater sense of understanding and you'll be sort of liberated in some ways

00:15:11.920 | from worrying.

00:15:12.920 | So I always want you to know what your fees, returns, and allocation are.

00:15:17.500 | Then I need to keep those things very simple.

00:15:19.240 | If you have to get a calculator out to figure out what your fees are, to me, that's bad.

00:15:23.740 | So we've opted for a pretty simple, I think, schedule.

00:15:27.940 | So no grading or just minimal grading?

00:15:30.380 | Well, we only change our fees once people get really big.

00:15:35.140 | So like if you're over, we participate in this thing called the Schwab Benchmarking

00:15:38.060 | Survey, and it reveals that over like, say, $8 to $10 million, we would negotiate down.

00:15:47.420 | So none of our biggest clients are paying 75 basis points.

00:15:52.540 | And the hard part is we want to have our own version of a betterment or wealth front or

00:15:59.340 | a smaller portfolio solution.

00:16:04.140 | We haven't figured that out yet.

00:16:06.100 | So I would say we're pretty boutique-y.

00:16:07.860 | Most of the people we work with have been successful and have significant wealth or

00:16:12.780 | on their way to that point.

00:16:15.260 | But I would love to figure out a solution that works perfectly for our firm that allows

00:16:19.380 | us to work with more people.

00:16:20.780 | Okay.

00:16:21.780 | So I've got an understanding, and I love what you're talking about.

00:16:24.660 | I love the little bit of your story.

00:16:29.180 | And well, before I ask you a hard question, so you defined the problem.

00:16:35.460 | You defined it as the problem is the model.

00:16:37.980 | The firms are on the top, and the people are on the bottom.

00:16:40.700 | And so in the context that you're describing, a smaller in terms of measured in terms of

00:16:46.660 | number of people, small independent firm, you just have you and a couple of advisors

00:16:51.420 | and some support staff is what it sounds like, and you're serving these 135 families, very

00:16:55.980 | intimate relationships.

00:16:57.380 | A lot of hands-on, very clear, simple, and transparent.

00:17:02.460 | So that's been your solution to the problem.

00:17:07.900 | Is that the solution for the industry?

00:17:12.140 | Is that the solution for the industry?

00:17:15.780 | We all have to make our own choices and have our own experiences.

00:17:19.020 | I would just say for me, what I realized is that I care deeply about having an investment

00:17:29.700 | philosophy that allows me to sleep well at night and feel like I have the best mathematical

00:17:35.120 | chance for success.

00:17:36.860 | So at my core, that's something that when I read this book that I mentioned earlier,

00:17:41.620 | this Larry Swedrow's only guide to a winning investment strategy you'll ever need, which

00:17:45.220 | by the way is an unfortunate title if you're going to go on to write 14 more books, if

00:17:50.060 | you call it the only guide.

00:17:51.540 | Indeed.

00:17:52.540 | But I would say when I read the first 100 pages of his book, I was like, this is what

00:17:58.460 | I'm meant to do.

00:17:59.740 | This is what I'm supposed to be doing.

00:18:01.920 | This process and this approach based on academic evidence makes me feel good about what I could

00:18:08.740 | do for other people.

00:18:11.380 | And I think part of the reason I mentioned my parents being in education is because I

00:18:15.780 | think at the core, one of the things I feel is my unique ability is taking a complex subject

00:18:22.900 | and distilling it down in such a fashion that a regular human could understand.

00:18:27.580 | Now obviously there are super technical people who want all they can get.

00:18:31.780 | They want to know how to do this themselves and they may come to work in our industry

00:18:36.580 | and make similar choices to what I've made or different.

00:18:39.260 | But for me, I'm an accidental entrepreneur.

00:18:42.340 | I wasn't a kid when I was a kid who had a lemonade stand or who had a newspaper route.

00:18:46.380 | I didn't know I was going to become a business owner.

00:18:49.140 | I love the firm where I worked.

00:18:50.980 | It was independent.

00:18:51.980 | It had its aim right at serving clients.

00:18:55.100 | But myself and one other guy who's 30 years old, by the way, there are seven of us who

00:19:00.180 | work in our firm today and we've just slowly grown over time.

00:19:05.060 | But from my perspective, becoming an independent firm was a phenomenal choice because now the

00:19:14.980 | technology is so good that I can compete with anyone from JP Morgan to Goldman Sachs to

00:19:20.220 | Northern Trust to the headquarters of Edward Jones is based here in St. Louis.

00:19:25.100 | We have everything I could want.

00:19:28.380 | If I want to choose the best resources available, I can go get them.

00:19:31.860 | They're affordable for my firm.

00:19:34.900 | We take the fiduciary mindset not just with respect to the products or investment philosophy,

00:19:41.260 | but with respect to tools and resources.

00:19:44.260 | Now an independent small firm like mine can have access to really powerful technology

00:19:51.340 | tools that make people's financial lives better.

00:19:56.020 | That one piece to me is like, I don't know why someone wouldn't choose this.

00:20:01.220 | Even the choice between working at a huge firm where you basically have to accept whatever

00:20:06.420 | resources they provide versus being able to choose yourself.

00:20:10.420 | I like the idea of having the control.

00:20:12.660 | On this other area too, it's so much fun to work with people you want to work with.

00:20:18.420 | When you have control over what your filter is like, when I go home at night, I generally

00:20:24.640 | feel energized because I work with people who give me energy.

00:20:27.620 | I don't work with people who bog me down.

00:20:30.100 | We're able to filter.

00:20:31.340 | We were lucky enough to get off to a great start when we started our firm and be able

00:20:34.660 | to choose the kind of people you work with.

00:20:37.060 | We don't have any jerks.

00:20:39.060 | We say the kind of people we want to work with are people who either understand our

00:20:42.780 | approach or have the ability to understand the approach.

00:20:44.960 | They want to delegate, meaning they don't want to do this themselves.

00:20:48.180 | They're fun to be with.

00:20:49.700 | I know that sounds squishy and soft, but we take that seriously.

00:20:55.000 | We care about the kind of folks we spend quality time serving.

00:21:00.140 | It's awesome.

00:21:01.140 | That's a long answer, but the answer is yes.

00:21:04.200 | I think this is a phenomenal solution.

00:21:06.920 | I think it's a great direction.

00:21:09.280 | I think it's great for clients.

00:21:10.640 | It's great for us.

00:21:12.520 | I don't know what I would change.

00:21:14.600 | I'm pretty introspective and constantly thinking about things that we could do better.

00:21:19.120 | I just feel like right now, it's an embarrassment of riches for independent firms.

00:21:23.080 | We have so many tools and resources.

00:21:25.240 | When I go to conferences, it just feels like if you could dream up something you want to

00:21:29.120 | provide to your clients, somebody could make it.

00:21:33.320 | What was the – I've not read Swedro's book, nor am I familiar with what he is teaching.

00:21:39.160 | What was he presenting in the first hundred pages that was so impactful for you?

00:21:44.120 | For me, it was really – so if you go back and you think about what I've been hearing,

00:21:47.960 | it was like all these guys who were picking stocks or timing the market were all gurus

00:21:52.440 | and they all had – everybody outperformed the market.

00:21:55.640 | Then I read his book and it was like, look, all the academic research basically says,

00:21:59.440 | hey, it's hard to beat the market.

00:22:00.760 | The people who try to do it, some do, but we can't predict in advance who will do it

00:22:06.000 | and the ones who did it last year aren't the ones who are going to do it next year.

00:22:10.520 | Your best option if you believe all that stuff is to own the market.

00:22:14.400 | Get low-cost diversified exposure to global capitalism and just go to sleep.

00:22:20.800 | Don't even pay attention to it.

00:22:22.960 | That rocked my world because I had just come out of a place that was completely the opposite.

00:22:29.160 | It was, hey, pay people high fees because they can outperform.

00:22:33.320 | If you want to get rock star returns, you got to hire the rock star.

00:22:37.960 | Here I was reading about basically the data.

00:22:42.560 | If you chose to hold people accountable to what they said they could do over long periods

00:22:46.000 | of time, it's very difficult to outperform or to pick the people who outperformed and

00:22:50.400 | that just blew my hair back.

00:22:52.600 | I couldn't believe that was true.

00:22:54.360 | I couldn't believe that there were so many people in the world who did something very

00:22:58.360 | different.

00:22:59.360 | I was like, this is the thing, Joshua, I would say that I could not get out of my head.

00:23:04.160 | I was like, if people know what I know, they will change their behavior.

00:23:07.880 | They will do things differently because if everybody read the first 100 pages of this

00:23:11.640 | book, they would make different decisions.

00:23:14.360 | For a long time, that's just what I said to people like prospective clients or people

00:23:17.200 | I wanted to hire.

00:23:18.200 | I was like, if you know what I know, you'll make different decisions because you're a

00:23:21.280 | smart person.

00:23:22.280 | >>It is funny.

00:23:23.960 | I am 30 years old.

00:23:25.480 | I started in the financial services business in 2008.

00:23:30.160 | I was 23 at the time.

00:23:33.560 | For me, I never participated in that brokerage, promote our mutual funds as being better than

00:23:40.080 | everyone else culture.

00:23:41.400 | First, I had spent years of reading and studying it from a personal finance level before I

00:23:46.800 | ever got into the professional level.

00:23:49.600 | I was pretty thoroughly convinced that it's pretty tough to outperform the market.

00:23:54.840 | Then when I got into it, I just assumed, well, I don't have any skill in outperforming the

00:23:58.480 | market.

00:23:59.480 | I never even tried to differentiate myself from the perspective of investment outperformance.

00:24:03.920 | That's a losing game from the beginning.

00:24:06.240 | I was always shocked when I ran across people who didn't have that perspective.

00:24:10.840 | People would ask me, what makes you better?

00:24:12.600 | I was like, nothing.

00:24:13.960 | I'm no better from the investment perspective.

00:24:16.320 | Why on earth would you think that anybody who's sitting here in a suit and tie actually

00:24:21.200 | taking the time to meet with you as an individual person is superior to any other financial

00:24:26.200 | advisor with a suit and tie?

00:24:27.440 | The guys and gals who are better, they're not meeting with clients.

00:24:33.920 | There's no time.

00:24:34.920 | There's no ability for them to meet with clients.

00:24:37.160 | It always has been surprising to me given the preponderance of the evidence that anybody

00:24:42.840 | could believe that my guy from this brokerage firm can call me on the phone and give me

00:24:49.400 | better stock tips than this other person.

00:24:54.120 | But I recognize that that is largely due to the massive transformation that's happened

00:24:58.400 | in the last 20 years in the world.

00:25:01.720 | I realize that it takes time for that to filter down to two people.

00:25:06.200 | Go ahead.

00:25:07.200 | - Can I ask you, so I love what you just said.

00:25:11.800 | I love that you didn't have to get burned to understand this yourself because so many

00:25:16.120 | people I meet, they come to this after having had a really bad experience.

00:25:20.760 | In fact, when I lost some money with stocks that I had purchased, this is in the book

00:25:26.200 | too, Larry Suedro says to me, I thought you read my book.

00:25:28.880 | I said, I did.

00:25:29.880 | He's like, why didn't you get rid of those individual stocks?

00:25:32.160 | I said, I don't know.

00:25:33.160 | I just couldn't pull the trigger.

00:25:35.400 | He was like, well, chalk it up to tuition.

00:25:37.600 | The money you lost is just a tuition payment.

00:25:40.120 | You learned a valuable lesson.

00:25:41.920 | So good for you for not having to go through some of that pain and getting to a good end

00:25:47.680 | quickly.

00:25:48.680 | I was just going to share one story.

00:25:50.600 | Do you like Michael Lewis?

00:25:52.160 | - Yes.

00:25:53.160 | - Okay, so I do too.

00:25:55.200 | I love Michael Lewis.

00:25:56.200 | I've read a lot of his stuff.

00:25:59.480 | I wouldn't say I don't love every ounce of what he's done, but I love the fact that he

00:26:03.200 | likes to choose people who make brave choices and write these big stories about them.

00:26:08.040 | - And let me put it in the context for the audience.

00:26:09.840 | Michael Lewis, the author of the big short, Flash, what was the most recent one, Flash

00:26:13.160 | Boys.

00:26:14.160 | - Yep, Blindside.

00:26:15.160 | - Right, so these very, I mean, they're beautifully well-written, but these very impactful investment

00:26:21.520 | books.

00:26:22.520 | - And Moneyball too, which Moneyball was basically the story of how data and the analysis of

00:26:27.440 | data was being used in baseball to help poorer teams compete with richer teams, which I love.

00:26:34.720 | I think that story has many parallels with the story that I wrote.

00:26:40.280 | But one of the things I was going to share with you is I saw Michael speak a couple times,

00:26:44.000 | but once I saw him speak at a conference and someone said, "How have you," I mean, here's

00:26:48.560 | a smart guy.

00:26:49.560 | He had a phenomenal job on Wall Street, wrote about it in Liar's Poker.

00:26:52.760 | "How do you invest your own money, Michael?"

00:26:55.800 | And he said, "You know, I'm from Louisiana, and in the Lewis household, we did just whatever

00:27:02.480 | our dad did and our dad did what our granddad did.

00:27:06.120 | So you went down to the Merrill Lynch office and you signed up and you made an account

00:27:09.960 | and you listened to whatever this broker that their family had used for years said to do

00:27:13.640 | and you did it."

00:27:14.640 | He said, "That's what I did until two of his best ideas went belly up."

00:27:20.680 | And he's like, one was like Lehman Brothers, Bonds, and the other, I can't remember, but

00:27:25.200 | he was like, "I just, I didn't even think about it.

00:27:27.880 | You just did, you did what your parents did."

00:27:31.520 | And also, I mean, I think about it, you know, especially in certain parts of our country,

00:27:36.480 | your parents don't talk about money.

00:27:38.520 | They talk about money less than they talk about politics and sex.

00:27:42.260 | So in terms of like how our world is evolving, for a lot of people, if they weren't, if you

00:27:48.200 | didn't have like sort of like transparency and open communication about money, what it

00:27:52.960 | does for your family, what you value about it, how your family makes important financial

00:27:57.440 | decisions.

00:27:58.440 | I mean, we really are starting from sort of like a very low baseline.

00:28:03.120 | If for years and years or generations and generations, people just sort of did whatever

00:28:07.340 | their parents did or whatever their grandparents did.

00:28:09.780 | And that thing, that decision wasn't even really discussed.

00:28:14.120 | It was just sort of like, you just did it and you just did it because that's what Louis's

00:28:18.280 | do.

00:28:19.280 | I mean, he shared that story and then said, you know, "Then I made a big change and now

00:28:22.480 | I work with an independent advisor and now I have a plan and now I feel so much better."

00:28:26.520 | I mean, I think here you have a very sophisticated, smart person, went to Princeton, arguably

00:28:31.600 | one of the best storytellers of our time saying, "Even I made decisions without sort of like

00:28:39.240 | a really thoughtful process.

00:28:41.520 | I just did what we Louis's did."

00:28:44.240 | I mean, that tells you to me that a lot of people are, it's going to take a long time

00:28:49.600 | for a lot of people to make big changes because this is just a topic that for years and years

00:28:54.360 | and years, people just taboo.

00:28:55.960 | You know, either people don't think they have enough money or they think they have too much

00:28:59.520 | and they don't want others to know about it or whatever.

00:29:02.360 | People don't talk about money, what it means to them, what it does for them.

00:29:05.600 | And so I think there's just, there's a lot of work to be done.

00:29:09.000 | And I love doing that work.

00:29:11.760 | I love, I mean, if we worked with computers and robots, this would be a really easy story.

00:29:16.800 | Hey, active managers have a hard time winning.

00:29:20.640 | You can put the odds in your favor.

00:29:22.760 | Here's how you do it.

00:29:23.760 | Oh, great.

00:29:24.760 | That makes a lot of sense.

00:29:25.760 | Let's do it.

00:29:26.760 | But that's not how it always works because we're dealing with humans who have history

00:29:29.760 | and legacy and their own money stories and their own issues and their own fears.

00:29:35.320 | And it's that the psychological complexity is the part that fascinates me probably the

00:29:40.000 | most because the indexy versus, you know, active kind of stuff.

00:29:45.040 | Like that's, that story to me now is a little bit less interesting.

00:29:49.440 | It's how do you connect with a real human to get them to make better financial decisions

00:29:54.120 | that matters the most and is the hardest.

00:29:58.320 | Subtitle on your book is "The Making of an Evidence-Based Investor."

00:30:03.000 | This evidence-based thing is kind of a popular term these days, evidence-based medicine or

00:30:06.640 | evidence-based blah, blah, blah.

00:30:09.840 | What do you mean by that subtitle?

00:30:12.280 | So first I would say I like words, but we've never, no one's ever found a good word to

00:30:18.440 | describe I think an investment approach that is something more than index funds, something

00:30:24.320 | more than passive.

00:30:26.120 | It's what is it that we can learn from academic research or from science that will help us

00:30:33.320 | make more money?

00:30:34.680 | What is, what's there that is repeatable and reliable and robust in the way of scientific

00:30:40.280 | research that will allow a person to feel like they have the right kind of investment

00:30:47.600 | approach?

00:30:48.600 | So evidence-based to me is the best name that is available for that kind of thinking.

00:30:55.800 | And really what I tell you, for the last 16 years, I've been, I'm 42 years old, for the

00:31:04.560 | last 16 years, I've been giving away books to friends, family, prospective clients, anybody

00:31:10.840 | I could find and said, "Hey, look, check this stuff out.

00:31:14.560 | I get really turned on by this.

00:31:16.400 | Let me know what you think."

00:31:18.120 | And after I would give them the book, I would check in with them and I would say, "What

00:31:20.720 | do you think?"

00:31:21.720 | And they'd be like, "Well, I stopped reading it.

00:31:22.720 | I didn't make it very far."

00:31:23.720 | "Why didn't you make it very far?"

00:31:24.720 | "Because I got bored."

00:31:26.000 | And what I realized was, you know, most people reading about finance, it's boring.

00:31:29.960 | And it took, not everybody was turned on by the same stuff.

00:31:32.720 | Like if you say evidence-based investing, that's a snooze fest for most people.

00:31:36.280 | So the reason I chose to write this book and do it by, you know, framing it all in my own

00:31:41.480 | stories was because I thought I could get people to pay attention long enough if I use

00:31:47.560 | my own experience and am vulnerable and share with people like some moments in my life that

00:31:53.160 | weren't all that great where I didn't have it all figured out, where I was struggling.

00:31:57.040 | I thought I might get people to stay tuned and actually get injected with a little bit

00:32:03.600 | of the stuff that I'm obsessed with that I wanted them to take hold of in those other,

00:32:08.640 | you know, books that I gave away for 16 years that they didn't make it through.

00:32:11.600 | So I really tried hard to bury the stuff that I want people to know, some of the investment

00:32:16.480 | basics I think.

00:32:17.560 | I tried hard to throw that into stories from my own experience.

00:32:23.640 | As I mentioned before, so far the thing that has made me the happiest is that people that

00:32:28.920 | wouldn't read the prior books I would give them made it through this.

00:32:31.720 | And when I asked them a few questions to see if they retained some of the stuff I wanted

00:32:36.000 | them to retain, the answer has been very positive.

00:32:39.400 | Ted Grennan: With regard to investment philosophy and evidence-based investing, let me tell

00:32:44.680 | you just briefly where I came to as far as the ideal approach for a financial advisor.

00:32:51.360 | And you can let me know if or where you think I'm wrong in terms of where I came to.

00:32:57.760 | I'm not a financial advisor anymore.

00:32:59.960 | I have no firm, no affiliation, no connection to any financial advisory firm.

00:33:04.800 | But I started with a company called Northwestern Mutual, a big insurance company.

00:33:11.600 | And I started in the first few years by primarily working in life insurance.

00:33:15.360 | And I transitioned over to investments as I built my skill and expertise in my marketplace.

00:33:23.080 | I didn't have anybody to work with and I didn't have any knowledge.

00:33:26.120 | So about three years in I started working and I chose to focus on the type of client

00:33:30.760 | that you outlined as far as the mass affluent.

00:33:34.720 | I didn't have any ability to work with somebody with $20 million.

00:33:38.480 | I had nothing special to bring to them.

00:33:40.760 | But I could serve effectively either high-income earners who were young or wealthy retirees,

00:33:47.640 | people who had anywhere from half a million to a few million bucks, that type of scenario,

00:33:52.960 | which is exactly the same type of client that everybody else is targeting as well, it seems

00:33:58.960 | like sometimes.

00:34:00.200 | But I came to the conclusion that the only major impact that I as a financial advisor

00:34:04.040 | could have was number one, to give people a confidence with their actual financial plan.

00:34:09.840 | People don't want investments.

00:34:10.920 | They want money.

00:34:11.920 | They want income.

00:34:12.920 | They want to know that their life and their goals are going to be realized.

00:34:16.480 | The reason we invest, the only reason we invest is simply because we value something that

00:34:22.600 | we're going to get in the future more than we value what we could spend the money on

00:34:26.960 | today.

00:34:27.960 | Without that, there's no rational reason to invest.

00:34:31.060 | So we have to make that very clear and spend our time focusing on that.

00:34:35.640 | So I came to the conclusion that I could offer really great financial planning and really

00:34:40.440 | good financial planning from the perspective of here are your goals.

00:34:44.440 | Here is the elegant and appropriate way to reach them.

00:34:47.880 | I could offer a lot of great service with good technical financial planning, the CFP

00:34:53.200 | stuff.

00:34:54.200 | Here's how you just make sure you're not making any big mistakes, overspending, etc.

00:34:58.080 | And then from the investment management perspective, the person who was the most influential in

00:35:03.520 | my life was Nick Murray and Nick Murray soundly convinced me that I could provide a tremendous

00:35:09.840 | service with helping people manage their own behavior and that as an advisor, the thing

00:35:18.680 | that we as individuals are the worst at, it's not knowing what to do.

00:35:22.200 | It's actually doing it in the same way that many times the biggest benefit that a personal

00:35:27.360 | trainer brings, sometimes it's the knowledge of which exercise to do and how many repetitions

00:35:31.540 | to perform of the exercise.

00:35:33.500 | But a lot of times it's the accountability and having somebody there to simply say, "Okay,

00:35:37.940 | do this.

00:35:38.940 | Now do this," and so that you don't have to worry about it.

00:35:40.920 | So I came to the conclusion that we as financial advisors, our biggest value proposition was

00:35:45.000 | helping our clients manage their behavior and that through good financial planning and

00:35:50.060 | good coaching, I could position them such that they would be comfortable in times of

00:35:54.360 | market downturn and also I could coach them in advance so that they would be aware of

00:35:58.920 | it and they wouldn't be caught and blindsided by their behavior.

00:36:02.960 | After a few years, I wanted to start this podcast and so that was when I left Northwestern

00:36:09.920 | Mutual and I had gone through the process even of establishing the paperwork for an

00:36:14.000 | RIA and if I were going to do it over again, I would probably go back and build a similar

00:36:18.280 | registered investment advisory firm, similar to what you've done and hold out those things

00:36:23.800 | that I just described because those were the conclusions that I reached of the biggest

00:36:28.800 | value that we reached in the industry and that was where I said, "This is where a financial

00:36:34.240 | advisor is worth their money and ignore most of the other things where they're not."

00:36:39.120 | Now whether you want to use Vanguard funds or DFA or whatever, it doesn't matter to me.

00:36:44.720 | There's a lot of good options there that can be done, but that was what I came to.

00:36:48.280 | So I'm curious.

00:36:49.400 | In everything I described, are there any of those points that you disagree with?

00:36:53.800 | First of all, if you ever decide to become an advisor again, let's talk.

00:36:59.800 | I love everything you just said and I think we have a lot in common.

00:37:05.760 | What city are you based in?

00:37:06.760 | West Palm Beach, Florida.

00:37:07.760 | Oh yeah.

00:37:08.760 | Nice place to visit.

00:37:09.760 | Okay.

00:37:10.760 | So that is awesome.

00:37:11.760 | I think we – I mean let's first say this.

00:37:16.360 | We agree on a lot.

00:37:17.520 | We deviate only in probably tiny places that is like trivial pursuit, but would you like

00:37:22.200 | for me to maybe – I would love, please.

00:37:24.880 | Yes.

00:37:25.880 | So first I would say I love Nick Murray.

00:37:29.800 | My firm, we're subscribers.

00:37:32.280 | I love his voice and I fear the day when he is not around because there is no voice who

00:37:37.640 | will replace him that I know of.

00:37:40.760 | But to say that one needs to manage client behavior is – that's an excellent objective.

00:37:49.760 | But where is there training for any financial advisory firm or wealth management firm as

00:37:56.240 | to how one gets to a level of emotional or psychological intelligence where you really

00:38:05.200 | can make a deep impact on another person?

00:38:09.640 | I found myself really longing for someone to train both me and my team.

00:38:18.520 | So basically what I'm saying is I agree that a lot of this is human behavior and the management

00:38:25.240 | of that behavior and holding people accountable to what they say they're going to do.

00:38:29.760 | Huge part of it.

00:38:30.760 | And from a financial planning perspective, I'll tell you, we don't say – we don't

00:38:34.640 | broadcast financial planning to prospective clients but we do financial planning.

00:38:40.000 | And I would say we agree on most things.

00:38:42.520 | But the thing where I think, at least from my point of view, I learned so much from two

00:38:48.480 | things, one experience and another person.

00:38:51.960 | So this is in the book.

00:38:54.040 | I don't want to give too much away if people are going to check it out or read it.

00:38:58.240 | But there's a really meaningful section for me that I included in the book that is about

00:39:03.080 | shortly after we started our firm, I was diagnosed with a rare form of blood cancer, a type of

00:39:09.120 | leukemia that 10 years prior killed basically everybody who got it.

00:39:14.400 | And science had revealed a drug that was considered like a miracle drug.

00:39:19.360 | There's actually a book written about it called The Magic Cancer Bullet.

00:39:22.880 | And unlike if you've met anybody who has had cancer, normal chemotherapy, it goes in, it's

00:39:27.320 | like a bomb and it explodes and they kill the bad stuff but they kill lots of good stuff.

00:39:32.020 | This was considered like a designer chemotherapy drug.

00:39:35.520 | It went in and it nipped the exact genetic malfunction right in the bud and with very

00:39:41.280 | few side effects, it could reduce and in some cases, people have said that it could even

00:39:49.300 | eliminate or shrink it down to a level that is unrecognizable, the cancer or the leukemia.

00:39:55.920 | Well, I share this experience in the book because the doctors who cared for me, they

00:40:01.240 | had massive like scientific knowledge.

00:40:04.320 | They both went to Stanford Medical School.

00:40:05.880 | They're both brilliant people.

00:40:08.840 | But they handled me in such a way that I felt, and this is the way in my firm we describe

00:40:15.080 | it but this may not mean that much to other people, I felt well-held.

00:40:19.600 | I felt completely understood.

00:40:22.040 | I mean, I would do anything that these people told me to do because I felt like they got

00:40:26.840 | me at a level that few people really did.

00:40:30.440 | I couldn't, if you told me how did they do it, how did it happen?

00:40:34.040 | I detail some of this in the book but it's hard to explain.

00:40:37.280 | So after this experience, I came back to my partner and I said, "Listen, I just learned

00:40:41.200 | from people how to help others, how they helped me in a traumatic situation feel a strong

00:40:48.200 | sense of calm and direction."

00:40:51.920 | When people we serve have traumatic things happen in their lives, either through the

00:40:56.480 | markets or other things in relationships or their own health, we have to be better at

00:41:01.000 | serving them.

00:41:02.000 | We got to go beyond the spreadsheet.

00:41:04.560 | We're very comfortable in like the quantitative places but we've got to get more comfortable

00:41:09.080 | and get to a place where we can make people feel the way I felt, to make people feel well-held

00:41:13.480 | or understood.

00:41:15.360 | So this may sound kind of kooky to some but we hired a psychotherapist and she's mentioned

00:41:20.200 | in the acknowledgments of my book and she was just at the launch party.

00:41:23.560 | She's a phenomenal resource, probably one of the top five people I've ever met in my

00:41:26.360 | life who comes to my firm once a quarter and helps us have deeper and more meaningful relationships

00:41:33.520 | with clients.

00:41:34.520 | I can't tell you how much further I think we've gone than just saying, "Hey, we need

00:41:39.240 | to be better at managing human behavior."

00:41:41.360 | We've gone to a whole other level where I'm so grateful and I love it.

00:41:47.800 | I'm obsessed with that piece of the puzzle because as you said, whether you use Vanguard

00:41:53.080 | or DFA or some other combination of stuff or AQR, Bridgeway or whatever, whatever fun

00:41:59.920 | choices you're making, from my point of view, as long as you feel like you have a process

00:42:06.680 | and a belief system because I do think some of the investment philosophy stuff, even though

00:42:11.560 | Nick Murray wouldn't necessarily agree with this, I do think some of the investment philosophy

00:42:15.160 | stuff helps people remain calm when the apocalypse du jour is underway.

00:42:22.800 | So if you have a scientific approach or an approach that feels like a rock, it makes

00:42:31.320 | them feel sturdy, then when everything else is chaotic, I think they have soft knees,

00:42:39.960 | meaning they sway a little bit.

00:42:41.040 | They don't break.

00:42:42.040 | They don't fall apart.

00:42:43.280 | So I would say that's one area where I think we've really gone beyond what I believe Nick

00:42:51.440 | has encouraged people, advisors to do because ultimately, the clients, even the smartest

00:42:57.240 | clients we work with, I don't know that they care.

00:42:59.600 | Oh, I do know that most of them don't care about the underlying investment, the funds

00:43:07.520 | and the strategy as much as they do the plan and their ability to reach their own goals

00:43:14.040 | and feeling understood and well-held and cared for.

00:43:18.200 | But that's been part of my own evolution.

00:43:20.400 | In the past, what I used to do was beat people over the head with what I consider to be the

00:43:24.960 | data and evidence that they should fall in love with.

00:43:27.320 | And what I found was people either fell asleep or were confused or frustrated, and I got

00:43:32.160 | tired of doing that.

00:43:33.160 | So then I started becoming a better listener and understanding what was important to them.

00:43:36.880 | And what was amazing was when their light was on and they were talking about themselves,

00:43:42.640 | I could tell they felt really great and they wanted to reciprocate and hear what was important

00:43:46.960 | to us, but most people just don't care that much.

00:43:50.520 | We have a few people who are sort of super nerds who love the same stuff we love and

00:43:56.320 | we send them special communications and let them backstage a little bit more.

00:44:01.000 | But for most people, they just want to live their lives and feel like they've made a smart

00:44:05.760 | money decision.

00:44:06.760 | And I feel like the approach we have and almost all of what you just said is spot on.

00:44:14.720 | Really thinking while I set this question up about what it was that the – two things

00:44:19.120 | that the psychotherapist taught you that were instrumental, but let me set the question

00:44:22.840 | up with my response.

00:44:26.720 | What you described just now was my experience and one of my frustrations – well, what

00:44:31.280 | I learned was first, I needed to listen better.

00:44:35.680 | And how I was trained was to do a few minutes of listening about goals and then to gather

00:44:39.880 | data and facts and then present plans and ideas and options.

00:44:44.000 | I learned that the longer I spent listening and the longer I spent asking and finding

00:44:47.720 | out what people wanted, then the less data and facts and things I needed to present because

00:44:53.920 | people didn't care.

00:44:54.920 | They didn't remember anything about what I actually presented.

00:44:59.360 | People don't understand how investments work.

00:45:01.240 | They don't understand how insurance policies work.

00:45:03.080 | They just don't understand how taxes work.

00:45:05.240 | And so ultimately – but they do understand how you made them feel.

00:45:08.320 | So I learned to spend a lot more time listening and really understanding what – how somebody

00:45:13.400 | feels and then – and that helped immensely.

00:45:17.480 | And back to your concept of the production culture, I was convinced that it allowed me

00:45:22.320 | to go much deeper with clients, but it kept me from seeing more clients.

00:45:26.720 | And if you're purely measured based upon numbers, then that doesn't work so well.

00:45:31.000 | You have to be in a culture that can permit you to go deep with fewer clients and then

00:45:36.360 | you have to be working with a client base where it's a worthy – it's a profitable

00:45:41.780 | investment of your time to go deep with those clients.

00:45:45.360 | With regards to like the technical proficiency, the other thing I learned was I learned to

00:45:49.000 | – in the beginning, maybe you were trained in the same way.

00:45:52.640 | I put together this data book, the – what was it called?

00:45:55.920 | The book with all the illustrations and the charts and the graphs and the things like

00:45:59.640 | that and I'd carry this thing around with me and then it went digital and people would

00:46:03.000 | put it on their iPads.

00:46:04.000 | Later, I quit all that stuff and I just go out with a legal pad and I draw pictures.

00:46:08.600 | And the guy who introduced us here was Carl Richards.

00:46:11.080 | I told Carl Richards – I can't remember if I told him on the show or told him privately

00:46:14.200 | but I said, "I'm a little jealous of you because I used to just draw pictures for my

00:46:17.360 | clients and it worked for me and you've made a whole career out of your stupid pictures

00:46:20.360 | and I should have done what you did."

00:46:23.840 | But if you could just simply draw a picture and make it clear, like you can communicate

00:46:27.980 | more with a little sketch drawing than you can with data and charts and pictures because

00:46:32.320 | I still would have people remember and they'd say, "Oh, that picture that you drew, I

00:46:36.800 | still remember that.

00:46:37.800 | I used that with other people," but they don't remember the numbers.

00:46:41.280 | So those are some of the – and with regard to Nick Murray, I wholeheartedly agree with

00:46:46.220 | you that he doesn't offer a lot of texture on how to actually implement it.

00:46:53.080 | The mistake I made and I learned it quickly that it was the wrong way.

00:46:56.520 | He based upon perhaps his experience, his age, his platform, he conveys in his writing

00:47:04.660 | the idea of taking almost a strong arm position.

00:47:07.560 | You will do this because I am the advisor and you pay me to tell you what to do and

00:47:11.200 | therefore you shall do what I tell you to do.

00:47:13.920 | So I picked a little bit of that up and I tried to do that a little bit.

00:47:17.320 | I tried to be kind of the strong arm.

00:47:19.080 | I am the advisor and you will do what I tell you or we're just going to terminate our

00:47:22.640 | relationship.

00:47:23.640 | It didn't work for me and I realized it was later that my managing director told me,

00:47:28.920 | he's like, "Joshua, what would you do if somebody came and interacted with you that

00:47:33.600 | way?"

00:47:34.600 | I said, "Well, you're right.

00:47:35.600 | That's not me.

00:47:36.600 | I would not respond well to that."

00:47:39.040 | So I canceled that concept of strong arm tactics.

00:47:43.440 | Not that – that wasn't being coercive but just simply holding my ground from almost

00:47:48.120 | a position of positional superiority.

00:47:50.880 | I'm the advisor.

00:47:52.040 | You need to do what I said and I realized that doesn't work for me.

00:47:54.600 | It's not working for my clients and I had to adjust.

00:47:56.920 | So that was a long setup to give you a little background to my question of saying what were

00:48:00.640 | two of the things that the psychotherapist taught you that were so instrumental of how

00:48:05.320 | to work with individual clients?

00:48:07.800 | Well, let me jump back even before her and tell you one of the things that upon reflection

00:48:16.520 | I realized.

00:48:19.000 | So back in 2001, one of the jobs I had when I went to my first independent RA and I worked

00:48:29.780 | under this guy Larry Swebdro.

00:48:31.440 | I got to go with him.

00:48:32.880 | He would go and give talks for firms around the country and I got to go with him to the

00:48:40.080 | offices that were within a drive of St. Louis.

00:48:43.160 | So he needed someone to drive him and he needed somebody to fast forward his slides.

00:48:48.200 | So that was me.

00:48:49.200 | I was the guy who would drive this guy to give this talk.

00:48:52.040 | So let's – I'll give you a real one.

00:48:54.240 | We went to Cape Girardeau, Missouri on like a Tuesday night and there were – there was

00:48:58.920 | a large crowd that an advisor there had put together in a gymnasium and it was definitely

00:49:05.640 | a weeknight and I'd say there were 75 to 100 people in the room.

00:49:10.760 | We get there.

00:49:11.760 | Larry signed some books and he's going to give this talk and his slides violate every

00:49:15.520 | PowerPoint rule that we know today.

00:49:17.640 | Tiny fonts.

00:49:19.520 | No one could read them.

00:49:20.920 | But people could tell this guy was passionate about what he was talking about.

00:49:24.200 | He's basically talking about active funds, lose, indexy stuff, wins, be patient, take

00:49:29.480 | the long view, you'll win over long periods of time.

00:49:32.960 | But all throughout the presentation I would watch people's body language and they were

00:49:36.400 | bored.

00:49:38.780 | When he would get to the very end he would tell this story, the big rocks story, which

00:49:43.840 | is basically about sort of putting the most important things in your life first, putting

00:49:49.440 | the big rocks in.

00:49:51.440 | It's really the old story like if you have a pitcher and there's a business professor

00:49:56.600 | in front of his class and he puts these rocks in the pitcher and he says, "Is the pitcher

00:50:01.320 | full?"

00:50:02.320 | A bunch of the students say, "Yeah, it's full."

00:50:04.320 | Then he takes out some gravel and he pours the gravel in the bucket and the gravel goes

00:50:08.080 | in between the big rocks and it seeps down and he goes, "Now is it full?"

00:50:11.440 | The students catch on and they say, "No, it's not full."

00:50:14.440 | He gets some sand out and he pours some sand in there and the sand falls down.

00:50:17.640 | "Is it full?"

00:50:18.640 | "No, it's still not full."

00:50:19.640 | He gets the water out and he pours the water in.

00:50:22.680 | Now it's all the way up to the top and they say, "Is it full?"

00:50:25.120 | "Yes, it's full."

00:50:26.120 | They say, "What's the moral of the story?"

00:50:28.560 | One business student says, "No matter how jammed your schedule is you can always fit

00:50:32.560 | more in."

00:50:33.560 | He says, "No, no, that's not it.

00:50:35.120 | That's not it."

00:50:36.120 | The moral of the story is if you don't put the big rocks in first you'll never get

00:50:39.680 | them in.

00:50:40.680 | When Larry would tell this story that's when people would sit up straight and pay

00:50:45.000 | attention.

00:50:46.360 | What he just did was he took the boring investment stuff and he created an intersection where

00:50:52.120 | it hit their real lives.

00:50:54.800 | Your life will be better if you are freed up from worrying about whether you've picked

00:51:00.560 | the right guru.

00:51:02.240 | Your life will be better if you have simplicity and transparency.

00:51:07.360 | It will allow you to focus on the important things first.

00:51:12.160 | That lesson never left me.

00:51:14.240 | I just hadn't really figured out how to apply it in our own practice.

00:51:20.080 | Why did people look like they were about to fall asleep for 20 slides but then on the

00:51:24.000 | last story why did they wake up?

00:51:26.640 | Because it had something to do with how this approach was going to make a difference in

00:51:30.320 | their lives.

00:51:31.480 | The biggest thing that Marilyn Wechter, our psychotherapist friend I would say, did for

00:51:35.920 | us was remind us that all of this is connected to how we make real people's lives better.

00:51:43.880 | In order to understand how we might help make another person's life better, let's understand

00:51:48.080 | what their life looks like.

00:51:49.600 | Let's understand how they make decisions, how they've made decisions in the past, what

00:51:53.160 | stories they've told themselves about money.

00:51:55.760 | For example, one of the most powerful moments that's depicted in the book that I had not

00:51:59.200 | long ago.

00:52:01.400 | We have an awesome client, CPA by background, so fairly technical person.

00:52:09.620 | One day she was sitting in our office and I said, and things have gone really well and

00:52:14.120 | she's feeling good, and I said, "What are you going to do?

00:52:17.120 | You haven't spent as much money this year as we have detailed in the plan.

00:52:22.240 | Are you going to give more?

00:52:23.240 | Are you going to do this thing or that thing?"

00:52:25.680 | She says, "You know what I think I'm going to do?

00:52:28.000 | I think I'm going to pay off my sister's mortgage."

00:52:30.760 | I said, "Wow, that's awesome."

00:52:35.240 | Then all of a sudden I noticed she got really quiet and her eyes started getting a little

00:52:40.640 | red and she started crying.

00:52:42.840 | Of course, because we've worked with a psychotherapist, we didn't have this before, but we have tissue

00:52:47.920 | in our office.

00:52:48.920 | I got tissue, gave it to her, I said, "Tell me what you're thinking about now."

00:52:54.080 | She said, "I'm thinking about how proud my mom would be if she were alive to know that

00:52:59.200 | I could do this for my sister."

00:53:03.480 | For me, that's the kind of stuff that is so exciting and is so much fun to be a part of.

00:53:11.820 | If you can make a difference in another person's life where you, you know, I didn't know that

00:53:18.760 | this was going to trigger that reaction, but being fully present, seeking to understand

00:53:24.200 | another human being, and caring about where that intersection is, where the intersection

00:53:29.720 | is between great financial planning, a sound approach, really super people who want to

00:53:36.280 | do great things in the world for the people they care about.

00:53:38.960 | I love that.

00:53:40.240 | That's what makes, you know, that Simon Sinek guy who says, "Start with why."

00:53:45.720 | That's the kind of thing that is my why.

00:53:48.260 | That's why I love doing what I do and I'm never going to stop doing it.

00:53:51.480 | I know things will change and evolve over time, but I love where I am in this business

00:53:56.920 | and being able to help people in that way.

00:53:59.960 | That's the big payoff.

00:54:01.560 | Those are the moments that just energize my whole office.

00:54:06.760 | Tom: Love the story.

00:54:09.880 | It's an awesome example of the power of what we can do when we actually realize and dig

00:54:14.280 | in a little deeper and realize that we all have goals that probably don't fit so well

00:54:20.560 | into the financial planning software, but once you get clear on what's possible, then

00:54:27.840 | you can indulge some of those goals.

00:54:32.520 | I'm going to give you…

00:54:33.520 | Go ahead.

00:54:34.520 | Ryan: I did actually want to answer one other thing you said or asked me about another tip

00:54:38.880 | or idea that Marilyn has helped us with.

00:54:42.200 | One I alluded to earlier, which is she says the buildings that fall after an earthquake

00:54:49.800 | are the buildings that don't bend.

00:54:52.160 | If you're too rigid, you break.

00:54:56.240 | One of the big questions is do you have soft knees?

00:55:00.560 | Do you sway or are you too rigid?

00:55:03.560 | How do you deal with adversity or trauma?

00:55:08.000 | One of the things that is interesting to figure out is in the people's past when they've

00:55:12.960 | had a tough time, whether it's dealing with market volatility or losing money or losing

00:55:18.520 | meaningful relationships in their lives, how do they deal with those things?

00:55:22.920 | Knowing and understanding how people have dealt with whatever trauma they've had in

00:55:26.720 | the past helps you understand how they may deal with it in the future.

00:55:31.120 | For example, people who are super sensitive to market gyrations, we want to help them

00:55:37.080 | not be so sensitive to those things, but we know it's going to take time.

00:55:40.800 | We have in the family profile or the mind map that we have for clients, if you are super

00:55:45.920 | sensitive to how markets move at this stage of your relationship with our firm, we have

00:55:50.960 | a section where we label you as high attachment or low attachment or moderate attachment.

00:55:57.160 | How attached are you to market volatility?

00:56:02.040 | Then we make sure we talk with those people who are highly attached to those kinds of

00:56:06.560 | movements in a way that makes them feel understood.

00:56:10.360 | That in turn builds the kind of emotional resilience and strength because then they

00:56:16.360 | say, "Hey, these people have me.

00:56:18.360 | They've got me.

00:56:19.360 | They understand me.

00:56:20.360 | They're with me.

00:56:21.360 | They're here to protect and help me."

00:56:22.840 | That kind of thing, as I said before, if you have too much volume, you can't do that.

00:56:26.960 | If you love that juicy part, if you love having that kind of relationship with people, if

00:56:30.720 | you have a million clients, you just can't do it.

00:56:34.000 | That's why we're pretty selective and have an awesome practice because the people who

00:56:39.360 | work with me all share in this sort of idea that providing that kind of service is really

00:56:45.080 | powerful and it's rare because most people who are out there who hire some financial

00:56:49.880 | advisor, typically they think it's just about the investment management piece.

00:56:54.000 | They don't know that much maybe about financial planning.

00:56:57.040 | They certainly don't think or know a lot about how someone else could affect their behavior.

00:57:01.280 | When you get to that stage of evolution, it's really fun.

00:57:09.000 | Love what you're doing, Matt.

00:57:10.000 | I'm now going to put you on the spot and give you my biggest rebuttals to everything that

00:57:14.880 | you've described, my biggest criticism of the financial advice industry.

00:57:19.480 | I'd love to hear your straightforward response.

00:57:24.720 | We obviously, as I described earlier, we came to similar perceptions and similar conclusions

00:57:31.960 | with regard to how to structure a practice.

00:57:34.600 | If I were not doing radical personal finance, I would either be a partner or I would have

00:57:42.320 | a practice similar to the one that you've described because it's a very, very pleasing,

00:57:48.200 | enjoyable business model where you can have a high degree of satisfaction that you're

00:57:54.240 | making a massive positive impact in the lives of your clients.

00:57:58.120 | Your clients love you.

00:57:59.920 | Your business becomes more like a family versus a transactional customer relationship which

00:58:06.680 | is what many advisors have created is a bunch of customers that buy from them but aren't

00:58:10.640 | very happy with them.

00:58:12.440 | However, the problem that I perceive and the reason why I do not run that type of firm

00:58:17.400 | now is the vast majority of people will never be able to benefit from the services of an

00:58:26.440 | advisor like that simply because they're not rich.

00:58:29.880 | What I came to the conclusion as a financial advisor is that we as financial advisors are

00:58:35.240 | very good at giving excellent advice to people who have money and to people who are rich

00:58:40.920 | but we have no clue or concept of how to actually help people get rich because all of the things

00:58:48.280 | that we teach, they might possibly be applicable, maybe, but they generally don't work unless

00:58:55.720 | somebody is already rich.

00:58:57.280 | That's where I set you up with that when I asked who do you work with and you said we

00:59:00.800 | work with people who are wealthy and have some wealth or people who are high income

00:59:04.440 | earners.

00:59:05.680 | That's who all financial advisors work with.

00:59:07.600 | They work with people who are wealthy or have high incomes.

00:59:10.000 | My major premise of radical personal finance is that financial advisors are good at helping

00:59:15.460 | people who are already rich and the way that you get rich is by having a high income or

00:59:19.280 | by building a big business and saving a lot of money.

00:59:22.200 | So the biggest problem with everything that you described is that it only works for people

00:59:28.480 | who are already rich and there's no way for us as financial advisors in the system you

00:59:33.240 | described.

00:59:34.240 | You said, "Okay, the problem is the people on the bottom and the firm on top and there's

00:59:38.600 | this beautiful RIA model and there's awesome tools and technology.

00:59:42.160 | That's great but that's only ever going to serve probably 4% of the population and the

00:59:47.000 | 4%, I'm just making that up simply because the top 20% are the top 20%.

00:59:51.280 | Maybe we're going to serve 20% of the population but the bottom 80% or 96% of the population

00:59:55.760 | is never going to be able to make use of these types of services.

01:00:00.760 | So what do we as financial advisors do to help the vast majority of people who you will

01:00:07.280 | never profitably be able to sit down with and create a mind map and create this investor

01:00:12.760 | profile questionnaire that talks about are they high attachment, moderate attachment

01:00:15.840 | or low attachment?

01:00:16.880 | What do we do to help the majority of people?

01:00:19.920 | Awesome question.

01:00:22.840 | I'll tell you the present answer and my aspirational answer.

01:00:28.160 | The present answer is I have sent so many people to Vanguard, it is annoying.

01:00:34.280 | Someone comes to me and I care about them and they say, "Hey, we want to work with your

01:00:37.360 | firm.

01:00:38.360 | Here's our situation.

01:00:39.360 | Here's what we're doing."

01:00:41.480 | And I say, "You shouldn't pay us our minimum fee.

01:00:44.440 | You should go to Vanguard.

01:00:46.400 | Here's a proxy for the kind of allocation I like but you do whatever you want to do."

01:00:50.200 | But this is the best solution today.

01:00:52.960 | Hold on.

01:00:53.960 | I want you to finish but I'm going to interrupt you.

01:00:56.480 | Even Vanguard doesn't solve the problem because out of your 135 clients – and here's the

01:01:01.920 | challenge – out of your 135 clients, tell me just a guess how many of them worked at

01:01:07.960 | a mainstream middle class job and saved a half a million or a million dollars by investing

01:01:13.360 | 15% of their income into a mutual fund plan over 40 years.

01:01:17.320 | What percentage of them did that as compared to how many of your 135 rich clients got there

01:01:23.240 | because they're making multiple six figures per year, living in St. Louis, Missouri or

01:01:27.080 | other low-cost of living places or built an independent business as an entrepreneur and

01:01:31.320 | sold it or developed a high percentage?

01:01:35.840 | So I would say I agree with you.

01:01:37.880 | It's a small percentage.

01:01:39.360 | I would say it's probably more than 10% but less than 20%.

01:01:45.160 | What I'm telling you, Joshua, is what is my present reality.

01:01:49.320 | My present reality is I agree that we don't do a good job of teaching people how to create

01:01:56.080 | wealth.

01:01:57.080 | For myself, as I mentioned earlier, I feel like I'm an accidental entrepreneur.

01:02:02.920 | I'm just an intellectually curious, hungry little bugger who kept rubbing up against

01:02:07.480 | people who I thought were smart and then gradually got lucky and became friends with someone

01:02:11.880 | who said he wanted to start a business and was tired of being a W-2 employee and said,

01:02:15.640 | "Let's do something together."

01:02:19.000 | The best decisions I ever made from a wealth creation standpoint were starting my own firm

01:02:24.800 | and then I had a consulting project with a mutual fund company about five or six years

01:02:30.000 | ago that was a really great project and a smart decision and worked out well for everybody

01:02:35.520 | who was involved.

01:02:36.960 | Those things, I didn't go to school.

01:02:38.980 | No one taught me how to do those things.

01:02:40.840 | I would say most of the people that we work with, they either inherited wealth, they worked

01:02:46.240 | for a phenomenal company that had an unbelievable run and they had stock options and they participated

01:02:51.400 | in the unbelievable run of the corporation and were very lucky to have worked at a company

01:02:55.640 | that had that experience.

01:02:57.680 | Or they owned a business and the business did well and they sold it and had a liquidity

01:03:01.360 | event.

01:03:02.360 | Our largest client we work with was a beer distributor in St. Louis.

01:03:06.160 | We have a lot of old beer money.

01:03:07.800 | So I have a lot of clients who became wealthy because they worked for Anheuser-Busch at

01:03:13.040 | a time when Anheuser-Busch became dominant.

01:03:15.840 | I agree with you.

01:03:16.840 | There is no one teaching how one becomes independently wealthy.

01:03:23.880 | I would tell you though that I do have some people, and as I said, I think it's more than

01:03:27.840 | 10%, less than 20%, who were just steady, patient savers.

01:03:34.360 | They deprived themselves of luxury items and they plotted along and they've created for

01:03:42.640 | themselves basically their own pension.

01:03:45.880 | I do have some people like that.

01:03:47.580 | But the answer for me presently is I don't have a business solution that scales well,

01:03:54.240 | that can help real people who make a modest income, who want to save a little bit of money.

01:04:02.600 | You're right.

01:04:03.600 | I can't provide the same level of service for that person as I can for the person who

01:04:07.920 | already has significant wealth.

01:04:10.160 | That frustrates me.

01:04:11.480 | Here is one of the things that we do in our office that I personally like.

01:04:16.000 | We don't have a huge retirement plan business, but I do like that when we do retirement plans,

01:04:20.880 | and they're typically for small businesses.

01:04:23.280 | So an orthodontist who has 20, we have an orthodontist that's like 200 miles from where

01:04:28.080 | we are, has 20 people who works for him.

01:04:30.440 | Good friend of mine, young guy, and started out as, will be a phenomenal client, but started

01:04:38.000 | out with like a retirement plan and a modest savings account.

01:04:46.640 | He and his staff will benefit from our time together.

01:04:51.760 | He will benefit in bigger service ways.

01:04:53.940 | The staff will benefit because they'll get what I consider to be an awesome investment

01:04:59.060 | approach at a very low cost.

01:05:01.060 | We have a different fee schedule, by the way, for retirement plans.

01:05:03.320 | It's 50 basis points instead of 75 basis points.

01:05:07.800 | That's the best thing I can do at the moment is tell people, "Here's what I know about

01:05:12.760 | if you're looking to invest your money in a smart approach, you can go to Vanguard or

01:05:17.320 | Betterment or Wealthfront."

01:05:18.320 | By the way, Betterment, Wealthfront, that kind of stuff, I love it because to me, that's

01:05:21.080 | a much better experience than people were getting at Edward Jones.

01:05:24.440 | So if somebody can have a good investment experience there and not pay high fees to

01:05:28.380 | underperform and not understand what they're doing, good.

01:05:31.160 | By the time you're ready to come to someone like us, you'll have had a better experience

01:05:34.000 | and have more money and not be so sour on how this industry works.

01:05:37.900 | So I don't feel threatened or weird about any of that stuff.

01:05:40.520 | I like it and wish I had my own version that we could offer people.

01:05:44.000 | But it is frustrating.

01:05:45.080 | I do agree with you that there's a huge hole in the sense that no one teaches anyone how

01:05:52.240 | to be entrepreneurially successful or how to create real wealth or how to even analyze

01:05:59.820 | what their unique ability is and what the most valuable piece of their offering is.

01:06:05.220 | So there is a huge hole there and I don't have a great solution for that.

01:06:10.160 | But in the interim, I think retirement plans are a great solution.

01:06:13.440 | And Vanguard is a good firm, Betterment, Wealthfront, those are good firms.

01:06:18.360 | And I think the thing that inspires me is that there are better choices now than there

01:06:22.960 | have ever been for real people.

01:06:25.200 | That still doesn't solve the problem that you're highlighting, but that's my answer.

01:06:29.120 | Trey Lockerbie (00:10:00): Yeah.

01:06:30.120 | And I know I'm putting you on the spot.

01:06:31.120 | I appreciate the answer.

01:06:32.200 | Part of it is just I like to ask financial advisors this question and part of it is a

01:06:35.600 | lot of financial advisors listen to the show and I want us as financial advisors to listen.

01:06:41.280 | Because as far as I'm concerned, it's very difficult for me to imagine a better solution

01:06:46.780 | than what you've described as your firm.

01:06:48.680 | And there are thousands of other guys and gals all around the country doing exactly

01:06:51.680 | what you've done.

01:06:52.840 | And so I see maybe there are still problems.

01:06:57.200 | I'm sure you guys have some business problems that you're working on.

01:07:00.220 | But as far as the model, everything you described as the technology and things like that, that

01:07:04.640 | didn't exist a decade ago.

01:07:06.460 | But today, I think we've effectively solved a lot of those problems.

01:07:10.580 | Now there are still problems of how does a new advisor start?

01:07:14.920 | You or I couldn't have started in the type of firm you were at if we hadn't had a little

01:07:18.240 | bit of experience.

01:07:19.240 | There's still an on-ramp problem.

01:07:20.640 | There's still a training problem.

01:07:21.840 | There's still some prohibitive challenges.

01:07:24.920 | But we've solved the 80% of the problem.

01:07:29.360 | There's just some minor tweaks.

01:07:31.040 | How do we create a training culture?

01:07:32.480 | Blah, blah, blah, et cetera.

01:07:35.920 | And frankly, you said, "Hey, why didn't you start a firm?"

01:07:38.600 | This is why I started Radical Personal Finance and it's my best attempt to try to figure

01:07:42.080 | out how do we build some sort of educational platform that will teach people how to become

01:07:47.660 | the type of investors that good financial advisors want to work with.

01:07:51.680 | And I don't have a solution.

01:07:54.520 | But I'm working to build the solutions and figure them out where – we can talk later.

01:07:59.840 | I can tell you some of the models that I've built.

01:08:02.380 | But this is I think where I'd love to see you and – I mean this is where I'm focused

01:08:06.160 | and I'd love to see you and smart people like you start to focus and figure out how

01:08:12.400 | to do it because that's one of the biggest areas of opportunity that we have to work

01:08:19.600 | in the general population.

01:08:21.760 | My final question to you, Matt, before I give you an opportunity to tell us about your firm

01:08:25.320 | because there may be people listening who would care to work with you and who want to

01:08:28.880 | read your book.

01:08:29.880 | But my final question to you is back to just something tactics and this one is a little

01:08:35.600 | bit time-based.

01:08:36.600 | As we record this here on April 19, 2016, there's a lot of changes with pending legislation

01:08:44.280 | coming out from the regulators about changes to the fiduciary status.

01:08:50.080 | It's quite the news these days.

01:08:52.760 | And you've described in your initial conversation here today, you described the problem which

01:08:59.160 | a lot of people have experienced and have seen and you described your solution.

01:09:04.040 | And I'd be curious, what do you see as the current state of the market and where is the

01:09:10.600 | market going with regard to this transparency and client service orientation?

01:09:17.960 | And please include in your comments your own perspective on the pending fiduciary regulation

01:09:23.320 | from the regulators.

01:09:24.880 | Matt Roberts - Okay.

01:09:26.480 | So on the fiduciary issue, my personal perspective is I don't think they went far enough.

01:09:33.680 | I don't think it's a political issue, although it was politicized.

01:09:39.840 | I think it's just right and wrong.

01:09:42.320 | It seems silly to me to have like a fiduciary standard on retirement accounts.

01:09:46.280 | So it's like, oh, you have to have this standard on this type of account, but not on other,

01:09:50.200 | you know, on taxable accounts.

01:09:51.200 | It's just silly.

01:09:53.840 | Everybody I think should be a fiduciary.

01:09:55.560 | It's just why and what sense does it make to be able to say, yeah, I, you know, I have

01:10:03.120 | a suitability standard instead of a fiduciary standard.

01:10:05.360 | It just seems silly to me.

01:10:06.800 | You should represent the best interest of the client no matter what.

01:10:10.000 | But I don't, you know, my personal view is I don't wait for the government to like tell

01:10:14.000 | me how to behave.

01:10:16.040 | You can't legislate, you know, in my opinion, proper behavior always.

01:10:22.440 | I mean, they can change like the baseline, but the best firms that I know are operating

01:10:28.440 | at a much higher level anyway.

01:10:29.720 | So this is a blip on most firms' radar.

01:10:32.960 | But for firms that derive a lot of revenue from sources that this rule will affect, I

01:10:38.200 | can see where it's disruptive.

01:10:39.520 | But in many ways, I think it didn't go far enough and was watered down and softened by

01:10:45.520 | the power of, you know, big firms and their lobbying efforts.

01:10:52.640 | And I know like here in St. Louis, there's a very vocal politician who is like, I think,

01:10:57.280 | backed by one of the bigger firms who's based here.

01:10:59.720 | And it's just it's too bad because if you're really out to help others, then this is a

01:11:04.480 | no brainer.

01:11:05.480 | So to me, the fiduciary standard is an easy one.

01:11:08.400 | And I think it was watered down a little bit.

01:11:12.320 | Our industry at times is inspiring and it's also humiliating.

01:11:15.520 | And that's the humiliating part of it.

01:11:17.280 | It's like, why would anybody resist that change?

01:11:20.880 | I don't get it.

01:11:22.200 | So that's my perspective on the legislative piece.

01:11:25.920 | And then just from sort of where things are going and where this, you know, the industry

01:11:33.160 | and I guess just, you know, kind of how the market feels, how this little world feels.

01:11:38.520 | I feel highly optimistic, but it's also slow.

01:11:41.240 | I mean, in many ways, I think like racism, like other things that just take time and

01:11:48.280 | people, you know, there are people who are going to retire out of this industry and there

01:11:52.920 | are people that are coming into it.

01:11:54.840 | And as people come into it, everybody I meet at, I used to be very down when I would attend

01:12:03.160 | like a continuing ed conference or something, I'd be like, you know, is this really the

01:12:06.460 | best of our industry right here?

01:12:08.840 | Are these the kind of people that are going to provide inspiration to me?

01:12:12.320 | Because it seemed like there wasn't a lot that was changing.

01:12:14.640 | But now I feel like there is just so much new energy.

01:12:18.400 | There's so much more sort of collaboration.

01:12:21.000 | Think about like what we're doing right now.

01:12:23.040 | The two of us talking and, you know, sharing ideas and someone else will hear our ideas

01:12:28.640 | and tags or put something on it that's better than what we thought of.

01:12:32.220 | And that sort of like notion, I heard a TED talk one time called crowd accelerated innovation.

01:12:36.400 | And it's like technology is allowing us to share ideas and improve upon each other's

01:12:41.240 | ideas so much faster than ever before that I just, I can't help but feel optimistic and

01:12:46.080 | inspired about what's coming in this space.

01:12:50.120 | When I meet young people like people that are going to work at my firm, this story is

01:12:54.320 | in my book Odds On.

01:12:56.440 | There's a young guy who came to interview with me and he said, Matt, I will work for

01:13:00.760 | free for you for two years.

01:13:03.440 | Now think about that.

01:13:04.440 | Why would a normal person want to work for free for someone else for two years?

01:13:10.640 | That's how hungry this person was to be out of the model he was in.

01:13:13.680 | And he worked in financial services at EverJones to be out of that world and be in this world.

01:13:20.040 | I mean, it's just, I see that happening, that kind of attitude, that kind of hunger for

01:13:25.400 | the kind of practice we've built more and more.

01:13:29.280 | So while some firms talk about they have a problem with talents and finding good people,

01:13:32.560 | we don't have that problem.

01:13:33.740 | We have lots of good people.

01:13:34.800 | If I had a big enough budget, I would just keep hiring rockstar people, man, because

01:13:39.280 | I love being around great people who want to do good work.

01:13:42.640 | And then just how things feel in the world to me.

01:13:45.120 | I'm just a perpetual believer in global capitalism and I have no crystal ball, but I just love

01:13:51.280 | what's happening.

01:13:52.280 | I love that firms like Dimensional and AQR and Vanguard just keep innovating and keep

01:13:58.080 | creating things that allow us, I think, to put the odds on the side of the investor.

01:14:03.360 | And the analogy that to me is the best I've come up with is like when you saw, I saw Steve

01:14:09.760 | Wynn, the Vegas casino owner on 60 Minutes one time, and they asked him, they said, hey,

01:14:14.880 | Steve, does any gambler ever really beat you?

01:14:18.880 | Does anyone ever really beat the house?

01:14:21.160 | And he said, over the long run, I'm the only winner.

01:14:24.760 | The math is figured out.

01:14:26.760 | And that's exactly the kind of attitude and approach that I like to give to the kind of

01:14:30.640 | people we work with.

01:14:33.040 | So that's my answer.

01:14:34.040 | Matt, this has been a great interview.

01:14:36.560 | Tell us about the book, the book website, your firm website, and feel free to plug any

01:14:40.880 | additional resources that you'd like to provide for my audience.

01:14:43.800 | Okay, cool.

01:14:44.800 | So I worked for two years on this book.

01:14:46.280 | I'm deeply proud of it.

01:14:48.280 | It has done well by the standards that I held myself to.

01:14:52.760 | It's called Odds on the Making of an Evidence-Based Investor.

01:14:55.100 | You can learn more about that at matthallbook.com.

01:14:58.180 | It's for sale on Amazon and Barnes and Noble and everywhere else where you would normally

01:15:01.460 | find books.

01:15:02.880 | My firm is called Hill Investment Group.

01:15:05.060 | My last name is Hall, but my partner's last name is Hill.

01:15:08.120 | He's a very unselfish guy.

01:15:09.320 | The only thing he ever asked for was to name the firm after him.

01:15:11.880 | So we did.

01:15:12.880 | It's called Hill Investment Group.

01:15:13.880 | It was started in June of 2005.

01:15:14.880 | We have an office in St. Louis, an office in Houston, and clients all over the country.

01:15:21.080 | And yeah, that's about it.

01:15:23.560 | We're barely on social media, but you can find us on LinkedIn and Twitter and Instagram

01:15:29.000 | and that kind of stuff.

01:15:30.000 | But I don't know.

01:15:31.000 | I'm so bad, I don't even know all our names and IDs on those things.

01:15:35.320 | But hillinvestmentgroup.com or our firm's motto is takethelongview.com.

01:15:40.400 | So you can find or take the long view, you can find us at takethelongview2 or ignorewallstreet.com.

01:15:45.440 | We bought all those URLs.

01:15:46.440 | Good.

01:15:47.440 | Nicely done.

01:15:48.440 | Matt, thanks for coming on.

01:15:49.440 | Hey, I loved it, man.

01:15:50.440 | Thanks a lot.

01:15:51.440 | Thank you for listening to this episode of Radical Personal Finance.

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