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Ric Edelman on Translating Financial Language for Consumers · Masters in Business

• 0:02
  Speaker 1: This is Master's in Business with Barry Ridholts on Bloomberg Radio.
• 0:09
  Speaker 1: This week on the podcast, I have a special guest.
• 0:12
  Speaker 1: His name is Rick Edelman. And if you are an advisor,
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  Speaker 1: if you are somebody who is interested in the financial
• 0:20
  Speaker 1: services industry or a consumer who is looking for financial advice, UH,
• 0:26
  Speaker 1: you're gonna want to hear this conversation. Rick has built
• 0:30
  Speaker 1: a powerhouse firm over the past thirty years. They now
• 0:34
  Speaker 1: manage twenty one billion dollars. And he did it really
• 0:41
  Speaker 1: in a in a way that is fairly unique. When
• 0:44
  Speaker 1: when he launched Anentileman financial services, there weren't very many,
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  Speaker 1: if any other similar firms. He he was a pioneer.
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  Speaker 1: He was doing things before there was a script or
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  Speaker 1: a roadmap or any sort of guidance. And he and
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  Speaker 1: his wife we're kind of making it up along the way.
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  Speaker 1: They knew what they didn't want to do. They saw
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  Speaker 1: what was taking place at the big brokerage firms, and
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  Speaker 1: they kind of became the anti broker. Uh. Not only
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  Speaker 1: are they um a traditional r i A as we
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  Speaker 1: think of them, meaning their fee based, not commission or
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  Speaker 1: transactional based. Uh, but they effectively have no minimums If
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  Speaker 1: you're a five thousand dollar account, they'll take it. If
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  Speaker 1: you're less than five thousand hours UH, they'll take your
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  Speaker 1: money and wave their fee on a pro bono basis.
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  Speaker 1: I can't think of any other firm that approaches asset
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  Speaker 1: management that way. It's fairly unique and and Edelman says,
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  Speaker 1: shame on people who don't do that. If you're in
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  Speaker 1: the services industry, like a doctor, you have an obligation
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  Speaker 1: to your clients. If it's If it's not quite a
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  Speaker 1: hippocratic oath, certainly the fiduciary standard requires not only putting
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  Speaker 1: the client first, but putting people who might not be
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  Speaker 1: clients first. And I think that's both a a unique
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  Speaker 1: and refreshing perspective that we don't hear a lot of
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  Speaker 1: UH in the world of finance. So I expect you'll
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  Speaker 1: find this conversation fascinating. So, with no further ado, my
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  Speaker 1: conversation with Edelman Financials Ric Edelman. My special guest today
• 2:27
  Speaker 1: is Rick Edelman. He is chairman and co founder of
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  Speaker 1: Edelman Financial Services, affirm that manages well over twenty billion
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  Speaker 1: dollars in assets for thirty four thousand families via forty
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  Speaker 1: three offices across the USA. Rick is the author of
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  Speaker 1: no less than nine books on financing, perhaps most notably
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  Speaker 1: The Truth about Money, which is now in its fourth edition.
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  Speaker 1: Is that right correct? Fourth edition? It is the winner
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  Speaker 1: of several prizes and awards on financial liter racy and education.
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  Speaker 1: Edelman Financial Services has been ranked either one or two, uh,
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  Speaker 1: the number one or two independent financial advisor in the
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  Speaker 1: US by Barons for the years two thousand and nine
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  Speaker 1: to two thousand and twelves. And then they kicked me
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  Speaker 1: off the list. They kicked you off the list. We'll
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  Speaker 1: get into that, Rick Edelman, Welcome to Bloomberg. Thank you,
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  Speaker 1: very great to be with you. Uh. You know, I've
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  Speaker 1: been looking forward to this since we bumped into each
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  Speaker 1: other at a conference way back when in um the spring,
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  Speaker 1: and you just sort of derailed me. Why did they
• 3:34
  Speaker 1: Why did they kick you off the Barons list? How
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  Speaker 1: do you go from number one to off the list? Well,
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  Speaker 1: because they wanted to shake up the list and create
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  Speaker 1: an opportunity for others to get accolades. Is number one,
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  Speaker 1: and I was number one three times, and that one
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  Speaker 1: in between it was number two. And so we agreed
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  Speaker 1: that I was evolving personally. I was spending as our
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  Speaker 1: firm grew, we we were much bigger than the typical
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  Speaker 1: advisory firm, of course, with twenty one billion in assets
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  Speaker 1: and with forty three offices, a hundred sixty advisors, six
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  Speaker 1: hundred employees. These days, I was spending as much of
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  Speaker 1: my time as CEO running the business as as an advisor,
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  Speaker 1: working with individual clients and the folks at Barons, and
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  Speaker 1: I recognize that we were creating the next generation in
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  Speaker 1: the advisory marketplace. You know when when we started, way
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  Speaker 1: back when I got licensed in eighty six, how about you,
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  Speaker 1: uh ninety something? Yeah, I mean back then everyone was
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  Speaker 1: the seven. I didn't get the six, I didn't get
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  Speaker 1: sixty five, and he gave up the seven. So when
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  Speaker 1: we began back in the eighties, there was no financial
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  Speaker 1: planning firm you could go join, so we had no
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  Speaker 1: choice but to start our own because the industry was
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  Speaker 1: brand new, and I was that first generation among the
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  Speaker 1: pioneers who create did this into you an early CFP?
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  Speaker 1: I never obtained my CFP. I didn't have the time,
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  Speaker 1: and I ended up teaching classes of CFPS and um
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  Speaker 1: A continuous certified Continuing at Instructor, and I taught at
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  Speaker 1: Georgetown University for nine years. I hold six professional designations,
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  Speaker 1: but never bothered to get that one. So so wait,
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  Speaker 1: let me interrupt you here because this is really fascinating.
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  Speaker 1: You began more or less as a financial journalist, and
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  Speaker 1: is that? Isn't that the background? Yes? And where did
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  Speaker 1: where did Georgetown fit in in the chronology? So my
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  Speaker 1: background as is as a journalist. That was my degree.
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  Speaker 1: I have a communications degree, not a business degree. And
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  Speaker 1: I'd like to brag that I graduated college without ever
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  Speaker 1: having taken a business class, which means I wasn't brainwashed.
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  Speaker 1: In journalism school, they teach you two things. One how
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  Speaker 1: to ask questions and to how to explain the answers
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  Speaker 1: in plain English. And my very good skills very important
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  Speaker 1: when dealing with individual consumers who aren't expert in this subject.
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  Speaker 1: And so I was writing in the financial trade press
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  Speaker 1: out of college, and that was my entree to personal finance.
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  Speaker 1: The publisher I started in the financial in the medical field,
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  Speaker 1: but my publisher owned a variety of financial publications, and
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  Speaker 1: there were twenty three of us on the editorial staff,
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  Speaker 1: and we ended up writing for a whole bunch of
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  Speaker 1: different things. And I wrote for some financial publications and
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  Speaker 1: that was my entree. And my wife and I in
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  Speaker 1: our early twenties, recognizing with my experience now as a
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  Speaker 1: writer in the financial press, Hey, we ought to pay
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  Speaker 1: attention to this and we decided to go to a
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  Speaker 1: financial planner. Like most young couples, we wanted to buy
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  Speaker 1: a house, and we went to a financial planner for
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  Speaker 1: advice on how to do that. He ended up telling
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  Speaker 1: us to lie on our mortgage application, told us to
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  Speaker 1: commit a felony qualify for the mortgage. Um. The guy
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  Speaker 1: was a jerk. He We could not believe that this
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  Speaker 1: crook was telling us to do this. It really made
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  Speaker 1: us mad. And that was the impetus for us saying,
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  Speaker 1: you know what, why don't we learn how to do
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  Speaker 1: this ourselves and then teach others what we've learned. And
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  Speaker 1: that was the basis and thes and not lying. To
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  Speaker 1: give people good advice, not bad advice. And so Jean
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  Speaker 1: quit her job, went to work for pain Web and
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  Speaker 1: they're back of office to learn the back end operational
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  Speaker 1: side of the business. I got securities licensed, joined an
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  Speaker 1: independent firm, became an independent advisor immediately on the broker
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  Speaker 1: dealer side or on the broker dealer side, like there
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  Speaker 1: really wasn't There wasn't scenario side back then, it really
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  Speaker 1: didn't exist. I mean it technically did, but nobody. Why
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  Speaker 1: are you explained to listeners the difference between commission and
• 7:21
  Speaker 1: fees just the nickel version. Well, back in the old days,
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  Speaker 1: you had the brokerage licenses where you made money commissions
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  Speaker 1: selling mutual funds um and every time you sold a
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  Speaker 1: mutual fund you're in a commission for doing so. The
• 7:35
  Speaker 1: notion of a fee based advisor being licensed by the
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  Speaker 1: SEC came about much later, and we made that jump
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  Speaker 1: in the early two thousand's, And so we began our
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  Speaker 1: firm in the nineteen eighties and focused on financial education,
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  Speaker 1: teaching consumers how money works and how to make it
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  Speaker 1: work for them. And we did it by seminars, teaching
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  Speaker 1: elementary school e t A S. How to say for college,
• 8:02
  Speaker 1: and the word spread and we ended up being invited
• 8:05
  Speaker 1: on the radio and eventually being offered my own radio show,
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  Speaker 1: and now twenty seven twenty eight years later, it's the
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  Speaker 1: longest running national personal finance radio show in the country.
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  Speaker 1: That's fantastic. You launched the firm in eight six as
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  Speaker 1: a broker dealer I was affiliated with a broker dealer
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  Speaker 1: for licensing and then the r I A part wasn't
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  Speaker 1: until the two came in oh three and we launched
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  Speaker 1: our fee based money management program, the Edleman Managed Asset Program.
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  Speaker 1: We launched that in two thousand five. Today it's one
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  Speaker 1: of the largest turnkey asset management programs in the industry
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  Speaker 1: with twenty one billion in assets. That that that's quite amazing.
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  Speaker 1: So the real question that's on my mind after hearing
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  Speaker 1: this is you've been doing this for twenty seven years.
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  Speaker 1: Who who is your competitors in that same space. Is
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  Speaker 1: it the big Merrill Lynches, is it the lpls, is
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  Speaker 1: it uh Dynasty or high Tower? How do you look
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  Speaker 1: at the world out there and say, oh, we're competing
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  Speaker 1: head to head with these guys. It's everybody and nobody.
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  Speaker 1: It's a I'm a big fan of astronomy and Gene
• 9:12
  Speaker 1: and I have done some phone throughout activities in astronomy
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  Speaker 1: of a big interest there. So let me give you
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  Speaker 1: one analogy. We know how big galaxies galaxies are, and
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  Speaker 1: we know that a couple of galaxies are colliding, including ours,
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  Speaker 1: including ours, and when you look at the nasive photographs
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  Speaker 1: of these colliding galaxies, there's an assumption when you first
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  Speaker 1: look at them, that all of the stars within the
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  Speaker 1: galaxies and all the planets within the galaxies will collide
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  Speaker 1: and be big explosions and all that kind of good stuff,
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  Speaker 1: except for the vast spaces between the stars exactly. And
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  Speaker 1: the galaxies are so huge that they will so called collide,
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  Speaker 1: but they will pass through each other and nothing will
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  Speaker 1: ever touch anything else because the spaces are so vast.
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  Speaker 1: By the same notion, in the financial services industry, our
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  Speaker 1: industry is so big. It's an nineties seven trillion dollar economy.
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  Speaker 1: That's how much money is invested. That's the net worth,
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  Speaker 1: the market value of all things in this country that
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  Speaker 1: have assets and market values, stocks, bonds, real estate, business assets.
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  Speaker 1: Ninety seven trillion dollars. No one in our industry has
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  Speaker 1: market share. Merrill Lynch, one of the biggest in the industry,
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  Speaker 1: has about three trillion dollars three out of ninety seven.
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  Speaker 1: They have coming up on five, Black Rock on six,
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  Speaker 1: and there's no market share anywhere. If you look at
• 10:32
  Speaker 1: the soft drink industry, there's coke and Pepsi and everyone else.
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  Speaker 1: Look at the airline industries, Delta United and everyone else.
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  Speaker 1: In most businesses, there are three or four major competitors
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  Speaker 1: who have market share. They're competing all the time in
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  Speaker 1: our industry, Barry, you're a competitor of mine. Have you
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  Speaker 1: ever encountered one of my clients ever anywhere? And I've
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  Speaker 1: never encountered one of yours? Because this industry is huge.
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  Speaker 1: We're talking about three hundred million Americans dealing with three
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  Speaker 1: hundred thousand advisers, most of whom have a couple of
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  Speaker 1: hundred clients, and dealing with a couple of tens of
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  Speaker 1: millions of assets, and so On the one hand, this
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  Speaker 1: industry is so huge, this economy is so vast, our
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  Speaker 1: country so broad. We will never encounter competition anywhere. We're
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  Speaker 1: all on the frontier and there are a bunch of
• 11:19
  Speaker 1: guys in the wilderness trying to shoot game. But we'll
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  Speaker 1: never account each other on the mountains because the mountains
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  Speaker 1: are too big. That's one answer. Here's the other answer.
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  Speaker 1: Everybody is my competition everywhere. Money magazine and kiplingers to
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  Speaker 1: publications that are constantly giving financial advice for five a
• 11:38
  Speaker 1: month are competition in may because I'm in the business
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  Speaker 1: of trying to get consumers to listen to my advice,
• 11:46
  Speaker 1: and they're being distracted by the advice for Money magazine
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  Speaker 1: and Kiplingers. They're being distracted by the Motley Full. They're
• 11:51
  Speaker 1: being distracted by Dave Ramsey and Susie Orman and Jim
• 11:55
  Speaker 1: Kramer and CNBC. And they're being distracted by the brokerage,
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  Speaker 1: the big box brokerage firm Merrill Lynch and Well's, far
• 12:01
  Speaker 1: Ago and Ubs and all the majors. They're being distracted
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  Speaker 1: by the mutual fund company's Fidelity in Vanguard and t
• 12:07
  Speaker 1: ro Price and t I A A. They're being distracted
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  Speaker 1: by the banks, um Us Trust and Bank of America
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  Speaker 1: and on and on and on. So in one sense, everybody,
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  Speaker 1: everywhere is my competition. So it depends on how you
• 12:20
  Speaker 1: look at it. I have to mention, you have a
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  Speaker 1: weekly radio show, you hold regular seminars, You've written nine books.
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  Speaker 1: What does that footprint do to distinguish you Rick Edelman
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  Speaker 1: from your everyone in No One competition. Well, it provides
• 12:39
  Speaker 1: name recognition. On the one hand, it also very importantly
• 12:43
  Speaker 1: helps consumers understand our philosophical view on financial planning and
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  Speaker 1: investment management, allows them to kick the tire, so to speak.
• 12:52
  Speaker 1: It allows them to get a lot of freer, low
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  Speaker 1: cost advice um that can be applicable to their own
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  Speaker 1: personal situation in a non threatening way. They can digest
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  Speaker 1: it as they wish, whether it's listening to the radio
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  Speaker 1: or watching our videos or my television series on Public
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  Speaker 1: Tape TV, or going to our seminars, or reading our
• 13:12
  Speaker 1: newsletter or going to our website. We we make financial
• 13:16
  Speaker 1: education accessible, we make it easy, we make it non threatening,
• 13:20
  Speaker 1: and I try really hard to make it fun. So
• 13:24
  Speaker 1: Scott Galloway is a professor and while you stern and
• 13:27
  Speaker 1: he covers a lot of technology companies like Amazon and
• 13:31
  Speaker 1: Facebook and Google, and he constantly says Amazon is where
• 13:38
  Speaker 1: they are today because their narrative is so clear, so
• 13:42
  Speaker 1: well defined, so well told by Jeff Bezos. How it
• 13:47
  Speaker 1: sounds like you're describing a somewhat similar approach that the
• 13:51
  Speaker 1: Rick Edelman story or Edelman Financial Services story is the
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  Speaker 1: business you're in, and everything else is just running the
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  Speaker 1: nuts and bolts of it. That's correct. Um. Most of
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  Speaker 1: the advisers in this industry, in my experience, come from
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  Speaker 1: a business background. They came from the brokerage industry of
• 14:10
  Speaker 1: the insurance industry. They spend most of their time talking
• 14:13
  Speaker 1: to each other, which means they're talking shop and filled
• 14:17
  Speaker 1: with jargon, and they don't know how to talk to
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  Speaker 1: ordinary consumers in plain English, in language people understand that
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  Speaker 1: is understandable and actionable. And my background and communications helps
• 14:32
  Speaker 1: me talk in plain English to folks in in clear,
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  Speaker 1: easy language, and it's I've learned. It's a big advantage
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  Speaker 1: because consumers are intimidated by this subject. They don't have
• 14:44
  Speaker 1: any background in it. Most people go through their entire
• 14:48
  Speaker 1: K to sixteen education without ever taking a personal finance class.
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  Speaker 1: Their parents taught them nothing about money, their employers teach
• 14:54
  Speaker 1: them nothing about money, and they're a litter. We have
• 14:56
  Speaker 1: a nation of financial literance. Every study tells us this
• 14:59
  Speaker 1: that more arey Americans can't pass a basic personal literacy
• 15:03
  Speaker 1: financial literacy class or test, and so we are the
• 15:08
  Speaker 1: oasis for these folks. We help them understand that this
• 15:11
  Speaker 1: stuff is not complicated. It's incredibly simple and easy to understand.
• 15:15
  Speaker 1: It's Wall Street that tries to make it intimidating, to
• 15:17
  Speaker 1: make you their slave, to make you think that you're
• 15:19
  Speaker 1: dependent on them to buy their high priced, high commission,
• 15:23
  Speaker 1: high risk, low liquidity products that are designed to benefit
• 15:26
  Speaker 1: themselves first and the consumer second. Actually the consumer third,
• 15:30
  Speaker 1: they benefit themselves first, the broker, yeah, so right, the
• 15:35
  Speaker 1: consumers fourth. And so we've always taken a different attitude,
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  Speaker 1: My wife and I we we took this from a
• 15:41
  Speaker 1: consumer perspective and said, we want to understand how this
• 15:44
  Speaker 1: works as consumers, and we're somebody going to share what
• 15:46
  Speaker 1: we've learned with others. And that's the basis of our books.
• 15:48
  Speaker 1: The tag onto my first book is that uh Personal
• 15:51
  Speaker 1: Finances fund uh And you know we we wrote it
• 15:55
  Speaker 1: and I'll do all the other financial education we do
• 15:57
  Speaker 1: because very simply, uh, money doesn't come with instructions. You know.
• 16:04
  Speaker 1: You you reference the complexity and the complications of finance
• 16:09
  Speaker 1: on Wall Street that has been described as a feature
• 16:13
  Speaker 1: not a bug. You obviously agree with that, meaning if
• 16:17
  Speaker 1: we make this really sophisticated and complex and convoluted, people
• 16:21
  Speaker 1: just pay us a fee to manage it. And made
• 16:23
  Speaker 1: camp people in Wall Street made its money by intimidating people,
• 16:28
  Speaker 1: obfuskating by being opaque and not being upfront and transparent.
• 16:35
  Speaker 1: Our attitude is I don't have to have a bias.
• 16:38
  Speaker 1: I don't have to try to sell you a product.
• 16:40
  Speaker 1: Instead I'll just teach you how money works. I'll explain
• 16:43
  Speaker 1: to you the difference between a stock and a bond,
• 16:45
  Speaker 1: and once you understand the difference, which is really easy,
• 16:47
  Speaker 1: you can then make an informed decision. And as long
• 16:50
  Speaker 1: as you retain me to assist you with this, then
• 16:53
  Speaker 1: I can make a living and we both win. So
• 16:55
  Speaker 1: I don't have to be a champion of any particular product,
• 16:58
  Speaker 1: or any particular company, or any particular strategy. We're free
• 17:03
  Speaker 1: to do whatever is in the client's best interest, and
• 17:05
  Speaker 1: that is uncommon in our industry, so we didn't really
• 17:09
  Speaker 1: talk about this previously. What about things like alternative investments,
• 17:13
  Speaker 1: hedge funds, vetric capital, private equity? Is that something that
• 17:17
  Speaker 1: you guys look at or do you? Is that just
• 17:19
  Speaker 1: too complicated and too expensive for for your client base.
• 17:23
  Speaker 1: We have available to us, as you do, virtually every
• 17:27
  Speaker 1: product available in the industry, so we can give our
• 17:29
  Speaker 1: clients anything. We choose not to give them any of
• 17:33
  Speaker 1: the stuff you've just described because they are not in
• 17:36
  Speaker 1: the client's best interests. These products are too complicated, they're
• 17:40
  Speaker 1: too expensive, they have a terrible history of underperformance, they're
• 17:44
  Speaker 1: very high risk, and they're ill liquid. Aside from those, Well,
• 17:49
  Speaker 1: I'm awesome, very often very adverse tax consequences rather than that,
• 17:52
  Speaker 1: you know, how was the how was the playing right?
• 17:54
  Speaker 1: I'm fond of saying, come for the high fees, stay
• 17:57
  Speaker 1: for the underperformance. Is it works out really well? And
• 18:00
  Speaker 1: you mentioned earlier, uh, the Dave Ramsey's and Susie Orman's
• 18:04
  Speaker 1: of the world, and how do you contrast what the
• 18:08
  Speaker 1: Rick Edelman's of the world do versus that group? Well,
• 18:11
  Speaker 1: we would you put yourself in that ground? You know,
• 18:13
  Speaker 1: if I were trying to be provocative, you know, I
• 18:16
  Speaker 1: would do something funny by saying the difference between me
• 18:18
  Speaker 1: and them is that I'm not an idiot. Um, but
• 18:20
  Speaker 1: but you're not gonna be provocaive. I'm not. I'm not
• 18:22
  Speaker 1: gonna be provocative and say that more seriously. I mean,
• 18:25
  Speaker 1: both of them are very talented and proven um successes,
• 18:29
  Speaker 1: and what they do there's a very big difference and
• 18:32
  Speaker 1: what they do versus what I do, and um, it's
• 18:36
  Speaker 1: twofold number one. I'm an actual practicing financial planner dealing
• 18:40
  Speaker 1: with actual clients, sitting across the coffee table, giving advice
• 18:44
  Speaker 1: to people on a long term, years and decades basis,
• 18:46
  Speaker 1: getting to know them, and their families in very intimate ways.
• 18:49
  Speaker 1: That is a very different perspective than when you're just
• 18:52
  Speaker 1: talking into a microphone on the radio to the masses,
• 18:56
  Speaker 1: where even if you're doing a call in show, as
• 18:58
  Speaker 1: Susie does and Dave does and I do, you really
• 19:01
  Speaker 1: can't do all that much for someone in a three
• 19:03
  Speaker 1: minute radio telephone conversation. And so when you are only
• 19:08
  Speaker 1: doing mass media activity, you're limited in your ability to
• 19:11
  Speaker 1: truly serve the client well, which is why we always
• 19:14
  Speaker 1: say on my show, don't act on anything you ever
• 19:16
  Speaker 1: here on the show uses as the basis for learning
• 19:18
  Speaker 1: more and talking to an individual advisor about your own
• 19:20
  Speaker 1: personal circumstances. There's one other very fundamental difference between Susie
• 19:24
  Speaker 1: and Dave and myself. They're talking to a different audience,
• 19:29
  Speaker 1: and that is why their advice is different than mine.
• 19:32
  Speaker 1: So who is your audience and who is their audience?
• 19:34
  Speaker 1: Their audience i'd like to refer to as the young
• 19:37
  Speaker 1: and the stupid um and again I'm not going to
• 19:39
  Speaker 1: be particularly provided um. They're talking predominantly to people who
• 19:43
  Speaker 1: are young, uh. Demographically if you look at their data
• 19:46
  Speaker 1: that there is more as a gray year audience, not
• 19:51
  Speaker 1: at all eighteen to thirty four year old single females
• 19:53
  Speaker 1: predominantly as our audience. Uh, and these folks don't have
• 19:57
  Speaker 1: much money, they don't have much knowledge, and they are
• 20:01
  Speaker 1: often in many cases, the vast majority of both of
• 20:04
  Speaker 1: their audiences are immature and irresponsible with personal finance. Dave's
• 20:09
  Speaker 1: big thing is helping people get out of debt. People
• 20:11
  Speaker 1: have too much credit card debt, they're over their heads
• 20:13
  Speaker 1: with mortgage debt, stream owned debt, and his advice, which
• 20:17
  Speaker 1: is a huge focus on getting rid of that debt,
• 20:20
  Speaker 1: is absolutely right, absolutely perfect for his audience. Susie very similar.
• 20:24
  Speaker 1: When they're talking to people who are irresponsible with money,
• 20:27
  Speaker 1: who are dealing with the emotional issues of money, who
• 20:30
  Speaker 1: are dealing with money as a power tool, and it's
• 20:33
  Speaker 1: an impact on their relationships that they have with their
• 20:36
  Speaker 1: their partner, their spouse, their families. The advice they're giving
• 20:39
  Speaker 1: them is very very good, very very important. But I'm
• 20:42
  Speaker 1: not talking to those people. People on talking to are
• 20:46
  Speaker 1: fifty years of age plus. They tend to be married,
• 20:49
  Speaker 1: they tend to be dual income, they tend to be
• 20:52
  Speaker 1: college educated, they tend to have half a million dollars
• 20:55
  Speaker 1: of investments, are more. All of this data is shown
• 20:57
  Speaker 1: by the survey research of our radio audience and our
• 21:00
  Speaker 1: seminar audiences. And we know that these folks don't need
• 21:04
  Speaker 1: my advice and whether or not they can afford a
• 21:06
  Speaker 1: cafe latte, they don't because they always advice. But there
• 21:10
  Speaker 1: you know, if you if a fight at a latte
• 21:12
  Speaker 1: is going to make a difference in your ability to retire,
• 21:14
  Speaker 1: you're doing something else very well. And that's my point.
• 21:17
  Speaker 1: So my audience doesn't need that kind of advice. They
• 21:19
  Speaker 1: don't need me to harp on them about the fact
• 21:22
  Speaker 1: that they're acting stupid, that they're buying, you know, fancy
• 21:25
  Speaker 1: pocket books and lots of jewelry and big costly vacations
• 21:29
  Speaker 1: when they're not even joining their four O one k
• 21:31
  Speaker 1: at work. I don't have to tell my clients this
• 21:32
  Speaker 1: because my clients are mature, intelligent, responsible members of their
• 21:35
  Speaker 1: community who simply want to understand the complexities of money,
• 21:39
  Speaker 1: of tax law, state planning, insurance, long term care, family
• 21:44
  Speaker 1: issues to help them make the best decisions that they're
• 21:47
  Speaker 1: already trying to make. So all we do is kind
• 21:49
  Speaker 1: of like tweak our clients along, do this instead of that,
• 21:53
  Speaker 1: because it's more efficient, more effective, it's lower risk, lower cost,
• 21:55
  Speaker 1: lower in tax, and so our audiences are very different. Therefore,
• 21:59
  Speaker 1: the advice Dave Ramsey gives is dead wrong for my clients,
• 22:03
  Speaker 1: but the advice I give my clients is probably dead
• 22:05
  Speaker 1: wrong for his. And so there is a place for
• 22:08
  Speaker 1: Dave Ramsey in this world, and for Susie Orman and
• 22:10
  Speaker 1: for me, and the audience needs to recognize who is
• 22:14
  Speaker 1: that they need to be listening to based on their
• 22:16
  Speaker 1: own situations. Let's talk about running a firm as large
• 22:20
  Speaker 1: as yours. You have forty three offices in sixteen states,
• 22:25
  Speaker 1: You work with thirty four thousand families. How many employees
• 22:28
  Speaker 1: do you have working? So that's a really big shop.
• 22:33
  Speaker 1: And you earlier, either proudly or cheapestly, admitted you took
• 22:38
  Speaker 1: no business classes whatsoever. How do U s chairman oversee
• 22:43
  Speaker 1: such an empire? Well, these days I don't have to,
• 22:46
  Speaker 1: so that's the good news. A year and a half
• 22:48
  Speaker 1: ago we brought in a CEO for the first time
• 22:51
  Speaker 1: so that I didn't have to continue running the firm
• 22:54
  Speaker 1: on a daily basis. My wife and I started the
• 22:57
  Speaker 1: firm thirty one years ago and we ran it ourselves
• 23:01
  Speaker 1: for a very very long time, the first thirty years,
• 23:04
  Speaker 1: and we began to realize that I was doing three
• 23:08
  Speaker 1: major things. One uh serving as a financial planner to
• 23:11
  Speaker 1: my personal clients that I've had for decades. Uh to
• 23:15
  Speaker 1: serving as the public face of the of the firm,
• 23:17
  Speaker 1: writing books, doing radio and TV seminars, public appearances and
• 23:20
  Speaker 1: all that kind of good stuff. And third, serving as
• 23:22
  Speaker 1: CEO of a growing enterprise. When you do all three
• 23:25
  Speaker 1: things in a full time basis, something has to slip,
• 23:29
  Speaker 1: and so we recognize that it was. You know, I'm
• 23:31
  Speaker 1: a really good CEO. I've I've done better as an
• 23:35
  Speaker 1: entrepreneur and founder than most in the industry. But I
• 23:38
  Speaker 1: wasn't doing it full time. So better to bring in
• 23:40
  Speaker 1: another talented, proven executive in our industry as a full
• 23:44
  Speaker 1: time CEO, so I didn't have to deal with the
• 23:45
  Speaker 1: day to day because, let's face it, dealing with I
• 23:47
  Speaker 1: T and operations and compliance and you know, finance and accounting.
• 23:51
  Speaker 1: You're right, that's not fun. That's all why I got
• 23:53
  Speaker 1: into the business. I got into the business because I
• 23:54
  Speaker 1: love consumers and I'm not a big fan of money.
• 23:57
  Speaker 1: I'm not a big fan of the subject of personal
• 23:59
  Speaker 1: finance and in sins I'm a big fan of individuals,
• 24:02
  Speaker 1: of people of their families, helping them achieve the goals
• 24:05
  Speaker 1: they have in life, getting their kids into college and
• 24:07
  Speaker 1: buying homes and caring for aging parents. That's the fun.
• 24:10
  Speaker 1: That's why we all get into financial planning, and the
• 24:13
  Speaker 1: operational side of the business is a distraction, necessary one,
• 24:17
  Speaker 1: an obligatory one, but nevertheless a distraction. So by bringing
• 24:21
  Speaker 1: in Ryan Parker, he was at LPL previously and before that,
• 24:26
  Speaker 1: which had seventeen thousand, I think fifteen thousand financial advisors
• 24:30
  Speaker 1: in their organization prior to that, uh frank Russell one
• 24:35
  Speaker 1: of the biggest firms in our industry, and before that
• 24:38
  Speaker 1: Franklin Templeton one of the biggest mutual fund companies in America.
• 24:41
  Speaker 1: Twenty year executive um fabulous guy, very skilled and talented
• 24:46
  Speaker 1: who's now running the firm day to day. So I
• 24:47
  Speaker 1: don't have to deal with all of that, and I
• 24:50
  Speaker 1: have my financial planning team working with my clients for
• 24:53
  Speaker 1: the most part, and so I can focus my energies
• 24:55
  Speaker 1: and attention on bigger picture stuff that is really going
• 24:58
  Speaker 1: to move the needle for a America, not just our firms,
• 25:01
  Speaker 1: but all of America dealing with a major challenges. We're
• 25:03
  Speaker 1: dealing in the field of personal finance. So you're now
• 25:07
  Speaker 1: twenty point six. I always afraid to round up, but
• 25:12
  Speaker 1: let's call it one. It depends on what the market
• 25:14
  Speaker 1: did today. You know, it's one billion, you know, so
• 25:17
  Speaker 1: it's not swinging five percent a day. But when did
• 25:23
  Speaker 1: that really ramp up? If you launched thirty one years ago,
• 25:26
  Speaker 1: was it was it that hockey stick growth immediately? Was
• 25:30
  Speaker 1: it a long slow process? Tell us about what that
• 25:32
  Speaker 1: growth curve looked like. It has been growing steadily and
• 25:37
  Speaker 1: growth was never our goal. Gene and I we real
• 25:40
  Speaker 1: simple about it. We said, look, we're going to help people,
• 25:42
  Speaker 1: and if somebody asks for our help and we don't
• 25:44
  Speaker 1: have the capacity to help them, we'll grow. We'll add
• 25:46
  Speaker 1: a financial planner who can assist, and we'll stop growing
• 25:50
  Speaker 1: when people stop asking us for help. But we continue
• 25:53
  Speaker 1: to receive tens of thousands of phone calls and emails
• 25:57
  Speaker 1: a year from people asking for our help, and so
• 26:00
  Speaker 1: we continue to grow to serve them. The real key
• 26:03
  Speaker 1: for us as we've grown is to sustain who we are,
• 26:08
  Speaker 1: because that's why people culture of the philosophy that you know,
• 26:12
  Speaker 1: there's a phrase somebody in your office referenced one face,
• 26:16
  Speaker 1: one voice. That's an internal phrase. It's gotten out into
• 26:20
  Speaker 1: the public, which is fine, but it was never meant
• 26:22
  Speaker 1: to be a slogan externally, but it's kind of become one.
• 26:26
  Speaker 1: The real message is this whene when someone calls our
• 26:29
  Speaker 1: office asking to talk with an advisor, the reason they're
• 26:33
  Speaker 1: doing that is that they've had some exposure somewhere to
• 26:36
  Speaker 1: our organization. They've heard my radio show, they've been to
• 26:38
  Speaker 1: a seminar, they've read one of my books, they've seen
• 26:41
  Speaker 1: my TV show, they've been to our website something somewhere,
• 26:44
  Speaker 1: and because of that, they've been exposed to our philosophy.
• 26:47
  Speaker 1: They know how I feel about mortgages, which is different
• 26:49
  Speaker 1: from most advisors. They know how I feel about muni bonds.
• 26:51
  Speaker 1: They know how we feel about investment management and insurance
• 26:54
  Speaker 1: and taxes and all this kind of good stuff. So
• 26:56
  Speaker 1: when they call in, it's because they liked what they heard.
• 26:58
  Speaker 1: They enjoyed that advice, and they want to know that
• 27:01
  Speaker 1: the advice they're going to get from my colleague is
• 27:03
  Speaker 1: the same as the advice they would have gotten for
• 27:05
  Speaker 1: me personally, And so we work really hard to make
• 27:08
  Speaker 1: sure that the client experiences uniform within the firm, that
• 27:12
  Speaker 1: no matter which of my hundred sixty advisers you talked to,
• 27:15
  Speaker 1: the philosophy, the methodology, the entire client experience will be
• 27:20
  Speaker 1: the same. It's the Starbucks model. Go to any Starbucks
• 27:23
  Speaker 1: in the country, you know what your experience will be.
• 27:25
  Speaker 1: Every latte tastes the same no matter where you are.
• 27:27
  Speaker 1: The stores all have the same look and feel. The
• 27:29
  Speaker 1: client's service, customer service for them is similar. The baristas
• 27:34
  Speaker 1: all act the same way. They can meet you, they
• 27:36
  Speaker 1: greet you the same way. And so we want the
• 27:38
  Speaker 1: client experience to be not dependent on you talking to me,
• 27:43
  Speaker 1: but on the firm itself, because that's the Achilles hel
• 27:46
  Speaker 1: In the financial services industry, Merrill Lynch has what fifteen
• 27:48
  Speaker 1: thousand brokers the thundering her, and the experience you have
• 27:53
  Speaker 1: as a client depends on which of those fifteen and
• 27:56
  Speaker 1: you talk to, because totally you have one guy buy
• 27:59
  Speaker 1: an IBM and another one is shorting it, one guy
• 28:01
  Speaker 1: is trading options, another one is buying mini bonds. Meryl
• 28:03
  Speaker 1: couldn't care less as long as those brokers are acting
• 28:06
  Speaker 1: honestly and ethically, morally and profitably. The advisors are free
• 28:10
  Speaker 1: to do what they want, which means the advice you
• 28:12
  Speaker 1: get is dependent on the advisor, not on Meryl. That's
• 28:15
  Speaker 1: not the same at Edelman Financial. At our firm, it's
• 28:17
  Speaker 1: all about the firm, it isn't about the individual advisor.
• 28:20
  Speaker 1: So that has been a hamstring in our growth because
• 28:23
  Speaker 1: we can only bring in advisors who agree with me,
• 28:26
  Speaker 1: who adhere to the philosophy, methodology and the process that
• 28:29
  Speaker 1: we use so that we can sustain the corporate culture
• 28:34
  Speaker 1: and the client experience. And so we don't have fifteen
• 28:37
  Speaker 1: thousand brokers like Meryl does. I wish I did, but
• 28:39
  Speaker 1: we don't. One day, I hope we will. We have
• 28:41
  Speaker 1: a hundred sixty and the client experience I fully believe
• 28:47
  Speaker 1: is consistent across the spectrum in our firm. What surprised
• 28:51
  Speaker 1: you about how you've developed was it? Was it the
• 28:55
  Speaker 1: number of advisors you've added, the number of clients, Like,
• 28:58
  Speaker 1: what was that process and what was as expected? And
• 29:02
  Speaker 1: what was Hey, I really wasn't thinking about that, I
• 29:06
  Speaker 1: guess the surprise to me was that we serve a
• 29:09
  Speaker 1: marketplace and we deliver services to that market in a
• 29:13
  Speaker 1: manner that is different from pretty much everybody else in
• 29:16
  Speaker 1: the industry. When you say you deliver services, is it
• 29:20
  Speaker 1: the services to clients or is it the footprint you
• 29:23
  Speaker 1: have that attracts the clients in the first place? The
• 29:25
  Speaker 1: services to the client. Most advisors, most firms are targeting
• 29:33
  Speaker 1: the high net worth. They want to deal with people
• 29:36
  Speaker 1: who have a million dollars or more. And you're a
• 29:38
  Speaker 1: minimum is five thousand dollars. That's very unusual. It's unheard of,
• 29:43
  Speaker 1: and it used to be fifty. Is it five thousand
• 29:46
  Speaker 1: with an advisor or five thousand worth a robo advisor?
• 29:49
  Speaker 1: Either way, and if you don't have the five thousand
• 29:52
  Speaker 1: will help you anyway. We'll treat you as a pro
• 29:53
  Speaker 1: bono case, so we'll help you until you get the
• 29:55
  Speaker 1: five thousand. Really, so, we don't care whether you have
• 29:57
  Speaker 1: any money or not. We only care as to whether
• 29:59
  Speaker 1: or not you want to improve your financial lot in
• 30:01
  Speaker 1: life and if you're willing to take you our advice.
• 30:04
  Speaker 1: So let me push back at that. I could hear
• 30:08
  Speaker 1: all the advisers listening saying, well, you're there are certain
• 30:13
  Speaker 1: costs associated with each household you have, legal and accounting
• 30:17
  Speaker 1: and compliance and all the software stack we have, each
• 30:20
  Speaker 1: of there's a per household cost to that at forget
• 30:24
  Speaker 1: fifty thousand, at five thousand, it's a big money loaser yea.
• 30:29
  Speaker 1: And what's your point, Well, this is what the why.
• 30:33
  Speaker 1: I think a lot of people don't take those clients. Yeah,
• 30:35
  Speaker 1: we'll shame on them, arrogant s obs. They ought to
• 30:37
  Speaker 1: get the hell out of this industry and explain what motivated.
• 30:40
  Speaker 1: Would you imagine a physician saying I'd love to help you,
• 30:43
  Speaker 1: but unfortunately you don't have any money, so I'm sorry,
• 30:45
  Speaker 1: I'm not gonna give you. That gets said every single day,
• 30:48
  Speaker 1: Oh we don't have insurance, Well go to the emergency room.
• 30:51
  Speaker 1: I can't help you. And so that's exactly what happens.
• 30:55
  Speaker 1: And they you do get the services and the care
• 30:57
  Speaker 1: that they need, because that's what There isn't a physician
• 30:59
  Speaker 1: in this country that will turned down a sick patient
• 31:01
  Speaker 1: because they don't have the money. And that's ridiculous. And
• 31:05
  Speaker 1: if they don't have the insurance, they're not getting past
• 31:07
  Speaker 1: in there set the front door only in certain small
• 31:10
  Speaker 1: private practices. But if you look at the vast majority
• 31:13
  Speaker 1: of physicians who are dealing with the hippocratic oath, they
• 31:15
  Speaker 1: are not going to look at somebody lying on the
• 31:18
  Speaker 1: sidewalk bleeding to death. Same Wait a minute, I think
• 31:20
  Speaker 1: I want to check the guy's wallet before if it's
• 31:23
  Speaker 1: the same thing here, these people are coming to us
• 31:25
  Speaker 1: saying I'm bleeding to death and I need your help,
• 31:27
  Speaker 1: and I'm not going to say to them, well, can
• 31:28
  Speaker 1: you afford my faith? My answer is I'm going to
• 31:31
  Speaker 1: help you, and if you can't afford my fail, I'll
• 31:32
  Speaker 1: waive my faith because what matters more is that you
• 31:35
  Speaker 1: get the help that you need. And you're right, most
• 31:37
  Speaker 1: advisors won't do it because their attitude is I can
• 31:39
  Speaker 1: only handle This is what most advisors say. I can
• 31:41
  Speaker 1: handle a hundred and fifty families and that's it, and
• 31:44
  Speaker 1: I can't fill them with people who can't afford me.
• 31:46
  Speaker 1: So this is why they're arrogant and they're idiots. If
• 31:49
  Speaker 1: you can't handle to serve these people because you can
• 31:54
  Speaker 1: only handle a hundred fifty clients, then double your capacity
• 31:56
  Speaker 1: to three hundred. Bring in another advisor. Because now you've
• 32:01
  Speaker 1: got two advisors, you now have double the capacity, and
• 32:03
  Speaker 1: you build the infrastructure so that the criteria of can
• 32:06
  Speaker 1: I afford you is no longer gone. And I'll take
• 32:09
  Speaker 1: it a step further from a practice management perspective. And
• 32:11
  Speaker 1: in this radio show we're talking to consumers. Let me
• 32:13
  Speaker 1: talk to advisors for a moment. If you're an advisor
• 32:17
  Speaker 1: and your attitude is I can't afford to take on
• 32:20
  Speaker 1: that small client because they don't have any money, let
• 32:22
  Speaker 1: me tell you something. The good will you will generate
• 32:24
  Speaker 1: and serving that client for years, that person will age
• 32:27
  Speaker 1: in life, and as they do, they will get money,
• 32:30
  Speaker 1: they will get an inheritance, they will win a legal judgment,
• 32:33
  Speaker 1: they will win the lottery, they will get uh, they
• 32:35
  Speaker 1: will marry up. That something will happen in their life,
• 32:38
  Speaker 1: and the good will you have bestowed on them for
• 32:40
  Speaker 1: years will come back to you in spades. Who referrals
• 32:42
  Speaker 1: you don't know who they know. You don't know who
• 32:44
  Speaker 1: they're going to become. So if you insist on being
• 32:46
  Speaker 1: self interested in self motivated, treat it like planning seeds.
• 32:50
  Speaker 1: Stop looking inward at what's in it for you, and
• 32:53
  Speaker 1: recognize that you have an obligation with your skills, talent,
• 32:56
  Speaker 1: and knowledge to help people who lack all three, to
• 32:59
  Speaker 1: serve them the way they need to be served. Don't
• 33:01
  Speaker 1: fulfill and maintain the terrible relationship and reputation that our
• 33:05
  Speaker 1: industry has, which is that we will only serve the
• 33:08
  Speaker 1: one percenters. This is why the hate Wall Street. It's
• 33:12
  Speaker 1: a terrible reputation Wall Street hasn't. It's well deserved. So
• 33:15
  Speaker 1: if you are a consumer, let me shift gears now
• 33:17
  Speaker 1: and talking to consumers. If you're trying struggling looking for
• 33:21
  Speaker 1: an advisor who won't help you because you're not already
• 33:24
  Speaker 1: a millionaire, well now you know there's a firm that
• 33:26
  Speaker 1: will help you, an award winning organization that will give
• 33:29
  Speaker 1: you the advice you need in the services that you need,
• 33:31
  Speaker 1: whether you have the million or simply wish that you did.
• 33:34
  Speaker 1: I love that. I love that I've pushed your buttons
• 33:35
  Speaker 1: and gotten you rolling. Let me ask you another question
• 33:39
  Speaker 1: that I know you're somewhat passionate about. You mentioned there
• 33:44
  Speaker 1: are three hundred thousand financial advisors in the United States.
• 33:49
  Speaker 1: I've heard you say that most of these folks are
• 33:52
  Speaker 1: either going to have to merge or get hired by
• 33:55
  Speaker 1: a bigger firm, or go out of business. True or false. Yeah,
• 33:59
  Speaker 1: So over the next five years, half of them will
• 34:00
  Speaker 1: be gone. Half will be gone. So the three will
• 34:03
  Speaker 1: be one fifty. What what are the other half going
• 34:05
  Speaker 1: to be doing They'll be other than working for you
• 34:09
  Speaker 1: or you or they'll be They'll be they'll get together
• 34:13
  Speaker 1: and and create larger practices. They will merge with each other,
• 34:16
  Speaker 1: they will join larger practices, or they will be out
• 34:20
  Speaker 1: of the business. The notion of a small solo practitioner
• 34:23
  Speaker 1: will be gone. That's that's a point notion. But it's
• 34:26
  Speaker 1: very you know, Norman Rockwell, Americana. Hey, here's a person
• 34:30
  Speaker 1: who's in a small town. He hung a shingle loud
• 34:33
  Speaker 1: He or she is working with his friends and neighbors.
• 34:36
  Speaker 1: And what is wrong with that model? It's unsustainable. This
• 34:40
  Speaker 1: is the model that you began with. It's the model
• 34:42
  Speaker 1: I began with. Model we all did. And it's not
• 34:44
  Speaker 1: that the model is bad. It's simply not sustainable into
• 34:49
  Speaker 1: day's environment. And there are three reasons for it. One
• 34:53
  Speaker 1: is regulatory, two is competition, and three is technology. From
• 34:58
  Speaker 1: a regulatory perspective of the SEC is more demanding. And
• 35:02
  Speaker 1: I put that in quotes as a good word, not
• 35:04
  Speaker 1: a bad word. The SEC is more demanding than ever
• 35:08
  Speaker 1: in making sure that advisors are serving the client's best interests,
• 35:12
  Speaker 1: that they that the advisors are engaging in practices that
• 35:15
  Speaker 1: are in the spirit and intent of the law, not
• 35:19
  Speaker 1: merely the rigs of the law, and so many advisors
• 35:22
  Speaker 1: are currently selling products that in the future will not
• 35:25
  Speaker 1: be able to be sold. We're already beginning to see
• 35:27
  Speaker 1: the beginnings of the fiduciary standard coming about. Despite the
• 35:30
  Speaker 1: best efforts of the current administration, who are not apparently
• 35:34
  Speaker 1: big fans of the fiduciary nor is the industry, and
• 35:36
  Speaker 1: despite all of their efforts to delay it quash it,
• 35:40
  Speaker 1: it's eventually going to happen. And when it does, the
• 35:43
  Speaker 1: majority of investment products currently foisted on the American populace
• 35:48
  Speaker 1: today will cease to exist. And when they cease to exist,
• 35:52
  Speaker 1: so will the commissions that are behind them, the non
• 35:54
  Speaker 1: traded reads that have a ten percent commission variable. Universal
• 35:58
  Speaker 1: of a problem with non traded reads with a ten
• 36:00
  Speaker 1: percent fig And how is how is uh? How are
• 36:03
  Speaker 1: the boys going to make their money down by the
• 36:05
  Speaker 1: docks If they can't charge a ten percent tax on that,
• 36:08
  Speaker 1: they won't be able to And they're going to quit
• 36:10
  Speaker 1: the business, and they're gonna become used car salesman, which
• 36:12
  Speaker 1: is what they should be doing anyway. So they're not
• 36:14
  Speaker 1: going to be able to survive because the regulatory environment
• 36:16
  Speaker 1: will not allow them to continue operating the way that
• 36:19
  Speaker 1: they currently do. Margins are going to be crushed, revenues
• 36:21
  Speaker 1: are going to be decreased, and many of these organizations
• 36:24
  Speaker 1: will just be thrown out of business. In fact, that's
• 36:26
  Speaker 1: one of the arguments the industry has used in court
• 36:28
  Speaker 1: to overturn the rule. They finally said to the judge,
• 36:31
  Speaker 1: if this rule goes in, we're going to be out
• 36:33
  Speaker 1: of business because we can't make the money we're making. Well,
• 36:35
  Speaker 1: that's the whole point of the rule. So that's a
• 36:38
  Speaker 1: rather silly argument. I thought. That's number one is regulation.
• 36:40
  Speaker 1: Number two is competition. Firms like mine are growing in
• 36:45
  Speaker 1: ways that have never been before. There are probably a
• 36:47
  Speaker 1: dozen of US firms like mine that have become not
• 36:50
  Speaker 1: just practices, but companies, businesses, survivable businesses. Yeah, where we
• 36:55
  Speaker 1: have the funding of private equity firms, where we have
• 36:58
  Speaker 1: incredibly depockets, we world class executives from a variety of
• 37:03
  Speaker 1: of expertise, and I T finance and accounting, in operations
• 37:07
  Speaker 1: and compliance and all over the map. Allowing us to
• 37:11
  Speaker 1: run our company is the way that IBM runs its company.
• 37:14
  Speaker 1: Enabling us to do things on a huge impactful basis.
• 37:16
  Speaker 1: You're going to see these mega firms like Edleman Financial.
• 37:20
  Speaker 1: In the future, you're going to see a trillion dollar
• 37:22
  Speaker 1: r i A, just like you have trillion dollar brokerage firms,
• 37:26
  Speaker 1: and that's going to create a big challenge for the
• 37:29
  Speaker 1: individual practitioner because he isn't gonna have the financial resources
• 37:32
  Speaker 1: largely again because of technology. Point number three. Technology is
• 37:36
  Speaker 1: getting to the point where much of what that old
• 37:39
  Speaker 1: country doctor does is being supplanted by technological solutions. The
• 37:44
  Speaker 1: same thing to advisors. Investment management is already a commodity.
• 37:49
  Speaker 1: You already have the ability to get investment management for
• 37:51
  Speaker 1: twenty five basis points one quarter of one percent per year,
• 37:55
  Speaker 1: incredibly low cost. So advisors who make their money by
• 37:59
  Speaker 1: charging big fees on investment management, or who claim they
• 38:02
  Speaker 1: can beat the market, those days are gone. So the
• 38:06
  Speaker 1: technological environment is going to be that the guy who's
• 38:09
  Speaker 1: got in that little Norman Rockwell town of a hundred
• 38:12
  Speaker 1: and fifty clients, the clients are going to be saying
• 38:14
  Speaker 1: to that advisor, I want the services of the biggest,
• 38:18
  Speaker 1: best firms, and that little country bumpkin isn't going to
• 38:21
  Speaker 1: be able to provide it because he doesn't have the
• 38:23
  Speaker 1: money to invest in that software, to build those technological
• 38:27
  Speaker 1: platforms and systems, and he's gonna lose out to the
• 38:29
  Speaker 1: competition voisted by the regulation, all because of the technology
• 38:33
  Speaker 1: revolution underway. These guys are dinosaurs and part of the
• 38:37
  Speaker 1: reason the average age in our industry, Barry, you know,
• 38:39
  Speaker 1: the answer is it's almost sixty years of age. So
• 38:43
  Speaker 1: facing this conundrum, the typical advisor is gonna say, in
• 38:47
  Speaker 1: his sixties, oh the hell with it, I just quit instead,
• 38:50
  Speaker 1: And that's why half of them are going to be gone.
• 38:53
  Speaker 1: We have been speaking with Rick Edelman. He is the
• 38:55
  Speaker 1: founder and chairman of Edelman Financial Services. If you enjoy
• 39:00
  Speaker 1: this conversation, be sure and stick around for the podcast extras,
• 39:03
  Speaker 1: where we keep the tape rolling and continue to discuss
• 39:06
  Speaker 1: all things investing. You can find that wherever fine podcasts
• 39:10
  Speaker 1: are sold iTunes, Overcast, SoundCloud or Bloomberg dot com. We
• 39:15
  Speaker 1: love your comments, feedback and suggestions right to us at
• 39:20
  Speaker 1: m IB podcast at Bloomberg dot net. Check out my
• 39:23
  Speaker 1: daily column on Bloomberg View dot com. You can follow
• 39:26
  Speaker 1: me on Twitter at rid Halts. I'm Barry rid Halts.
• 39:29
  Speaker 1: You're listening to Masters in Business on Bloomberg Radio. Welcome
• 39:46
  Speaker 1: to the podcast, Brick, Thank you so much for doing this.
• 39:48
  Speaker 1: This has been a conversation I have been looking forward
• 39:51
  Speaker 1: to and I have I have so many more questions
• 39:54
  Speaker 1: we haven't gotten to. UM. I have to ask you
• 39:59
  Speaker 1: launched us thirty one years ago. You look back. Do
• 40:02
  Speaker 1: you ever turned around and say, how the hell do
• 40:04
  Speaker 1: we get to twenty one billion dollars? It? It is
• 40:07
  Speaker 1: the success of of this like, wait, what what? How
• 40:10
  Speaker 1: did that happen? Yeah? Because it wasn't. It wasn't. Never
• 40:13
  Speaker 1: the intention when I created my first business plan, which
• 40:17
  Speaker 1: Gine and I did when we were planning the launch
• 40:21
  Speaker 1: of our little practice. My business model called for us
• 40:26
  Speaker 1: earning three thousand dollars a month. Did you did you
• 40:28
  Speaker 1: bootstrap this or did you use an outside investor? No? No, no,
• 40:31
  Speaker 1: we we bootstrapped. I don't get the sense you're a
• 40:33
  Speaker 1: big private equity guy. Though you referenced the availability of capital.
• 40:37
  Speaker 1: Do you use private equity capital? We do now? And
• 40:39
  Speaker 1: what do? We were one of the first to have
• 40:41
  Speaker 1: done that. We started in two thousand five with our
• 40:45
  Speaker 1: first we've gone through UM use it for acquisitions or
• 40:48
  Speaker 1: how does that just just to fund the growth and
• 40:51
  Speaker 1: fueling of our firm. You know, we got to the
• 40:53
  Speaker 1: point recognizing No. Five we built a very nice little
• 40:57
  Speaker 1: practice at that point was one of the largest and industry,
• 41:00
  Speaker 1: and like any other self respecting entrepreneur, all of my
• 41:03
  Speaker 1: net worth was tied up in the value of the business.
• 41:05
  Speaker 1: People say where do you investment? Used to say, highly
• 41:07
  Speaker 1: speculative growth company, And so I guess I'm gonna steal
• 41:12
  Speaker 1: that line from As we wanted to grow on a
• 41:14
  Speaker 1: national scale, we realized that would be very expensive and
• 41:17
  Speaker 1: very risky, and any self respecting financial planner would say
• 41:21
  Speaker 1: you shouldn't throw off some of that risk, yes, And
• 41:24
  Speaker 1: so that was what we did. And so we are
• 41:26
  Speaker 1: now on our third private equity partner and our best
• 41:28
  Speaker 1: to date, Helman and Freeman and um So it's been
• 41:33
  Speaker 1: a great ride. And I assume you guys are still
• 41:36
  Speaker 1: majority owners, you and and Gene. No, we're not any longer.
• 41:40
  Speaker 1: I'm still the largest individual shareholder of the farm, but
• 41:43
  Speaker 1: Helmant and Freeman is now the majority old is it?
• 41:46
  Speaker 1: Is it? Oh? Really that's quite fascinating In terms of control,
• 41:50
  Speaker 1: Do you still maintain control or no longer? I used to,
• 41:53
  Speaker 1: but I gave that to Helman and Freeman, but they
• 41:56
  Speaker 1: their attitude is that and the reason that they were
• 41:59
  Speaker 1: interested in partnering with Gene and May in the firm
• 42:02
  Speaker 1: was that they love what we do and they want
• 42:05
  Speaker 1: to sustain and expand it. They don't want to change
• 42:10
  Speaker 1: it in any way. And they are quite passive in
• 42:13
  Speaker 1: their ownership and they are fabulous Pete partner. There has
• 42:17
  Speaker 1: been no nothing noticeable by any of our staff, or
• 42:21
  Speaker 1: our planners or our clients by their presence. So one
• 42:25
  Speaker 1: of the questions that come up all the time with
• 42:28
  Speaker 1: the solo practitioners is, Hey, what happens if you're hit
• 42:31
  Speaker 1: by a bus? What sort of succession plan do you? So?
• 42:34
  Speaker 1: So what you just made me think of this? Now?
• 42:37
  Speaker 1: What how do you guys think about the future of
• 42:40
  Speaker 1: Edelman Financial? What sort of succession plan? We recognized this
• 42:43
  Speaker 1: a long time ago, and that was the impetus of
• 42:46
  Speaker 1: getting outside money to bring in and create a very
• 42:50
  Speaker 1: talented executive team. Uh. And so we've been working very
• 42:54
  Speaker 1: hard at this for years and we've made um I'd
• 42:57
  Speaker 1: say it's almost total, not yet total, but almost total.
• 43:00
  Speaker 1: And its transition. I now have to co hosts on
• 43:02
  Speaker 1: my radio show so they noticed that they can take
• 43:06
  Speaker 1: the show over at any moment. And I noticed the
• 43:08
  Speaker 1: on your video segments you were rotating a lot of
• 43:10
  Speaker 1: other people through UM. Well, in house, we have ten
• 43:14
  Speaker 1: full time instructors who do all of our seminars. Will
• 43:18
  Speaker 1: do six hundred seminars this year nationally, Like I do
• 43:20
  Speaker 1: virtually none of them. I used to do all of them,
• 43:23
  Speaker 1: do all them. Now I do virtually none. So we
• 43:25
  Speaker 1: have all of our instructors doing all of our seminars.
• 43:28
  Speaker 1: Were how productive of the seminars? Because quick flashback, I
• 43:33
  Speaker 1: remember about fifteen years ago going with a buddy name
• 43:36
  Speaker 1: is Tony Dwyer who was I forgot the name of
• 43:39
  Speaker 1: the farm he was at, and it was my this
• 43:41
  Speaker 1: like late nineties, early two thousands. It was my first
• 43:43
  Speaker 1: exposure to that sort of seminar. And obviously the nineties
• 43:48
  Speaker 1: are a different era than today. Wait, you could show
• 43:51
  Speaker 1: up and have a long discussion with people, and that's
• 43:53
  Speaker 1: the difference between them breaking out a checkbook and saying
• 43:56
  Speaker 1: here's half a million dollars versus a phone call and
• 43:59
  Speaker 1: email or what ever, how how successful, how productive do
• 44:03
  Speaker 1: you find that form of communication versus radio, television, everything else.
• 44:07
  Speaker 1: Our seminars are very effective. We'll have tens of thousands
• 44:10
  Speaker 1: of people attend we've we've over the years have had
• 44:12
  Speaker 1: I don't know how many millions, millions points, I don't
• 44:15
  Speaker 1: know how many people have attended our seminars over the decades.
• 44:19
  Speaker 1: But they're very effective as an educational tool because it
• 44:22
  Speaker 1: allows people to sit in a ninety minute session um
• 44:27
  Speaker 1: with a speaker and you know, there's audio and there's video,
• 44:30
  Speaker 1: there's handouts there. It's it's very disarming. It's very low risk,
• 44:34
  Speaker 1: very low pressure. We're not doing product pitching seminars like
• 44:37
  Speaker 1: the guy's pitching annuities. But we're doing is education. And
• 44:40
  Speaker 1: people pay a fee to come to our seminars, to
• 44:41
  Speaker 1: typically charge fifteen bucks to get in. Just in order
• 44:44
  Speaker 1: to make it, they have to really be committed to down.
• 44:47
  Speaker 1: We were not, and we're not giving them a free
• 44:48
  Speaker 1: state dinner. We're not you know, we're not there to
• 44:50
  Speaker 1: feed their stomach. We're feeding their brains. And we're giving
• 44:52
  Speaker 1: them information that they can use on their own with
• 44:55
  Speaker 1: their own advisor, or if they choose, they can hire us.
• 44:57
  Speaker 1: That's entirely after them. But nobody's pulling out a checkbook,
• 44:59
  Speaker 1: No be signing up anything that night. They're simply getting
• 45:02
  Speaker 1: an education. That's fascinating. So you do books, you do radio,
• 45:06
  Speaker 1: you do your own video. In terms of the time
• 45:11
  Speaker 1: you put in, what is the most time consumptive? And
• 45:13
  Speaker 1: then I have a follow up question, what what takes
• 45:16
  Speaker 1: more of your time and attention writing a book or
• 45:19
  Speaker 1: doing the radio show or or And now you don't
• 45:22
  Speaker 1: do the seminars, Well, they're all I mean, I create
• 45:24
  Speaker 1: the seminars still and train the speakers. So again that
• 45:28
  Speaker 1: one face, one voice, they're all messaging the same thing.
• 45:31
  Speaker 1: They're following my script um. And so they're they're all,
• 45:36
  Speaker 1: I don't know how much. I mean, the businesses are
• 45:38
  Speaker 1: life and and you know, I don't know. I don't
• 45:40
  Speaker 1: have any. So then the flip side of that is
• 45:43
  Speaker 1: what do you think resonates the most with the consumer
• 45:47
  Speaker 1: or or different consumers. It's different. Some people love listening
• 45:50
  Speaker 1: to the radio, Others love going to seminars of love
• 45:53
  Speaker 1: love reading the books that different people like to digest
• 45:56
  Speaker 1: the content in their own style. And then and now
• 45:58
  Speaker 1: you think I've prone to be I'm master at all
• 46:01
  Speaker 1: of those forms of communication, master of all media. I
• 46:04
  Speaker 1: think how it's going to get angry at you if
• 46:06
  Speaker 1: you can quite say it that one I did, though, UM,
• 46:08
  Speaker 1: and the videos, that's relatively new in the history of
• 46:12
  Speaker 1: of what I mean. I know you've been doing it
• 46:14
  Speaker 1: for a while, but the books, the radio came away
• 46:16
  Speaker 1: before that. Well. I've been doing TV for almost twenty
• 46:19
  Speaker 1: five years. My first TV show was back in the nineties,
• 46:22
  Speaker 1: and I've hosted a variety of them currently on PBS,
• 46:24
  Speaker 1: and I do specials for them as well. And uh,
• 46:28
  Speaker 1: TV is probably my least favorite. Why a medium, Well,
• 46:33
  Speaker 1: because it's personal finance is not a very visual medium.
• 46:36
  Speaker 1: You know, there are no cars exploding on set, there's
• 46:39
  Speaker 1: no you know, there's nobody with a low cut dress
• 46:42
  Speaker 1: and standing in front of a blue screen. I mean,
• 46:44
  Speaker 1: it's just it's it's a yeah, you know, it's a
• 46:51
  Speaker 1: medium that UM doesn't. I don't think it's terribly conducive.
• 46:55
  Speaker 1: It's a talking head conversation. So I work really hard
• 46:58
  Speaker 1: on our TV shows to make get visually interesting and stimulating,
• 47:03
  Speaker 1: and I think we do a really good job at that.
• 47:05
  Speaker 1: But television is much harder to produce than radio because
• 47:10
  Speaker 1: it has to be scripted to the minute. You're creating
• 47:12
  Speaker 1: a visual element in addition to an audible element, and
• 47:15
  Speaker 1: it's just very it's very difficult to do. It's it's
• 47:18
  Speaker 1: the audience loves it. It's great. But radio is so
• 47:21
  Speaker 1: much easier to produce. I also noticed that the television
• 47:24
  Speaker 1: clips are the on on your site are two three
• 47:28
  Speaker 1: four minutes. Yeah, we carve them up and the radio
• 47:30
  Speaker 1: is much longer form correct because people are usually listening
• 47:33
  Speaker 1: to the radio or a podcast and while they're doing
• 47:35
  Speaker 1: other things. That's good and bad. The good news is
• 47:38
  Speaker 1: you can multitask. The bad news is you're only half
• 47:40
  Speaker 1: listening and you usually got wrong what you thought. I said,
• 47:43
  Speaker 1: if you're in the car, or on a treadmill or
• 47:46
  Speaker 1: on a bike, you're really paying attention. It's if you're
• 47:48
  Speaker 1: trying to read while you listen, or your vacuuming, or
• 47:51
  Speaker 1: you're yelling at the kids or whatever. You know, so
• 47:53
  Speaker 1: and that you so. People often will call and they'll
• 47:55
  Speaker 1: say Rick said on the radio. The following they're like, no,
• 47:58
  Speaker 1: he didn't. But before we get to our favorite questions,
• 48:03
  Speaker 1: I have to ask about this astronomy thing. How did
• 48:08
  Speaker 1: you get interested in astronomy and what are you doing
• 48:11
  Speaker 1: with that? Well? I'm really bad at it. Um when
• 48:14
  Speaker 1: you say bad at it, So you haven't discovered gravity waves.
• 48:18
  Speaker 1: I appreciate that, but all you know, I can't. I
• 48:21
  Speaker 1: can't tell you most of what I'm looking at at
• 48:22
  Speaker 1: the night. There are apps for that, you have any
• 48:25
  Speaker 1: fantastic But no, no, no, no, no no, I don't
• 48:27
  Speaker 1: like them. I mean, I have a GPS on my
• 48:30
  Speaker 1: uh own um saddle, on my own um telescope, but
• 48:36
  Speaker 1: I don't like to use it because what what fascinates
• 48:39
  Speaker 1: me about astronomy is what a fascinated Galileo and Hyigans
• 48:46
  Speaker 1: and um uh Hovelius and and all of these guys
• 48:51
  Speaker 1: from the Renaissance. They were looking up the night sky,
• 48:53
  Speaker 1: not knowing what they were looking at. And when Galileo
• 48:56
  Speaker 1: pointed his telescope to Jupiter and saw the moons of
• 49:01
  Speaker 1: Jupiter for the first time ever, when he looked at
• 49:05
  Speaker 1: the rings of Saturn for the first time, the first
• 49:08
  Speaker 1: time that uh Clavicus saw the orion Nebula. Uh this
• 49:14
  Speaker 1: it was the age of wonder. And so when I
• 49:17
  Speaker 1: use the telescope, I don't use a GPS, which tells me,
• 49:20
  Speaker 1: you know, pointed to Neptune because I want to see it.
• 49:23
  Speaker 1: Uh Instead, you know, I don't want don't show me
• 49:26
  Speaker 1: a a a dark cluster. I instead want to just
• 49:30
  Speaker 1: take my telescope pointed up at the sky and see
• 49:33
  Speaker 1: what I see and enjoy the wonder of this. And
• 49:36
  Speaker 1: that has been our basis of astronomy. So what you
• 49:38
  Speaker 1: and I do is we collect rare astronomy books. We
• 49:41
  Speaker 1: collect books from the fifteen hundreds and sixteen hundreds written
• 49:46
  Speaker 1: by bra hay And and these greats in the field
• 49:50
  Speaker 1: of astronomy who were documenting for the very first time
• 49:54
  Speaker 1: things that no human had ever seen before, trying simultaneously
• 49:57
  Speaker 1: to explain what they were looking at. And it's the
• 50:00
  Speaker 1: age of wonder that, unfortunately we've gone away. We had
• 50:03
  Speaker 1: this this solar eclipse a couple of months, amazing, fascinating,
• 50:08
  Speaker 1: but everybody knew it was coming, and everybody knew what
• 50:10
  Speaker 1: it was, and everybody knew why it was and what
• 50:12
  Speaker 1: it all meant. Back in the sixteen hundreds and in
• 50:15
  Speaker 1: the in the year a thousand, when a solar eclipse came,
• 50:18
  Speaker 1: they would cause wars, It caused people to panic, the
• 50:23
  Speaker 1: exactly And so we've lost the wonder of astronomy fascination.
• 50:28
  Speaker 1: So here's where I have to totally disagree with you.
• 50:31
  Speaker 1: We absolutely have not lost the wonder of astronomy. Right now,
• 50:35
  Speaker 1: the biggest debate going on in in cosmology is dark matter.
• 50:41
  Speaker 1: Have we found We've actually recently discovered that most of
• 50:46
  Speaker 1: what we thought was dark matter is really just very
• 50:49
  Speaker 1: thinly dispersed gases and dust. Understood, and I'll take it
• 50:52
  Speaker 1: a step further, and that's the multiverse concept. Um, that's
• 50:55
  Speaker 1: a whole, that's a whole, different layer. I understand that.
• 50:57
  Speaker 1: But so yes, I don't mean to suggest that the
• 50:59
  Speaker 1: age of one or is gone, but what you're talking
• 51:01
  Speaker 1: about requires a pretty advanced level of knowledge that most
• 51:04
  Speaker 1: consumers looking up at the night sky. In fact, let's
• 51:07
  Speaker 1: face it, most people looking at the night sky can't
• 51:09
  Speaker 1: see any stars because of pollution, and they live in
• 51:15
  Speaker 1: cities where the lights just kill it. And so what
• 51:19
  Speaker 1: I have been focusing on is this age of wonder.
• 51:22
  Speaker 1: And so what Gene and I did was we gave
• 51:24
  Speaker 1: a bunch of money to Rowan University to create the
• 51:26
  Speaker 1: Edelman Planetarium, and we have thousands of school children every
• 51:32
  Speaker 1: year going to the planetarium for free. Because if you
• 51:35
  Speaker 1: can get a child excited about science at a young age,
• 51:39
  Speaker 1: they become immersed in science for life, and we know
• 51:42
  Speaker 1: that that's the key to America's productivity in the future
• 51:45
  Speaker 1: is stem education. So we're very heavily focused on science
• 51:49
  Speaker 1: education for for kids. This is why we've given rowing
• 51:52
  Speaker 1: another big bucket of money for the Edelman Fossil Park,
• 51:55
  Speaker 1: which is paleontology. We're finding dinosaurs in South Jersey. Um,
• 52:01
  Speaker 1: they're everywhere, They're everywhere and define but they're everywhere not
• 52:04
  Speaker 1: at the Fossil Park. You go in there for an hour,
• 52:06
  Speaker 1: you will find fossils and you get to take them home.
• 52:09
  Speaker 1: And so by getting kids to focus on I think
• 52:12
  Speaker 1: the two most fun sciences dinosaurs and stars, paleontology and astronomy,
• 52:18
  Speaker 1: we can make a big difference in uh these kids
• 52:21
  Speaker 1: lives and in the nation's competitive edge over the next
• 52:23
  Speaker 1: several decades. So what do you what do you read?
• 52:26
  Speaker 1: What do you pay attention to related to astronomy? Because
• 52:29
  Speaker 1: if you're on Twitter, you could follow some amazing people.
• 52:32
  Speaker 1: It's like building your own um Phil played as Bad
• 52:36
  Speaker 1: Astronomer and Michelle Taylor and there's a whole run of
• 52:38
  Speaker 1: people who are just wonderful. Is there anything you anyone
• 52:41
  Speaker 1: you read? Any blogs you follow, any television shows you like,
• 52:44
  Speaker 1: not in astronomy particularly. I am more focused these days
• 52:49
  Speaker 1: over the past ten years on exponential technologies generally because
• 52:54
  Speaker 1: I think that's more impactful to our daily lives and
• 52:59
  Speaker 1: of to me, just greater fascination of artificial intelligence, robotics,
• 53:03
  Speaker 1: machine learning, big data, uh neuroscience, but striguing things. Yeah,
• 53:09
  Speaker 1: and that's what my new book is, My ninth book
• 53:12
  Speaker 1: is all about the truth about your future, how these
• 53:14
  Speaker 1: exponential technologies are going to impact our personal finances. Let
• 53:17
  Speaker 1: me make one television recommendation and then we'll get back
• 53:19
  Speaker 1: to our questions, which is on the on the Science Channel,
• 53:24
  Speaker 1: How the universe works. Yes, we do watch that. We
• 53:27
  Speaker 1: also watch planets Planets is interesting. Yeah, so yeah, I
• 53:30
  Speaker 1: mean it's have you been paying attention to the thought
• 53:33
  Speaker 1: process about the new ninth planet somewhere out beyond the
• 53:38
  Speaker 1: uh um one of the big asteroid belts beyond Uranus
• 53:41
  Speaker 1: is planet Uranus. Is this giant planet that we've never
• 53:45
  Speaker 1: been able to see that is potentially disrupting um comments
• 53:49
  Speaker 1: and other things. Yeah, and I'm a big fan of
• 53:52
  Speaker 1: the fact that Pluto was demoted. I don't know, I
• 53:55
  Speaker 1: don't disagree with Yeah, I I do. In fact, I
• 53:57
  Speaker 1: went to a an event at the Smithsonia and by
• 54:00
  Speaker 1: the guy who did it, and it was a great presentation.
• 54:03
  Speaker 1: He said, why I killed Pluto, Pluto and White deserve.
• 54:05
  Speaker 1: His daughter was very angry at very much so because
• 54:08
  Speaker 1: of the whole Disney thing. Um, but um, yeah, so
• 54:11
  Speaker 1: there's no question I think you're right that the ninth planet,
• 54:14
  Speaker 1: that real ninth planet, has been discovered in our Solar System.
• 54:17
  Speaker 1: I'm fascinated by, um, the fact that we now have
• 54:21
  Speaker 1: satellites that have reached interstellar space. I mean, the the
• 54:24
  Speaker 1: original voyage that they have. No people don't understand what
• 54:27
  Speaker 1: you mean by interstellar space. There's there's some argument if
• 54:29
  Speaker 1: it's truly in interstellar they're at the outer edges of
• 54:32
  Speaker 1: the Solar System, but they're far beyond Pluto concept that
• 54:36
  Speaker 1: the light from the Sun doesn't reach it. That isn't
• 54:40
  Speaker 1: a I mean, look up at the sky and when
• 54:42
  Speaker 1: you see something black, it means that what's behind it
• 54:45
  Speaker 1: hasn't been able to reach us yet. And that's how
• 54:47
  Speaker 1: far away Voyager is. That's just heady to me. And
• 54:51
  Speaker 1: the one big reason I like astronomy. It helps ground us,
• 54:54
  Speaker 1: It helps us realize in our busy important days, tiny
• 54:57
  Speaker 1: insignificant nothing exactly, So let's not get too caught up
• 55:01
  Speaker 1: in our own self importance, which, by the way, is
• 55:03
  Speaker 1: what's so fascinating about the rare Earth thesis. And I'll
• 55:06
  Speaker 1: give you a thirty second digression. So originally, UH go
• 55:11
  Speaker 1: back a thousand years and Earth is the center of
• 55:13
  Speaker 1: the universe, and there is no other planets, and there
• 55:16
  Speaker 1: is no other life anywhere else. It's just us. And
• 55:19
  Speaker 1: then we discover not only are there a hundred billion
• 55:22
  Speaker 1: stars or two billion stars in our galaxy, there are
• 55:25
  Speaker 1: a couple of hundred billion galaxies in our known universe
• 55:29
  Speaker 1: before we even get to the multiverse. But it turns
• 55:31
  Speaker 1: out the universe is an extremely hostile place with in
• 55:36
  Speaker 1: the center of a galaxy, there's just too much radiation
• 55:38
  Speaker 1: to sustain life as we know it. UH. In the
• 55:41
  Speaker 1: outer parts of the galaxy, there just isn't enough heavy
• 55:45
  Speaker 1: metals to create UH planets that have enough gravity or
• 55:50
  Speaker 1: have enough actual landmass that you can have an atmosphere
• 55:53
  Speaker 1: and have And you end up turning out that the
• 55:57
  Speaker 1: sort of most systems are binary, which creates very irregular orbits,
• 56:01
  Speaker 1: which creates very regular seasons. The all the unique factors
• 56:05
  Speaker 1: that came together in the Solo System with this planet,
• 56:09
  Speaker 1: with this unusually large moon relatively close to us, is
• 56:13
  Speaker 1: exceedingly rare, and you may end up when not with
• 56:16
  Speaker 1: millions of planets that can sustain earthlike intelligent advanced life,
• 56:23
  Speaker 1: but only a dozen or so per galaxy. I love
• 56:27
  Speaker 1: that whole fascinating digression because it's just full circle for
• 56:32
  Speaker 1: completely different reasons. And by the way, I have no
• 56:34
  Speaker 1: idea if it's true. It's just a fascinating thought experiment. Yeah,
• 56:39
  Speaker 1: until it's all irrelevant, because until they conquer the speed
• 56:43
  Speaker 1: of light, which well, but they're on the verge of
• 56:47
  Speaker 1: doing this. There's a design underway now that they think
• 56:50
  Speaker 1: they can send spaceships out at the speed of light.
• 56:54
  Speaker 1: That itself is pretty remarkable. They're doing with laser beams. Um.
• 56:58
  Speaker 1: That's until they solve that issue. It's all academic because
• 57:02
  Speaker 1: everything is so far away. Even if the life is there,
• 57:06
  Speaker 1: were too far away to ever know it right by
• 57:08
  Speaker 1: the time you get there, that their life cycle is
• 57:11
  Speaker 1: already over. It's fascinating, all right. In the last twelve
• 57:14
  Speaker 1: minutes or so, we have let's attack the last of
• 57:19
  Speaker 1: our questions. Who are some of your early mentors, anybody
• 57:24
  Speaker 1: really stands out as guiding your career in the financial industry,
• 57:28
  Speaker 1: that we're none. I invented most of what we do
• 57:30
  Speaker 1: in our firm, and we were pioneers in the type
• 57:33
  Speaker 1: of advice we were giving and the way we were
• 57:35
  Speaker 1: delivering it, who we were delivering it four. So there
• 57:38
  Speaker 1: really weren't mentors in the field itself. I have to
• 57:42
  Speaker 1: thank my parents, my father and my mom, because they
• 57:44
  Speaker 1: were entrepreneurs and business owners, and most of what I
• 57:47
  Speaker 1: learned about being a business owner I learned from osmosis
• 57:49
  Speaker 1: from growing up in that household. What did your parents
• 57:52
  Speaker 1: do what? My dad was a pioneer in his industry,
• 57:55
  Speaker 1: in the bowling industry. He ran bowling tournaments across the
• 57:58
  Speaker 1: country and became the biggest at it. And even today
• 58:03
  Speaker 1: my brother now running the business outside of out of
• 58:05
  Speaker 1: Las Vegas, UM. So it's you know, bowling was a
• 58:09
  Speaker 1: huge industry in this fifties, sixties and seventies in this country.
• 58:12
  Speaker 1: The number one participant sport in the nation. Some argue
• 58:15
  Speaker 1: it's fishing, but there are no numbers to support that.
• 58:17
  Speaker 1: Everybody knows how many people go to a bowling alley,
• 58:20
  Speaker 1: So Um, so that was a neat way to grow up. Um.
• 58:23
  Speaker 1: Within the media world, I have had a large number
• 58:26
  Speaker 1: of mentors radio and TV. There were a large number
• 58:29
  Speaker 1: of people who helped spur my growth and development and
• 58:32
  Speaker 1: skill set at being a host of radio and television.
• 58:35
  Speaker 1: And I've found over the years that in the media
• 58:38
  Speaker 1: world there are a lot of people who will help
• 58:40
  Speaker 1: you in your success. I'm sure you've experienced that here
• 58:42
  Speaker 1: a bloom Shot unlike Wall Street, where it's very cutthroat
• 58:46
  Speaker 1: and people will do whatever they can to hurt you
• 58:48
  Speaker 1: and harm you and steal your business. But that's not
• 58:51
  Speaker 1: the way it works in media. People are very helpful
• 58:53
  Speaker 1: and and supportive to uh eight year career. At least
• 58:57
  Speaker 1: that was been my experience. And there is some mentorship
• 59:01
  Speaker 1: that actually takes place in Wall Street, but I think
• 59:03
  Speaker 1: it's faded over time, and the sort of mentorship that
• 59:06
  Speaker 1: existed twenty years ago or fifty years ago, it is
• 59:10
  Speaker 1: all but but gone today. It's it's few and far between.
• 59:13
  Speaker 1: How about how about investors? Who has influenced your approach
• 59:17
  Speaker 1: to thinking about portfolio management? Marco Witz clearly um Harry Markoitz,
• 59:25
  Speaker 1: winner of the Nobel Prize for his modern portfolio theory.
• 59:28
  Speaker 1: The basis of his work is the foundation of our
• 59:32
  Speaker 1: investment management approach. Famine and French who just who also
• 59:36
  Speaker 1: have won the Nobel Prize. They are three factors. French,
• 59:40
  Speaker 1: uh yeah, Well their joint work is what led to it.
• 59:43
  Speaker 1: French is overdue. Um yeah. And he you know, maybe
• 59:46
  Speaker 1: he left Chicago a little too early, you know, being
• 59:48
  Speaker 1: a dartmouth. You imagine going to New Hampshire because the
• 59:53
  Speaker 1: weather is better than Chicago. What can I tell you?
• 59:56
  Speaker 1: So they're a three factor model. Now five factor model
• 59:59
  Speaker 1: is um uh taking the industry to a whole another
• 1:00:02
  Speaker 1: level and investment management concepts. And now Richard Taylor, who's
• 1:00:06
  Speaker 1: this year's winner of the Nobel a behavioral finance guy.
• 1:00:10
  Speaker 1: Um Marco Witz told me I've had the opportunity to
• 1:00:13
  Speaker 1: spend a lot of time with Marco Wits and he
• 1:00:15
  Speaker 1: told me that he Although Taylor is considered the father
• 1:00:18
  Speaker 1: of behavioral finance, MARKA. Witz considers himself with the grandfather.
• 1:00:21
  Speaker 1: He wrote the He wrote the first paper on behavioral
• 1:00:24
  Speaker 1: finance back in the fifties, and it's a fascinating um
• 1:00:29
  Speaker 1: thought experiment that acknowledges that humans don't behave the way
• 1:00:34
  Speaker 1: classical economists expect humans to behave and everybody gets it
• 1:00:37
  Speaker 1: except economists. That's what's so fascinating about behavioral finance. So
• 1:00:41
  Speaker 1: we've been studying all of us. I've been writing about
• 1:00:43
  Speaker 1: it for decades, and those three major themes explained the
• 1:00:48
  Speaker 1: basis of our investment management approach. Let's talk about books.
• 1:00:51
  Speaker 1: What are some of your favorite books, be they fiction, nonfiction,
• 1:00:54
  Speaker 1: finance related or not. What What are you reading? What
• 1:00:57
  Speaker 1: have you enjoyed. I'm a huge fan of Early American
• 1:00:59
  Speaker 1: his three of written or not written read most UH
• 1:01:03
  Speaker 1: of what I can get my hands on. Churnow and
• 1:01:07
  Speaker 1: Isaac Center my two favorite UH authors. Stories. Did you
• 1:01:11
  Speaker 1: get the good new Galleo book from? I do have it,
• 1:01:15
  Speaker 1: but I'm not reading it yet because I'm reading Churnow's
• 1:01:17
  Speaker 1: book on Grant. Oh really, I'm a third of the
• 1:01:19
  Speaker 1: way through that thousand page book. I brought the Galleo
• 1:01:23
  Speaker 1: book home and my wife grabbed it and she's like,
• 1:01:25
  Speaker 1: I'm like, can I take a look at that? She's like,
• 1:01:27
  Speaker 1: I'm a hundred pages into it. I'm sucked in. I'll
• 1:01:29
  Speaker 1: give it back. So so that's my next biography. I'm
• 1:01:32
  Speaker 1: a big fan of American history and biography and and uh.
• 1:01:36
  Speaker 1: The problem I have with the books that the Gene
• 1:01:38
  Speaker 1: and I have collected on early astronomy is that they're
• 1:01:41
  Speaker 1: almost all in Latin, which we don't read. A few
• 1:01:45
  Speaker 1: of them are in Greek, which is even worse. Google translated,
• 1:01:48
  Speaker 1: just translated right for you. Yeah. Are these books, by
• 1:01:51
  Speaker 1: the way, are they purely are they not in digital format? No?
• 1:01:56
  Speaker 1: I understand that, But have you gone through the process
• 1:02:00
  Speaker 1: of preserving them for prospect for for the future in
• 1:02:04
  Speaker 1: some digital format? You are entrusted with these rare books.
• 1:02:07
  Speaker 1: We do recognize that we are the current caretakers as
• 1:02:10
  Speaker 1: opposed to the owners of these books, and so, um,
• 1:02:13
  Speaker 1: you know, we have plans, so so think about going
• 1:02:16
  Speaker 1: digital with those eventually. Try now has put out a
• 1:02:19
  Speaker 1: number of spectacles. What else have you read of his
• 1:02:23
  Speaker 1: that you really like? Um? I like everything that that
• 1:02:28
  Speaker 1: he's written. His book on Washington, I love and U.
• 1:02:33
  Speaker 1: I mean it just their history is not dry when
• 1:02:36
  Speaker 1: it's done correctly, and they read like fiction. They read
• 1:02:40
  Speaker 1: like thrillers. And even when you know the outcome, you're
• 1:02:43
  Speaker 1: amazed at what you didn't know that and it helps
• 1:02:46
  Speaker 1: you gain a fresh appreciation and humility for the founding
• 1:02:52
  Speaker 1: of our nation. And that's what probably my biggest regret.
• 1:02:55
  Speaker 1: If I had things to do over again, I would
• 1:02:56
  Speaker 1: join the military. I grew up in an arrow. It
• 1:03:00
  Speaker 1: was just after you both after the Vietnam War and
• 1:03:04
  Speaker 1: the draft was over, and before the Gulf Wars, and
• 1:03:08
  Speaker 1: so how how old are you all right? So you
• 1:03:11
  Speaker 1: got you got three years on me. I've always had
• 1:03:14
  Speaker 1: a similar thought. I debated it very briefly in college.
• 1:03:18
  Speaker 1: I never it wasn't even a debate for me. I mean,
• 1:03:20
  Speaker 1: my father was adamant. He served in World War Two,
• 1:03:23
  Speaker 1: as did my uncle's but my dad coming out of
• 1:03:25
  Speaker 1: Vietnam was adamant on my brothers, and I had no
• 1:03:30
  Speaker 1: it was not a conversation. So but looking back on
• 1:03:33
  Speaker 1: it and reading, um, what these folks did to build
• 1:03:36
  Speaker 1: our nation, Um, it's it's very humbling. We we have
• 1:03:40
  Speaker 1: a number of military vets in our office and where
• 1:03:45
  Speaker 1: we have a disproportionate number. And it's always been one
• 1:03:48
  Speaker 1: of those things, you know, when I was younger and
• 1:03:52
  Speaker 1: less disciplined and less responsible, that's something I would have
• 1:03:56
  Speaker 1: loved to do. Um did churn out write JP Morgan biography,
• 1:04:00
  Speaker 1: And I'm remembering that correctly. I don't know if that
• 1:04:03
  Speaker 1: wasn't somebody else but but Washington and granted the two
• 1:04:08
  Speaker 1: you really Benjamin Franklin's that Isaacson did is awesome. I mean,
• 1:04:14
  Speaker 1: they're two great writers, and so whoever they write about
• 1:04:17
  Speaker 1: is worth reading. So all biographies, let's let's talk a
• 1:04:20
  Speaker 1: little bit about UM and lots of books on exponential technologies.
• 1:04:25
  Speaker 1: Let's I have on my website a complete list of
• 1:04:28
  Speaker 1: the books I recommend as well as in our industry.
• 1:04:30
  Speaker 1: There's so many books in our field about manias and
• 1:04:32
  Speaker 1: crashes that go back a hundred years to help people
• 1:04:36
  Speaker 1: understand what to do when markets tank, which they inevitably do,
• 1:04:40
  Speaker 1: going back to the tool of Craze of sixteen thirty
• 1:04:42
  Speaker 1: six and all the way through to the crash of
• 1:04:44
  Speaker 1: twenty nine. UM. So d Burger is the bo that's
• 1:04:48
  Speaker 1: one of them. Uh, there are I list a couple
• 1:04:51
  Speaker 1: of dozen books on my website, UM that you ought
• 1:04:53
  Speaker 1: to read if you want to become more familiar with
• 1:04:56
  Speaker 1: how money works and how to make it work for
• 1:04:58
  Speaker 1: you it. I will include a link on the right
• 1:05:02
  Speaker 1: up to this to to your book list. UM. Now,
• 1:05:06
  Speaker 1: and when I was trying to pull it up on Google,
• 1:05:08
  Speaker 1: but it didn't come up. House of Morrigan is what
• 1:05:10
  Speaker 1: did come up? That is a churn out book. Um,
• 1:05:13
  Speaker 1: so let's talk about a time you fail to tell
• 1:05:16
  Speaker 1: us when you tried something it didn't work, and what
• 1:05:18
  Speaker 1: you learn from the experience. I've never failed at anything.
• 1:05:21
  Speaker 1: I've just learned lots of ways not to do things,
• 1:05:23
  Speaker 1: meaning meaning what you know you learn more from your
• 1:05:26
  Speaker 1: failures than your successes. You know you learn more when
• 1:05:28
  Speaker 1: you're listening to when you're talking, and so we you know,
• 1:05:32
  Speaker 1: entrepreneurial activity means taking risks, doing things that have never
• 1:05:35
  Speaker 1: been tried, and they don't always work out the way
• 1:05:38
  Speaker 1: that you'd hoped. I can't begin to tell you the
• 1:05:39
  Speaker 1: money that we've blown doing things in ways that didn't
• 1:05:44
  Speaker 1: work out. But you know what you learn how not
• 1:05:46
  Speaker 1: to do it next time. And there's a rule in
• 1:05:49
  Speaker 1: our firm, a basic rule that we teach at New
• 1:05:51
  Speaker 1: Higher Orientation everybody who comes in. And one of those
• 1:05:53
  Speaker 1: rules is the following. You're allowed to make mistakes, You're
• 1:05:57
  Speaker 1: expected to make mistakes. You're simply not allowed to make
• 1:06:00
  Speaker 1: the same mistake twice. Always, always a new mistake. Go
• 1:06:03
  Speaker 1: make a new one. There are plenty of mistakes out
• 1:06:04
  Speaker 1: there to make. There's no mistake. We tell our staff,
• 1:06:06
  Speaker 1: there is no mistake you can make that I can't fix.
• 1:06:09
  Speaker 1: We're not in the medical field. You're not gonna kill anybody.
• 1:06:13
  Speaker 1: Don't worry about this. There's nothing you can do we
• 1:06:15
  Speaker 1: can't fix. Don't worry about making a mistake that costs
• 1:06:17
  Speaker 1: a client money, because we'll reimburse the client. So don't
• 1:06:20
  Speaker 1: worry about this. Do what is in the best interests
• 1:06:23
  Speaker 1: of the client. Do what you think is right, use
• 1:06:25
  Speaker 1: your judgment, use your brain. That's why we're hiring you.
• 1:06:28
  Speaker 1: And if you do make a mistake, tell us we'll
• 1:06:30
  Speaker 1: fix it. And now you know what not to do
• 1:06:32
  Speaker 1: next time, and go on and figure out something else
• 1:06:34
  Speaker 1: to do wrong. Um, down to a last few questions.
• 1:06:37
  Speaker 1: What do you do to keep mentally sharp outside of
• 1:06:40
  Speaker 1: the office? What do you do to relax? My wife
• 1:06:42
  Speaker 1: and I love to entertain We love movies. Um. We
• 1:06:46
  Speaker 1: love to travel, which historically we've never really been able
• 1:06:49
  Speaker 1: to do, but finally, thanks to Ryan Parker as our
• 1:06:51
  Speaker 1: new CEO, we get that opportunity now. Uh and I
• 1:06:54
  Speaker 1: love to play cards, love to play chess, love the
• 1:06:57
  Speaker 1: shoe pool, and we'd just be with that's a nice,
• 1:07:01
  Speaker 1: nice list. If a recent college grad or millennial came
• 1:07:05
  Speaker 1: to you and said they were interested in going into finance,
• 1:07:09
  Speaker 1: what sort of advice would you give them? Don't do
• 1:07:12
  Speaker 1: it the way I did it, because the way I
• 1:07:14
  Speaker 1: did it no longer exists. If I don't do what
• 1:07:16
  Speaker 1: you're trying to do either, Barry, I mean, I would
• 1:07:18
  Speaker 1: tell them not to do what you're doing because what
• 1:07:20
  Speaker 1: you and I do no longer exist. And that is
• 1:07:22
  Speaker 1: is that true that you can't go backwards into this, No,
• 1:07:25
  Speaker 1: you can't become a mass media guy anymore. Radio, as
• 1:07:30
  Speaker 1: you know, Barry, has evolved and changed dramatically over the years.
• 1:07:34
  Speaker 1: The opportunity that I had to host a radio show
• 1:07:37
  Speaker 1: twenty seven years ago doesn't exist today. And so I
• 1:07:40
  Speaker 1: would not encourage somebody new in the business to try
• 1:07:43
  Speaker 1: to become a mass media person. Do not try to
• 1:07:47
  Speaker 1: become a broadcaster. Instead, become a narrow caster, meaning develop
• 1:07:52
  Speaker 1: a niche. Um. I know, yeah, I know an advisor
• 1:07:56
  Speaker 1: in Maryland who only works with Marriott employees, as office
• 1:08:00
  Speaker 1: is across the street from Marriott's world headquarters. I know
• 1:08:02
  Speaker 1: an advisor in Dallas who only works with the United
• 1:08:04
  Speaker 1: Airline pilots because that's their hub. I know an advisor
• 1:08:07
  Speaker 1: who only works with retirees, another one only with executives,
• 1:08:11
  Speaker 1: another one only with divorces. Um. It's like medicine. My
• 1:08:14
  Speaker 1: farther just had surgery on his thumb, and the surgeon
• 1:08:17
  Speaker 1: is a guy who only operates on thumbs. He's the
• 1:08:20
  Speaker 1: thumb guy. You no matter if you've got an issue,
• 1:08:22
  Speaker 1: you're gonna go see this guy. Yeah, well, we need
• 1:08:25
  Speaker 1: to specialize in our field. There are we're becoming more complex,
• 1:08:29
  Speaker 1: more complicated with tax law and everything else, investment management issues.
• 1:08:32
  Speaker 1: Be be the planner to plumbers. Go to the plumbing convention,
• 1:08:36
  Speaker 1: right for the plumbing magazine, and don't take anyone who's
• 1:08:38
  Speaker 1: not a plumber. Be a narrowcaster. Focus on your niche,
• 1:08:41
  Speaker 1: what motivates you, What do you love? Serve that audience
• 1:08:45
  Speaker 1: and no one else. That's fascinating. And our final question,
• 1:08:49
  Speaker 1: and my personal favorite, what is it that you know
• 1:08:52
  Speaker 1: about investing management, financial services, the whole field we toil
• 1:08:57
  Speaker 1: in today that you wish you knew thirty years ago.
• 1:09:02
  Speaker 1: I wish I had realized earlier that what we were
• 1:09:06
  Speaker 1: doing in our firm and Edelman Financial was unique in
• 1:09:09
  Speaker 1: the industry, that the fact that we were serving the
• 1:09:11
  Speaker 1: mass affluent, middle class Americans and that the rest of
• 1:09:15
  Speaker 1: Wall Street wasn't. I didn't realize. I didn't. It took
• 1:09:19
  Speaker 1: me over a decade to figure that out. I couldn't
• 1:09:23
  Speaker 1: understand why we were so popular and why so many
• 1:09:25
  Speaker 1: people were coming to us. It's because nobody else would
• 1:09:27
  Speaker 1: talk to them. They had been orphaned by the rest
• 1:09:29
  Speaker 1: of Wall exactly, and so had I realized that earlier
• 1:09:32
  Speaker 1: we would have become our begun our national growth earlier.
• 1:09:36
  Speaker 1: That's quite fascinating. Rich, Thank you for being so generous
• 1:09:39
  Speaker 1: with your time. This was really quite delightful. Barry, you
• 1:09:42
  Speaker 1: make it easy. Thank you. Um We have been speaking
• 1:09:44
  Speaker 1: with Rick Edelman. He is the chairman, co founder and
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