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Investing In The Great Wealth Transfer: Masters in Business with Adam Frank · Masters in Business

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio, news.
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  Speaker 2: I'm Barry Ritholtz.
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  Speaker 3: You're listening to Masters in Business on Bloomberg Radio. My
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  Speaker 3: extra special guest this week is Adam Frank. He is
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  Speaker 3: the head of wealth planning and advice at J.P.
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  Speaker 2: Morgan.
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  Speaker 3: Previously, he held the same job at Bear Stearns before J.P.
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  Speaker 2: Morgan acquired them.
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  Speaker 3: The group manages about $ 1. 4 trillion and specializes in in
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  Speaker 3: sophisticated family business and succession planning, estate and gift tax management, philanthropy,
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  Speaker 3: estate litigation, taxation, and employee stock option analysis.
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  Speaker 1: J.P.
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  Speaker 3: Morgan's combined asset and wealth management business, including global institutional,
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  Speaker 3: private bank, and retail, is over $ 7 trillion. Adam Frank,
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  Speaker 3: welcome to Bloomberg.
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  Speaker 1: Barry, thanks. It's great to be here.
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  Speaker 2: It's great to have you. That was a mouthful to
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  Speaker 2: get out. I'm glad.
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  Speaker 1: That and $ 3 will get you on the subway.
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  Speaker 2: That's right.
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  Speaker 3: So before we delve into what you do at JPM,
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  Speaker 3: let's talk about your background, because it's really very, very interesting.
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  Speaker 3: You earned a bachelor's in psychology at University of Pennsylvania,
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  Speaker 3: then a JD at Yale. I'm guessing the original plan
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  Speaker 3: wasn't wealth management.
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  Speaker 1: It was not.
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  Speaker 4: The original plan was practicing law because it was either
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  Speaker 4: that or being a doctor.
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  Speaker 2: One or the other.
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  Speaker 1: It was my mom's. Those my mom told me.
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  Speaker 2: And you didn't just practice law.
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  Speaker 3: You begin your career as a law clerk to Judge
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  Speaker 3: Jacob Mishler in the Eastern District of New.
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  Speaker 2: York, a legendary court. And then you end up.
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  Speaker 3: Working with him for a year and a half, two years.
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  Speaker 2: You did the full clerkship. Tell us what that was like.
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  Speaker 4: It was very interesting because he was a senior judge
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  Speaker 4: at the time, so he got to generally choose his
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  Speaker 4: own cases. He wasn't really in the criminal wheel, so
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  Speaker 4: he mostly had civil cases. And it was fascinating to
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  Speaker 4: watch him from the bench, or watch him on the bench,
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  Speaker 4: objecting on behalf of parties because their lawyers weren't quick enough.
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  Speaker 1: And, uh.
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  Speaker 4: Encountering him thinking, watching him think through or talking with
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  Speaker 4: him understanding his thought process of how he would get
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  Speaker 4: to a conclusion and then doing the research to back
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  Speaker 4: up that conclusion or sometimes tell him why I thought
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  Speaker 4: the conclusion was not right. But the biggest benefit of
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  Speaker 4: the fact that he was senior, he and his wife
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  Speaker 4: had a condo in a water Hill in Florida. And
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  Speaker 4: so every year he got, he would write to the
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  Speaker 4: chief judge, the chief justice of the Supreme court who
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  Speaker 4: would appoint him to the southern district of florida in
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  Speaker 4: miami where he would sit for four months in each
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  Speaker 4: of his clerks there were two of us got to
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  Speaker 4: go down to of miami on combat pay from the
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  Speaker 4: government so it was uh... it was a nice gig
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  Speaker 4: and that was a that was a very interesting court
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  Speaker 4: as well cuz he was in the criminal will there.
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  Speaker 2: And and you know uh.
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  Speaker 3: i don't care how much you like or dislike florida
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  Speaker 3: there were worse things in the world than miami in in.
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  Speaker 4: The winter yeah in the winter was it when it
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  Speaker 4: was winter nineteen ninety three and and seven or eight
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  Speaker 4: ice storms in New York. So my wife was, kept
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  Speaker 4: planning to come visit me in Florida and she kept
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  Speaker 4: not being able to because the airports were closed and
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  Speaker 4: the weather was so bad and I felt a little
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  Speaker 4: bit guilty but not that guilty.
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  Speaker 3: Not that guilty. No. So after you clerked, your first
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  Speaker 3: year at Sullivan and Cromwell and then you were at Schulte,
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  Speaker 3: Roth and Zabel, two highly regarded firms. You're focusing on
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  Speaker 3: high net worth clients and closely held businesses. Mm-hmm. Tell
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  Speaker 3: us a little bit about that practice. You can see
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  Speaker 3: how your progression is moving you towards wealth management.
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  Speaker 4: Well, it was interesting when I was in law school,
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  Speaker 4: my third year, I just took a trust in the
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  Speaker 4: states class because it fit into my schedule because I
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  Speaker 4: didn't want to have classes on Fridays. And the T &
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  Speaker 4: E course was Tuesday, Thursday. And it was fascinating because
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  Speaker 4: it's a case book and it's stories that the judges
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  Speaker 4: have written about the litigants in front of them.
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  Speaker 1: And it was fascinating.
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  Speaker 4: All of the families fighting over who mom loved best,
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  Speaker 4: using their money or their business or their restaurant as
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  Speaker 4: a proxy for that. And I just, it was fascinating
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  Speaker 4: to me because I was a psychology major as an undergrad.
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  Speaker 4: I didn't want to go to grad school, which is
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  Speaker 4: why I ended up in law school.
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  Speaker 3: And....
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  Speaker 4: I just thought it was a great intersection of law
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  Speaker 4: and property class, which I really enjoyed, and the psychology.
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  Speaker 4: And it was very human, as opposed to a corporate
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  Speaker 4: practice or a litigation practice, both of which are great
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  Speaker 4: if you're interested in them, but I wasn't in particular.
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  Speaker 4: So being at Sullivan, I did a bunch of work
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  Speaker 4: on estate litigation, actually. And it was the same thing.
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  Speaker 4: It was families fighting over who mom loved best. One
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  Speaker 4: of the people in the case that I worked on
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  Speaker 4: had found out about a year and a half before
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  Speaker 4: her mother died that she was adopted.
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  Speaker 2: Oh, really?
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  Speaker 4: And so she and her son, the older woman's grandson,
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  Speaker 4: sort of moved in, took over.
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  Speaker 1: Bad behavior.
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  Speaker 4: They stole money. They did a lot of bad things.
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  Speaker 1: Which is terrible.
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  Speaker 4: And it was a terrible story. But as a third party,
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  Speaker 4: it was so interesting.
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  Speaker 1: And so... Like, it's other people's problems. Right? And that was...
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  Speaker 1: I enjoyed it.
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  Speaker 2: Hey, soap operas are popular for a reason, right?
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  Speaker 1: And so that was it. It was a big soap opera.
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  Speaker 4: And then I ended up finishing that litigation successfully and
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  Speaker 4: then working, as you said, on wealthy families, inheritors of wealth,
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  Speaker 4: creators of wealth, business owners, people wanting to create a
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  Speaker 4: family compound or do whatever. And so it was a
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  Speaker 4: very varied practice. Sullivan called it the Estates and Personals
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  Speaker 4: Group because we did a lot of personal work. I
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  Speaker 4: sued a dry cleaner once because he ruined a couture dress.
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  Speaker 4: by ironing out the pleats.
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  Speaker 3: So this is very rich veins for a lot of
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  Speaker 3: our later discussion. How do you get from Schulte-Roth to
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  Speaker 3: Bear Stearns?
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  Speaker 2: If I read your bio correctly.
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  Speaker 3: You joined Bear in the legal and estates department, not
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  Speaker 3: as wealth management?
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  Speaker 4: So the team that I run now, the wealth planning
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  Speaker 4: team and the wealth management team that I ran at Bear,
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  Speaker 4: is the team of former, it's generally planners, so practicing
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  Speaker 4: trust and estate and tax lawyers, CFP professionals, CPAs, and
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  Speaker 4: other designations of people who are enthusiastic about bigger picture planning,
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  Speaker 4: helping advisors work with their clients in the areas that
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  Speaker 4: advisors aren't necessarily great at talking about. So Bayer at
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  Speaker 4: the time, it was a, the late 90s, it was
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  Speaker 4: like 2000 when I started talking to them, was still
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  Speaker 4: very much in the transaction mode. It was, they had
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  Speaker 4: stockbrokers calling clients to say, got this great bond, or
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  Speaker 4: we've got this great stock idea. And what they wanted
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  Speaker 4: was people who could talk to wealthy people about something
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  Speaker 4: other than the next stock or bond idea. Their kids,
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  Speaker 4: their plans, their goals, their estate documents, their ownership structure, right?
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  Speaker 4: All of the ancillary things that are critically important to somebody,
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  Speaker 4: but you're not necessarily going to your financial advisor for
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  Speaker 4: that unless you know that.
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  Speaker 1: They have it.
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  Speaker 4: So I was hired into Bayer to basically start that
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  Speaker 4: group up or help start that group up. And it
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  Speaker 4: grew significantly while we were at Bayer. So the fee-based revenue,
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  Speaker 4: which is how we measured the success, when I got
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  Speaker 4: to Bayer in 2001, early 01, was about 3% of
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  Speaker 4: the net revenue of private clients. And by the time
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  Speaker 4: 2006 ended, it was about 37%.
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  Speaker 1: That's a big move in five years.
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  Speaker 4: It's a huge move. And we hired the right people,
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  Speaker 4: the right advisors, the right planners. But it was really
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  Speaker 4: changing the culture of how the advisors interacted with their clients,
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  Speaker 4: as well as bringing on managed platforms, which Bayer didn't
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  Speaker 4: really have when I joined. And then we hired a
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  Speaker 4: group of people from Oppenheimer when they got sold to Fonstock.
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  Speaker 4: Or when they got sold to CIBC, tried to sell
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  Speaker 4: them to Fonstock, and we brought a lot of them over.
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  Speaker 1: It grew significantly.
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  Speaker 4: And then after 06 is when Bayer started, like the
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  Speaker 4: beginning of 07 is when Bayer started having trouble. It's
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  Speaker 4: when the housing market first started to crack. And through
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  Speaker 4: the summer of 07, our stock price continued to fall.
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  Speaker 3: And we'll talk more about that a little bit. I
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  Speaker 3: want to ask you about that transition. But I want
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  Speaker 3: to stay with lawyering for a bit. You're lawyering for
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  Speaker 3: years for very wealthy families.
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  Speaker 2: How does that tee you up? to run a wealth
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  Speaker 2: management practice?
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  Speaker 3: And what does it teach you about what the industry
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  Speaker 3: just gets wrong about what wealthy people need?
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  Speaker 4: I don't know that it's what they get, what the
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  Speaker 4: industry gets wrong. Even now, there's a little bit of
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  Speaker 4: a blind spot because the focus of the wealth management
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  Speaker 4: industry broadly is investment product and investment success. measured against,
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  Speaker 4: and part of this is regulatory and it's partly the
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  Speaker 4: result of the kinds of oversight that we have at
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  Speaker 4: the governmental levels, but it's a focus on relative performance
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  Speaker 4: relative to an index, relative to a benchmark, relative to
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  Speaker 4: something to prove how good an investor you are. And
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  Speaker 4: at this point, I think people expect that their investments
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  Speaker 4: will perform in some way relative to the S & P.
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  Speaker 4: Everybody can see you, CNBC, Bloomberg, right? Everybody has all
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  Speaker 4: of the news at their fingertips and the democratization of
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  Speaker 4: information that came about with the internet and decimalization of
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  Speaker 4: pricing has caused a lot of people to become more
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  Speaker 4: knowledgeable generally. But the industry still attracts people who are
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  Speaker 4: really interested in investing and thinking about why am I
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  Speaker 4: going to buy this company versus that company or why
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  Speaker 4: am I going to by this manager versus that manager,
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  Speaker 4: this fund versus that fund. And what I see, what
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  Speaker 4: I saw in the legal practice and moving over into
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  Speaker 4: wealth management is really people have a purpose for their
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  Speaker 4: money or people have an idea about what they want
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  Speaker 4: their money to be able to do for them. And
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  Speaker 4: if you can talk about what are your goals, look,
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  Speaker 4: what's the intent of your money? What's this for, really?
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  Speaker 4: Why do you need to beat the S & P? well,
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  Speaker 4: I want to make sure that I can retire well
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  Speaker 4: and maintain my three homes and make sure my kids
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  Speaker 4: go to the best schools and make sure my grandkids
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  Speaker 4: are taken care of. And if you can show them
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  Speaker 4: that they can do all of that and more, they
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  Speaker 4: can give charitably, they can get a fourth home, they
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  Speaker 4: do whatever, it's very freeing for them to not have
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  Speaker 4: to focus on investment returns. But it's not the same
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  Speaker 4: skill set usually for somebody to be comfortable talking about
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  Speaker 4: the numbers, talking about the underlying fundamentals of a company
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  Speaker 4: or the alpha that this manager brings, right? And using
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  Speaker 4: Greek letters to people who are very smart, but they're
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  Speaker 4: not trained in finance is like you're talking Greek to them, right?
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  Speaker 3: Literally.
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  Speaker 4: And a lot of times people smile and nod because
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  Speaker 4: nobody wants to Nobody wants you to think that they
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  Speaker 4: don't understand what you've told them. But at the same time,
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  Speaker 4: a lot of times they don't really. But if you
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  Speaker 4: take away all of that and say, what's the purpose
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  Speaker 4: of the money? And does it need to grow at
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  Speaker 4: this amount? Or if it doesn't, here's what happens. Like
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  Speaker 4: if your money never grows again, you can live your
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  Speaker 4: life as you have it today with inflation for the
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  Speaker 4: next hundred years and you'll be fine. And people, then
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  Speaker 4: you can see people like say, huh, I haven't thought
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  Speaker 4: about it that way. Nobody's told me, nobody's thought about
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  Speaker 4: it or given me that framework. Let's talk about what
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  Speaker 4: I want to do, what I've thought about in the background,
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  Speaker 4: but have not been able to.
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  Speaker 1: I didn't think I had the freedom to do that.
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  Speaker 3: I'm so glad you framed it this way. Let's both
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  Speaker 3: agree that the industry overemphasizes investing and And are we
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  Speaker 3: beating the benchmark?
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  Speaker 2: Where are we?
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  Speaker 3: What do you think the industry, you mentioned a blind spot,
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  Speaker 3: but what does it underemphasize?
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  Speaker 2: Is it taxes? Is it estate planning?
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  Speaker 3: Or is it the whole family dynamics around succession planning
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  Speaker 3: and generational wealth transfer? Where should there be greater emphasis
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  Speaker 3: if there's too much emphasis on, hey, how'd my portfolio
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  Speaker 3: do this week?
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  Speaker 4: I'm in a unique position because I think JP Morgan
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  Speaker 4: is in many regards at the forefront of this and
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  Speaker 4: we're not like the first mover, but we focus a
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  Speaker 4: lot and ask our advisors to focus on exactly those things.
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  Speaker 4: The estate planning, the succession planning, the family dynamics. We
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  Speaker 4: have a team dedicated to family engagement and governance. Thinking
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  Speaker 4: about the purposes of your wealth. how to make sure
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  Speaker 4: that your plan, your estate plan, your financial plan is
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  Speaker 4: successfully transitioned from generation one to generation two to generation
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  Speaker 4: three because it's usually not, a failure usually isn't the
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  Speaker 4: result of bad documents or poor drafting or a bad
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  Speaker 4: investment plan. It's the people who aren't prepared or the
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  Speaker 4: people who aren't executing what you thought they would execute
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  Speaker 4: because they're not you and maybe you didn't, trained them enough.
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  Speaker 4: So I think generally the blind spot is more of
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  Speaker 4: an emphasis on purpose and intent and goals, right? The
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  Speaker 4: industry has moved, it's moved from transactions to fees and
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  Speaker 4: managed money. And the conversation around managed money is generally,
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  Speaker 4: what are your goals? Like what's the time period you need?
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  Speaker 4: What's your risk tolerance, right?
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  Speaker 3: All of the financial plan de-emphasizes this quarter, this.
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  Speaker 1: Year, right?
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  Speaker 4: But it, Which is good, and it's a step in
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  Speaker 4: the right direction. I still think that it could be
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  Speaker 4: taken further to say, here's the overall financial plan, but
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  Speaker 4: you've got some short-term needs, you've got medium-term needs, you've
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  Speaker 4: got longer-term needs. Let's think about this and whether it's
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  Speaker 4: a bucket framework or whatever you want to call it.
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  Speaker 4: And then particularly for legacy, the legacy bucket, the succession bucket,
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  Speaker 4: whatever it is.
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  Speaker 3: Philanthropy, wealth transfer, down the whole list.
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  Speaker 1: How do you effect that?
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  Speaker 4: Because that's the stuff, the short-term spending, I want to
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  Speaker 4: put an addition on my garage. I want to get
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  Speaker 4: a third home. I need another car. That's spending money. Like,
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  Speaker 4: you can plan for that, but that's what people are
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  Speaker 4: doing in their day-to-day lives. If you can help them,
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  Speaker 4: that's great. And if you could help get their cash, like,
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  Speaker 4: you know, move your cash out of a savings account
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  Speaker 4: into an investment account where you're getting an extra few
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  Speaker 4: percentage points, that's great. And that's very useful at the margins.
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  Speaker 4: Once you start talking to people about their kids or nieces, nephews,
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  Speaker 4: their pets, their grandkids, then you're talking about the things
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  Speaker 4: that people really care about. And a lot of people
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  Speaker 4: think of their businesses as a child and really care
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  Speaker 4: about their business. You can talk about the business and
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  Speaker 4: how they can think about transitioning the business, whether the
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  Speaker 4: succession plan is giving it to one of their kids
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  Speaker 4: or more than one of their kids or selling it
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  Speaker 4: to a third party or employees. Once you start talking
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  Speaker 4: about those things, the conversation turns. And I think that's
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  Speaker 4: where you end up developing the much stronger relationship that
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  Speaker 4: doesn't rely, even if it's not quarter to quarter, it's
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  Speaker 4: year to year and still relative performance to something.
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  Speaker 3: So when did you realize that your psychology degree was
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  Speaker 3: going to be more valuable than the law degree?
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  Speaker 4: It was probably a couple of years in once I
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  Speaker 4: realized what I was supposed to be doing.
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  Speaker 2: Really, really fascinating.
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  Speaker 3: Coming up, we continue our conversation with Adam Frank. head
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  Speaker 3: of wealth planning and advice at J.P. Morgan, talking about
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  Speaker 3: how J.P. Morgan Wealth Management grew from a small part
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  Speaker 3: of the firm to a substantial entity.
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  Speaker 2: I'm Barry Ritholtz.
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  Speaker 3: You're listening to Masters in Business on Bloomberg Radio. I'm
• 17:20
  Speaker 3: Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.
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  Speaker 3: My extra special guest this week is Adam Frank. He's
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  Speaker 3: head of wealth planning and advice at J.P. Morgan. His
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  Speaker 3: group runs about $ 1. 4 trillion in client assets. So I
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  Speaker 3: want to talk a bit about Bayer, which led you
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  Speaker 3: to JPM. You ran a very similar wealth management group there.
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  Speaker 3: And you mentioned earlier what it was like in 06, 07.
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  Speaker 3: But I'm fascinated by September 08 and March 09. You're
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  Speaker 3: right in the center of the storm.
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  Speaker 2: What was that experience like? That had to be Sheer mayhem.
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  Speaker 1: It was in fact sheer mayhem.
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  Speaker 4: It started probably over the summer when the hedge fund
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  Speaker 4: blew up.
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  Speaker 2: That was 08 or 07?
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  Speaker 1: That was 07. That was the year before. Right.
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  Speaker 2: And the market was still rallying?
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  Speaker 1: The market was doing very well.
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  Speaker 4: And in fact, after JPMorgan agreed to buy Bear Stearns
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  Speaker 4: on March 16th, 2008, the market rallied through the summer
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  Speaker 4: until September. And there were indications before that countrywide, like
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  Speaker 4: there were a few other firms that were teetering. There
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  Speaker 4: was one bank that started at the beginning of 07
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  Speaker 4: that went under, and I can't remember which one, but
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  Speaker 4: that sort of started the crack to demonstrate the cracks
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  Speaker 4: in the housing market. But the summer, the hedge fund
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  Speaker 4: was collapsing and Rich Marin, who was the head of
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  Speaker 4: Bear Stearns Asset Management at the time, was like out
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  Speaker 4: and he was posting a movie review on his blog.
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  Speaker 4: He was completely tone deaf, and we got a lot
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  Speaker 4: of flack for that. And then being there in September
• 19:07
  Speaker 4: when the.
• 19:09
  Speaker 2: Lehman and the IG?
• 19:11
  Speaker 4: Well, it was Lehman first over the weekend, and then
• 19:14
  Speaker 4: the Reserve Fund, which broke the buck, which we had
• 19:18
  Speaker 4: a relatively large position in for clients, And just watching
• 19:27
  Speaker 4: that week, and an advisor I know had, when I
• 19:31
  Speaker 4: saw him the following year in like the summer of 2009,
• 19:36
  Speaker 4: so after the crisis, right, it was the September of 08, March, sorry,
• 19:40
  Speaker 4: March of 08 was Bayer's collapse, September of 08 was
• 19:43
  Speaker 4: the beginning of the crisis, Lehman and AIG and the rest.
• 19:45
  Speaker 1: And then by.
• 19:46
  Speaker 3: The time you get to March 09, the market's bottoming,
• 19:48
  Speaker 3: The market's back.
• 19:49
  Speaker 2: So by the summer, people are still nervous, but things
• 19:52
  Speaker 2: are getting much better.
• 19:53
  Speaker 4: But he had this stack of Wall Street journals on
• 19:56
  Speaker 4: his desk upside down. And when clients would come in,
• 19:59
  Speaker 4: being nervous about the market, not wanting to invest, he
• 20:01
  Speaker 4: would take them one by one and flip them over
• 20:03
  Speaker 4: like Bear Stearns, AIG, Fannie and Freddie, right, which was
• 20:08
  Speaker 4: over the summer.
• 20:10
  Speaker 1: Lehman, Merrill, right? If you remember all of that.
• 20:13
  Speaker 4: Morgan Stanley, Smith Barney, boom, boom, boom. Madoff, which came
• 20:19
  Speaker 4: in the middle of all that, right? And just the stack,
• 20:22
  Speaker 4: the weight of the papers hitting the table was just
• 20:25
  Speaker 4: such a visceral reminder of that. But in March, we
• 20:29
  Speaker 4: had no idea that that was coming. We actually thought
• 20:31
  Speaker 4: that it was capitulation. Bear didn't manage the balance sheet
• 20:36
  Speaker 4: of those funds well. We ended up taking a couple
• 20:38
  Speaker 4: billion dollars of assets, bad assets, onto our books, which
• 20:41
  Speaker 4: caused that collapse. The weekend was, the weeks leading up
• 20:44
  Speaker 4: to it were chaos, because everybody kind of knew that
• 20:47
  Speaker 4: we were going to go out of business, but we
• 20:51
  Speaker 4: were still in business. And in fact, the Friday, so
• 20:53
  Speaker 4: March 17th was Monday, the 14th, that Friday, a client
• 20:57
  Speaker 4: wanted to come in and talk about moving their accounts
• 20:59
  Speaker 4: over to Bear Stearns. And three of us met with her, like,
• 21:04
  Speaker 4: You know we're going to go, like we're going out
• 21:05
  Speaker 4: of business this.
• 21:06
  Speaker 1: Weekend, right?
• 21:07
  Speaker 2: Can you wait till Tuesday?
• 21:08
  Speaker 4: We don't know what's going to happen. Are you sure
• 21:10
  Speaker 4: you want to move forward with this? Oh yes, no,
• 21:12
  Speaker 4: I definitely want to do this. So we had the
• 21:16
  Speaker 4: most surreal meeting of my career.
• 21:18
  Speaker 2: That's unbelievable.
• 21:20
  Speaker 1: And then that weekend we had the, there was an auction, right?
• 21:22
  Speaker 4: So Saturday we were in the tower and all the
• 21:24
  Speaker 4: different businesses had their books open and like, um, Flowers,
• 21:30
  Speaker 4: Chris Flowers came in and J.P. Morgan was there and
• 21:32
  Speaker 4: a bunch of other firms were looking to buy either
• 21:36
  Speaker 4: pieces of the firm or the whole thing. And by Sunday,
• 21:39
  Speaker 4: it was a done deal. And 8 o'clock Sunday night,
• 21:42
  Speaker 4: we got the, we were on a Zoom call with
• 21:45
  Speaker 4: Jamie and Bill Harrison and the people on the operating
• 21:48
  Speaker 4: committee for J.P. Morgan and the Bayer operating committee saying,
• 21:51
  Speaker 4: we've reached a deal. We've sold to J.P. Morgan because
• 21:55
  Speaker 4: we didn't know if we were coming into work on Monday. Right,
• 21:58
  Speaker 4: so Friday, you see people were taking the Aeron chairs
• 22:03
  Speaker 4: and using them as dollies to take their boxes out.
• 22:07
  Speaker 4: And so one of the guards, I was at 383 Madison,
• 22:09
  Speaker 4: and one of the guards said to a woman who
• 22:11
  Speaker 4: was rolling out three boxes on a chair, he's like, well,
• 22:13
  Speaker 4: you can't take that out of the building. She says,
• 22:15
  Speaker 4: I'm gonna bring the chair back, I'm just taking the
• 22:16
  Speaker 4: boxes out. He's like, yeah, okay, go ahead. This is
• 22:21
  Speaker 4: the most bizarre time I've lived through in a business sense.
• 22:25
  Speaker 2: And it was pretty clear, J.P.
• 22:26
  Speaker 3: Morgan was by far the savviest acquirer during the financial crisis.
• 22:32
  Speaker 3: What was that transition like, not just that weekend, but
• 22:35
  Speaker 3: from Bayer, which was doing something in a very specific way,
• 22:40
  Speaker 3: to J.P. Morgan Chase, which was large but clearly getting larger?
• 22:45
  Speaker 3: And they had cleared out their book of any derivatives
• 22:50
  Speaker 3: and securitized junk years earlier. So they were in a
• 22:54
  Speaker 3: great position. What was that transition like?
• 22:57
  Speaker 4: It was, for a while, it was numbing. I mean,
• 23:01
  Speaker 4: we were numb. And JPMorgan bought all of Bayer. There were,
• 23:07
  Speaker 4: I think, four primary businesses that they were interested in,
• 23:10
  Speaker 4: but they'd gotten everything. And I think it took six
• 23:14
  Speaker 4: or eight months for them to, if not more, to
• 23:16
  Speaker 4: really understand what they had gotten. And so for a while,
• 23:19
  Speaker 4: we were just operating as a standalone division. where it
• 23:22
  Speaker 4: was Bear Stearns, a division of J.P.
• 23:23
  Speaker 1: Morgan.
• 23:24
  Speaker 4: I've been doing the same job since basically 2001, but
• 23:27
  Speaker 4: starting in 2008, I was doing the same job. I
• 23:30
  Speaker 4: must have had six different business cards because we were
• 23:34
  Speaker 4: Bear Stearns, then it was Bear Stearns, a division of J.P.
• 23:36
  Speaker 1: Morgan.
• 23:36
  Speaker 4: Oh, no, Bear Stearns, a J.P. Morgan company. Then after
• 23:39
  Speaker 4: the closing, so for two months, we were a J.P.
• 23:41
  Speaker 1: Morgan company. Then we were a division of J.P. Morgan.
• 23:43
  Speaker 1: Then we got rid of the Bear Stearns name. Then
• 23:45
  Speaker 1: we moved across the street. Same thing.
• 23:48
  Speaker 2: Just the same, different business card.
• 23:50
  Speaker 1: But they....
• 23:52
  Speaker 4: While they were figuring out what they had and what
• 23:55
  Speaker 4: they wanted to do with it, especially on the private
• 23:59
  Speaker 4: client side, because J.P. Morgan did not have a broker-dealer-based
• 24:02
  Speaker 4: wealth manager. They had the branch-based advisors who used a broker-dealer,
• 24:06
  Speaker 4: but they were branch advisors generally.
• 24:13
  Speaker 1: Working with.
• 24:15
  Speaker 4: Not proprietary investment products, but proprietary thought leadership and the
• 24:21
  Speaker 4: private bank.
• 24:22
  Speaker 1: And they didn't have.
• 24:25
  Speaker 4: The broker-dealer-based wealth managers, the wire house model, even though
• 24:29
  Speaker 4: Bayer was more boutique-y. And so they didn't quite know
• 24:33
  Speaker 4: where to put us, and they left us alone for
• 24:35
  Speaker 4: a while. So we were part of J.P. Morgan with
• 24:37
  Speaker 4: all the benefits of that, but still sort of off
• 24:41
  Speaker 4: to the side. And it took a couple years for
• 24:44
  Speaker 4: the company, for the firm to start to integrate the
• 24:51
  Speaker 4: the heritage bear business into the broader wealth management channels.
• 24:56
  Speaker 4: For a while, we were aligned with the private bank
• 24:58
  Speaker 4: in the line of business, the asset and wealth management business.
• 25:01
  Speaker 4: And then we moved over in 2019 into the consumer
• 25:05
  Speaker 4: bank where we sit today. So we're in the consumer
• 25:08
  Speaker 4: community bank aligned with the branch advisors who are, we're working,
• 25:16
  Speaker 4: JP Morgan has worked very hard to get them more
• 25:20
  Speaker 4: aligned to a planning framework. And so I think that
• 25:25
  Speaker 4: on the whole, it was a good transition. It was
• 25:29
  Speaker 4: just weird for a couple of years. And then the transition,
• 25:33
  Speaker 4: it's different cultures that you're merging. And ultimately, I think
• 25:35
  Speaker 4: the culture that's emerged is a very good one.
• 25:38
  Speaker 3: What's the big takeaway from that experience about risk and
• 25:41
  Speaker 3: liquidity and just fragility of institutions? What do you look
• 25:46
  Speaker 3: back at that and say, hey, it's almost 20 years ago,
• 25:49
  Speaker 3: here's my big lesson.
• 25:54
  Speaker 2: This March, it'll be 20 years.
• 25:55
  Speaker 1: It'll be 20 years, no, I know.
• 25:56
  Speaker 4: I still have a confirm on my desk that I
• 26:00
  Speaker 4: had framed, and then I had the frame broken and moved.
• 26:03
  Speaker 4: I sold a couple hundred shares of Bear Stearns that
• 26:05
  Speaker 4: I had because I had exercised some options, and I
• 26:07
  Speaker 4: was just holding them, because Bear Stearns is a great
• 26:09
  Speaker 4: stock company.
• 26:10
  Speaker 3: And the stock had done nothing but go up for decades.
• 26:13
  Speaker 4: Right, and so I sold that stock at like $ 3. 79.
• 26:17
  Speaker 4: The Monday, the 17th.
• 26:19
  Speaker 1: Because somebody's office.
• 26:20
  Speaker 3: They left a little money on the table and went
• 26:21
  Speaker 3: for $ 10.
• 26:22
  Speaker 4: I know.
• 26:22
  Speaker 3: I know.
• 26:23
  Speaker 1: But Monday, I said, why is the stock trading at $ 3.
• 26:26
  Speaker 3: 50?
• 26:26
  Speaker 1: It's a $ 2 deal. Because nobody believed.
• 26:28
  Speaker 2: Well... Enough people didn't believe it.
• 26:30
  Speaker 4: Enough people didn't believe it, but the shorts were covering.
• 26:32
  Speaker 4: There were a lot of market explanations, like, oh, I'll
• 26:35
  Speaker 4: go up and sell. So it reminds me, I don't
• 26:37
  Speaker 4: know what I'm doing in terms of investments.
• 26:40
  Speaker 2: Well, at least in terms of trading.
• 26:41
  Speaker 4: In terms of trading, for sure. But the market's unpredictable.
• 26:46
  Speaker 4: And it reinforced the lesson of diversification as a way
• 26:51
  Speaker 4: to preserve wealth. Not a way to build it necessarily,
• 26:55
  Speaker 4: but it's definitely a way to preserve it. And it
• 26:59
  Speaker 4: really reinforced the value of relationships and the value of
• 27:09
  Speaker 4: knowing other people. A lot of clients stayed with us,
• 27:13
  Speaker 4: partly because it was J.P.
• 27:14
  Speaker 1: Morgan.
• 27:15
  Speaker 4: But in part, especially in the months leading up to
• 27:19
  Speaker 4: March of 2008, because they had personal relationships with the
• 27:23
  Speaker 4: advisors and they trusted the advisors not to lead them astray,
• 27:30
  Speaker 4: not to do anything that was not in the client's
• 27:34
  Speaker 4: best interest. And the good advisors who had developed those
• 27:38
  Speaker 4: relationships didn't do it because of their investment returns or
• 27:41
  Speaker 4: because they were beating the index or because they were
• 27:43
  Speaker 4: the best investment managers, although some of them are very good,
• 27:46
  Speaker 4: it's because they got to know the people and they
• 27:49
  Speaker 4: got to know their kids. They got to know what
• 27:51
  Speaker 4: they wanted their money to do for them. And they
• 27:54
  Speaker 4: were able to remind them that, like, diversification didn't work
• 27:57
  Speaker 4: in 2008, right? The stocks were down. Everything was down.
• 28:01
  Speaker 3: Right.
• 28:01
  Speaker 2: Correlations all went to one.
• 28:03
  Speaker 1: Right.
• 28:03
  Speaker 2: Everything went down.
• 28:04
  Speaker 3: But you brought up a fascinating point about it's not
• 28:09
  Speaker 3: just about accumulating wealth. It's about preserving wealth. Talk a
• 28:14
  Speaker 3: little bit about that, because in my experience, that pivot
• 28:19
  Speaker 3: from I'm working, I'm saving, I'm investing to, all right,
• 28:23
  Speaker 3: now I have a big pile and I have to
• 28:25
  Speaker 3: think about preserving it and maybe even spending some of it.
• 28:30
  Speaker 2: What's your experiences like with that?
• 28:32
  Speaker 4: It has been, it's a change in mindset and particularly
• 28:37
  Speaker 4: for business owners who step back from the business, either
• 28:40
  Speaker 4: because their kids are taking over because they've sold it
• 28:42
  Speaker 4: or because they affirmatively want to do something else, it's
• 28:48
  Speaker 4: a very hard mindset shift to go from an owner-operator,
• 28:55
  Speaker 4: whether that's of a business or of your portfolio, right?
• 28:57
  Speaker 4: You're an owner-operator, you're accumulating, you're focused on growth and accumulation,
• 29:05
  Speaker 4: and you're willing to take risks to grow that wouldn't
• 29:09
  Speaker 4: make sense if you were really trying to preserve and extend.
• 29:13
  Speaker 4: or if you wanted to spend. Making that shift has,
• 29:18
  Speaker 4: as I've observed it across the years, is very difficult
• 29:22
  Speaker 4: for people. Some people do it better than others. Some
• 29:23
  Speaker 4: people prepare for it for a couple of years. And
• 29:26
  Speaker 4: the best time to prepare with a plan or whether
• 29:31
  Speaker 4: it's a retirement plan or a financial plan or some
• 29:34
  Speaker 4: kind of plan is.
• 29:35
  Speaker 1: A few years before the event.
• 29:37
  Speaker 4: And most people wait until, okay, I'm ready.
• 29:39
  Speaker 1: To, I'm retiring in December.
• 29:41
  Speaker 3: 65.
• 29:41
  Speaker 2: Let's get something.
• 29:42
  Speaker 1: Let's get, let's put a plan together.
• 29:43
  Speaker 2: Right.
• 29:44
  Speaker 4: And like, okay, the second best time, right? The best
• 29:46
  Speaker 4: time would have been two years ago. The second best
• 29:48
  Speaker 4: time is now. So like, let's do it now. Cause
• 29:51
  Speaker 4: it's always better to have a plan than not, even
• 29:55
  Speaker 4: if it would have been better to have a plan before. Um,
• 29:59
  Speaker 4: but really thinking about stewardship of capital. And for families
• 30:05
  Speaker 4: of significant wealth, where there's going to be a generational transfer,
• 30:10
  Speaker 4: wealth transfer, and or philanthropy, it's thinking about how to
• 30:16
  Speaker 4: preserve it, grow it, because you want to make sure
• 30:19
  Speaker 4: it keeps pace with inflation. And most people who are
• 30:23
  Speaker 4: successful at business, successful athletes, successful at whatever they do,
• 30:29
  Speaker 4: aren't content just treading water or keeping pace with inflation.
• 30:35
  Speaker 1: There's a competitive juices.
• 30:36
  Speaker 4: They want to do better, but they want to do
• 30:39
  Speaker 4: it thoughtfully and in service of their goals. Whereas I
• 30:43
  Speaker 4: think a lot of people in earlier stages are doing
• 30:45
  Speaker 4: it in service of growth for growth sake. And preservation,
• 30:52
  Speaker 4: it's not what you get, it's what you keep. So
• 30:54
  Speaker 4: preservation is important and taxes come into it and you
• 30:56
  Speaker 4: mentioned you meant You mentioned them. The words will come
• 31:01
  Speaker 4: out eventually. You mentioned them before. But taxes are an
• 31:05
  Speaker 4: important component, and it's an important component for advisors to
• 31:09
  Speaker 4: be thinking about, even if we can't give tax leader
• 31:12
  Speaker 4: legal advice and make sure that clients always work with
• 31:16
  Speaker 4: their own tax advisors. But the more you can help
• 31:20
  Speaker 4: clients to minimize tax, whether it's by asset location in
• 31:24
  Speaker 4: tax-advantaged accounts or by vehicle choice or by the type
• 31:29
  Speaker 4: of investment they have or by various strategies, the more
• 31:35
  Speaker 4: they have in their pocket, the more they have to keep.
• 31:36
  Speaker 4: So it's a combination of that. But for many people,
• 31:40
  Speaker 4: it's a very difficult transition.
• 31:42
  Speaker 2: It's kind of fascinating. Let's stay with taxes.
• 31:45
  Speaker 3: One of the biggest surprises I've experienced over the past decade, hey,
• 31:50
  Speaker 3: if you're 50 basis points ahead or behind the index,
• 31:54
  Speaker 3: clients don't even notice.
• 31:57
  Speaker 2: But save someone.
• 31:58
  Speaker 3: $ 50, 000 or $ 100, 000 in taxes because you have a tax
• 32:03
  Speaker 3: group that specializes in tax preparation for investors, which maybe
• 32:08
  Speaker 3: the average CPA doesn't know all the ins and outs.
• 32:12
  Speaker 2: You have a friend for life.
• 32:15
  Speaker 3: It's amazing to me how, I mean, I guess I
• 32:18
  Speaker 3: shouldn't be surprised that people hate paying taxes.
• 32:21
  Speaker 2: And if you could.
• 32:22
  Speaker 3: Just find, I'm not talking about, you know, Wesley Snipes
• 32:26
  Speaker 3: or anything that's going to get you in trouble. I mean,
• 32:28
  Speaker 3: just black-letter law. Here's how we can reduce your total
• 32:32
  Speaker 3: tax burden.
• 32:33
  Speaker 2: It's enormous.
• 32:34
  Speaker 3: So talk a little bit about all the things around
• 32:37
  Speaker 3: the investment portfolio that may matter as much or more.
• 32:43
  Speaker 1: Well, it's at least as much, right?
• 32:46
  Speaker 4: If you think about it, advisors charging a fee and
• 32:48
  Speaker 4: the fee's basis points, right? It's 20, 30, 40, 50,
• 32:50
  Speaker 4: whatever the advisory fee is. if you can save a
• 32:54
  Speaker 4: client several million dollars in taxes, which, you know, it's
• 32:57
  Speaker 4: capital gains taxes, 24%, like.
• 33:01
  Speaker 1: You can.
• 33:03
  Speaker 4: Really talk, you can justify your fee because the fee
• 33:07
  Speaker 4: isn't just an investment management fee.
• 33:09
  Speaker 1: It's an overall advisory fee.
• 33:10
  Speaker 4: And if you're advising clients across the portfolio, including tax strategies, again,
• 33:18
  Speaker 4: not giving tax advice, but thinking about tax strategies. So
• 33:22
  Speaker 4: there are products there's, Tax transition management is you're moving from, right, somebody,
• 33:26
  Speaker 4: a new client comes to you. They want to move over,
• 33:28
  Speaker 4: but they've got a lot of funds with built-in gains.
• 33:31
  Speaker 4: They've got a lot of low basis stocks. Well, how
• 33:34
  Speaker 4: can they move into something that you're recommending? There are
• 33:39
  Speaker 4: ways to do it that are thoughtful, slow, right? Because
• 33:42
  Speaker 4: you can't realize all of the gains in one year
• 33:46
  Speaker 4: or you'll pay a lot of tax. But you can
• 33:48
  Speaker 4: do it over time. You can generate losses to offset them.
• 33:52
  Speaker 4: There are other strategies to harvest losses and be very
• 33:59
  Speaker 4: thoughtful on a net basis. And there's the income tax strategies,
• 34:06
  Speaker 4: which usually focus on capital gains because there's very little
• 34:08
  Speaker 4: you can do for ordinary income. And there are some
• 34:13
  Speaker 4: financial products that work. And obviously, asset location, putting high
• 34:17
  Speaker 4: turnover portfolios into your retirement accounts or into another tax
• 34:22
  Speaker 4: advantage vehicle is a good strategy or something that generates
• 34:26
  Speaker 4: ordinary income versus municipal bond income. And then there's the
• 34:34
  Speaker 4: transfer tax strategies, which I think the big headline, $ 30
• 34:39
  Speaker 4: million for wealth transfer, the lifetime exclusion, has gotten a
• 34:44
  Speaker 4: lot of people thinking that they don't have any exposure
• 34:47
  Speaker 4: at all. Most families don't have $ 30 million between two spouses.
• 34:52
  Speaker 4: But at the federal level, that exemption is portable between spouses.
• 34:57
  Speaker 4: Somebody dies, the other spouse can use the deceased spouse's exemption.
• 35:01
  Speaker 4: In New York, the exemption is.
• 35:03
  Speaker 1: $ 7, 350, 000, not portable.
• 35:05
  Speaker 4: In Massachusetts, it's like $ 2 million. In Oregon, it's a
• 35:08
  Speaker 4: million dollars. In Illinois, it's like four. So there are
• 35:12
  Speaker 4: a lot of families who don't consider themselves super wealthy.
• 35:17
  Speaker 4: They're not flying... private. They're not renting helicopters. They don't
• 35:21
  Speaker 4: have multiple homes in different countries, but they might be
• 35:26
  Speaker 4: subject to those taxes. If you can save people those
• 35:28
  Speaker 4: taxes just by retitling accounts or doing something else that's
• 35:35
  Speaker 4: very simple and doesn't affect their life at all, right?
• 35:39
  Speaker 4: Nothing's going to change.
• 35:39
  Speaker 2: It's a little paperwork.
• 35:41
  Speaker 4: A little paperwork and that's it. That's the kind of
• 35:43
  Speaker 4: thing where, especially if you can demonstrate that through, you know,
• 35:47
  Speaker 4: some kind of like a software or Excel or something
• 35:50
  Speaker 4: where you could say, here's what would happen if you
• 35:52
  Speaker 4: do nothing. And here's what happens if you just change
• 35:54
  Speaker 4: the title on these three accounts and here's what it is.
• 35:57
  Speaker 4: And you're going to save a million dollars in tax
• 35:59
  Speaker 4: to the state of Illinois or to the state of
• 36:00
  Speaker 4: New York. To your point, it's huge. And helping somebody
• 36:05
  Speaker 4: keep that money now, they're not keeping it. Their kids
• 36:08
  Speaker 4: are keeping it, right? Because they have to both die
• 36:10
  Speaker 4: in order for that to take effect. But it's money
• 36:13
  Speaker 4: that they now have available for their legacy. So If
• 36:17
  Speaker 4: they think about, well, I would have paid a million
• 36:19
  Speaker 4: dollars in tax, now I don't have to worry about that.
• 36:22
  Speaker 4: I can spend a little more, right? Because my kids
• 36:25
  Speaker 4: are going to get this extra million bucks. So it's
• 36:28
  Speaker 4: a way of thinking, and this word is so overused,
• 36:32
  Speaker 4: but it's a way of thinking very holistically about what
• 36:35
  Speaker 4: do people have, and not just what do they have
• 36:37
  Speaker 4: in their portfolios, but what do they have in their families,
• 36:40
  Speaker 4: what do they have overall, and what do they want
• 36:43
  Speaker 4: for it?
• 36:43
  Speaker 3: So you mentioned tax loss harvesting. I'm curious... What your
• 36:47
  Speaker 3: approach is, do you use direct indexing? Do you use
• 36:51
  Speaker 3: the long shorts, the 150-50 type stuff? What's the approach
• 36:56
  Speaker 3: to tax loss harvesting from your perspective?
• 36:59
  Speaker 1: I'm old enough to remember the 130-30. 130-30, right. That
• 37:02
  Speaker 1: didn't turn out that well.
• 37:04
  Speaker 2: We've had great experience with it.
• 37:06
  Speaker 3: It's the other one that seems to have gotten into
• 37:09
  Speaker 3: trouble where you're using futures losses to offset ordinary income.
• 37:15
  Speaker 3: which when I first saw that, I'm like, I'm an
• 37:17
  Speaker 3: attorney also. And I looked at it and I go,
• 37:19
  Speaker 3: that doesn't make any sense to me. But the straight
• 37:22
  Speaker 3: up direct indexing and long short seems to just be
• 37:26
  Speaker 3: black letter law.
• 37:27
  Speaker 4: And just like plain vanilla law, so direct indexing, but
• 37:31
  Speaker 4: plain vanilla loss harvesting, you know, the classic is you
• 37:35
  Speaker 4: have a stock and it takes a loss or it
• 37:38
  Speaker 4: takes a dip one day and you sell it and
• 37:40
  Speaker 4: you buy a similar stock. I'm not, I can't use
• 37:44
  Speaker 4: company names or I would I would say something. I'd
• 37:47
  Speaker 4: be a little clearer in that example. But there are
• 37:52
  Speaker 4: a number of financial products that allow us to be
• 37:57
  Speaker 4: very thoughtful.
• 37:57
  Speaker 1: About loss harvesting.
• 37:59
  Speaker 4: And there have been a number of companies that have
• 38:03
  Speaker 4: come down the road that specialize in tax management, not
• 38:08
  Speaker 4: just loss harvesting within a portfolio, transition management, overall ongoing
• 38:12
  Speaker 4: tax management. And we've generally used all of those strategies.
• 38:19
  Speaker 4: Some of the financial products, some of them JP Morgan
• 38:21
  Speaker 4: and some third party, right? Because we have an open
• 38:23
  Speaker 4: architecture platform. And then some things that are proprietary that
• 38:28
  Speaker 4: we overlay onto client portfolios. And it's been successful. We
• 38:36
  Speaker 4: are ramping up that capability currently And I'm excited for
• 38:43
  Speaker 4: where that's going to go in the next six months
• 38:46
  Speaker 4: to a year, I think.
• 38:47
  Speaker 3: Yeah, no, there's a lot of really interesting things happening there.
• 38:50
  Speaker 3: Last question on this, because I can go down this
• 38:53
  Speaker 3: rabbit hole and lose half our audience talking about taxes
• 38:57
  Speaker 3: and loss harvesting. Typically, successful entrepreneurs arrive with a lot
• 39:04
  Speaker 3: of concentrated risk.
• 39:06
  Speaker 2: They became successful.
• 39:08
  Speaker 3: Because they built up either their business or their stock
• 39:11
  Speaker 3: options or whatever it is, and so much of this
• 39:14
  Speaker 3: wealth is tied to just one stock or one business.
• 39:18
  Speaker 3: How do you persuade somebody who has that concentrated wealth that, hey,
• 39:24
  Speaker 3: if you want to preserve this, you have to think
• 39:26
  Speaker 3: about diversifying?
• 39:27
  Speaker 2: As you mentioned earlier, you've already won the game. now
• 39:31
  Speaker 2: let's think about keeping.
• 39:32
  Speaker 4: It so for some people it's easy because they recognize
• 39:34
  Speaker 4: that they are heavily concentrated i spoke to somebody a
• 39:40
  Speaker 4: day or two ago very concentrated in his employer's stock 95%
• 39:46
  Speaker 4: of his net worth is tied up in it. He
• 39:48
  Speaker 4: completely recognizes the overweight and is looking for ideas of
• 39:52
  Speaker 4: how to get out, not trying to be convinced of
• 39:56
  Speaker 4: whether he should get out or not. I think he's
• 39:58
  Speaker 4: the exception, or not the exception, he's in the minority.
• 40:02
  Speaker 4: More entrepreneurs and C-suite executives of public companies or private
• 40:07
  Speaker 4: companies are very optimistic about the future of their company
• 40:13
  Speaker 4: and prefer to retain their holdings. There are also a
• 40:18
  Speaker 4: lot of restrictions on what executives can do, particularly public
• 40:22
  Speaker 4: company executives.
• 40:24
  Speaker 2: You can always file a plan and say, I'm going
• 40:26
  Speaker 2: to sell.
• 40:27
  Speaker 3: X a quarter, and this way there's no inside information.
• 40:32
  Speaker 4: 10b51 plans are very common, but there's also investor perception.
• 40:36
  Speaker 4: There's the board of directors and their perception of a
• 40:39
  Speaker 4: senior executive who's selling rather than acquiring. And that plays
• 40:44
  Speaker 4: into a lot of those decisions, again, more than the
• 40:47
  Speaker 4: executives would like. And those executives are ones who understand
• 40:50
  Speaker 4: that they're concentrated, are trying to get out, and aren't
• 40:54
  Speaker 4: able to as much as they want to. For people
• 40:58
  Speaker 4: who need to be convinced, like, you can give them
• 41:01
  Speaker 4: all the statistics in the world, show them, right, the
• 41:03
  Speaker 4: Nifty Fifty.
• 41:03
  Speaker 1: Right, it was GE.
• 41:07
  Speaker 4: Kodak, IBM, AT & T, like.
• 41:10
  Speaker 1: All of those companies, they're all gone, right?
• 41:12
  Speaker 4: Or they've morphed into something else and the stocks have
• 41:15
  Speaker 4: declined significantly over time. But that's never going to be
• 41:19
  Speaker 4: my company, right? My company is not going.
• 41:22
  Speaker 2: To do that. Just look at GE after 2000. I mean,
• 41:25
  Speaker 2: talk it.
• 41:26
  Speaker 3: And they had the world's most generous stock. I think
• 41:29
  Speaker 3: they subsidized employee stock purchases by like 20%, a crazy number.
• 41:34
  Speaker 3: So there were all these GE millionaires with one stock.
• 41:38
  Speaker 1: Right.
• 41:38
  Speaker 4: And the same thing happened to Microsoft in like 2000, 1999, 2000,
• 41:41
  Speaker 4: the tech wreck. There were a number of companies that
• 41:44
  Speaker 4: had those very generous reloads or stock grants.
• 41:50
  Speaker 2: ESOPs and RSUs.
• 41:51
  Speaker 4: And the employees believed in the stock as the executives did.
• 41:56
  Speaker 4: And a lot of them ended up paying taxes on
• 42:00
  Speaker 4: the value at exercise or at vesting. holding the stock
• 42:05
  Speaker 4: and watching it decline to the point where they didn't
• 42:09
  Speaker 4: have enough cash to pay the tax. And so you
• 42:14
  Speaker 4: can tell people that all day. For people who really
• 42:18
  Speaker 4: believe in their stock, it's very hard to convince them
• 42:20
  Speaker 4: to diversify. For people who understand that they have a concentration,
• 42:26
  Speaker 4: they don't necessarily want to sell everything, but they're willing
• 42:29
  Speaker 4: to take 10% off the table, 20%, 5%, whatever it is,
• 42:33
  Speaker 4: Then it's a question of how, what's the most tax
• 42:35
  Speaker 4: efficient way to do it? What's the most thoughtful way
• 42:37
  Speaker 4: to do it? And then that's where you get into
• 42:40
  Speaker 4: things like qualified small business stock for private companies where
• 42:44
  Speaker 4: you can exempt up to $ 10 million of capital gain
• 42:48
  Speaker 4: from taxes. A lot of, to your point earlier, a
• 42:50
  Speaker 4: lot of CPAs don't know about that rule. And so
• 42:53
  Speaker 4: I've talked to clients and just mentioned, hey, your stock
• 42:57
  Speaker 4: sounds like it might be eligible for this QSBS, qualified
• 43:00
  Speaker 4: small business stock treatment. Has your accountant mentioned it?
• 43:03
  Speaker 1: No, he hasn't. When did you buy it?
• 43:06
  Speaker 4: Do you meet all these criteria? You know you could
• 43:08
  Speaker 4: save taxes on 10 million bucks. We just saved you
• 43:13
  Speaker 4: $ 2. 38 million in taxes.
• 43:14
  Speaker 1: Isn't that great?
• 43:15
  Speaker 3: That QSBS has come up time and time again where
• 43:18
  Speaker 3: you're looking at somebody and it's like, you're looking at
• 43:21
  Speaker 3: a returns and why isn't this a QSBS?
• 43:24
  Speaker 2: Why are you paying capital gains on.
• 43:26
  Speaker 3: The sale of a small business? My accountant did it.
• 43:30
  Speaker 2: It's amazing.
• 43:31
  Speaker 3: Coming up, we continue our conversation with Adam Frank, head
• 43:35
  Speaker 3: of wealth planning and advice at J.P. Morgan, talking about
• 43:38
  Speaker 3: the state of wealth management today.
• 43:41
  Speaker 2: I'm Barry Ritholtz.
• 43:42
  Speaker 3: You're listening to Masters in Business.
• 43:45
  Speaker 2: On Bloomberg Radio. I'm Barry Ritholtz.
• 43:48
  Speaker 3: You're listening to Masters in Business on Bloomberg Radio. My
• 43:52
  Speaker 3: extra special guest this week is Adam Frank. He's the
• 43:54
  Speaker 3: head of wealth planning and advice at J.P. Morgan. So
• 43:58
  Speaker 3: let's talk a little bit about what's going on today
• 44:01
  Speaker 3: in wealth management. I'm intrigued by what you guys do
• 44:05
  Speaker 3: with student athletes. Tell us a little bit about the
• 44:09
  Speaker 3: board you guys have put together and what is that
• 44:12
  Speaker 3: space like today?
• 44:14
  Speaker 4: So at a firm level, we put together an athlete
• 44:16
  Speaker 4: council to help inform us how to engage with athletes
• 44:23
  Speaker 4: across their careers. So at every stage from student athlete
• 44:27
  Speaker 4: to pro and making that transition then from pro to
• 44:31
  Speaker 4: retired athlete and making that transition and really everything in
• 44:34
  Speaker 4: between when you're a pro etc um and the council
• 44:38
  Speaker 4: has been great at helping us think about how to
• 44:43
  Speaker 4: talk to athletes not because they're different they're all people
• 44:46
  Speaker 4: right and that's the one thing again coming back to
• 44:47
  Speaker 4: my psychology degree everybody's people but a couple of the
• 44:52
  Speaker 4: council members had said at one point you have to
• 44:55
  Speaker 4: be a little delusional to play at this level, to
• 44:59
  Speaker 4: excel at a sport. And you can't tell somebody, well,
• 45:04
  Speaker 4: you can't do that, don't do that, don't spend this,
• 45:07
  Speaker 4: don't do that. So it's really helping us as advisors
• 45:11
  Speaker 4: and planners frame what we're talking about in a way
• 45:15
  Speaker 4: that resonates with athletes. And you know the statistics. There
• 45:19
  Speaker 4: are millions of kids who play high school athletics. A
• 45:22
  Speaker 4: small percentage of them go on to play at NCAA schools.
• 45:26
  Speaker 4: And there's hundreds of thousands of kids who play at
• 45:28
  Speaker 4: NCAA schools. A small percentage of those, less than five
• 45:33
  Speaker 4: or 10%, go on to play pro. Now, right, so
• 45:38
  Speaker 4: they're gonna be delusional for a while, and then that
• 45:40
  Speaker 4: delusion is gonna end pretty quickly. Now with NIL, some
• 45:47
  Speaker 4: of the kids, even in high school and college, are
• 45:50
  Speaker 4: able to monetize their name and their image, their likeness.
• 45:53
  Speaker 4: They're able to be paid some significant sums. And there
• 45:59
  Speaker 4: are kids who are getting relatively smaller amounts, $ 10, 000, $ 15, 000, $ 20, 000.
• 46:02
  Speaker 4: And then there are kids who are getting $ 60, 000 a
• 46:05
  Speaker 4: month or a couple million dollars over the course of
• 46:09
  Speaker 4: a contract or a year. And helping them plan for
• 46:16
  Speaker 4: the potential that they may not be in that small
• 46:19
  Speaker 4: percentage that goes pro and in pros gets a big contract.
• 46:25
  Speaker 4: But helping them enjoy what they have, but really think
• 46:29
  Speaker 4: about it as they're the CEO of their money. What
• 46:35
  Speaker 4: do they need to do to make sure that it's
• 46:38
  Speaker 4: doing whatever it can, it's maximizing its value for them
• 46:41
  Speaker 4: while it's working for them? Because at some point it
• 46:43
  Speaker 4: might stop working. And in the same way that an
• 46:46
  Speaker 4: athlete can, their career can be ended unexpectedly by an
• 46:51
  Speaker 4: injury or something else. We don't want that to happen
• 46:55
  Speaker 4: with their portfolio. So it's, helping to educate the students
• 47:01
  Speaker 4: in particular to think about money in a different way.
• 47:04
  Speaker 4: And for a lot of the student athletes who are
• 47:07
  Speaker 4: getting significant sums, they're having to make really adult money
• 47:11
  Speaker 4: decisions at a time when they don't have significant background
• 47:15
  Speaker 4: in it at all. And a lot of times their
• 47:17
  Speaker 4: parents don't have significant background. The parents are obviously one
• 47:21
  Speaker 4: of the key advisors to these kids. but we're trying
• 47:26
  Speaker 4: to use the council as people who these athletes look
• 47:29
  Speaker 4: up to as a way to say, we're doing this
• 47:36
  Speaker 4: because it's important to us to give back to the
• 47:38
  Speaker 4: athlete community. And we're doing it here because JP Morgan's
• 47:42
  Speaker 4: made this commitment to provide education and advice to athletes,
• 47:48
  Speaker 4: not only at all stages of their careers, but really
• 47:50
  Speaker 4: we're not looking only for the pro making a multi-million dollar,
• 47:55
  Speaker 4: hundred million dollar contract. We're looking at the kids in
• 47:59
  Speaker 4: D3 schools who maybe they're getting NIL, maybe they're not,
• 48:02
  Speaker 4: but we know they need good money habits. They need
• 48:05
  Speaker 4: to develop good skills at thinking about money and thinking
• 48:09
  Speaker 4: about it as wealth. Because a lot of these kids,
• 48:12
  Speaker 4: sometimes the kids who are earning the money are the first,
• 48:16
  Speaker 4: like they're going to have the most money of anybody
• 48:18
  Speaker 4: in their family.
• 48:19
  Speaker 3: So let's stay with that a little bit because I'm
• 48:22
  Speaker 3: sure you remember the, was it ESPN 30 under 30? Yeah.
• 48:25
  Speaker 3: I don't know, about a decade ago, 20 years ago,
• 48:28
  Speaker 3: one in four NBA players filed bankruptcy and I think
• 48:33
  Speaker 3: it was one in three football players.
• 48:35
  Speaker 2: The numbers were just shocking and horrifying.
• 48:40
  Speaker 3: I know you don't want to just scare the kids,
• 48:42
  Speaker 3: but how do you make them aware that hey, you know,
• 48:47
  Speaker 3: there's a right way to do it. There's a not
• 48:49
  Speaker 3: so right way to do it. And here's what history
• 48:52
  Speaker 3: has told us is the.
• 48:53
  Speaker 2: Wrong way to do it. Look at the bankruptcies.
• 48:55
  Speaker 4: We've tried that. I mean, the industry has tried that
• 48:58
  Speaker 4: over the years. It's very hard to go in and
• 49:02
  Speaker 4: tell somebody who's come to you for financial advice, like
• 49:05
  Speaker 4: guidance to say, you can't do this, you can't do that.
• 49:08
  Speaker 4: Look at what might happen to you. Because again, these
• 49:11
  Speaker 4: if the kids are any good at their sport, they're
• 49:13
  Speaker 4: a little bit delusional, right? Based on that comment from
• 49:16
  Speaker 4: one of the council members. And so you've got to
• 49:19
  Speaker 4: figure out out a framework that works. And one of
• 49:22
  Speaker 4: the components of that is, we know you're going to
• 49:26
  Speaker 4: spend some money. Let's figure out what you're going to spend. Like,
• 49:29
  Speaker 4: what do you want to spend the money on? You
• 49:31
  Speaker 4: get this big lump sum.
• 49:32
  Speaker 1: You want to buy a car? You want to trick
• 49:34
  Speaker 1: out your apartment?
• 49:35
  Speaker 4: Like, what do you want to do? Let's put money
• 49:38
  Speaker 4: aside for that. Now you've do you have anything left?
• 49:41
  Speaker 4: And actually, before that, it's okay, you've gotten this money,
• 49:44
  Speaker 4: let's say.
• 49:45
  Speaker 1: It's $ 200, 000.
• 49:46
  Speaker 4: You've got to put aside, because you're a 1099 person,
• 49:48
  Speaker 4: you're not getting a W-2, you're not being withheld, right?
• 49:51
  Speaker 4: You've got to put money aside for taxes. And I
• 49:54
  Speaker 4: remember my first paycheck, right? I was working for.
• 49:56
  Speaker 2: Who was this FICA guy?
• 49:57
  Speaker 4: Right, and why am I giving him a third of
• 49:59
  Speaker 4: my money? He really annoyed me. And so you've got
• 50:03
  Speaker 4: to make sure that they know, if you have a
• 50:06
  Speaker 4: deal for $ 200, 000, you can't commit to spend $ 200, 000. You've
• 50:11
  Speaker 4: got to commit to spend less than that. And here's
• 50:13
  Speaker 4: a guidance as to, you know, sort of rates and everything.
• 50:16
  Speaker 1: And then.
• 50:18
  Speaker 4: You don't know how long your career is going to last.
• 50:20
  Speaker 4: Not telling them you can go bankrupt in five years,
• 50:22
  Speaker 4: but you don't know how long your career is going
• 50:23
  Speaker 4: to last. Instead of committing to a three-year car lease
• 50:29
  Speaker 4: for this great sports car, what about doing something like this?
• 50:34
  Speaker 4: Or what about a different car? What about maybe a
• 50:37
  Speaker 4: sponsorship with a local dealer and you get something like that.
• 50:41
  Speaker 1: So it's helping to reframe it.
• 50:45
  Speaker 4: But the way that we do that is to be
• 50:48
  Speaker 4: one of the people that the athletes trust. And right now,
• 50:52
  Speaker 4: or when we're introduced, they trust their parents for the
• 50:55
  Speaker 4: most part. They trust their agents. They trust their coaches.
• 51:00
  Speaker 4: And they look up to the people who've been in
• 51:02
  Speaker 4: their shoes before who have made mistakes and been successful,
• 51:06
  Speaker 4: been open about the mistakes they've made. And that's the
• 51:08
  Speaker 4: purpose of the council as well is to help us
• 51:14
  Speaker 4: by virtue of putting the council together, really help us
• 51:18
  Speaker 4: sort of ride their coattails, but gain a little bit
• 51:20
  Speaker 4: of trust that way. But also make sure that we're
• 51:23
  Speaker 4: there for the coaches and we're there for the parents
• 51:26
  Speaker 4: and we're there.
• 51:26
  Speaker 1: For the agents.
• 51:27
  Speaker 4: And, you know, make sure that the kids have a
• 51:29
  Speaker 4: good team around them and agent, attorney, accountant, and advisor.
• 51:34
  Speaker 2: Who's on the council? Tell us about the folks that
• 51:37
  Speaker 2: are on that.
• 51:38
  Speaker 1: Let's see.
• 51:38
  Speaker 4: Meg Rapinoe, Sue Bird, Tom Brady, Jalen Brunson.
• 51:42
  Speaker 2: Asia Wilson. You couldn't get anybody who won any championships?
• 51:47
  Speaker 2: That's an amazing list already.
• 51:49
  Speaker 1: Allie Love, Dwayne Wade, Alex Morgan. I knew I missed some.
• 51:54
  Speaker 1: And Kayvon Thibodeau.
• 51:56
  Speaker 4: All to a person really committed to making sure that
• 52:00
  Speaker 4: the student-athletes didn't to the extent they can, didn't make
• 52:05
  Speaker 4: the mistakes that they did, really wanting to give back and, like,
• 52:09
  Speaker 4: pay it forward to some extent.
• 52:11
  Speaker 1: And K.T.
• 52:11
  Speaker 4: Kavon in particular, because he was in the first or
• 52:14
  Speaker 4: second NIL class, he has firsthand experience, and he knows
• 52:18
  Speaker 4: what it's like to have that money at a young age. Now,
• 52:22
  Speaker 4: fast forward, he's been very successful in his athletic career,
• 52:27
  Speaker 4: but you got to think that nine kids out of
• 52:29
  Speaker 4: ten who are following him, they're not going to be
• 52:31
  Speaker 4: the ones who end up on the Giants.
• 52:33
  Speaker 3: Right.
• 52:33
  Speaker 2: Right, to say the least. So let's talk a little
• 52:36
  Speaker 2: bit about what I keep hearing.
• 52:40
  Speaker 3: About this intergenerational wealth transfer that's supposedly underway. There's been
• 52:47
  Speaker 3: a number of news stories and opinion pieces where people
• 52:53
  Speaker 3: are saying, hey, you think the boomers are moving all
• 52:57
  Speaker 3: this money? They're going to spend a lot of it down.
• 52:59
  Speaker 3: They're going to spend it. They're not downsizing home-wise. They're
• 53:02
  Speaker 3: going to spend it on health care and other issues.
• 53:05
  Speaker 3: Are we really looking at a $ 50 or $ 75 trillion
• 53:09
  Speaker 3: wealth transfer?
• 53:10
  Speaker 2: And if we are, when is it really going to
• 53:12
  Speaker 2: ramp up?
• 53:14
  Speaker 4: Those are the numbers that you hear about, I hear
• 53:16
  Speaker 4: about them. We all read about them. I've written about
• 53:18
  Speaker 4: the Great Wealth Transfer. We have some white papers out
• 53:21
  Speaker 4: on the Great Wealth Transfer. I believe it's happening as
• 53:25
  Speaker 4: the boomers have started to pass away and transfer money.
• 53:28
  Speaker 4: But if you think about what the transfer is, the
• 53:31
  Speaker 4: first transfer is horizontal, right? It's spouse one to spouse two.
• 53:35
  Speaker 4: And then from spouse two, potentially the kids and grandkids
• 53:38
  Speaker 4: and so forth.
• 53:39
  Speaker 1: But I think you're right.
• 53:40
  Speaker 4: A lot of the money will be spent. Healthcare is
• 53:45
  Speaker 4: very expensive and more people who have the means are
• 53:49
  Speaker 4: able to be cared for at home.
• 53:51
  Speaker 1: And that costs a lot of money.
• 53:54
  Speaker 4: But I do think that there's something to given the
• 53:58
  Speaker 4: bull market that we've participated in for the last 13
• 54:02
  Speaker 4: years or so, there's a lot of wealth. And to
• 54:08
  Speaker 4: a large extent, it's concentrated in older people who've had
• 54:12
  Speaker 4: more time to accumulate and to have their portfolios grow.
• 54:19
  Speaker 4: And so I think there's something to it. I don't
• 54:22
  Speaker 4: know that it's going to feel materially different. It just, it,
• 54:26
  Speaker 4: It means the same thing for advisors that we've always had.
• 54:28
  Speaker 4: I think it's a different way of framing it, which
• 54:31
  Speaker 4: is if you, as an advisor, you're talking to mom
• 54:36
  Speaker 4: and dad, and they've been clients of yours for 20
• 54:39
  Speaker 4: or 30 years. You grew up with them or they
• 54:41
  Speaker 4: grew up with you. They're getting older. When they eventually
• 54:46
  Speaker 4: pass away, if you don't have a relationship with their kids,
• 54:50
  Speaker 4: that money is likely to move somewhere else as an advisor.
• 54:55
  Speaker 4: It'll go to a self-directed platform. It'll go to a
• 54:58
  Speaker 4: competitor where the kids have a relationship or where they
• 55:00
  Speaker 4: know somebody they went to school with works.
• 55:04
  Speaker 1: So it's.
• 55:07
  Speaker 4: Important for advisors to develop those relationships with G2, G3,
• 55:13
  Speaker 4: and for advisors to have potentially multi-generational team so that
• 55:17
  Speaker 4: you've got somebody who can relate better to a 20-year-old
• 55:22
  Speaker 4: than the people who are relating very well to the six-year-olds,
• 55:24
  Speaker 4: because the cultural frame of references are different. And it's
• 55:29
  Speaker 4: easier for people to relate to people who are more
• 55:31
  Speaker 4: like them. But at the end of the day, people
• 55:35
  Speaker 4: generally are going to do business with people they know, like,
• 55:37
  Speaker 4: and trust. If you can develop that, so you have
• 55:41
  Speaker 4: to know the people, and you have to know them
• 55:43
  Speaker 4: for a while to develop that trust, and hopefully you're likable.
• 55:47
  Speaker 3: So let's talk about what I think is the most
• 55:50
  Speaker 3: interesting trend when it comes to wealth transfer, which is
• 55:54
  Speaker 3: inter vivos. For those of you who don't speak Latin,
• 55:59
  Speaker 3: why wait until you're dead? Why not enjoy your kids
• 56:02
  Speaker 3: or grandkids spending their inheritance now when you're here to
• 56:07
  Speaker 3: see it? How big of a trend is this? What
• 56:10
  Speaker 3: are you seeing with this space?
• 56:12
  Speaker 4: We're seeing some. It's still for families who aren't in
• 56:19
  Speaker 4: the top, the top, top echelon where there's plenty of money,
• 56:23
  Speaker 4: it doesn't matter what they do. There's still a lot
• 56:26
  Speaker 4: of concern, because your point earlier is exactly right. People
• 56:30
  Speaker 4: have spent decades being savers and being told, don't touch principal, right?
• 56:39
  Speaker 4: Save it, accumulate it, grow it, make sure you have enough.
• 56:41
  Speaker 4: You always want to make sure you have enough. And
• 56:43
  Speaker 4: they're not spending what they could.
• 56:44
  Speaker 3: So....
• 56:49
  Speaker 4: It's hard to shift people out of that mindset. I
• 56:54
  Speaker 4: don't want to say easiest. One of the ways to
• 56:56
  Speaker 4: do it is start small. I want to leave my
• 56:59
  Speaker 4: kids two million dollars each.
• 57:01
  Speaker 1: I got three kids.
• 57:02
  Speaker 4: Okay, great, but you don't necessarily want to give them
• 57:04
  Speaker 4: a million dollars now. That's a lot of money. That's
• 57:07
  Speaker 4: three million dollars off your balance sheet.
• 57:08
  Speaker 1: That's scary.
• 57:09
  Speaker 4: But could you start making annual gifts? 19,000 each, so
• 57:12
  Speaker 4: maybe 38,000 to each kid. Maybe 38 grand to their spouses.
• 57:17
  Speaker 4: another 38 to their kids, to your grandkids. And that's
• 57:22
  Speaker 4: a more manageable number. That's hundreds of thousands of dollars,
• 57:24
  Speaker 4: depending on how big their family is, as opposed to millions.
• 57:27
  Speaker 4: And it's a way to get people started with that idea.
• 57:31
  Speaker 4: And if you do that for a couple of years,
• 57:35
  Speaker 4: especially over the last 13 years, the people who are
• 57:37
  Speaker 4: giving the money away can see, well, my portfolio is
• 57:39
  Speaker 4: still growing, even though I'm spending what I want to
• 57:42
  Speaker 4: spend and I'm giving my kids $ 100, 000, $ 200, 000 total. okay,
• 57:46
  Speaker 4: now I'm ready to, like, now let's talk about that
• 57:50
  Speaker 4: gift that you talked about before. So I think it's
• 57:52
  Speaker 4: a gradual process, but you have to have the relationship
• 57:56
  Speaker 4: and the trust.
• 57:59
  Speaker 3: So before I get to my favorite questions, I have
• 58:02
  Speaker 3: one last question, and you're really the perfect person to
• 58:05
  Speaker 3: ask this. So we've talked about estate planning and gift planning.
• 58:11
  Speaker 3: We watched various permutations of the tax cuts and job
• 58:16
  Speaker 3: acts and the threatened 2026 sunset, then a higher exemption,
• 58:20
  Speaker 3: then a lower exemption, then the hole in the donut,
• 58:23
  Speaker 3: don't die this year. Oh, good advice, I'll try not
• 58:26
  Speaker 3: to die in, what was it, 2023? Don't die, otherwise
• 58:31
  Speaker 3: it'll cost you too much. How do you think about
• 58:35
  Speaker 3: multi-decade plans for families when the tax code has, I
• 58:40
  Speaker 3: don't know, certainly no more than a 10-year life and
• 58:45
  Speaker 3: more often a two- or a four-year half-life?
• 58:48
  Speaker 4: Unfortunately, you've got to plan for the tax code you have,
• 58:51
  Speaker 4: not the tax code you want.
• 58:54
  Speaker 1: And what I've seen.
• 58:55
  Speaker 4: Practitioners do over the course of the last 30 years
• 58:59
  Speaker 4: is really make plans more flexible. Disclaimer planning, planning with
• 59:04
  Speaker 4: trust where there's a lot of flexibility as to, who
• 59:08
  Speaker 4: gets the money, when they get it, who can give
• 59:09
  Speaker 4: it to them. So it's building in flexibility. And it's also,
• 59:15
  Speaker 4: we tell clients and we recommend, like, look at your
• 59:19
  Speaker 4: plan every three to five years. If there's a major
• 59:22
  Speaker 4: life event, you get a job, you lose a job,
• 59:25
  Speaker 4: you win the lottery, something happens, check your plan, make
• 59:29
  Speaker 4: sure it works. But if there's not, like, every five years,
• 59:33
  Speaker 4: just look at it. Make sure that what you have
• 59:37
  Speaker 4: on paper is actually what you want to happen. And
• 59:40
  Speaker 4: then it goes back to what I said before. The
• 59:43
  Speaker 4: paper can be fine. You still need to make sure
• 59:45
  Speaker 4: that the people who are involved, the people who are inheriting,
• 59:48
  Speaker 4: the people who you put in charge of their money
• 59:50
  Speaker 4: if you have trust, the trustees, you got to make
• 59:52
  Speaker 4: sure that those people want to do the job, are
• 59:55
  Speaker 4: capable of doing the job, and have people the same
• 59:59
  Speaker 4: values around money and like what you don't want to
• 1:00:02
  Speaker 4: do is put somebody in charge of your kids money
• 1:00:05
  Speaker 4: and they never learned the lesson about spending they don't
• 1:00:09
  Speaker 4: want your kids to spend anything so if your kids
• 1:00:13
  Speaker 4: want a new car and they currently drive a corolla
• 1:00:16
  Speaker 4: they can get another corolla but if they really want
• 1:00:19
  Speaker 4: to if they want a lexus they want accurate no
• 1:00:22
  Speaker 4: they're not going to not going to do that so
• 1:00:25
  Speaker 4: it's it's a lot about the people but but um
• 1:00:30
  Speaker 4: But that's it.
• 1:00:32
  Speaker 3: And you, throughout our conversation, you've spent a lot of
• 1:00:35
  Speaker 3: time talking about litigation between siblings, across generations, fights, all
• 1:00:42
  Speaker 3: the psychology, and all the things that I know from
• 1:00:47
  Speaker 3: a distance just look foolish and wasteful. How do you
• 1:00:52
  Speaker 3: guide people to make better decisions so that their kids
• 1:00:57
  Speaker 3: aren't fighting over the inheritance or that There isn't an
• 1:01:00
  Speaker 3: expense of litigation that's going to fritter away 20% of
• 1:01:03
  Speaker 3: the estate.
• 1:01:08
  Speaker 4: It goes back to having a plan or making a
• 1:01:11
  Speaker 4: plan early enough so that you as the wealth owner
• 1:01:17
  Speaker 4: can have conversations because it's about communication.
• 1:01:22
  Speaker 1: It's about making.
• 1:01:24
  Speaker 4: Sure that your kids or your inheritors know what you
• 1:01:27
  Speaker 4: expect of them. know what you expect of them with
• 1:01:30
  Speaker 4: respect to the wealth that you're providing to them, but
• 1:01:34
  Speaker 4: also with respect to the relationship that they have with
• 1:01:37
  Speaker 4: each other. There are plenty of parents who have two kids,
• 1:01:41
  Speaker 4: and one of them is not great with money, and
• 1:01:44
  Speaker 4: the other one's terrific, and they want to put the
• 1:01:47
  Speaker 4: terrific kid in charge of the spendthrift kid's money. Like,
• 1:01:51
  Speaker 4: do you really want to have your daughter going to
• 1:01:54
  Speaker 4: her brother and saying, can I have $ 1, 000 for whatever?
• 1:01:58
  Speaker 4: and he's in a position to say no, like what
• 1:02:01
  Speaker 4: happens at Thanksgiving that year? It's really just thinking about
• 1:02:06
  Speaker 4: what are you telling your kids? How are you training
• 1:02:12
  Speaker 4: them to think about money and wealth and to think
• 1:02:17
  Speaker 4: about what it can do for you? And we talk
• 1:02:21
  Speaker 4: to athletes about this too, because we do a lot
• 1:02:22
  Speaker 4: of athlete education as part of the Athlete Center of Excellence.
• 1:02:27
  Speaker 4: And it's really thinking about what do you want your
• 1:02:30
  Speaker 4: money to do for you, right? It needs to work
• 1:02:33
  Speaker 4: for you. You shouldn't be working for it. So having
• 1:02:36
  Speaker 4: it grow is great. What is it going to do
• 1:02:39
  Speaker 4: for you? What's it going to do for your life
• 1:02:43
  Speaker 4: and your life? Is inheriting money, is this going to
• 1:02:45
  Speaker 4: change your life? Is it going to change your life?
• 1:02:47
  Speaker 4: And is it going to change the relationship between you?
• 1:02:51
  Speaker 4: And this is common with business owners. family, the business
• 1:02:56
  Speaker 4: owner has three kids, two of them are in the business,
• 1:02:58
  Speaker 4: one of them is not, or one of them is
• 1:02:59
  Speaker 4: in the business, two of them aren't. That one's going
• 1:03:02
  Speaker 4: to be in charge of the business. Is that sibling
• 1:03:04
  Speaker 4: going to be working for her brothers and growing the
• 1:03:07
  Speaker 4: business and her brothers who are taking no part in
• 1:03:10
  Speaker 4: the business benefit from it? And if so, maybe the
• 1:03:13
  Speaker 4: answer is yes. But if it is, you've got to
• 1:03:16
  Speaker 4: communicate that and make sure that everybody's on the same page.
• 1:03:19
  Speaker 4: So I think a lot of it goes back to
• 1:03:20
  Speaker 4: communication and that family governance. What's the Framework within which
• 1:03:26
  Speaker 4: we're thinking about our money how can we? Put people
• 1:03:30
  Speaker 4: in the best position to make good decisions, but ultimately
• 1:03:34
  Speaker 4: there's still gonna be Family fights and litigation because that's
• 1:03:37
  Speaker 4: the way the world works.
• 1:03:38
  Speaker 2: That's how people are.
• 1:03:39
  Speaker 3: All right I only have you for a few moments
• 1:03:41
  Speaker 3: more So let's jump to our speed round starting with
• 1:03:44
  Speaker 3: who were your early mentors who helped shape your career?
• 1:03:49
  Speaker 1: My dad.
• 1:03:52
  Speaker 4: There was my sixth grade biology teacher, Jim Van Tassel,
• 1:04:00
  Speaker 4: but not sixth grade, I guess he was eighth grade.
• 1:04:04
  Speaker 4: And not my career so much as like he gave
• 1:04:05
  Speaker 4: me ideas about what I could do, like what was possible.
• 1:04:12
  Speaker 4: Lila Gleitman at Penn, a couple of my professors at school,
• 1:04:17
  Speaker 4: at law school, Jack Mishler, Judge Mishler, But it's just,
• 1:04:27
  Speaker 4: you know, there have been a bunch of people through
• 1:04:29
  Speaker 4: my career who've sort of given me more life advice
• 1:04:33
  Speaker 4: than career advice, necessarily. And most of the advice was
• 1:04:37
  Speaker 4: just always thinking about people. Huh.
• 1:04:40
  Speaker 3: That's really interesting. Let's talk about books. What are you
• 1:04:42
  Speaker 3: reading currently? What are some of your favorites?
• 1:04:45
  Speaker 4: What I'm reading currently, I can't remember the name of it,
• 1:04:48
  Speaker 4: but it's the book about Alex Murdaugh, the guy from
• 1:04:52
  Speaker 4: South Carolina who killed his family. He was a terrible person.
• 1:04:56
  Speaker 4: I didn't realize quite how bad a person he was
• 1:04:57
  Speaker 4: because I was like tangential.
• 1:04:59
  Speaker 1: In the heart of... I can't remember the name of
• 1:05:01
  Speaker 1: the book. Great book.
• 1:05:03
  Speaker 3: Really? Let's see if I can find it while we're.
• 1:05:06
  Speaker 1: I'm sure you'll be able to. Alex Murdaugh. M-U-R-D-A-U-G-H.
• 1:05:13
  Speaker 2: Oh, there are tons of books on this.
• 1:05:17
  Speaker 1: In the Heart of Evil or.
• 1:05:20
  Speaker 2: Blood on Their Hands, The Devil at His Elbow.
• 1:05:22
  Speaker 1: The Devil at His Elbow.
• 1:05:24
  Speaker 2: The Devil at his Elbow.
• 1:05:25
  Speaker 1: The Devil at his Elbow.
• 1:05:27
  Speaker 3: Alex Murda and the Fall of a Southern something.
• 1:05:31
  Speaker 1: That's it.
• 1:05:31
  Speaker 2: Fall of a Southern Dynasty.
• 1:05:32
  Speaker 1: Fall of a Southern Dynasty, right?
• 1:05:33
  Speaker 3: Yeah.
• 1:05:34
  Speaker 2: Yeah.
• 1:05:35
  Speaker 1: Fascinating book.
• 1:05:36
  Speaker 3: Really? Yeah.
• 1:05:37
  Speaker 4: Really fascinating. I just finished a book about the Belgian
• 1:05:44
  Speaker 4: expedition to the South Pole, to Antarctica, I should say.
• 1:05:47
  Speaker 1: Also can't remember. My memory is terrible. A Belgian one?
• 1:05:50
  Speaker 2: Not, not, what was the famous?
• 1:05:53
  Speaker 1: Shackleton?
• 1:05:54
  Speaker 3: Not the Shackleton one, which was an amazing, amazing book.
• 1:05:58
  Speaker 1: It was an amazing book.
• 1:05:58
  Speaker 2: Endurance, that was the Shackleton one.
• 1:06:00
  Speaker 1: That was the Shackleton one.
• 1:06:01
  Speaker 4: This was about a different guy who went, I think,
• 1:06:05
  Speaker 4: before Shackleton. And it was sponsored by the, he was Belgian,
• 1:06:12
  Speaker 4: or half the crew was Dutch.
• 1:06:14
  Speaker 1: I can't remember.
• 1:06:14
  Speaker 4: Again, not a great memory for titles of books, but
• 1:06:18
  Speaker 4: a terrific book. Really gripping story about their trip and
• 1:06:22
  Speaker 4: the problems they had Again, because of the people who
• 1:06:26
  Speaker 4: were trying to execute the plan.
• 1:06:27
  Speaker 2: Dig it up and.
• 1:06:28
  Speaker 1: I'll dig it up and let you know, yeah.
• 1:06:30
  Speaker 2: What about streaming these days?
• 1:06:31
  Speaker 3: What's entertaining you, either podcasts or Netflix or what have you?
• 1:06:36
  Speaker 1: Oh, we....
• 1:06:39
  Speaker 4: We just watched on YouTube the... There was a documentary
• 1:06:45
  Speaker 4: about the villages that was fascinating.
• 1:06:47
  Speaker 2: Down in Florida?
• 1:06:48
  Speaker 1: Called The Bubble, yeah.
• 1:06:49
  Speaker 2: Okay.
• 1:06:50
  Speaker 4: Really interesting Dutch filmmaker. I think she was Dutch or Swedish.
• 1:06:55
  Speaker 4: She did a great job. We're watching the fifth season
• 1:06:57
  Speaker 4: of Ted Lasso, but we're waiting. My wife is not
• 1:07:00
  Speaker 4: interested anymore in waiting week after week, so we're waiting
• 1:07:02
  Speaker 4: until the whole thing drops.
• 1:07:03
  Speaker 1: And then we're going to go back.
• 1:07:04
  Speaker 2: I'm in the exact same position. I can't wait to
• 1:07:06
  Speaker 2: watch that.
• 1:07:07
  Speaker 3: My wife is like, and we've been watching Reacher on Prime,
• 1:07:11
  Speaker 3: and there was a giant cliffhanger, and she's like, this
• 1:07:13
  Speaker 3: is why I hate doing this.
• 1:07:15
  Speaker 2: And I think it drops tonight, so we'll find out. Oh,
• 1:07:17
  Speaker 2: there you go. But she's the same way.
• 1:07:19
  Speaker 3: She won't let me watch the new season of Lasso
• 1:07:22
  Speaker 3: until they're all out. Our final two questions, what sort
• 1:07:26
  Speaker 3: of advice would you give to a recent college grad
• 1:07:29
  Speaker 3: interested in a career in either wealth management, advice, planning,
• 1:07:36
  Speaker 3: or estate and trust law?
• 1:07:39
  Speaker 4: I talk to a lot of kids in college about
• 1:07:42
  Speaker 4: their careers. Really think about what you want to do.
• 1:07:44
  Speaker 4: Do you want to work with clients one-on-one? Do you
• 1:07:47
  Speaker 4: want to be an advisor? Do you prefer to work
• 1:07:51
  Speaker 4: with clients but not have that responsibility for decisions. Because
• 1:07:57
  Speaker 4: there are plenty of ancillary careers on Wall Street or
• 1:08:01
  Speaker 4: in law where you're giving guidance and giving advice, but
• 1:08:06
  Speaker 4: you're not the primary person. You're not the person they
• 1:08:08
  Speaker 4: call up when there's a crisis. Some people want to
• 1:08:11
  Speaker 4: be that person. Some people don't. And kids come and
• 1:08:15
  Speaker 4: they say, well, I want a career in investment banking. OK, well,
• 1:08:18
  Speaker 4: I don't do investment banking. Do you want a career
• 1:08:19
  Speaker 4: at a bank? Do you want to work with individuals
• 1:08:22
  Speaker 4: or institutions? And there are some people who want to
• 1:08:24
  Speaker 4: work with individuals because they like the thing that I
• 1:08:27
  Speaker 4: loved about the casebook, the families fighting. There are some
• 1:08:31
  Speaker 4: people who want nothing to do with that. They don't
• 1:08:33
  Speaker 4: want the drama. They just want institutions because they're still people.
• 1:08:37
  Speaker 4: But it's people who are usually making, they're not as
• 1:08:42
  Speaker 4: emotional because they're not as emotionally invested because it's not them,
• 1:08:45
  Speaker 4: it's their company. And it's really just understanding what's out
• 1:08:50
  Speaker 4: there and thinking about how what exists, which is hard
• 1:08:55
  Speaker 4: to find out everything that exists, aligns with what you're
• 1:08:58
  Speaker 4: interested in. And then just talk to me as many
• 1:09:00
  Speaker 4: people as possible who you know in the industry to
• 1:09:03
  Speaker 4: understand what there is and what you could do.
• 1:09:07
  Speaker 3: And our final question, what do you know about the
• 1:09:09
  Speaker 3: world of planning and advice and wealth management today might
• 1:09:13
  Speaker 3: have been useful 30 years ago or so when you
• 1:09:16
  Speaker 3: were first getting started?
• 1:09:18
  Speaker 4: Nobody cares about... Not that nobody cares. It doesn't matter
• 1:09:26
  Speaker 4: where the numbers come from. People want you to make
• 1:09:29
  Speaker 4: them feel good. And people don't want you to lie
• 1:09:32
  Speaker 4: to them, but people want you to make them feel good.
• 1:09:34
  Speaker 4: They want you to talk to them like a person.
• 1:09:36
  Speaker 4: They don't want you to talk to them like a
• 1:09:38
  Speaker 4: client or to prove how smart you are. It took
• 1:09:42
  Speaker 4: me a while to make the transition from a legal career,
• 1:09:45
  Speaker 4: where my job was to be smart and to write, like,
• 1:09:48
  Speaker 4: speak in Latin, right? Talk about inter vivos, whatever, and
• 1:09:51
  Speaker 4: everything else to a career in wealth management, which is,
• 1:09:55
  Speaker 4: it's very different, even though I'm generally talking about the
• 1:09:58
  Speaker 4: same topics, but I have to talk about them very differently.
• 1:10:01
  Speaker 4: And that it would have been useful to understand that
• 1:10:03
  Speaker 4: before I went in. Instead, it just took me a
• 1:10:04
  Speaker 4: couple of years to get into it.
• 1:10:07
  Speaker 2: Really interesting.
• 1:10:08
  Speaker 3: Adam, thank you for being so generous with your time.
• 1:10:10
  Speaker 3: This was really quite fascinating. We have been speaking with
• 1:10:14
  Speaker 3: Adam Frank, He is the head of wealth planning and
• 1:10:17
  Speaker 3: advice at JP Morgan. If you enjoy this conversation, well,
• 1:10:22
  Speaker 3: check out any of the 650 we've done over the
• 1:10:24
  Speaker 3: past 12 years. You can find those at iTunes, Spotify, Bloomberg, YouTube,
• 1:10:30
  Speaker 3: or wherever you get your favorite podcasts. I would be
• 1:10:34
  Speaker 3: remiss if I didn't thank the crack team that helps
• 1:10:36
  Speaker 3: us put these conversations.
• 1:10:38
  Speaker 2: Together each week. Anna Luke is my producer. Sean Russo
• 1:10:42
  Speaker 2: is my researcher. I'm Barry Ritholtz. You've been listening to
• 1:10:46
  Speaker 2: Masters in Business on Bloomberg Radio.