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HighTower's Weissbluth Commits to Fiduciary Standards (Audio) · Bloomberg Intelligence

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  Speaker 1: I'm Charlie Pellett. That's a Bloombard business flash. Thank you
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  Speaker 1: e t F. Let's go to Katherine Calgary for the
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  Speaker 1: e t F Report. Vanguard took in one forty billion
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  Speaker 1: dollars in new money in the first half of the year.
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  Speaker 1: Bloomberg Intelligence analyst Eric Baltuna says Vanguard's game continues to
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  Speaker 1: cause Wall streets some pain. His reasoning, if you take
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  Speaker 1: Vanguards three trillion dollars, they only take home about three
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  Speaker 1: point nine billion dollars in fees from that money. To
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  Speaker 1: put that into perspective, if for every three trillion active
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  Speaker 1: mutual funds have they taken about thirty billion? And for
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  Speaker 1: every three trillion hedge funds have they taken about fifty
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  Speaker 1: five billion. Valtuna says a popularity of low cost e
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  Speaker 1: t s and index funds represents a transfer of wealth
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  Speaker 1: away from nancial middleman toward investor accounts. He has an
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  Speaker 1: addition to Vanguard's low fees, the financial industry is also
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  Speaker 1: being hurt by the lack of trading done by Vanguard's
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  Speaker 1: index funds and e t s. Low turnover within those
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  Speaker 1: funds means less revenue for Wall Street firms. That's your
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  Speaker 1: Bloomberg ETF Report. I'm Catherine Cowdery. This is taking stock
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  Speaker 1: with Gableen Hayes and Prim Fox on Bloomberg Radio. Your money,
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  Speaker 1: your financial wellness. Someone that's looking out for your financial wellness.
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  Speaker 1: Elliott Weiss Blooth. He is the founder and the chief
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  Speaker 1: executive officer of High Tower, helping to manage about thirty
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  Speaker 1: five billion dollars of customer assets. Elliott, thank you very
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  Speaker 1: much for being in the studio. Always a pleasure him.
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  Speaker 1: All Right, So you gotta just step back and tell
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  Speaker 1: me what's been going on since last time we spoke,
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  Speaker 1: Because you know, if you take a look at the
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  Speaker 1: SMP five dred, you know you're up about six percent
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  Speaker 1: so far this year. But you've kind of done a
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  Speaker 1: round trip. If you already packed in January and held
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  Speaker 1: onto your your stomach as the stock market crater, what's
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  Speaker 1: been going on. Well, hopefully if you have a good
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  Speaker 1: financial advisor, you, um didn't look at all the blood
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  Speaker 1: that was showing in December and January and February. You
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  Speaker 1: you sort of turned off the screen. You didn't look
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  Speaker 1: at all the all the bad news. Markets recovered. Things
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  Speaker 1: today look a little bit more stable. But if you
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  Speaker 1: have somebody who's looking out for your investments for you, um,
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  Speaker 1: you don't have to worry exactly about what's happening in
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  Speaker 1: the marketplace because you've entrusted a professional, hopefully your fiduciary,
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  Speaker 1: to keep an eye on that for you. I'm glad
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  Speaker 1: you mentioned fiducier. Maybe we can just do a little
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  Speaker 1: sidebar here, because fiduciary is a hot word this year
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  Speaker 1: because it has to do with the new Department of Yeah, okay,
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  Speaker 1: explain what's going on, and also about your registered reps
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  Speaker 1: and responding. So, first of all, the fiduciary standard is
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  Speaker 1: not new. The fiduciary standard is embedded in what it
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  Speaker 1: means to be a doctor, to be a lawyer, to
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  Speaker 1: be an accountant, And in the most simplest terms, it
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  Speaker 1: means that the service provide or has a legal obligation
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  Speaker 1: to put their clients or their patient or their person
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  Speaker 1: they're serving first. They can't put their own economic interest
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  Speaker 1: in front of what they're saying to their to the
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  Speaker 1: patient of the client. So just when you go see
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  Speaker 1: a doctor, you don't ever worry that a doctor is
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  Speaker 1: prescribing a drug to you because they're getting paid to
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  Speaker 1: prescribe that drugs. So the high degree of confidence in
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  Speaker 1: the areas of medicine in our industry. Unfortunately, that term
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  Speaker 1: has become a really hot topic. There are are parts
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  Speaker 1: of the industry where there's a fiduciary duty, like High Tower,
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  Speaker 1: and there are parts of the industry where people pretend
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  Speaker 1: to be fiduciaries and they're not really fiduciaries. The Department
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  Speaker 1: of Labor unfortunately has made that even more complicated because
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  Speaker 1: what they've done is they've tried to redefine the fiduciary duty,
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  Speaker 1: and they've done it with good intentions. I applaud their intention,
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  Speaker 1: but it's kind of like if the U. S d A.
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  Speaker 1: Came out and said, you know, we're gonna have vegetarian steak,
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  Speaker 1: or we have a new way to kosher a pig,
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  Speaker 1: all right, and you gotta look at that and you go, well,
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  Speaker 1: how does that work Exactly, I'm going to be a vegetarian,
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  Speaker 1: but I get have a stake once in a once
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  Speaker 1: in a while. Well, that doesn't work. You can't be
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  Speaker 1: a vegetarian and occasionally have state because that means you're
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  Speaker 1: not a vegetarian. So similarly, with the Department of Labor,
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  Speaker 1: they said, well, we're going to have fiduciaries, but here's
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  Speaker 1: a bunch of exceptions and situations where the conflict of
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  Speaker 1: interest can actually exist in their relationships. So that high tower,
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  Speaker 1: we don't we don't buy that. We don't think that's
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  Speaker 1: a true fiduciary duty. We think that those loopholes and
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  Speaker 1: caveats sort of swiss cheesing of the Department of the
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  Speaker 1: of the of the rule is really a problem because
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  Speaker 1: it creates confusion. So we hope that the Department of
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  Speaker 1: Labor and the the sec and and the government sort
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  Speaker 1: of gets a little more organized, has a little more
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  Speaker 1: frank conversations, and we have a single, clear, unambiguous fiduciary
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  Speaker 1: duty standard where there's no ambiguity. Everybody understands what it
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  Speaker 1: means and you can trust that when you have a fiduciary,
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  Speaker 1: it's really a true fiduciary. All right, so now let's
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  Speaker 1: talk about the actual money. Right and now we are
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  Speaker 1: post brexit, we're living in a low interest rate and
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  Speaker 1: by arment UH for a one case i R race,
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  Speaker 1: they are tax advantaged accounts. What should people be thinking
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  Speaker 1: about for those kinds of investments, Well, the most important
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  Speaker 1: thing they should be doing is really getting the advice
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  Speaker 1: of a third party. And everybody's situation is a little
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  Speaker 1: bit different. A lot of it has to do with
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  Speaker 1: where you are in your life cycle, a lot of
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  Speaker 1: it has to do with the planning that hopefully you
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  Speaker 1: have a financial plan that takes into consideration where you
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  Speaker 1: are in terms of building a family and building a career,
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  Speaker 1: and all of these are important tools that a financial
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  Speaker 1: advisor will integrate into a holistic plan. And this is
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  Speaker 1: where we talk about financial wellness. If you have a
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  Speaker 1: thoughtful financial plan and a fiduciary advisor, you hopefully can
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  Speaker 1: back away from what happens day to day in the
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  Speaker 1: stock market or what happens week to week and a
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  Speaker 1: situation like breaks that happens. If you trust your financial
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  Speaker 1: advisor is doing what he's doing, you might have a
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  Speaker 1: curiosity about sort of the global economic plitical landscape, but
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  Speaker 1: you don't have anxiety that it's going to have a
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  Speaker 1: have a an impact on your portfolio where you have
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  Speaker 1: to actually engage to worry about it. That's what a
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  Speaker 1: good financial advisor should be doing, should be doing for you.
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  Speaker 1: I wonder whether your background as a lawyer, because I
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  Speaker 1: know that you you have a law recovering right. But
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  Speaker 1: the reason I bring that up is because lawyers are
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  Speaker 1: either advocates or interrogators. There's always the other side and
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  Speaker 1: people who are not professional in let's say, managing money,
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  Speaker 1: who try to do it themselves. They're up against some
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  Speaker 1: very smart, energetic, and powerful adversaries. Well so, statistically, um,
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  Speaker 1: there's a doining how you count the data, Between five
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  Speaker 1: and six trillion dollars of assets are managed by do
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  Speaker 1: it yourselfers, and some of them are doing it themselves
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  Speaker 1: in a very sort of disorganized fashion. Some of them
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  Speaker 1: are plugged into a firm like Vanguard, and they're using
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  Speaker 1: very thoughtful tools and dis and and products that have
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  Speaker 1: very low cost to them. There's another six trillion dollars
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  Speaker 1: that are being in the hands of brokers, folks that
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  Speaker 1: are not fiduciaries. They may even call themselves financial advisors,
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  Speaker 1: but from a legal perspective, they don't owe you a
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  Speaker 1: fiduciary duty. And then there's a few trillion dollars that
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  Speaker 1: are in the hands of true fiduciaries. So if you
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  Speaker 1: take a look at those three segments of the industry, um,
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  Speaker 1: we obviously are biased because we're in the business of
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  Speaker 1: providing advice. We think that having a true professional manage
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  Speaker 1: your financial plan and manage the assets for you is
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  Speaker 1: obviously the right way to go compared to somebody who
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  Speaker 1: has an agenda to sell you, to sell you a product.
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  Speaker 1: But doing it yourself, and many people do it successfully themselves,
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  Speaker 1: requires a lot of time and care and attention, and
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  Speaker 1: it's probably better for you than at the hands of
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  Speaker 1: somebody who has an ulterior motive and a conflict of
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  Speaker 1: interest where you're unaware that they're actually making money off
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  Speaker 1: of you, not making money for you. In the legal profession,
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  Speaker 1: in the medical fashion, as a lawyer, you don't represent yourself.
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  Speaker 1: As a doctor, you typically don't treat yourself or or
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  Speaker 1: right or your family members for example, not allowed to unethical.
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  Speaker 1: In the financial industry, people in the financial business, they
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  Speaker 1: manage their own money many times should that change, I
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  Speaker 1: don't think so that's a great point them. I think
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  Speaker 1: in some cases the sort of I eat my own
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  Speaker 1: cooking is a really good metric of credibility. Now, many
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  Speaker 1: financial advisors will say, you know, I invest alongside my clients,
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  Speaker 1: I use many of the products that my clients use,
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  Speaker 1: and we think that's a perfectly suitable way to establish credibility. Now,
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  Speaker 1: depending on where that financial advisor, maybe inside of their
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  Speaker 1: own financial plan visa their clients, you may have some
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  Speaker 1: differences in people's needs and risk tolerances. So it's not
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  Speaker 1: a requirement from a client's perspective that their financial advisor
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  Speaker 1: be invested in all the things that they are. But
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  Speaker 1: there's nothing wrong with the nancial advisor, uh saying to
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  Speaker 1: a client that I eat my own cooking and I
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  Speaker 1: put my money at risk the same way that I
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  Speaker 1: put your money at risk. Last point to you, low
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  Speaker 1: interest rates? Is this the topic of the year for customers? Well,
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  Speaker 1: I think it's been a bit of a topic for
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  Speaker 1: a while. I think we've been living in this environment,
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  Speaker 1: um for for some time now. Uh. And again, because
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  Speaker 1: I'm not in the markets business, I'm a recovering lawyer,
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  Speaker 1: and and UH do not do not comment on on
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  Speaker 1: rates in which way they're going. But I certainly am
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  Speaker 1: surrounded at High Tower by some very fine, thoughtful financial
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  Speaker 1: advisors that are true professionals in this and the consensus
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  Speaker 1: opinion from a couple of them that are sort of
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  Speaker 1: close to close to me is that we're going to
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  Speaker 1: be sort of in this environment for at least a
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  Speaker 1: near term, and given where we've been, it's it's not
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  Speaker 1: likely to change soon. Thank you very much for spending
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  Speaker 1: time and coming into the studio. Elliott Wis Blooth is
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  Speaker 1: the founder and the chief executive officer of High Tower,
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  Speaker 1: helping to manage thirty five billion dollars. You're listening to
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  Speaker 1: taking stock. We're going to take you through to the
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  Speaker 1: clothes next, and this is Bloomberg. Yeah,