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How First Trust Became a Quiet Force in ETFs · Trillions

• 0:05
  Speaker 1: Boking on trillions.
• 0:06
  Speaker 2: I'm Joel Webber and I'm Eric Belchunis.
• 0:12
  Speaker 3: Eric.
• 0:12
  Speaker 4: You know something that you know about is steak dinners.
• 0:15
  Speaker 4: You like to make a lot of bets that involve
• 0:17
  Speaker 4: steak dinners.
• 0:19
  Speaker 1: We have enough whole.
• 0:20
  Speaker 4: Episode that is more or less about the steak dinner,
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  Speaker 4: only it's a different type of steak dinner.
• 0:25
  Speaker 1: Yeah.
• 0:25
  Speaker 2: Look, I mean in the funds business, for decades, there
• 0:30
  Speaker 2: was you know, beating the market. There was low fees,
• 0:33
  Speaker 2: and there was relationships. You know, for a long time
• 0:36
  Speaker 2: they had loads where you literally paid a broker to
• 0:38
  Speaker 2: put the client's money in the fund, and over the
• 0:41
  Speaker 2: years that became like seemingly expensive. But the idea of
• 0:44
  Speaker 2: having relationships and whining and dining advisors and investors is
• 0:50
  Speaker 2: one of the ways that you can actually sidestep the
• 0:53
  Speaker 2: Vanguard effect. And you know, no firm does it better
• 0:56
  Speaker 2: than First Trust. There's a couple to do it, but
• 0:58
  Speaker 2: I think First Trust is probably the best us at it.
• 1:01
  Speaker 2: And they're the sixth biggest etfi Shure despite not really
• 1:05
  Speaker 2: playing Vanguard's game, which.
• 1:07
  Speaker 4: Is always of interest to us, as is the story
• 1:10
  Speaker 4: that we're going to talk about on this episode, which
• 1:13
  Speaker 4: cat our I about First Trust by Emily Graffeo and
• 1:18
  Speaker 4: Max Abelson by Bloomberg BusinessWeek. So joining us in this episode,
• 1:23
  Speaker 4: we've got Emily Graffeo, a cross asset reporder for Bloomberg News,
• 1:27
  Speaker 4: as well as Max Abelson, a finance reporter here at Bloomberg,
• 1:34
  Speaker 4: this time on trillions First Trust. Emily, Max, Welcome to Trillions.
• 1:41
  Speaker 3: That's an honor to be here.
• 1:42
  Speaker 5: Thanks for having us.
• 1:43
  Speaker 4: Okay, Emily, you report on ETFs among other things. I'm
• 1:47
  Speaker 4: curious how much you knew about First Trust before you
• 1:51
  Speaker 4: started working on this on this story.
• 1:54
  Speaker 5: Well, what I knew about First Trust before I started
• 1:57
  Speaker 5: working was I just looked at the data of comparing
• 2:02
  Speaker 5: the largest ETF issuers and then their average expense ratios.
• 2:07
  Speaker 5: So I knew that First Trust was the sixth largest issuer.
• 2:10
  Speaker 5: I knew that they somewhat stayed under the radar. You
• 2:13
  Speaker 5: go to ETF conferences, I never really noticed they were there.
• 2:17
  Speaker 5: A lot of the other issuers have like big booths
• 2:19
  Speaker 5: at these conferences. First Trust seemed to me to almost
• 2:23
  Speaker 5: just stay in their own lane. They didn't market much
• 2:26
  Speaker 5: to retail. You never really see a First Trust commercial
• 2:30
  Speaker 5: like you do with some of these other issuers like
• 2:33
  Speaker 5: an Invesco qqq AD, and so I knew that they
• 2:36
  Speaker 5: were big. I knew that they were almost you could
• 2:40
  Speaker 5: call them quiet, and I knew that their average expense
• 2:43
  Speaker 5: ratio was much higher than the top competitors when you
• 2:47
  Speaker 5: look at the league table. And Bloomberg Intelligence actually had
• 2:51
  Speaker 5: this report out estimating that they make almost as much
• 2:55
  Speaker 5: revenue selling ETFs as Vanguard, but they're like fifteen times smaller.
• 3:01
  Speaker 5: So that data almost anomaly, jumped out to me, and
• 3:06
  Speaker 5: it was something that I know Bloomberg Intelligence had done
• 3:08
  Speaker 5: a number of research reports on.
• 3:11
  Speaker 4: So a quiet but lucrative business model. It's also privately held.
• 3:16
  Speaker 4: Jim Bowen is sort of the person in charge there, right,
• 3:19
  Speaker 4: He's put together a little quiet empire. What do you
• 3:21
  Speaker 4: know about Jim now that you've worked on the story.
• 3:25
  Speaker 5: So, Jim Bowen has been at the helm of First
• 3:29
  Speaker 5: Trust almost since the beginning. He became the CEO of
• 3:34
  Speaker 5: the company pretty soon after the company started.
• 3:38
  Speaker 3: You know, in like White House presidential elections there. I
• 3:42
  Speaker 3: don't think people talk about it anymore, but there was
• 3:44
  Speaker 3: that old thing about like do you want to have
• 3:46
  Speaker 3: a beer with them? You know, as a Wall Share reporter, here.
• 3:50
  Speaker 3: There's so many people who I write about who I
• 3:52
  Speaker 3: would really not want to have a beer with. One
• 3:55
  Speaker 3: thing I want to say about Jim Bowen is like,
• 3:56
  Speaker 3: I would definitely have a beer with that guy. He
• 3:58
  Speaker 3: seems very charismatic. He seems very proud of what he does.
• 4:04
  Speaker 3: He seems to sort of cherish it. And his enthusiasm
• 4:07
  Speaker 3: for his job made made my job easier because it
• 4:11
  Speaker 3: was fun to sort of behold someone and to chronicle
• 4:13
  Speaker 3: someone who gets so worked up about what they do.
• 4:16
  Speaker 3: So many people are like bored or just boring and
• 4:19
  Speaker 3: he and he's neither. He exudes this this confidence and
• 4:24
  Speaker 3: this sense of honor in what First trust does we
• 4:28
  Speaker 3: help the financial advisor because the financial advisor helps the
• 4:31
  Speaker 3: client and we love that. And I was it was
• 4:34
  Speaker 3: fun fun for me to understand when he meant and
• 4:36
  Speaker 3: to and and to like even do something as simple
• 4:39
  Speaker 3: as like watching his speeches on YouTube.
• 4:41
  Speaker 4: Also worth mentioning that he did not participate or neither
• 4:44
  Speaker 4: did First Trust in the story, So Emily break down
• 4:48
  Speaker 4: a little bit about what you've learned about how the
• 4:51
  Speaker 4: first trust model works and how that's different than sort
• 4:54
  Speaker 4: of maybe the rest of what has become the prevailing
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  Speaker 4: model in the in the ETF.
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  Speaker 5: And right, so first trust sells their funds. They pitch
• 5:05
  Speaker 5: their funds directly to financial advisors who then by select
• 5:10
  Speaker 5: the funds for their end clients. Which we're aware that
• 5:15
  Speaker 5: a number of firms in the ETF industry do that,
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  Speaker 5: but their distribution model really stands out. They have what
• 5:25
  Speaker 5: they call wholesalers, which are essentially salespeople that pitch the
• 5:28
  Speaker 5: funds to the financial advisors. They have wholesalers all over
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  Speaker 5: the country who are assigned to small territories, think like
• 5:37
  Speaker 5: just you know, one part of the southern US, to
• 5:41
  Speaker 5: go out to financial advisors and pitch these funds. A
• 5:46
  Speaker 5: lot of ETF companies from at least from my reporting,
• 5:52
  Speaker 5: you know, they'll have a wholesaler who maybe sells both
• 5:55
  Speaker 5: mutual funds and ETFs, or they'll have a relatively small
• 5:59
  Speaker 5: team not really pushing the ETFs onto the financial advisors.
• 6:05
  Speaker 5: One reason is because there's this saying, as I'm sure
• 6:08
  Speaker 5: you guys know, in the ETF world, ETFs are bought,
• 6:11
  Speaker 5: not sold, so their lower fee that's really where the
• 6:16
  Speaker 5: industry kind of competes. They have a lower fee fund.
• 6:20
  Speaker 5: You mark it to a retail investor. A retail investor
• 6:22
  Speaker 5: just wants to buy the cheapest fund out there. First
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  Speaker 5: trust is different. They don't really play that that low
• 6:30
  Speaker 5: fee game. Instead, what they're doing is having these financial
• 6:34
  Speaker 5: advisors who, from what I understand, are extremely knowledgeable. They
• 6:39
  Speaker 5: pick up the phone when you have a question. If
• 6:42
  Speaker 5: you're a financial advisor, they're there for you throughout the
• 6:46
  Speaker 5: journey of owning this fund. And that's what we know
• 6:51
  Speaker 5: about how their I guess distribution model is a little
• 6:53
  Speaker 5: bit different from these other ETF companies.
• 6:57
  Speaker 4: Eric, when you break down sort of how that model
• 6:59
  Speaker 4: works and what's in it for advisors who are getting
• 7:04
  Speaker 4: pitched on products, how does that all fit together. This
• 7:06
  Speaker 4: is the side of the industry that we actually don't
• 7:08
  Speaker 4: talk about that much on the on the show.
• 7:10
  Speaker 2: Yeah, so advisors managed like forty trillion dollars of people's
• 7:14
  Speaker 2: money in America. That's a lot of money. They're the
• 7:16
  Speaker 2: gatekeepers of all that money. So of course they're getting
• 7:19
  Speaker 2: pitched to constantly. Like if you're an advisor and you
• 7:21
  Speaker 2: go to an ETF conference, you're like a rock star.
• 7:24
  Speaker 2: Basically everybody wants to, you know, sell to rockstar, not
• 7:29
  Speaker 2: like no, okay, well, Richard.
• 7:31
  Speaker 5: Key Erk is pretty famous at these conferences. If you
• 7:33
  Speaker 5: walk with him at a conference, you can't walk.
• 7:37
  Speaker 2: So I will get pitched for media attention, but I'm sorry.
• 7:40
  Speaker 2: Media attention is under asset allocation. Okay, So I know
• 7:44
  Speaker 2: my place. So these advisors rias up to big advisors
• 7:49
  Speaker 2: are really the sort of bell of the ball at
• 7:52
  Speaker 2: these conferences, and a lot of them now the sales,
• 7:55
  Speaker 2: they don't really want to take calls. I mean, they're
• 7:57
  Speaker 2: harder to sell to than ever. They don't have loads anymore,
• 8:00
  Speaker 2: and so I think first load, by the way, a
• 8:02
  Speaker 2: load again is what I said earlier, which is where
• 8:06
  Speaker 2: the fund has like a let's say four point seventy
• 8:08
  Speaker 2: five percent load, where let's say it's a blank, blank fund.
• 8:13
  Speaker 2: I would then the client would pay four point seventy
• 8:16
  Speaker 2: five percent of their ore their own money that I
• 8:18
  Speaker 2: would get the broker just for the luxury of putting
• 8:21
  Speaker 2: you in this probably crap fund.
• 8:23
  Speaker 1: Handler feet.
• 8:24
  Speaker 2: Yeah, the whole mutual fund industry was built that way.
• 8:26
  Speaker 2: It's almost like a bribe, and there's so much money
• 8:29
  Speaker 2: sitting in bad funds because of it. Now, first trust
• 8:32
  Speaker 2: is a little bit of a throwback, but they don't
• 8:34
  Speaker 2: do that. That is really seventy five percent. Takes a
• 8:37
  Speaker 2: long time to overcome that in performance, and the funds
• 8:41
  Speaker 2: that they were putting those loads on were usually over
• 8:43
  Speaker 2: one percent of an expense ratio plus one percent trading fees.
• 8:46
  Speaker 2: Add it up and the investors barely get any of
• 8:49
  Speaker 2: the returns over thirty years. This is what Bogel and
• 8:51
  Speaker 2: Vanguard fought against. Now First Trust is a little bit
• 8:54
  Speaker 2: of a throwback, but they still are in the ETF business.
• 8:56
  Speaker 2: Their funds are, you know, forty eight to seven five
• 9:00
  Speaker 2: basis points, so they're definitely more expensive. The asset waight
• 9:03
  Speaker 2: to average vvtfs is eighteen basis points, so they're above that.
• 9:07
  Speaker 2: But they aren't beta like. These are funds trying to
• 9:10
  Speaker 2: outperform a little bit. They've got smart, beta active, they
• 9:13
  Speaker 2: do a lot of strategies a little different, and I
• 9:16
  Speaker 2: guess their pitch to the advisor is, look, you could
• 9:19
  Speaker 2: do a Vanguard fund, but you do ours and you
• 9:21
  Speaker 2: can have a chance to outperform. We're not that expensive,
• 9:26
  Speaker 2: and you know you like us. I mean, and I
• 9:28
  Speaker 2: think part of the winding and dining is that just
• 9:30
  Speaker 2: to tap that. So we wrote a We were fascinated
• 9:33
  Speaker 2: by this. And you know, we wrote a piece I
• 9:35
  Speaker 2: don't know, a couple of years ago trying to explain
• 9:37
  Speaker 2: where all flows come from, and we rarely got it
• 9:40
  Speaker 2: down to the three c's, which is cheap, creative or cabernet,
• 9:44
  Speaker 2: and we you know, and I'm not judging it. This
• 9:47
  Speaker 2: is part of how funds and anything is sold. Like
• 9:50
  Speaker 2: if you're in politics and you want another country to
• 9:53
  Speaker 2: do something for you, you're gonna have a dinner with them,
• 9:55
  Speaker 2: You're gonna go golfing. Like it's pretty much just an
• 9:57
  Speaker 2: old school attempt. Now, a lot of the new issuers
• 10:00
  Speaker 2: what their move now is to do educational stuff like
• 10:02
  Speaker 2: blog posts and they have podcasts. It's more of like
• 10:05
  Speaker 2: a soft cell. I think First Trust is just a
• 10:07
  Speaker 2: little more of the old guard in terms of how
• 10:09
  Speaker 2: they're selling their products.
• 10:18
  Speaker 4: Here we are first Trust, we know is wielding steak dinners.
• 10:21
  Speaker 4: How is that influencing their business strategy?
• 10:24
  Speaker 3: Machs All right, well, let me just say something about
• 10:26
  Speaker 3: steak dinners. Besides the fact that every now and then
• 10:28
  Speaker 3: I myself enjoy a good steak dinner.
• 10:30
  Speaker 1: I probably owe you several actually.
• 10:32
  Speaker 3: Actually technically you do.
• 10:33
  Speaker 1: Omi. Thank you for bringing that up. Okay, you know,
• 10:35
  Speaker 1: there is.
• 10:36
  Speaker 3: Nothing wrong with us steak dinner, and in fact, there's
• 10:38
  Speaker 3: nothing unusual about a steak dinner and finance. It would
• 10:41
  Speaker 3: be really hard to try to find pieces of serious
• 10:44
  Speaker 3: business on Wall Street and in financial capitalism that does
• 10:48
  Speaker 3: not involve steak dinners of some kind. What is interesting
• 10:52
  Speaker 3: and newsworthy about First Trust, according to emails we reviewed
• 10:57
  Speaker 3: and interviews we did, is that, in order to win business,
• 11:04
  Speaker 3: First Trust has gone up to the line that's allowed
• 11:08
  Speaker 3: by the financial industry self regulatory arm, which is called Finra,
• 11:12
  Speaker 3: and potentially cross that line because what the industry will
• 11:17
  Speaker 3: not let you do, Joel, If I'm the first dress
• 11:20
  Speaker 3: wholesaler and you're the financial advisor, I can't take you
• 11:23
  Speaker 3: out to use a real example, a three hundred dollars
• 11:27
  Speaker 3: hockey game and also three hundred dollars of food. On
• 11:29
  Speaker 3: top of that, I can't drop off a really nice
• 11:33
  Speaker 3: meal for you and then and then bounce. I can't
• 11:37
  Speaker 3: take you out for what what would go beyond what
• 11:42
  Speaker 3: the industry calls sort of Emily, what are those great words?
• 11:47
  Speaker 1: It can't be neither.
• 11:49
  Speaker 5: Extensive, frequent or extensive.
• 11:51
  Speaker 3: Can't be too frequent, and it can't be too extensive
• 11:53
  Speaker 3: and that makes sense.
• 11:54
  Speaker 1: Boy, that's a hazy line, though, you know, I.
• 11:56
  Speaker 3: Think that's actually a really fair point that what we're
• 11:58
  Speaker 3: talking about in the story. This is not a story
• 12:01
  Speaker 3: of bright lines and obvious tomfoolery. This is a story
• 12:06
  Speaker 3: about about a gray area that the industry itself does
• 12:09
  Speaker 3: not say, Eric, you can do this up to X
• 12:13
  Speaker 3: plus eighty one, but if you do X plus eighty two,
• 12:16
  Speaker 3: that's a problem. There is a certain kind of fog
• 12:19
  Speaker 3: or haziness in the industry. And this story is not
• 12:23
  Speaker 3: a story about First Trust, you know, doing anything that's
• 12:27
  Speaker 3: like as we say, it's not like we it's about
• 12:30
  Speaker 3: buying a freezer full of steak. It's about the ways
• 12:33
  Speaker 3: that First Trust, by its own account, according to one
• 12:36
  Speaker 3: email we have, may have been getting up to that
• 12:40
  Speaker 3: line or maybe potentially crossing it. And of course, of
• 12:42
  Speaker 3: course we do have one email where a guy is saying, listen,
• 12:45
  Speaker 3: pay to play is illegal, and you all are doing it.
• 12:48
  Speaker 3: So to the extent that there are some lines. Pay
• 12:52
  Speaker 3: to play is a clear line, and according to this
• 12:54
  Speaker 3: one email, it was potentially being crossed.
• 12:57
  Speaker 4: Emily Finra is the regulatory agency that oversees a lot
• 13:02
  Speaker 4: of this stuff. There's also an investigation into First Trust
• 13:05
  Speaker 4: that you all report on. What do we know about
• 13:06
  Speaker 4: that investigation.
• 13:09
  Speaker 5: Well, we know that the investigation is still ongoing as
• 13:12
  Speaker 5: of right now, and it's been going on for at
• 13:15
  Speaker 5: least a year now that FINRA has been looking into
• 13:19
  Speaker 5: First Trust sales practices. So we don't know that many details,
• 13:25
  Speaker 5: but we do know that there is an investigation. It's
• 13:29
  Speaker 5: been going on for quite some time, and it's a
• 13:33
  Speaker 5: little open ended what will come of the investigation. We
• 13:38
  Speaker 5: know that when it comes to pay to play, FINRA
• 13:41
  Speaker 5: hasn't really they haven't really leavied much fines on other firms.
• 13:47
  Speaker 5: There's not much precedence for, you know, a press release
• 13:52
  Speaker 5: coming out that FINRA has investigated a company and they
• 13:55
  Speaker 5: found instances of pay to play or instances of winding
• 13:59
  Speaker 5: and dying that cross the line of what they would
• 14:02
  Speaker 5: deem acceptable.
• 14:03
  Speaker 2: One of the things I noticed about covering First Trust,
• 14:05
  Speaker 2: also besides some of the you know, interesting stories and
• 14:08
  Speaker 2: their sort of relationship, you know, a sort of relationship
• 14:13
  Speaker 2: sales tactics, is that they cover a part of the
• 14:17
  Speaker 2: country that a lot of times gets left behind and
• 14:19
  Speaker 2: not focused on. And I think you mentioned in your story,
• 14:21
  Speaker 2: because I've always found that they really speak to the
• 14:24
  Speaker 2: sort of Midwestern heartland of the country, whereas Black Rock
• 14:27
  Speaker 2: and Vanguard are on the coast kind of And I
• 14:30
  Speaker 2: think that actually matters. You know, if you're an advisor,
• 14:33
  Speaker 2: you feel like they're just more connected to you, both
• 14:36
  Speaker 2: geographically and spiritually in a way, and I think that
• 14:39
  Speaker 2: works for them to a degree.
• 14:41
  Speaker 3: I think that's a great point. We have a quote
• 14:43
  Speaker 3: in the story, thanks to Emily's reporting, where someone who
• 14:46
  Speaker 3: I believe is actually from Ohio himself talked about how
• 14:49
  Speaker 3: meaningful it was that first trust will like go to you,
• 14:53
  Speaker 3: they'll pay attention to you, they'll cater you to you,
• 14:55
  Speaker 3: they'll care, they'll care about you. And I think that
• 14:58
  Speaker 3: that sense of caring came through and our reporting first.
• 15:02
  Speaker 3: Just as far as I can tell, it's like they're
• 15:04
  Speaker 3: not putting lip service into the idea that they like
• 15:06
  Speaker 3: are really interested in what's happening in like exurban Cleveland.
• 15:09
  Speaker 3: They seem to really go to the financial advisors there
• 15:13
  Speaker 3: and help them and like think the work they do
• 15:15
  Speaker 3: is honorable and that's a you know that that's a
• 15:18
  Speaker 3: pretty savvy, savvy move, I think. I think I admire.
• 15:22
  Speaker 5: That, and Jim Bowen is really boots on the ground.
• 15:25
  Speaker 5: I mean he is going to these various financial advisor
• 15:29
  Speaker 5: conferences around the world and making speeches, and I'm not
• 15:32
  Speaker 5: sure if you would see that with other, you know,
• 15:34
  Speaker 5: CEOs of giant ETF companies going to some conference that
• 15:41
  Speaker 5: you know, maybe only a handful of financial advisors actually
• 15:44
  Speaker 5: watched the panels.
• 15:46
  Speaker 2: Yet at the same time, you know, he's rarely on TV.
• 15:48
  Speaker 2: I mean, I don't think I've ever seen him on
• 15:50
  Speaker 2: financial TV. I don't see him at the ETF conference
• 15:53
  Speaker 2: like he It seems like he's real more focused on
• 15:56
  Speaker 2: just going right to the advisor in their space rather
• 16:01
  Speaker 2: than doing it through mediums.
• 16:03
  Speaker 1: So what is he selling, what's in the portfolio and
• 16:06
  Speaker 1: what is performance been like.
• 16:07
  Speaker 5: Himly so, First Tres has over one hundred ETFs. They
• 16:13
  Speaker 5: have buffer ETFs. One of their biggest funds is a
• 16:19
  Speaker 5: dividend index fund, so they have I think Eric had
• 16:24
  Speaker 5: mentioned they have a lineup of you can call them
• 16:26
  Speaker 5: smart beta funds. They have their buffer funds. They have
• 16:30
  Speaker 5: a handful of actively managed fixed income funds that have
• 16:34
  Speaker 5: outperformed the AG for some time. They also have a
• 16:40
  Speaker 5: crypto fund that did really well in twenty twenty four,
• 16:45
  Speaker 5: outperforming some other crypto funds. So it's kind of a
• 16:49
  Speaker 5: mixed bag. But you're not going to see a complete
• 16:52
  Speaker 5: like plane Vanilla index tracking fund. Most of the funds
• 16:57
  Speaker 5: have some type of smart indexing tilt to them. When
• 17:03
  Speaker 5: it comes to performance, it's hard to measure, you know,
• 17:09
  Speaker 5: how does one ETF company, how does their performance stack
• 17:12
  Speaker 5: up against the rest of the competition, because as I mentioned,
• 17:17
  Speaker 5: their funds are a little different than what you're going
• 17:19
  Speaker 5: to get from a Vanguard or a black rock or
• 17:23
  Speaker 5: even a you know, an an investco the other firms
• 17:27
  Speaker 5: at the top of the league table. But when it
• 17:30
  Speaker 5: comes to comparing First Trust performance, the funds were mediocre,
• 17:35
  Speaker 5: pretty middle of the pack when you compare them to
• 17:38
  Speaker 5: their morning star appeers.
• 17:39
  Speaker 2: Yeah, and this is an important point because if you're
• 17:42
  Speaker 2: an advisor, and you are a fiduciary advisor, you could
• 17:45
  Speaker 2: get into some hot water if you if you bought
• 17:47
  Speaker 2: a first Trust ETF that was fifty basis points more
• 17:51
  Speaker 2: than the Vanguard that did the same thing, that would
• 17:53
  Speaker 2: be odd and I would think you'd get some looks
• 17:56
  Speaker 2: for that. But if you're buying something that has a
• 17:58
  Speaker 2: lot of IP in it. It's an active management, there's
• 18:01
  Speaker 2: a strategy, it's trying to beat the benchmark. Then it
• 18:04
  Speaker 2: could be the fiduciary move because you're paying for the IP.
• 18:08
  Speaker 2: And I think First Trust case again to their credit.
• 18:10
  Speaker 2: As somebody who covered mutual funds back in the day,
• 18:13
  Speaker 2: you just wouldn't believe how much people used to pay
• 18:15
  Speaker 2: between the loads and the fees. That a First Trust
• 18:18
  Speaker 2: smart beta ETF at fifty five basis points or even
• 18:20
  Speaker 2: seventy is a you know, within range of a fair
• 18:25
  Speaker 2: deal versus what she used to get in some of
• 18:27
  Speaker 2: these mutual funds. That said, somebody else might go, well,
• 18:31
  Speaker 2: I can get a Vanguard dividend fund for four or
• 18:33
  Speaker 2: five basis points, I don't need that. Well, the First
• 18:35
  Speaker 2: Trust person would say, yeah, but we're we put a
• 18:38
  Speaker 2: lot of secret sauce into the smart beta process in
• 18:43
  Speaker 2: a way that you know, maybe it values certain stocks
• 18:46
  Speaker 2: and this and that, and that secret sauce is how
• 18:49
  Speaker 2: much is that worth? Well, that's what people are struggling
• 18:51
  Speaker 2: with right now in the ETF space. Capital Group, all
• 18:54
  Speaker 2: these legacy asset manager coming into the ETF space, which
• 18:57
  Speaker 2: I call the terrodome because it's so brutal trying to
• 19:00
  Speaker 2: figure out how can I sell this thing when everything's free?
• 19:04
  Speaker 1: It's not easy.
• 19:05
  Speaker 2: And so First Trust, in my opinion, has found a
• 19:08
  Speaker 2: viable road in selling IP and you know, doing a
• 19:12
  Speaker 2: lot of relationship management with it, keeping in touch with
• 19:15
  Speaker 2: the advisor, being nice to them. And so we have
• 19:19
  Speaker 2: studied them because honestly, they're like, they're a model, I
• 19:23
  Speaker 2: guess of one way to fight the Vanguard effect. And
• 19:26
  Speaker 2: when we write on the Bloomberg terminal, you know a
• 19:28
  Speaker 2: lot of our clients are scared of Vanguard. Let's just
• 19:31
  Speaker 2: be it's you know, it's it's like Amazon coming to
• 19:35
  Speaker 2: your little town, you know, when you're a retail shop, Like,
• 19:37
  Speaker 2: how can I, Oh, here's this shop that actually is
• 19:40
  Speaker 2: still successful and profitable?
• 19:41
  Speaker 1: How to do it?
• 19:42
  Speaker 2: So to me, First Trust has always been at least
• 19:44
  Speaker 2: somewhat of a model for how to you know, live
• 19:48
  Speaker 2: and survive and even thrive in the Vanguard era.
• 19:50
  Speaker 3: Is Pterodoma reference to the third Mad Max with That's Thunderdome.
• 19:56
  Speaker 2: I know the Terodome reference is in you.
• 19:59
  Speaker 1: It's around the same year, Oh public Enemy, thank you.
• 20:03
  Speaker 2: Yes. If you look at the lyrics of that song,
• 20:05
  Speaker 2: it's that's what you feel when you launch an ETF.
• 20:09
  Speaker 3: This is the first time in exchange traded fund and
• 20:11
  Speaker 3: public enemy were mentioned in the same minute.
• 20:18
  Speaker 4: Okay, Emily, I want to bring it back to some
• 20:20
  Speaker 4: of the other reporting that you have in this story,
• 20:21
  Speaker 4: because there's some interesting details that came out of divorce
• 20:24
  Speaker 4: proceedings as well that really show how the company First
• 20:28
  Speaker 4: Trust goes about entertaining right and that is the thing
• 20:31
  Speaker 4: that has they've attempted to distinguish their business model with.
• 20:35
  Speaker 4: So when you think about all of this and how
• 20:38
  Speaker 4: they go about doing it, what are some of the
• 20:39
  Speaker 4: things that stick out to you and how we'll First
• 20:42
  Speaker 4: Trust likely continue to distinguish itself in the marketplace.
• 20:48
  Speaker 5: This is a company that really puts an emphasis on
• 20:54
  Speaker 5: the entertaining of these financial advisors. And there was an
• 20:58
  Speaker 5: email that we uncovered where the wholesaler said, we're expected
• 21:04
  Speaker 5: to entertain. The company was built on entertaining. It was
• 21:07
  Speaker 5: and still is the leg up on our competition. So
• 21:11
  Speaker 5: that is really where they stand out.
• 21:14
  Speaker 3: You know that reminds you family, we have all these
• 21:17
  Speaker 3: details in the story that are I think pretty fun
• 21:20
  Speaker 3: and pretty eye catching. Forty eight hundred dollars from as scarves.
• 21:24
  Speaker 3: It was it seventy thousand bucks, Emily at like a
• 21:27
  Speaker 3: rich Carlton in Florida, you know, the three hundred dollars
• 21:31
  Speaker 3: hockey tickets and three hundred bucks on top. It reminds
• 21:34
  Speaker 3: me that we're living in this current moment right now
• 21:36
  Speaker 3: where I think there's a really big open question about
• 21:40
  Speaker 3: the rules of the road for businesses right which is
• 21:42
  Speaker 3: a nice way of saying regulation. And the way is
• 21:45
  Speaker 3: that those rules are going to be rolled back, which
• 21:47
  Speaker 3: is a regular way of saying deregulation. And I think
• 21:50
  Speaker 3: there's a world where a lot of the moors and
• 21:53
  Speaker 3: the standards that guide how we operate in professional corporate America,
• 21:58
  Speaker 3: a lot of those rules could potentially be changing, and
• 22:02
  Speaker 3: some of those rules might be changing drastically, which it.
• 22:06
  Speaker 4: Makes this little hazy gray area all the more interesting. So,
• 22:09
  Speaker 4: Emily Max, thanks for joining us on trillions.
• 22:11
  Speaker 3: Thank you so much, love it, thank you.
• 22:18
  Speaker 4: Thanks for listening to Trillions until next time. You can
• 22:21
  Speaker 4: find us on the Bloomberg terminal, Bloomberg dot com, Apple Podcasts, Spotify,
• 22:27
  Speaker 4: or wherever else you'd.
• 22:27
  Speaker 5: Like to listen.
• 22:29
  Speaker 1: We'd love to hear from you. We're on Twitter.
• 22:31
  Speaker 4: I'm at Joel Webbers Show, he's at Eric Caulchewness. This
• 22:36
  Speaker 4: episode of Trillions was produced by Magnus Hendrickson.
• 22:39
  Speaker 1: Bye.