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Fees & Transparency | How is Your Financial Advisor Being Paid?

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And thank you all for joining us for, uh, this edition.

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Today we\'re gonna talk about something that I think, uh,

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weighs on a lot of investors\' minds. Um, there, there tends to be, uh,

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somewhat of a lack of transparency on this topic in the industry.

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And the topic is, is fees and all fees associated with investing.

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We have the perfect guest for us here today. Uh, JT Lavery, uh,

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longtime coworker and friend of mine.

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He\'s the Associate Director of National Sales at Symmetry Partners. Jt,

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thanks for joining us here,

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Tom. Thanks for having me. Appreciate it. So,

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Jt, tell us a little bit about, about your background, um,

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working with advisors.

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I\'ve been working with advisors, Tom, for about 23 years now, kind of in,

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in different facets. Uh, I started off on the service side of things at a, at a,

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at a major mutual fund company up in Boston, answering phones and, and,

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you know, trying to solve problems. And I, you know,

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transitioned over to the sales side, uh, a few years after that. So I have a,

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you know, pretty good background working with advisors that were more on the,

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uh, commission side of things,

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as well as advisors that are on the fee-based side of things. For

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Our listeners, um, describe the difference between the two because I,

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I think a lot of folks out there don\'t know if they\'re paying fees or

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commissions, and,

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and I\'ve heard many times talking to investors that they don\'t think they pay

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anything. Mm-hmm.

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Yeah. So, uh, you know, commissions are paid out, uh, by,

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let\'s say a mutual fund company.

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They will pay out a commission to the advisor who sells that particular mutual

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fund to, uh, to their client.

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And it\'s could be paid out in a very various of different ways. Um, you know,

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if it\'s a shares, it\'ll be an upfront sales charge, B shares,

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which don\'t even think is even a thing anymore.

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It was a contingent deferred sales charge. There was no upfront sales charge,

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but it was a declining sales charge As time goes on and you,

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and you were to sell that particular holding, you know, the,

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the sales charge would be reduced. And then you also had c shares that were,

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you know, about a 1%, you know, uh, uh, trail that would, uh,

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that would pay out to the advisors.

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And those are paid through various fees that are within the mutual funds that

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the mutual fund companies, uh, structure around, you know,

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marketing of their particular products as well as, um,

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as selling those particular products,

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verse the fee side of things where it\'s advisors are just simply charging a fee

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for their advice. They\'re advising their clients on what they should be doing.

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Um, there\'s often, there\'s more than just, um, more advice,

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more than just advice that goes into it. It\'s, you know, financial planning,

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holistic planning and things like that. But it\'s generally a,

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a fee that\'s fully disclosed that they, that they pay.

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And the way most advisors will structure their fees,

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they\'ll structure \'em in such a manner that the more money you have, uh,

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you\'ll start to see those fees actually go down. So

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What I\'m hearing you say, it sounds like, and I think the,

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you said contingent deferred sales charge, right?

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If if you\'re earning a commission, that is a, it\'s a sales charge, correct?

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Right. Whereas, uh, fee for advice is exactly that,

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right? It\'s a fee for, for giving advice so that it\'s not necessarily a,

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a sales charge. Um,

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why do you think it\'s important for investors to know the difference between the

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two? Well,

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It\'s important for them to know the difference. It\'s,

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I think it\'s just important for them to know what they\'re, what they\'re getting.

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First of all, commissions. You can say that there\'s, you know,

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conflicts of interest perhaps. Are they getting sold something that,

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that has a higher commission that, that, you know,

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the advisor\'s gonna get paid more money on, you know, verse, you know,

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they always say, you know,

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a fee-based advisor usually will generally sort of align themselves with the

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client, let\'s say, on the, on the same side of the table, so to speak. They\'re,

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they\'re, they\'re going in as a team, we\'re here to, you know, you got your,

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you want to get from point A to point B,

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let\'s figure out the best way to do that,

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and then we\'ll put you in the appropriate investments. And, you know,

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because they\'re not, you know, getting any commissions, you know,

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generally speaking, there\'s a, I think,

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a certain comfort level knowing that the investment solution\'s gonna be right

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for them.

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No, that, that\'s a really great explanation. And you know, this,

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this podcast where, where our advocates of,

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of financial advisors and financial advice,

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I\'ve said many times before that I always get asked, you know, what\'s a,

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what\'s a great stock tip? What\'s a great tip? What\'s some advice for investing?

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And my advice is always work with a, a fee advisor,

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because that advice is extremely valuable.

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What are you seeing the average on the fee based side average advisory fees in

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the industry? What should investors, what should they know about advisory fees?

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Um, just generally? Yeah, generally,

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Generally speaking, I would, I would say that the, you know,

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the average fee probably comes in around 1%. Um, you know, we see, you know,

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just on our, on ourt here at Symmetry,

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I think the average advisory fee is somewhere around 97 basis points,

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if I\'m not mistaken.

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And so we\'ll see advisors charge as little as maybe 60 or 50 basis points,

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and we\'ll see advisors charge, you know, as, as high as 125 basis points.

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It\'s hard to say what\'s right. It\'s, what it comes down to is, you know,

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your comfort level and what you\'re getting for those services.

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Some advisors will, uh, will charge, let\'s say lower basis points,

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but they\'ll also charge on top of that for other services, like, let\'s say,

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financial planning. Okay.

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Whereas some advisors will charge 125 basis points and let\'s say maybe financial

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planning\'s included in that. And so it\'s always good to know, you know,

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you know, not only what you\'re paying,

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but also what you\'re getting for that particular price or that fee that you\'re

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paying. Okay.

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So these are a couple things that I kind of want to dive into a little bit.

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First and foremost, I think, you know,

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it\'s not fair to talk about price and fees without talking about value, right?

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Right.

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And so I think that you are going to see varying degrees of fees across the

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board, depending on, on, on the advisor\'s value proposition,

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1% that we\'ve seen that fee, that that really hasn\'t changed. Mm-hmm. Right?

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Mm-hmm. Um, we, we do hear a lot about price compression in the industry, but I,

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I think when it comes to the, the financial advisor\'s compensation,

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and I would argue that the financial advisor is the, uh,

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most valuable person in the value chain. Mm-hmm. That fee hasn\'t changed,

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but investors are looking more for, from their advisors. So there\'s some,

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there\'s some margin compression there, right?

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Yeah. The advisor, you know, uh,

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clients are becoming more savvy conversation around fees. It\'s,

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it\'s out in the open, right? You see \'em on commercials all the time,

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whether it\'s Schwab or Fidelity or Vanguard, you know, talking about, you know,

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low fees. So, uh, it\'s out there and clients are well aware of that.

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And so they\'re starting to ask questions,

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they\'re starting to ask what they\'re getting for, for that particular fee.

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But at the end of the day, you know, you know, it\'s,

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it\'s only an issue in the absence of value, you know,

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so if the advisor\'s providing value and they see that and they know that, then,

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you know, generally speaking,

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clients tend to be comfortable with what they\'re paying.

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Certainly, certainly. What are you, you know, the advisors that are charging 1%,

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what are the typical types of services that you see advisors performing for,

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for that fee to add value to the equation?

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That\'s a great question. You know, we, we kind of see,

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we see a lot of advisors that are rolling financial planning into their fee.

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You know, we, we, we see that there\'s, um,

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there\'s a lot of advisors that actually have a, a, um, what I would say,

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a very big financial planning focus. So they\'ll charge for financial plans,

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and they may do some advisory business along the way, uh,

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just to help out clients. And so they\'ll, you know,

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they may charge maybe a little less, maybe around 80 basis points,

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80 to 90 basis points, kind of what we\'re seeing there.

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Okay. That makes a lot of sense. I, I,

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I think that the value proposition for the advisors actually shifted quite a bit

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over the years. You know, you and I have talked, um, a lot about this and,

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you know,

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there was a time where the value proposition was thought to be returned. Mm-hmm.

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I\'ll pay you a higher fee for higher rates of return. And is that the case? No,

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because

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It\'s, you know, I, I think the, the juries, you know, come in, in terms of,

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of returns and in terms of what types of investments you should be in. I mean,

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right now, I mean,

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you\'re seeing huge outflows from going from what I would say traditional active

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to more traditional passive types of investing. And so I think the, the,

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the main role for the advisor is just really being that behavioral coach. Uh,

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when we\'re left to our own devices, we don\'t make,

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we necessarily don\'t make the best decisions, uh, when it comes to investing.

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We, we get very emotional about our, our money and when, when markets are down,

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we, we tend to hit, you know, hit the panic button and sell,

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and that\'s the wrong time to sell. And so, um, you know, when you look at the,

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like, industry studies that are out there, I mean, the vanguard\'s out, you know,

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advisor Alpha is a big one, shows that, you know,

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working with a financial advisor, you can, um, you know,

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capture about 300 basis points extra just by working with a financial advisor.

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And they actually attribute most of that to,

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but I think about half of that to behavioral coaching. Sure.

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And the, um, just for our listeners out there,

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the advisors Alpha study that was done by, uh, Vanguard,

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I believe it\'s a paper that they put out in conjunction with,

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with the Spectrum group. And,

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and it does show that investors who tend to work with financial advisors tend to

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have better performance,

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but it doesn\'t necessarily mean that the advisors tinkering with the portfolio.

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The value proposition, to your point, is coaching. It\'s competent,

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it\'s communication. It, it\'s, it\'s these things that help the investor, uh,

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whether the good times and the bad. And, and,

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and providing that sort of foundation,

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helping the investor stay the course really is the, the secret to,

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to having a successful investment experience. I

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Think it\'s also important to add that I think a lot of advisors now, you know,

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there is sort of a, a paradigm shift.

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It\'s not necessarily the returns that I can generate for you. Um, it\'s,

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it\'s the other things that I can do for you, um,

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because they know that they\'re not portfolio manager. Mm-hmm. You know, they\'re,

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you know, they\'re,

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they\'re running their own business and that business is helping people.

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And if they\'re spending all their time trying to figure out what the best stock

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is, they\'re, they\'re probably gonna miss the boat on, you know,

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helping their clients, you know, with their financial planning and,

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and meeting their, you know, their financial goals over time. Sure,

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Sure. So, you know, we talked a lot about the advisor compensation,

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and I kind of wanna revert back because, you know, the topic today is fees.

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Mm-hmm. It\'s not just advisory fees.

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There are a number of other fees associated with investing.

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You talked a little bit about the ahas, B shares and CS shares,

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which are typically sales charges for mutual funds,

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but there are no load mutual funds out there. There are. Correct. And, uh,

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what that means is there, there isn\'t a, a sales charge per se,

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but that doesn\'t mean that they\'re for free. Correct. Correct.

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Nothing\'s for free.

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Right.

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So talk to us a little bit about the costs that are associated with investing in

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something that, that, that no load or doesn\'t have a, a sales charge. Sure.

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Yeah.

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There\'s a couple costs to think about. You know, there\'s, I always refer to it,

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you know, the cost of investing, right? There\'s, there\'s gonna be, you know,

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some cost to, you know, running a portfolio. I mean,

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that\'s where your expense ratios come in, which is the really, it\'s the,

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the cost of running that particular, let\'s say, mutual fund if,

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whether it\'s a no load or, or a loaded mutual fund. I mean,

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those are things like, you know, trading costs, management fees, um,

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things of that nature. There\'s also, um, you know,

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custody fees that you have to think about, you know, what, uh,

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what custodian is gonna be housing those, those, um,

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those assets for you and what that pay structure looks like. I mean, we see,

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you know, uh, some custodians that\'ll do a flat, you know, flat rate fee,

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and we see some that\'ll have more of a tiered structure.

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So the more that you give them the, the lower that fee will come down. Again,

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there\'s, you know, certain services that are,

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that are provided by the custodian that you may seem are valuable.

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So maybe paying 15 basis points is worth it,

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and you may not see any value in that. And, and paying something like, you know,

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five or seven basis points maybe more, more suited.

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But those are all sort of what I would say in the category of just the cost of

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investing.

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Sure. Sure. And, and when you\'re looking at investment vehicles,

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mutual funds mm-hmm. ETFs,

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those expense ratios that comprise some of those costs,

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what are you seeing on average out there, and are those fees coming down? Uh,

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They are coming down, I pulled some numbers, you know, looking at just on,

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on averages, the, you know,

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the average expense ratio for a large cap mutual fund,

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about 86 basis points on the small cap side, it\'s averaging around, you know,

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1.4%. You know, so again, those are the averages. So you,

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you do see some mutual funds that can be as high as a, you know,

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north of a hundred and twenty five hundred thirty basis points.

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And then you can see some that are just a couple of basis points, you know,

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two basis points, five basis points for, you know, just a simple, uh,

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index tracking strategy. Okay. So

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You said a couple things there that I find interesting. First and foremost, uh,

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the asset class matters, right? Mm-hmm. Large cap versus small cap.

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And I think it would make sense that smaller cap stocks,

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smaller stocks are probably more costly to, to manage and maintain.

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So you\'d expect higher expense

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Ratio, right? Yeah. And to trade \'em, it\'s harder to get access to \'em.

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Yeah. And we see the same thing in, in liquid alternatives.

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Like those alternative strategies tend to be a little pricey. Um,

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so the asset class matters. We are believers of global diversification,

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so having a little bit of all of those asset classes I think makes a lot of

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sense. Correct. Um,

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but you also mentioned something that I kind of want to dive into a little bit.

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You know, 86 basis points on average for large cap mutual fund.

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But you said you can get asset class exposures with index funds for just a

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couple of basis points, correct? Or hundredth of a percent. Mm-hmm. Why is that?

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Uh, I think it comes down to, you know, activity.

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The more active a strategy is you\'re, you\'re gonna see, you know, more turnover,

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that\'s more trading, and that\'s gonna, you know,

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cause the expense ratios to be a little bit higher than a more passive

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portfolio. Let\'s just, let\'s, let\'s just say tracking the s and p 500.

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Sure.

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So someone who is trying to attempt to outperform the s and p

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500 will do so by buying and selling Correct. Creating activity,

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raising costs, also taxes. Mm-hmm.

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Whereas simply buying and holding an index of the s and p 500,

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obviously is going to not only be less costly, but also more tax efficient.

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Correct.

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And it\'s also important to know what you\'re, what you\'re buying.

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There\'s a lot of people out there who, who believe in active management.

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They think that that,

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that there is alpha out there that a portfolio manager can provide,

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and in order to capture that alpha,

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they\'re willing to pay the extra expenses for that. So if you,

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if you know that going into it, then knowledge is king. Right? So,

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so you\'re okay with that. It\'s the people that don\'t understand that,

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that are in a portfolio, let\'s say a 401K plan, for example,

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you go into the menu, you,

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most people are probably gonna look at what their historical returns are,

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and they\'re gonna probably make a decision based off of past performance not

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knowing what, what\'s under the underlying securities or,

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or what the strategy is behind the individual mutual fund.

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And they could be paying, you know,

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higher fees and not knowing really what they\'re paying or why they\'re paying it.

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Yeah.

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And it, and it\'s important, right? At the end of the day,

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what you pay in fees comes off the top of what your return is. And over time,

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that can be substantial. We say lot on this podcast, you know, we,

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we can\'t control the markets, we can\'t control asset allocation,

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we can\'t control costs, and we can\'t control taxes. And we, we,

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we educate our listeners that, hey, focus on things you can control. Mm-hmm.

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Right? And so fees do matter at the end of the day.

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And I think there\'s been a lot of studies out there, if I\'m not mistaken,

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Morningstar had one not too long ago that says,

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one of the key indicators of a mutual fund\'s performance is the expense ratio.

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The lower the fee, the greater likelihood it\'s gonna perform well. Yeah. Well

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Think about this. So in, in keeping with that,

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if you are in a mutual fund that has a 1% expense ratio and that mutual fund

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returned 5%,

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you\'re automatically giving up 20% and you\'re giving that back to the,

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to the fund company, right?

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501 is four. Exactly.

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Just, you know, basic math right there. Mm-hmm. So there, there, there is,

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you know, fees do matter and they do erode, you know,

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performance particularly over time. Uh,

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I got a couple other examples here I can share with you. You know, please just,

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you know, keeping things simple, you know,

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a hundred thousand dollars investment over 20 years, um,

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assuming a 6% rate of return in a mutual fund that has a 1% expense ratio,

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forget about, you know, custody,

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forget about advisory fees and all that other stuff,

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just straight up just investing in a one per, in a mutual fund that\'s, uh, 1%,

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uh, at the end of that 20 years, you know, you\'ll end up with a,

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a gross return of $320,713 and 55 cents.

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Take a look at the cost of fees.

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The cost of fees of that are actually $55 $383 and 78 cents.

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So you\'re gonna end up, uh, at the, in your account at the end of the day,

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after 20 years with, uh,

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$265,329 and 77 cents.

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And that\'s if you\'re invested in a, a, a mutual fund that has, you know,

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expense ratio 1%. And some people look at that and they say, that\'s great.

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That\'s that, that\'s a good return over 20 years. I\'ll take that.

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When you compare that, everything else being equal, but it\'s invested. Now in a,

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in a mutual fund that has an expense ratio of, uh, 25 basis points, again,

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a hundred thousand dollars over 20 years, 6% rate of return. The end of that,

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you, you,

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you still end up with the $320,713 55 cents,

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uh, on the gross end. But on the net,

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what you end up with is $305,919 and 75 cents.

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And so that\'s a cost, cost of fees there of 14,

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do $14,793 and 80 cents.

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So that\'s a significant difference ends up in your pocket. That\'s,

329
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That\'s, that\'s, that\'s massive. And we,

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we told our listeners there wouldn\'t be any math, but, uh, no, that, that,

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that is very true. But the thing is fees,

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it\'s part of investing like anything else. Mm-hmm. Right. They\'re,

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they\'re there. And I think it\'s important for investors to know,

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one of the things, uh, I read an article many years ago,

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and I think it\'s still prevalent and it\'s the notion of transparency, right?

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And, and, and what this article did, it was from,

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from State Street Global Advisors partnering with, uh, Wharton.

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And they interviewed a number of investors, um, about fees and,

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and their sentiments around fees.

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And what that study showed us was, it\'s not so much the,

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the level of the fee as they just wanted to know what it is.

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And why do you think there\'s such a lack of transparency with,

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with costs in this industry?

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I just think it\'s easy to, it\'s easy to bury. That\'s

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Unfortunate.

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You know, I think, and, and I think that\'s, that\'s,

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that\'s starting to change a little bit. I know we see it in our business,

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you know, and one of the things that,

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that we always kind of pride ourselves on are full transparency on fees,

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you know? But if you can look,

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if you can look less expensive than your competitor,

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then you feel that\'s gonna give you a competitive advantage. And so, you know,

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so it\'s,

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it\'s unfortunately I would say it\'s not uncommon for investment companies or

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other providers to, you know, kind of, you know,

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bury their fees or sort of hide them within, you know, the structure of their,

357
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of their, um, of their costs.

358
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Well, I think you, you said it best, right? In in, if there\'s value,

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the fees don\'t matter. Correct. Right. If you\'re getting what you\'re paying for.

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And so I think that there\'s a notion of a lot of advisors out there not wanting

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to talk about fees,

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cuz they might not be confident in their own value proposition. However,

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there are a lot of advisors that you and I work with on a daily basis that

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they\'re very upfront with what their cost structure is.

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They\'re very upfront with the fees are of the underlying investments,

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and they bring that transparent to the table because they have a very strong

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value proposition of their

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Clients. Yep. Yeah. They\'ll have it on their website, they\'ll have their,

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their fee, you know, their fee schedule on there along with, you know, the,

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the various services that they charge and, you know,

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whether you feel it\'s high or whether you feel it\'s low, at the end of the day,

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it\'s up to you to decide what\'s best for you. But at least you know,

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you have that full disclosure. Um, so you can make the,

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the best decision possible. Certainly,

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Certainly. So if, if our listeners are out there looking for a,

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a financial advisor, you know,

377
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some of the things that I\'m hearing you say that they should be looking for is,

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is the advisor using a commission-based mo a commission-based model or a

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fee-based model? Mm-hmm. Are they, uh,

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transparent with their compensation and uh,

381
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are they transparent with their value proposition? Correct. Is,

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is there anything else that, that you would add to that?

383
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Um, just knowing what services you\'re gonna get. You know, I think, you know,

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time and time again, we, he,

385
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we hear stories that client felt that they were gonna get something from an

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advisor that they\'re,

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they\'re just not getting and they end up firing that advisor. You know,

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so knowing what you\'re gonna get from that advisor, and, and some advisors,

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again, they\'ll have this right on their website or they\'ll have it on that first

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consultation that they talk to. They\'ll tell you, Hey, look, you\'re gonna get,

391
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you know, four, you know, four meetings a year.

392
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You\'re gonna get six phone calls, you know, from me a year and,

393
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and here\'s my cell phone number. If there\'s ever an emergency for something,

394
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you know, give me a call. And then there\'s other advisors that\'ll say, you know,

395
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I\'ll meet you with you twice a year and we\'ll review your portfolio and if

396
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everything looks good, then we\'ll, I\'ll talk to you in six months.

397
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And if you\'re okay with that,

398
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and you at least you know that going into the relationship, I think where,

399
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where people get burned is they,

400
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they think they\'re gonna get more outta the relationship than they\'re getting.

401
00:19:28.700 --> 00:19:31.840
And a lot of times it\'s just slimy cuz of lack of transparency.

402
00:19:32.290 --> 00:19:34.120
Right. And I think that transparency is a,

403
00:19:34.360 --> 00:19:36.400
a tremendous way for advisors to build trust.

404
00:19:36.400 --> 00:19:38.440
Cause it\'s all based on trust at the beginning of the Absolutely.

405
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At the end of the day anyway, so Absolutely.

406
00:19:40.340 --> 00:19:41.800
And it\'s also important, Tom,

407
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to remember that as you\'re looking for a financial advisor, it\'s a,

408
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you think of it as a, a mutual interview. It\'s, it\'s, you know, they\'re,

409
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they\'re looking to see if you\'re gonna be a good client for them,

410
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just like you\'re looking to see if they\'re gonna be a good advisor for you.

411
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And so it\'s important that, that, uh, that a, your values are aligned.

412
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It\'s important to look for that full transparency,

413
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but it\'s also important that it\'s, you know, somebody that you can connect with.

414
00:20:02.810 --> 00:20:06.600
Absolutely. Absolutely. And, um, every investor\'s unique. Mm-hmm.

415
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And every advisor\'s unique in, in trying to find that match,

416
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I think is very important. So for our listeners out there, uh,

417
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those that might be looking for financial advisor,

418
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make sure that you\'re getting, uh, transparency into costs.

419
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Make sure you\'re getting transparency into value proposition.

420
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Make sure that you\'re using someone who is maybe not necessarily earning sales,

421
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uh, charges or sales commissions, uh, but actually giving fee for advice,

422
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which eliminates conflicts of interest. Um, and so I think that\'s, there\'s a,

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there\'s a lot there for our listeners to digest. JT, I want to thank you for,

424
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for joining us here today. It\'s been a pleasure talking to

425
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You. This has been a great time. We gotta do this more often.

426
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Absolutely. We\'d love to have you back on the show. Uh, so in closing,

427
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I wanna thank the listeners for, for chiming into this, uh, podcast. And, uh,

428
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we\'ll get you at the next one. And, uh,

429
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for those of you who are looking for our, some of our previous episodes, uh,

430
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you can find them wherever you\'re currently finding your podcast.

431
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So thank you so much for your time and, uh, I\'ll see you at the next one.

432
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Symmetry Partners llc,

433
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it\'s an investment advisor firm registered with the Securities and Exchange

434
00:21:07.760 --> 00:21:08.580
Commission.

435
00:21:08.580 --> 00:21:13.280
The firm only transacts business in states where it is properly registered or

436
00:21:13.720 --> 00:21:16.760
excluded or exempted from registration requirements.

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Listed in: Business

Alternative Investments | Part Two: How Can They Mitigate Risk in Your Portfolio?

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Welcome back to part two on our discussion of alternative investments here with

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us as Phil McDonald,

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portfolio Manager and managing Director of Investments at Symmetry Partners.

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Phil, welcome back.

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Thanks for having me back. Tom,

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I think we\'re getting a lot of questions from investors and and advisors because

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of the fact that you look at the performance of some of these alternative asset

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classes in a year like 2022. However,

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I think we would caution our listeners to, to not chase returns,

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and it\'s more of a strategic allocation that you wanna hold in your portfolio

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for a long duration.

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I would totally agree with that. And, and you have other considerations here,

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like broadly speaking, the expectation of the 60 40 portfolio,

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the return on the so-called 60 port,

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40 portfolio is likely going to be below average for in, in the near future.

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So you start to think about like, okay,

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my traditional portfolio isn\'t gonna return, you know, the 40 year average,

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what we saw decades ago. So where else might I be,

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might be able to go for returns and diversification? So you,

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you have that inflation surprises, you have increased correlation of,

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of traditional asset classes in the recent past. You know,

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of all these things kind of pointing to the benefit of having a diversified

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alternative strategy. And I would agree with you,

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I think you were alluding to the strength of 2022. It was,

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it was a very good year for certain alternative strategies.

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I would encourage people to think of that as an outlier year like that.

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That\'s not a year that can necessarily happen again unless all the bad things

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that happen in the equity and fixed income markets and with inflation kind of

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recur. So I, I would encourage people to almost think in terms of sharp ratio,

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right? So an excess return for a given volatility,

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a sharp ratio above 0.5, getting to maybe a 0.8, is,

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is the type of realm I think you should think of for,

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for a diversified alternative strategy. And,

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and to kind of put specifics on that,

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so something that has is managed to a 10% volatility or standard deviation that

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would be a five to 8% excess return on the risk-free rate. So,

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so you know, you\'re talking single digit excess returns for, uh,

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a strategy that\'s scaled to a 10% volatility. So, you know,

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to take people out of this expectation of,

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of a home run year kind of happening again, it\'s less likely to happen again.

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Gotcha.

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Um, just to clarify some of that, because I think that\'s some,

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some very important advice there. When we talk sharp ratio,

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the way I look at that is bang for your buck. Are you,

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are you getting the return for the risk that you are taking?

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And the higher the sharp ratio,

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the greater the return is for the risk that you\'re taking.

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And so when we\'re talking about, you know, years like 2022, which is an outlier,

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which I would agree, you know,

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investors could have alternatives in their portfolio for years with a trade off

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being,

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you might be getting single digit returns while the markets may be producing

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double digit returns. We don\'t know when the next 20, 22, 2 is gonna happen.

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But having an allocation of those alts will certainly help weather that storm.

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Uh, uh, totally agree. Yes.

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So I think a misconception here, and this is just from my conversations with,

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with advisors, investors alike, they think alternative strategies,

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they think returns. Mm-hmm.

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They think even tactical shifts into and hour. Exactly. Yeah.

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But what I\'m hearing you say that this is more of a risk mitigating strategy

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than a return reaching strategy.

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I think it\'s, it\'s strongly risk mitigating from a diversification standpoint,

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but I\'m not quite sure how

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Much you have to give up in returns. Okay. I mean, it,

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I I wouldn\'t necessarily say it, it\'s gonna hurt you over the long term.

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I think you need to think about the right portfolio you, you want to be in. And,

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you know, I dunno if you had a question here, but, uh, you know, there,

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there are some very specific use cases that I think make sense and that would be

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managing just the life cycle,

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how financial plans and asset allocations change as a person ages. Again,

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we, we have a finite kinda life here where we\'re earning and spending and maybe

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bequeathing and then preferences. So theoretically, as someone ages,

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they\'re the, the risk of their portfolio should, should come down over time.

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They\'re converting their human capital,

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their potential for earning during their career into financial capital.

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They\'re investing that hopefully they\'re being thoughtful about the

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diversification of, of, of those kind of two buckets and say,

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equity beta should come down as you age.

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Where do you go with that allocation in your portfolio?

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Historically and traditionally, someone would say, oh, fixed, fixed income,

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of course. But we\'ve been seeing for a decade, you and I right,

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we\'re we\'re both nodding and smiling.

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There have been times when people were strongly opposed to increasing the fixed

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income allocation in their portfolio. So if it\'s just, you know, gas and break,

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you know, what do you do? You, you know,

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we\'ve seen investors and advisors kind of freeze and, and say, oh,

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there\'s no solution here. But this third or fourth, right,

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with cash in the consideration bucket of allocation really opens things up.

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You can take down beta risk, uh, equity beta,

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and you can allocate and diversify not only into fixed income.

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Gotcha.

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And you, you know, we, I joke around saying it depends, right? We,

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we say that a lot here, um, because I also think it\'s a perfect portfolio.

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You know, we, we look at portfolios as being a series of trade offs.

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And so I immediately think, well gosh, you know,

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if you don\'t really give up any of the return,

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but you can definitely mitigate some of the risks through sharp ratio,

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as you said, like looking at that particular statistic, who,

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what are the trade-offs of, of investing in alternatives? And,

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and immediately I think, well, well, you\'re still, there\'s still cost,

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even though you can get lower cost alternative exposures,

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there\'s still a cost element to that. Um, and also, you know,

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we talk a lot about tracking error on the behavioral side, right?

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If you\'re gonna add an alternative asset class to your portfolio,

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but you\'re honed in on the s and p 500, you\'re,

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you\'re not gonna be tracking that index.

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Right?

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Is that, is that a correct way of thinking about it?

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Absolutely.

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And I\'m glad you brought that up because not only are alternatives difficult to

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benchmark, there are some indices that I think, um, are,

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are relevant to a diversified, you know, conservative strategy. We, we,

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you know, we run an alternative strategy, uh,

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in different forms that is not seeking to, to be very volatile, right?

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So sub under that 10% volatility that I gave as,

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as the example to conceptualize a sharp ratio. So we, we,

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we don\'t even believe in a, uh,

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that high level of volatility in an alternative strategy. Um,

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but you raise a very good point.

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So not only are alternatives difficult to benchmark,

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but if you have alternatives in your portfolio,

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the appropriate benchmark for your portfolio should reflect

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the allocation you have. If it\'s 50% diversified equity,

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40% diversified fixed income, and 10% alts,

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you should probably benchmark yourself to a blended benchmark of a

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50, 40 10 mix of relevant indices.

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Not just look to the s and p 500, because again,

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you probably have a 0.5 beta in that portfolio.

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You don\'t want to compare yourself to something that is a 1.0 beta.

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Sure, sure. Absolutely. And you know, we, we talk a lot about, on this podcast,

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a lot of folks look at benchmarks to look at the performance, their portfolio,

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and I think that makes a lot of sense. But the true one,

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true benchmark is are you hitting your goals from a financial planning

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standpoint? Right? And so I think that\'s a better way to, to,

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to look at it versus just making sure that you may or may not be

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outperforming the s and p,

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which is a very visible benchmark out in the world today.

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And we can think the media outlets for that certainly. Right.

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So let\'s talk a little about, uh, allocation to alts, right?

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Let\'s say you have an investor, let\'s say it\'s 60% stock, 40% bond,

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maybe a small cash position in there. How should that investor consider adding,

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uh, alternatives to the portfolio? Is there a maximum amount you would put in?

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Is there a minimum amount? Would you take it from the stock side?

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Would you take it from the bond side? How does that work? And how should our,

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our listeners be conceptualizing adding that asset

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Class? So we, we have some opinions here, but I think in the end, it\'s,

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it\'s gonna be what is acceptable to the investor and what their financial

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advisors would recommend start the starting point matters.

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So if you\'re exceptionally conservative to start, say you\'re,

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you know, 10% equity in 90% fixed income,

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I think taking it ha having a a higher allocation alt might

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make more sense than if you were starting from the other end. So, uh,

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in terms of the distribution of returns and, and you know,

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the level of volatility of a diversified AL strategy,

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it\'s a little bit more similar to fixed income. It\'s, it\'s,

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I like to say those returns are fueled by different things. You know, it\'s not,

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you know, duration and credit risk and illiquidity type of stuff.

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It\'s other drivers that, that give you returns and alternatives.

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But our rules of thumb, which, you know, are for people to take or leave,

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would be maybe up to about 25% if you\'re starting from a very conservative, uh,

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portfolio. And if you\'re starting from a very aggressive portfolio,

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just say someone\'s a hundred percent equity invested in says, ah,

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I want to add malts to this portfolio, but I don\'t like fixed income. Um,

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I know a few of those, maybe,

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Maybe something more in the realm of 15%,

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I think lower than 10% allocation of anything to the portfolio is gonna have a,

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a, a limited effect on, on the outcome, right?

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So 10 percent\'s probably our general starting point to add something and, and,

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and see, uh, beneficial effect to the portfolio and,

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and where we\'ve landed on where to fund it from.

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So I didn\'t forget that part of your question,

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where believers in prorata from the,

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the asset allocation,

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so if you\'re a 60 40 investor and you put say,

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20% alternatives,

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60% of that should be probably funded from a reduction in inequity

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and 40% from a reduction in fixed. And they go, again,

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these are starting rules of thumbs. I I am very familiar with people who,

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because that returns distribution to alts, you know, the volatility and the,

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and kind of the average return to the distribution to alts is a little

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more similar to fixed income than it is to equity.

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I know folks who want to take 100% on a fixed income, that is an approach,

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but if you think about that, you\'ve done nothing to reduce your equity risk.

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So if someone is, again, aging life cycle is a consideration here,

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diversifying both systematic, traditional,

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systematic exposures of equity and fixed,

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we think taking from both makes a lot of sense to fund that ALT\'s position.

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There are exceptions, you know, there, there are, you know,

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there are people who have different savings or different, you know,

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sources of income, maybe people with three pensions, you know, like who, uh,

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who look a little different from an average investor. So again,

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individual specifics need to come into play, but those,

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those are my starting rules of thumb in a vacuum.

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Well, that makes a lot of sense,

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especially if you\'re looking at alternatives as a third leg to the stool, right.

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Stocks and bonds.

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And if the third category is going to be alternative asset classes or

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alternative strategies, it should come out prorata.

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It\'s not that the ALS are taking the place of equities or fixed income,

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it\'s something completely, completely different in the portfolio.

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Yep.

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Fantastic. So, um, Phil, I wanna thank you so much for your time. This is, uh,

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uh, super enlightening and just to kind of recap what we discussed, uh,

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for our listeners, um,

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alternative investments are a great way to diversify a portfolio beyond stocks,

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bonds, and cash.

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There are ways to get exposures to liquid alternative strategies through

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ETFs and mutual funds. With that should,

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you should expect a level of transparency to make sure you are getting those

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diversification benefits and, uh, certainly, uh, liquidity being a,

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uh, a factor there as well. And you know, whether or not alternatives are,

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are suitable for you, as we always say and unfiltered finance. You know,

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the best advice we can give is to always work with a financial advisor or

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financial professional that can take a look at your own personal situation,

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assess that situation, and, uh, make sure that they recommend, uh,

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an asset allocation, uh, that\'s suitable for you.

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Thank you listeners for joining us today. Uh, Phil, once again,

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it\'s always fun having you on the show. We\'ll certainly have you back. Great.

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Thanks for having me.

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For those of you who are looking for additional information,

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you can always visit our website@www.symmetrypartners.com. Feel free to,

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uh, listen to this podcast, uh,

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again or access any of our previous podcasts to the, uh,

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So thanks for listening and we\'ll catch you next time.

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Listed in: Business

Alternative Investments | Part One: There is Real Value in Non-Traditional Assets and Special Commodities

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Thank you for joining us. Uh,

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we have a special episode today where we want to talk about, uh,

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an area of the market that, uh, a lot of investors have probably heard of, uh,

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and probably most investors don\'t have a lot of exposure to.

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And that is alternative investments.

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And I have the perfect guest for us here today. Uh, Phil McDonald,

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who is a portfolio manager and the managing director of investments at Symmetry

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Partners, and is the resident expert on,

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on alternative investing here at Symmetry. So Phil, thanks for joining us today.

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Thanks for having me. I\'m happy to be here.

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So I kinda wanna start very high level, Phil, um,

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because I think alternative investments is a, is a very, very broad topic.

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I mean, it can cover things, uh,

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such as precious metals to hedge fund strategies, um,

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all the way down to things like NFTs, right? Or, or even, you know,

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card collecting to an extent, right? So if you could just very high level give,

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give us a very broad definition, uh, on your view on alternative investing,

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please.

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And thank you that,

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that is a highly relevant question because alternatives is one of those labels

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and investing that doesn\'t have, uh,

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a perfectly agreed upon definition. I think, you know,

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certain people hear it and they think different things. Um,

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I think a useful definition to keep in mind is really, uh,

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the starting point is anything that is an investment strategy that is different

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from or diversifying to traditional asset classes that is

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equity and fixed income, right? Um,

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but I think you can\'t really stop there because, you know,

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you called attention to, to certain ideas that, you know,

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people might think of if, you know, you mentioned alternative investing,

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you know, baseball cards or, you know,

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a lot of interesting different artwork choices. Yeah. We\'ve talked about,

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talked about

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That before.

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Cars, uh, timber farmland, you know, these are all, some,

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a lot of people think real estate, right? Which I think we could,

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we could debate that one,

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but I think not only should the investment strategy be different, but there,

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there should be kind of an economic rationale for why you might

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earn a return on that different strategy. And, and more specifically,

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where\'s the premium coming from? Right? So I think very quickly for me,

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that collapses down more to specific liquid,

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uh, investment in trading strategies.

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Sometimes based on themes we\'re al already familiar with in,

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in asset classes we\'re already familiar with.

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You don\'t necessarily have to go really far a field to find an

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addition to a portfolio that will, will make a difference in terms of, you know,

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adding an alternative, uh, investment exposure.

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Sure. Thank you for that. And, um, you know,

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I think it is that broad of a definition, right? I mean, uh,

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just to sort of clarify for, for our listeners, um,

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the word alternative means alternative, you said traditional asset classes,

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stocks, bonds.

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There is a correlation benefit to owning both stocks and bonds in a portfolio

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Most years. Most years. Yeah. We\'ll get to that. We will get to that. Um,

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however, um, you know, alternatives, to me it is a,

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it\'s a correlation story in, in all of those investments, if you will,

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whether it\'s cars, stamps, baseball cards, commodities,

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they are going to have or should have some sort of diversification benefit.

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And that\'s the purpose of it, right?

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Totally. You, you nailed it.

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The diversification benefit of an alternative strategy performing alternatively,

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right? So if you wanna get a little bit geeky, you know,

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you can think about something whose return stream looks different. So, you know,

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low correlation and expected return from that, you know, economic logic,

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that underlying fundamental theme as to if I do this trading strategy,

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I should expect a return, hopefully lower volatility than, than say,

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a equity market. So right there, you, you can talk about high sharp ratios or,

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you know, high excess returns relative to the volatility you\'re talking about.

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And, and absolutely diversification is the benefit. Very often, I, I, you know,

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use the, um, analogy of, you know, a third bucket of diversification.

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All you thought really all you had was two, well,

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there\'s this third bucket you might want to consider for some clients. And,

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and one, one thing I want to clarify here on, on this topic while we\'re here,

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most of these strategies are not a hedge,

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diversification is not a hedge.

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So if you\'re diversified with regard to, you know,

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equity markets and volatility, it doesn\'t mean when equities go down 10%,

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you go up 10%. It\'s not that directly, you know,

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inverse of a relationship. It\'s unrelated, you know,

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it\'s not sensitive to what the equity or fixed income market hopefully is doing.

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That\'s really what diversification is.

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So it\'s not the taking the, the counterpoint, if you will, right?

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Like something zigs this must zag, so to speak. Right? And so the idea is, it,

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it\'s not going to behave from a return standpoint like any other,

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it shouldn\'t behave like any other asset classes you currently have in your

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portfolio. And I really like the way you put that sort of a, a third bucket,

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right? I I maybe even a fourth, right? Because I think of cash. Yeah, exactly.

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So, so most investors have cash, bonds and stocks,

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most of their 401ks. And so what you\'re saying,

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there\'s this whole other realm of alternatives that can have

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diversification benefits because of the fact that they don\'t behave like stocks,

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bonds, and cash. Correct.

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So let\'s talk a little bit because I think alternatives sometimes get a bad

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rap. Um, I think a lot of it has to do with the,

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so maybe the broad definition has something to do with it,

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but let\'s just kind of pick it apart with some of the,

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the arguments I\'ve heard from, uh, investors and financial advisors alike.

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And the first one that comes to mind is cost, right? You know,

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you think hedge funds,

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you think two 20 or three and 30 where you\'re the managers earning, you know,

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2%, 3% plus a,

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a large portion of the profits talk to us a little bit about cost with

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alternatives,

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Right? And that I think is a fair critique of,

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I dunno if I wanna call it a traditional model of alternative investing,

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maybe older model where some of this, these strategies started mm-hmm.

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Which really only offered in limited partnerships,

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which tend to have high minimums, you know,

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so only high net worth folks can qualify for them. They\'re illiquid.

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So capital could be tied up for something even up to 10 years opaque,

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you\'re not really sure what the manager is doing and, and expensive, you know,

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even, you know,

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sometimes you have like fund to funds and feeder funds and you have layers of

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fees, and then obviously those, those performance fees come into play as well.

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Um, so the good news is that that\'s not the only way to access alternative

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strategies. Now, you,

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the investor is able to invest in mutual funds and even ETFs that offer

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alternative strategies for the most part, liquid, transparent, you know,

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you get all the benefits of, you know, the regulatory requirements of,

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of being a fund in these structures.

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Not all strategies live well in that liquid structure.

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So, you know, you don\'t have quite literally that list of, you know,

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that funny list of all the things we could think of that someone might think of

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as, as a good investment. So you, you are more constrained,

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but still there\'s quite a bit to, to choose from. And then, you know,

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to your point,

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most of those strategies are just gonna have a very straightforward expense

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ratio on the fund. It\'ll be very clear what the investor has to pay on average.

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You typically see higher fees than, you know, a traditional say,

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index fund for equity or, or, or fixed income. But you,

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you\'re getting something different in, in a well-managed alternative strategy,

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Right? And you hit on a couple of of points there, right?

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Cost is something that always comes up. And uh,

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I understand that even in some of these ETF or mutual fund type vehicles,

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that there, there could be a higher layer of cost,

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but there are ways to get exposures to these asset classes without paying

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two and 20. Mm-hmm. Right. Um, you also mentioned liquidity, right?

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I think that gets solved for,

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if you\'re not using a limited partnership sort of vehicle.

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If you\'re using an etf, they\'re very, very liquid.

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So you can get your money whenever you may need it.

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But you also hit on something that I think is, I think,

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important to investors and it\'s transparency, right?

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The opacity of a hedge fund, traditional,

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if I can use the word traditional hedge fund tends to be a little bit, uh,

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black boxy, if you will, right? Right. And maybe investors are thinking of,

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you know, things like Bernie Madoff or things like that, right?

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Where you don\'t know what\'s going on under the hood,

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but an ETF or a mutual fund,

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an ETF specifically, you\'re gonna get a a lot of transparency in that. Correct?

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Yeah,

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Absolutely.

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So you know exactly what you\'re holding.

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Absolutely. And, and, uh, you\'ve touched upon a point,

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which I think is very relevant,

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and thankfully there\'s been an evolution in the industry to kind of bring

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attention to some of that. So the,

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the idea of a global macro go anywhere,

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hedge fund a star manager who, you know, returned a thousand percent last year,

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you know, raising funds, just like in telling investors, I\'m really smart.

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I\'m smarter than all the rest. Invest with me.

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I\'ll find whatever the opportunity is globally, you know,

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regardless of country or region or asset class. Like,

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I will go find that opportunity and I will achieve a higher return. That,

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that\'s certainly something to probably be very careful of, right? He,

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he might wanna shy away from that. So over the last, I don\'t know,

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I\'ll say 25 years or so, there,

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there\'s been light kind of shown upon this idea that, you know,

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hedge funds don\'t hedge, you know, some hedge funds have a lot of beta,

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some hedge funds are,

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are implementing strategies you can get with liquid strategies. You know,

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this idea of hedge fund replication was, was an interesting arm of, uh,

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quantitative research. So I, I think for,

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for those who are interested and have the time as an alternative investor, you,

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you should be able to get from your manager a very specific explanation of

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exactly what\'s happening in the strategy,

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why it\'s an alternative strategy,

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why the fee being charged on that strategy makes sense,

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how it\'s diversifying to traditional asset classes. And really, I think at a,

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on a very basic level,

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confirm you\'re not paying alternative investment fees for

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just call it equity beta, right?

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Because we know equity beta is available in really high quality ETFs from

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Vanguard for probably three basis points. Yeah.

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I think that\'s a very important point, right? And, and we\'re firm believers on,

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on, on transparency. And if you\'re using alternatives correctly,

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if I\'m understanding what you\'re saying,

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and it is a diversification play to ensure that you\'re getting that

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diversification, you need that level of transparency. And a lot of times, and,

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and we\'ve read about this and talked about this in the past,

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sometimes these more opaque type strategies, you know,

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if equities are doing really, really well,

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they might be very correlated to equities at that very given point in time.

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And then the whole story of diversification kind of goes out the window,

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doesn\'t it?

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A hundred percent.

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And I think financial media hasn\'t helped in that education, right?

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So there\'s been stretches of time when equity markets were doing very well,

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and hedge funds haven\'t been, and, and you know, the storyline there is,

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you know, hedge funds failed. And well, if hedge fund,

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if a real alternative strategy has zero beta to the equity market and the equity

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equity market\'s doing well,

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I wouldn\'t necessarily expect to see those hedge funds up just because,

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Right? If, if the,

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if the alternative investment that you\'re using for diversification is zigging,

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while your equities are zigging, you

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Should ask questions. You should ask

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Questions. Absolutely. Absolutely. Well, let,

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let\'s talk a little bit about the performance, uh, of,

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of alternative investing in relation to portfolio.

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And you alluded to this in the beginning when, uh, you mentioned that, you know,

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sometimes stocks and bonds do behave alike. Mm-hmm. And we saw that in 2022,

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right? Yeah. Both had, uh, extremely volatile tough year,

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both ended up in, in the red. Um,

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how did alternatives do, or what,

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how did alternative asset classes perform during that timeframe?

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Uh, certain of them did reasonably well. So, uh, I\'ll,

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I\'ll maybe run through a few examples of, uh,

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strategies that are alternative. Uh,

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our diversified alternative investment approach would include.

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One of those is something called, uh, manage futures or trend following, or,

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you know, if you want to think about, you know, quantitative factor investing,

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which you know, is what we think about a lot, you can, you can consider that,

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um, longitudinal momentum or momentum over time.

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And this is really just a strategy that takes advantage of investing in futures

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and forwards. So derivatives that\'ll cover, you know, commodities,

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equity markets, fixed income markets. Uh, and in the simplest sense,

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if a trend in an asset class is up,

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especially over, you know, short, medium, and long-term time periods,

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the managed future strategy would essentially be long that exposure.

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And if a trend is down over, you know,

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short and long horizon managed future strategy would be short, uh,

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that asset class or commodity. So in 2022,

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when everything felt like it was going down and continuing down,

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the managed future strategy was able to reposition and be short,

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many of those strategies that were showing persistent negative price signals.

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So in 2022 a year when both equity and fixed income markets globally,

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generally speaking on a diversified basis,

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were down and very positively correlated,

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something like a managed future strategy was up, uh, strongly and,

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and very diversifying. That\'s

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Really interesting.

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And so would you\'d have the same expectation if both stocks and bonds were

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up, that the mayor\'s future strategy might be down, or does it depend?

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It depends.

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So it depends on the strength of those signals and the persistence of those

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trends. So in, in certain stable, neutral, slow,

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generally up markets, those signals may be too choppy to, to make use of.

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And maybe if there\'s conflicting signals, say, you know,

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up in the short term, down strongly in the medium term,

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up slightly in the long term, you know,

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you can\'t always make sense of those quantitative signals and,

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and you might have no exposure in that type of underlying market or commodity or

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asset class.

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So that\'ll conclude part one of our, uh, conversation alternative investments.

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Phil, thanks for joining us. And for our listeners, uh,

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if you\'re looking for additional information,

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please feel free to visit our website, www.symmetrypartners.com,

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and to access more of the Unfiltered Finance podcasts.

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Please feel free to find us wherever you\'re getting your podcast today.

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Be sure to stay tuned for part two.

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Symmetry Partners LLC is an investment advisor firm registered with the

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Securities and Exchange Commission.

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investment strategy, product,

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Listed in: Business

Q1 2023 | Putting the Quarter-in-Perspective | Part Two: Interest Rate Hikes & Bank Failures

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shift a little bit to some of the headlines that we saw because there was

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there\'s quite a bit. It felt like it was a very long quarter. Yeah, and you

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know as we did see some positive results, but can we

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talk a little bit about just in general some of the headlines that we saw and

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then specifically I want to take a dive into inflation

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and then the banks because that was

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a really big headline. We got a lot of a lot of calls regarding that look

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there there were

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Striking headlines around things like

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shocks to sort of economic surprises on

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job numbers to what was going on with the FED

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to Banks not just near the United States but

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internationally and yet what you see is kind

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of, you know markets do what they do in in any given day. They respond

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to that but they are quick to incorporate the news

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and get back to pricing on other kinds of things. And

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so I would say as a micro dosage of

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what the ride is for investors. It\'s

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this it\'s if you can sort of

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take in stride that there are going to be lots of headlines and

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that there may be short-term Market reactions headlines over the

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longer term that kind of gets filtered out on

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the upside and downside right and what you get back

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to is. Hey one of my paying for right I\'m paying for some kind

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of future earnings or I\'m lending with some expectation that

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I\'m going to get paid and income stream based on that and that tends

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to drown out the short term noise and now

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you\'re back to factors of how much did I pay did I

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get my earnings did I not is

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We\'re upside to that right and markets are kind of a weighing machine

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in that sense. Right? They\'re weighing those earnings. They\'re weighing those

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cash flows in the future. Right? So I would say

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lots of lots of news lots of scurrying

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around the news.

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You know at the end of the day we\'re sort of where we started one

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of the headlines and one of the things that we\'ve been getting a lot

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of questions about I\'m talking about is is inflation. I know we\'ve spent some time

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already today talking about that. We did

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see US inflation ease a little bit but there

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might be some pressures coming up. So if you don\'t mind commenting on that, that

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would be great. Yeah, you bet. I think it\'s helpful to kind of

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take a step back and look at

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With the onset of the pandemic right everything kind

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of shut down and then when we went to reopen things back up

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factories didn\'t necessarily open up, especially in

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places like China right for some time. Right and the the

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supply chain was suddenly

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constrained and so we

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had a hard time getting Goods, right but there was a lot

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of demand because we were at home, you know person stuff and so

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as you have demand shoot up but supplies constrained

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price shoots up, right? That\'s just sort of Economics 101

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and we saw that and at the time, you know, the Fed was quick

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to say, hey, look we think this is transitory think eventually things

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settle down we get manufacturing back online. We work

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out the bugaboos associated with the supply chain

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and those the price pressure doesn\'t inflationary pressure should come back

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down over time and in large respect

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this seems to have proven that out right?

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I think what really got the fed\'s

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attention and started them down the path.

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Of really dramatically raising rates was

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the fact that well while goods were

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sort of starting to come back down. It was

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inflation associated with services that was going up. And

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in fact, what we\'ve seen is good coming down

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the the overall inflation of

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the CPI number or that PC number coming down from its

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highs last summer, but while that\'s been happening underneath

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Inflation associated with Services has continued to

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go up.

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And so even if we\'re at a point now where the latest inflationary readings

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are half of what they were.

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Just a year ago this time.

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Services inflation is up and continuing to go the wrong direction. Right? And

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so the the FED has said hey, look

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first of all, we don\'t look at kind of the overall CPI number. We don\'t

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that\'s not how we measure it. We\'re looking at these underlying statuents and

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they prefer the the pce as

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opposed to CPI, but they\'re all just kind of ways of measuring, you know

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inflation in the economy. And so

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one of the ways that we\'ve looked at

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this for a very long time is core CPI, right? We\'re stripping out the

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volatility of energy and food because those tend to move around so much and then

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you know, we\'ve been introduced to this concept that not

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only is it core CPI, but it\'s core Goods CPI and

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course Services CPI. And so the FED now is very focused

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on core Services looking at Services minus

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services for energy and food and what

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we see are again our sort of troubling Trends

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around services and housing

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in terms of the impact that that

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has now pushing.

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Up or holding up those inflation numbers and if they

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continue on the wrong direction, that\'s what the fed\'s concern about and the

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the whammy that potentially comes

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from if Services costs go

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up at some point that starts to impact Goods costs as

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well. Right? And so if you look at this where the the white

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bars are coming down, right the the concern

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is that Services cost the cost of producing goods

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and delivering them right is going to impact the the cost

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that gets passed through and goods start to come back up and there\'s sort

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of a double double impact of inflation if

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you will and that\'s what I think the FED is incredibly concerned about

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and and why they say look we\'re gonna ratchet rates up

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and we\'re gonna keep them up there long enough until we\'re convinced that we\'ve we\'ve

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stamped this out and brought it back down to a level that\'s

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livable because the last thing you want to do is take your foot off the pedal.

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And then suddenly have a Resurgence of these

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inflation Air Forces which that we\'ve saw

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in the 70s, right if you think about what we\'ve we\'ve

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seen this show before the early 70s the FED raising

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rates taking their their foot off the brake, I guess and then

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Resurgence of inflation in the late 70s stagflationary

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environment and it took the volcker FED in the 80s

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taken rates to places. We\'d never seen until recently right to

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to stamp that out. And so I think the FED

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is taking a lesson from history and said we don\'t want to repeat those mistakes.

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We\'re gonna stay on this until we\'re sure right absolutely and

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speaking of the fed and it says been a very fast pace

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in terms of Ray hikes. Yeah

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historically exactly exactly so

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they they have meant business and I

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think Market participants repeatedly made

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the mistake of not taking

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the FED at its word.

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Right and and equities markets have

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definitely gotten well ahead of the FED particularly at

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the end of last year and maybe potentially the beginning of this year bond markets

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now are pricing that the FED

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will pull back and yet the FED is saying no. No, we\'re we\'re

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gonna raise rates and we\'re gonna keep them there longer and that\'s

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you know, we have no expectation that we would

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pull back from that anytime this year. Right? So the market

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participants are our forward looking forward pricing, but

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they seem to not be taking the FED at its word. I think that\'s pulled

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back a little bit in February and March we started to

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see Market participants kind of get their arms around.

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Actually be coming and we see you know

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investors like hedge funds really sort of looking at volatility

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Bets with the expectation that hey this

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may get a little more turbulent before it gets better. Right? So

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there\'s a lot of sort of now Market positioning

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for the fed me

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actually do this and we may see an economic pullback,

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but that may not necessarily mean the FED response to

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it. Right? I think again as we look forward the

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the way that I would think about this as an investor as a the

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stock market is not the economy, right? The

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markets are definitely driven by

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interest rates and fed movement

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and yet

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Much like headlines the markets take that

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news and stride it gets built into prices and there

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may be short-term volatility associated with this but if you look out over

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time, you know, what what do we see going back to

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you know, as long as we have records 1926 and Beyond

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right Imperial heads when interest rates

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go up interest rates go down inflationary environments disinflationary environments

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recessionary environments across all of those things markets

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tend to produce a return

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of you know, seven to ten percent average annual

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you don\'t get that every year but you get on average over time and it\'s

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paying you for those cash flows so much like,

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you know, the all the comments that we\'ve had prior to

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this.

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As investors, it\'s important to sort of take in its Stride

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Right put some blinders on there may be volatility associated with

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this ride. You will get wet on this ride. Right but we

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promise you\'ll come out in the other side, right and when you do,

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you know, the markets will get back to doing what they

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do, which is you know, paying you for putting Capital to work

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in there. So so that I would say again we watch these

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things. We we sort of especially working

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in the industry. It\'s a incumbent upon

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us to have some product prognostication about where this could

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be headed at the end of the day what we think matters very little it\'s

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what actually happens and we build portfolios to

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be as robust as we can because Anything Could Happen. Yeah, that\'s that\'s fantastic.

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And that\'s a really good way of putting it. We don\'t know what\'s

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happening, but we\'re

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We\'re invested in a way to endure what\'s to come? Right? Exactly. So

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one of the headlines that we we spent

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a lot of time talking to advisors and investors alike is the

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the notion of the banks and we saw from Silicon Valley

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and First Republic and a few others.

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I think it\'s a it\'s a risk reward story. But I also think

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this is the diversification story there. I\'d love to hear your thoughts. Yeah. Well, yes,

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I think

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the the situation with the banks

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has a lot to do with other stuff, right? Yes, the

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the banks were quick to come out and say well this

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is a consequence of how rapidly the FED is

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raised interest rates. And this is potentially impaired the

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asset base of these Banks and there\'s no question right over the

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course of 2022. You saw the asset base

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drop significantly across banks in

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general because right so, you know first principles,

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what is a bank do they take money in when they

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take that money in as a deposit? It\'s a liability to them. Right?

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So they take that liability and they got to go match it up

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with an asset and they do that either by making loans and if

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they can\'t make enough loans, then they got to go buy bonds treasuries.

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For instance, right? Yes. That\'s the old against the

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liabilities. So if you if you\'ve got a bank that

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has a bunch of bonds that they\'re holding as an asset

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and the value of those bonds dramatically drop. They\'ve lost

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a lot of money against the liabilities that

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are still where they are, right and

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So that\'s that\'s the the challenge for

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the financial.

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sector and it no surprise the financial sector

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was sort of the worst performing sector for the first quarter in large

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part because of these Dynamics

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It was a part of what happened at svb. It was a catalyst

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for the bank run that followed but the bank

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run followed because of the unique dynamics of

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svb, correct? Right and the the failure

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of silvergate was

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function of crypto and had as

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much to do with FTX the failure of FTX, which

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was a Ponzi scheme, right? So you have

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a lot of kind of very unique situations Signature Bank,

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very crypto focused right First Republic the

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very very heavily on

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the asset side writing interest only mortgages

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right in to a degree that other

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Banks didn\'t have some unique characteristics of these Banks which cause

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them to be sort of the canary in the coal mine if you will right

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and Credit Suisse just

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Has struggled for years, right? And this was

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just the nail in the coffin form. The concern is are they

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the canary in the coal mine or are they just being punished because

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the malfeasance and poor management?

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And I think the answer is a bit of both, right? So the the

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fed and other institutions got

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together and said, hey, we got a backstop this thing to keep any contagion

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from spreading and assure depositors that

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they\'re deposits are safe, even if the value of the bond the assets

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that these banks are holding have dropped down. We the the government

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are going to step in and and backstop not just

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your 250,000 but everything right that was

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the strong message that they sent and that sort of seem to

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work, right it calm markets. Thanks for still being sort of reviewed and

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I would say look there\'s there could be more to this story. There could be

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other shoes to drop in time. Right? So you\'ll continue

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to watch it. I think as in as a person

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who has money at a bank, right am I rushing to pull my money

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out? No, I\'m fairly confident that you know,

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we\'re we\'re gonna survive this right now.

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Did I say the same thing in 2008 when when I

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really thought hey, man, the whole financial system could go down.

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These Banks had collapse in Mass. I don\'t think we\'re anywhere

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near that I think banks are much healthier than than they

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were then and I think the issues that they have have to do with treasuries and

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the FED has said look, we\'re gonna step in and provide as much liquidity

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as necessary for the banks. So this becomes

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a potential issue down the down the pike, right? If

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in fact the FED has to step in and provide the

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Surplus liquidity to the treasury market,

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why might they have to do that?

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Well, if for some reason we default on the debt ceiling for instance,

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right that could be very problematic and the FED

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might have to take aggressive steps in a way that we\'ve

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never seen before to step in and try and provide Surplus liquidity

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specifically to the treasury market. That would

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be a complete roll reversal of where we\'ve been right? That\'s that\'s

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taking the quantitative tightening off the table and now we\'re back to quantities, right

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so so could things come down the bike that

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would cause a, you know, real dislocation to

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banking to markets sure it could happen

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again. Who knows right? Everybody\'s got a crystal

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ball.

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Nobody\'s usually right spot on about what\'s gonna happen, but

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it\'s a potential risk that you want. Hey, look this might happen, but

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we\'ll survive.

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Yeah, no, absolutely. And as you said before, I mean, it seems like the markets

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have.

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sort of shrugged off those headlines because we\'ve seen some pretty decent returns

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and in q1, but I think you know in

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Let\'s let\'s go back to the text docs, right? I mean that\'s what\'s really

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leading the charge here, isn\'t it?

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well

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I think there are a lot of Dynamics at play.

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But underpinning all of that is risk and reward right?

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I mean that at the end of the day, it\'s that simple

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what are the risks and what are the rewards and how much am I

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willing to pay for those rewards? And am I underestimating those

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risks? Right? So everything is sort of a function of those things

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and so I would say look in equities. The the

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tech stocks is a risk, right? There\'s there\'s certainly reward

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there\'s upside there. We\'re seeing it in terms of markets, but I think there\'s risk

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right in fixed income. There\'s potential

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risk associated with the yield curve

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and what happens with the fed and raising rates in areas,

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like financials. There\'s risks

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right associated with that. I think the key

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takeaway for that for anybody looking at

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it is

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Broad diversification not just in

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one geography not just inequities not just in fixed income

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across factors as much as you

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can broadly diversify the more robust your portfolio is to

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stand up to any of those unique risks.

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And so I would I would say.

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That that would be where I would encourage investors to

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sort of keep their heads.

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I it\'s always challenging when you have tech stocks doing

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as well as they are because they drive

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markets you want to be there. You want to participate in it.

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There\'s a a benefit socially to

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holding names that people are familiar

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with and talk about right if you think about the

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fomo experience that people have

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missing if you\'re missing out, right? Yeah, my next

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door neighbor. He\'s he\'s got Google and apple and they\'re tear on

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the cover off the ball. Never mind. What happened last year right now, I gotta you

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know, keep up with the Joneses on that water cooler. Alpha

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is what I call that. Yeah water cooler Alpha and I would just

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say hey look at the end of the day. We\'re people right if we

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were autonomous, you know Vulcans. This would just be

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economics and math and we can figure it all out reality is

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we\'re people and you got to build a portfolio you can live with right as

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our as our good friend Phil Henry says, you

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got to build a portfolio you can live with and then live with it, right? I think

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that\'s absolutely true. And so you have to take into account.

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The the investor psychology associated with this that\'s

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why I think momentum is such a

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powerful factor to build into your portfolios

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because momentum picks up

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these like when tech stocks going to run you end up

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owning things like Apple and Google and because they

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are demonstrating positive momentum, right? So you you\'re picking

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up some of that you\'re participating in that upside and I

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think as a as an investor, that\'s that would probably be enough for

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me, right? It\'s a modicum of the things that I everybody else

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is holding that that\'s working but it\'s also stuff that\'s not working

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because eventually that circles around and that becomes the thing

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that\'s worth. I don\'t have to try and time it. I\'m just holding it and I\'m

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waiting keeping my powder dry in that area so that when it

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does I benefit that that\'s how I would think about it look again

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tech stocks are

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The amazing thing about markets is they run longer than you think they should right. They\'re

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fueled by stuff. Sometimes you don\'t understand and and

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in many cases, I think the

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tech stock Dynamic is is part

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fairy dust, right and you know,

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we watched it run for a decade and drive markets, you know

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for you know, double digit returns for years because

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that happen again, of course, it could right. I\'m not

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gonna tell you again. I am cautious about the

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dynamic being set up looking very similar to

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the dynamic that we saw at you know, 2019 2020.

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Yeah. No, absolutely and you know that seems like that tech

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store keeps popping up. I started my career in the late 90s and that was the

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whole story and then I saw a lot of portfolios.

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A lot of people see their portfolios blow up but because of overexposure to

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to technology and they having a

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balanced portfolio Diversified across multiple asset classes regions geographies.

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That\'s that\'s the best course of action at the

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end of the day. So yeah, I think I go back to the the E-Trade

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baby, right if you remember the E-Trade baby so easy

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baby. Yeah that was born right on the text actually and then

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they they put the baby away for a while baby\'s back right now. I was

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a little bit older now, he\'s out of the wedding, you know hanging out

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with this guys and gals but to

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me that a Hallmark of a caution, right because

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the reality is it\'s it\'s easy but

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hard right it\'s not you know, it\'s not

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difficult to say. Hey look broadly based diversification sit still it\'s

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incredibly difficult to do. Yeah, right and that\'s where

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the real benefit of working with financial professionals comes in because everybody

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thinks they can do it everybody. They\'re gonna be Spock

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and devoid of emotion, but then the moment of truth comes

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The market drops 40% and you\'re looking at like am I gonna

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be able to retire? Right and the fear grips hold and it\'s

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2 am and you\'re thinking what do I do? Right. That\'s

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when you need to have that dispassionate third party

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to pick up the phone and say I want to sell everything. They whoa. Let\'s

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revisit right like is anything changed? Oh the

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market drop 40% right has anything in your life changed right?

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Maybe that\'s not the best course of action. Let\'s take a beat having that

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dispassionate a third party to keep you from blowing yourself up

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at that exact moment is invaluable. Yeah

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and making sure you have the right mix between stocks bonds

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and maybe even Alternatives depending on the investor and if someone

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can\'t sleep at night, it\'s not necessarily that they should take action,

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but they might be in the wrong asset allocation for

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their

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The risk, you know their ability to accept right? Yeah,

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it could be that often. What I\'ve

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experienced is when it\'s that it\'s because the client wanted

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more Tech right in their portfolios or more of what\'s

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working, right? And then when that\'s no longer working, they

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can\'t sleep at night, but cautionary Tale the other

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piece of that is we\'re surrounded by the news 24/7

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right? It\'s just and it\'s always the whatever

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bleeds leads right? And so it\'s this constant

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drum beat of kind of negative stuff. And I think that investors

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need a voice.

402
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That that they trust to say. Hey, yeah. No I

403
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saw that too. Yes, that bank went out of business. Here\'s

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why we shouldn\'t Panic here, right? Yep. We

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see all that. Here\'s why we\'re gonna stay the course. Here\'s why we\'re not gonna Panic. Here\'s

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what let\'s you know, our long-term goals are and we\'re in good

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shape to hit those. I think that sort of calming reassurance

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helps people get back to sleeping at night. Yeah. No,

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I agree Casey as always. It\'s a pleasure talking to you.

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Thanks for joining us great having you here and I want to thank all of

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our listeners and these feel free to access other podcasts

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that we have done and they can be

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accessed anywhere you get your podcast. So thanks everyone and we

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will see you next time symmetry Partners LLC.

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Listed in: Business

Q1 2023 | Putting the Quarter-in-Perspective | Part One: Market Performance

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\\xa0everyone. This is Tom Romano head of strategic relationships at

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00:00:10.700 --> 00:00:14.200
\\xa0symmetry partners and joined with me. Today is Casey Dillon

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\\xa0a long time friend of symmetry and our

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\\xa0internal communication strategist. Thank you Casey for

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\\xa0joining us today. Tom is excellent to be here with you live in

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\\xa0person. Yeah, fantastic. Fantastic So today, we\'re gonna go

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\\xa0through our q1 2023 quarter in

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\\xa0perspective. It\'s been quite the

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\\xa0interesting quarter to say the least we\'ve had

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\\xa0some volatile markets. Although

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\\xa0I\'ll be at some positive results. We\'ve seen things

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\\xa0like banking collapses in the headlines. There\'s still of

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\\xa0course the concerns about inflation. And so

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\\xa0Casey thank you for joining us to give us some perspective

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\\xa0of what\'s going on in the market. So in a

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\\xa0nutshell what happened in q1 of 2023, yeah

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\\xa0in a nutshell, I\'ll be brief if I

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\\xa0can so if you recall

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The fourth quarter of last year, right? The

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\\xa0last year was a brutal year across a number of metrics, but

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\\xa0the fourth quarter we started to see some respite

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\\xa0from that and the first two months of the fourth quarter,

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\\xa0right? We saw markets actually rebound pretty

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\\xa0significantly in October and November and much of

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\\xa0that was driven by the sense across

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\\xa0the markets Market participants that maybe

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\\xa0the Fed was done raising interest rates, maybe

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\\xa0that the inflationary pressures that

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\\xa0we had seen in the spring of 2022. We\'re

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\\xa0starting to Abate and the market is

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\\xa0a forward-looking forward pricing mechanism. And so

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In the fourth quarter, that\'s what it did. It looked forward.

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\\xa0It started to anticipate a period when the the

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\\xa0Fed was not raising interest rates and inflation would be tamed.

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\\xa0And of course what happened in December was

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\\xa0a bit of a comeuppance for

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\\xa0those Market participants who got a little bit ahead of

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\\xa0the fed and we saw a pullback in

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\\xa0December.

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And markets responding to the fact that the FED said well, no,

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\\xa0we\'re pretty set on continuing to raise rates.

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\\xa0And and we think we\'re gonna keep them higher longer.

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As we rolled into the first quarter of this year. We saw

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\\xa0a replay of a lot of those Dynamics coming into

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\\xa0January Market participants

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\\xa0again. It\'s sort of

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Determined that this was the year the Fed was

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\\xa0going to stop rate and Market participants started to

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\\xa0look forward and price as if the not only

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\\xa0with the FED stop racing rates, but they would start to pull rates

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\\xa0back by the end of the year given where people

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\\xa0reading the tea leaves assumed the

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\\xa0economy would be by mid-year.

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And so you saw a really robust Rebound in

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\\xa0January for a lot of the names that have been

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\\xa0really beat up in 2022 specifically the

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\\xa0large cab growth and Tech names and

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\\xa0so there was something of a reversion to

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\\xa0the mean in terms of those names really

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\\xa0leading the charge in January. Those are

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\\xa0the names that were most beaten up in 2022. Those are the

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\\xa0names that snap back fastest in the

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\\xa0first quarter. And so January where we

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\\xa0saw for instance the S&P down 20% for

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\\xa02022. We saw

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\\xa0a Resurgence just in the month of January the SP was up

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\\xa0like eight percent and the NASDAQ double that right just on the

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\\xa0strength of kind of those large cap Tech names and of course what happened

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\\xa0as we rolled into February the news that

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\\xa0came out on the sort of

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\\xa0economic underpinnings specifically job data for

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\\xa0January really surprised Market

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\\xa0participants because

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It was so robust. So strong it exceeded expectations. It

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\\xa0served as a really Stark reminder that we\'re

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\\xa0not out of the woods yet.

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And and it sent shock waves

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\\xa0across the market in the sense that everyone who

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\\xa0had said. Okay. Well now the FED is gonna have to wind this down all

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\\xa0the sudden the the realized maybe not

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\\xa0right not only is the fed maybe not gonna wind this

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\\xa0down because the economy is hotter than we thought it was but we potentially

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\\xa0risk sort of a flare-up of inflation

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\\xa0just as it was coming down and the FED may have

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\\xa0to get more aggressive in in tackling that and

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\\xa0so February saw sort of a revisitation of

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\\xa0those expectations that market participants

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\\xa0had and as we rolled into March then all

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\\xa0eyes were on the Senate

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\\xa0hearings with the the chairman

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\\xa0of the fed and based on his

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\\xa0comments Futures skyrocketed for an expectation

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\\xa0of a 50 basis point raise at

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\\xa0the end of March the Futures went up to like a 70% chance that

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\\xa0the Fed was gonna raise 50 basis points, and

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\\xa0of course what happened then you know days later.

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Started imploding right and that sort

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\\xa0of Royal financial markets and

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\\xa0the FED did end up raising rates. But

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\\xa0only by 25 basis points after they had worked to

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\\xa0sort of rescue. I don\'t know rescues the

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\\xa0right term but step in aggressively and calm markets

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\\xa0particularly folks who

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\\xa0had cash on deposited Banks to keep sort

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\\xa0of a contagion effect and a larger Bank Run taking place.

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\\xa0Right? So we end the first quarter with a really

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\\xa0sort of wild trip of markets shooting

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\\xa0up coming back down a lot of volatility a lot

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\\xa0of fear injected in markets in March with the

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\\xa0headlines and yet at the end of the quarter you finished up

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\\xa0pretty again pretty solidly across

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\\xa0us markets International Development markets emerging

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\\xa0markets in fixed income inequities, right?

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\\xa0We it was a it was a pretty decent first

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\\xa0quarter from a return perspective despite all of that. Yeah sure.

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\\xa0It was like it\'s a very interesting quarter.

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And I\'d like the way you put it on the things the kind of the Resurgence of

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\\xa0these tech companies that didn\'t have a great year last year, but you\'re

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\\xa0seeing asset classes such as the energy

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\\xa0sector right who had a great year last year is to

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\\xa0use your your term of aversion to the mean right? They had

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\\xa0a tough time in the first quarter, right? Yeah. Yeah and and frankly

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\\xa0prices have been coming down in oil and gas pretty

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\\xa0consistently.

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Since last fall so we did see a continuation of that. I

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\\xa0do think and likely there\'s

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\\xa0more conversation to be had

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\\xa0around this but the concern that I have or

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\\xa0or would have based on

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\\xa0how markets performed in the first quarter is that

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\\xa0it was so dominated by a

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\\xa0handful of names, right? We we\'ve seen

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\\xa0this Dynamic before where we\'re

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\\xa0sort of the top largest growth Tech

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\\xa0names sort of dominate performance

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\\xa0of the market and we and we saw that again in

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\\xa0the first quarter right? You think about Facebook alphabet

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\\xa0Apple Google Netflix, right?

139
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\\xa0All of those firms were

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\\xa0really been challenged in 2022 had a

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\\xa0nice Resurgence across the first quarter, but when

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\\xa0you dig deeper into the performance particularly here domestically what

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\\xa0you see is they were the lion

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Care of that return that we saw the market it was once again

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\\xa0the fact that these top handful of names represent twenty

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\\xa0plus percent of the overall

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\\xa0market, right? So think S&P 500 has got ostensibly 500

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\\xa0names in it the top 10 names

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\\xa0accounted for all at

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\\xa0least 80% of that return right the

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\\xa0top top five names half of it, right? So so

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00:07:43.300 --> 00:07:46.400
\\xa0again, you\'re getting a lot of that return concentrated in

153
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\\xa0these names.

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Because they\'re so large disproportionately to

155
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\\xa0the other names in those indices

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\\xa0and it lit. It\'s the rising tide lifting

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\\xa0all boats, but the concern that you

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\\xa0have with that and we saw that in 2022 when the

159
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\\xa0air goes out of the balloon to a degree. Well that

160
00:08:06.600 --> 00:08:09.500
\\xa0can be a double-edged sword. Right if those names start

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\\xa0to pull back in valuations, you

162
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\\xa0could see that turn around and become an anchor pulling

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\\xa0markets down, right and that can happen very quickly just based

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\\xa0on the fact that it\'s so concentrated in a

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\\xa0handful of names that are all sort of in the

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\\xa0same kind of economic Waters right in terms of kind of

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\\xa0this large growth Tech, you know richly valued.

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\\xa0Yeah. It sounds a lot like me, you know, I\'ve

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\\xa0had these conversations over the years even going back before 2022

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\\xa0coming out of the pandemic

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\\xa0and those tech stocks. They were the story they were leading

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\\xa0the charge and what I\'m hearing you say, is that sort

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\\xa0of the casing q1, but that double-ed

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word is just going back 2022 would

175
00:08:50.700 --> 00:08:53.700
\\xa0be an example of if you\'re not well Diversified

176
00:08:53.700 --> 00:08:56.800
\\xa0that could be a painful experience it can and I\'m

177
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\\xa0I\'m reminded of

178
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The experience that we had coming out of the tech bubble,

179
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\\xa0right? So if you think about if in fact

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\\xa0the run-up invaluations in this sort of handful of

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\\xa0techniques is analogous to what we saw in

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\\xa0the late 90s.

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They were so richly valued that when the

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\\xa0tech Bubble Burst it took a decade the Lost

185
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\\xa0decade right of just you know, subpar returns

186
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\\xa0for the valuations to get

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\\xa0back to a place where markets could then start

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\\xa0to take off again. And so the concern that

189
00:09:32.400 --> 00:09:36.200
\\xa0that one might have is valuations are

190
00:09:35.200 --> 00:09:40.400
\\xa0still Rich, right? Even after 2022 on

191
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\\xa0a Price to Book basis very

192
00:09:42.200 --> 00:09:45.600
\\xa0expensive on a price to

193
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\\xa0forward earnings basis. It\'s expensive and

194
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\\xa0so it\'s not

195
00:09:51.600 --> 00:09:54.600
\\xa0as if these are our Bargains to

196
00:09:54.600 --> 00:09:57.800
\\xa0be had in a Marketplace that that\'s discounting

197
00:09:57.800 --> 00:10:00.700
\\xa0them. They are still incredibly expensive. And so

198
00:10:00.700 --> 00:10:03.400
\\xa0anything that goes wrong right if the

199
00:10:03.400 --> 00:10:06.300
\\xa0if in fact the economy runs into turbulence at

200
00:10:06.300 --> 00:10:09.700
\\xa0some point or the expectations for growth, I mean,

201
00:10:09.700 --> 00:10:12.600
\\xa0you know, we\'re in earning season and Netflix had sort

202
00:10:12.600 --> 00:10:14.100
\\xa0of positive numbers, but

203
00:10:14.100 --> 00:10:17.700
They sort of gave lackluster guidance for next quarters

204
00:10:17.700 --> 00:10:20.400
\\xa0growth. Right? So all you need is for for Market

205
00:10:20.400 --> 00:10:23.400
\\xa0participants to to a once again sour on the

206
00:10:23.400 --> 00:10:27.400
\\xa0prospects of these names and you\'re right back to it\'s

207
00:10:26.400 --> 00:10:29.300
\\xa0too too rich like I\'m paying

208
00:10:29.300 --> 00:10:32.500
\\xa0too much today for for earnings in

209
00:10:32.500 --> 00:10:35.100
\\xa0the future that may or may not materialize right? And so

210
00:10:35.100 --> 00:10:38.700
\\xa0I\'ve got to pay less and so the price has to come down. Yeah, right. And

211
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\\xa0again, I\'m not suggesting that we have a lost decade

212
00:10:41.300 --> 00:10:44.200
\\xa0in front of us, but this potentially room to run

213
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\\xa0if markets turn and I think that\'s the the concern that

214
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\\xa0I would share with investors. That\'s what I

215
00:10:50.100 --> 00:10:53.500
\\xa0prepare them for. Hey, we\'ll take what we get. Right? We\'re happy

216
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\\xa0to get those returns, but

217
00:10:56.200 --> 00:10:59.500
This could still be valve this this, you know, we\'re in the third inning potentially

218
00:10:59.500 --> 00:11:02.900
\\xa0look or fourth ending. There\'s a lot of game left and we\'re

219
00:11:02.900 --> 00:11:05.000
\\xa0just gonna buckle up and be ready for it. Yeah, and what is

220
00:11:05.300 --> 00:11:09.200
\\xa0interesting what this quarter and you detect upon that I\'d love to get your thoughts developed International

221
00:11:08.200 --> 00:11:11.300
\\xa0to having a very good quarter.

222
00:11:11.300 --> 00:11:14.400
\\xa0I mean when we saw these large Tech

223
00:11:14.400 --> 00:11:17.600
\\xa0names and in the past when they had their run prior to 2022, it

224
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\\xa0was a pretty much us dominated run up.

225
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Give us some commentary on what we\'re saying in the developed International

226
00:11:24.500 --> 00:11:27.100
\\xa0Space. Yeah, I think some of

227
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\\xa0it is the Resurgence of the

228
00:11:32.900 --> 00:11:35.700
strength of the sort

229
00:11:35.700 --> 00:11:38.200
\\xa0of the the companies that are there that have

230
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\\xa0sort of suffered through a decade of kind of sub-par performance

231
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\\xa0and they were in a much stronger financial

232
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\\xa0position. Then they

233
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\\xa0were for instance going into the global financial crisis, right and they

234
00:11:50.300 --> 00:11:53.700
\\xa0weren\'t super expensive. Right?

235
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\\xa0So from a perspective of they were kind of relatively cheaply

236
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\\xa0priced compared to

237
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\\xa0US stocks. And so if we look at just the performance

238
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\\xa0the they don\'t have to have that much right

239
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\\xa0surprise upside.

240
00:12:10.300 --> 00:12:14.300
To have nice performance right across the board or

241
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\\xa0relatively decent performs.

242
00:12:16.700 --> 00:12:19.800
So I think people were pleasantly surprised by

243
00:12:19.800 --> 00:12:23.500
\\xa0some of the financial resilience in

244
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\\xa0Europe particularly coming out of

245
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\\xa0the effects of the the Russian Ukraine

246
00:12:28.900 --> 00:12:31.600
\\xa0conflict and looking at the impact that

247
00:12:31.600 --> 00:12:34.500
\\xa0for instance the the price of gas price

248
00:12:34.500 --> 00:12:37.100
\\xa0of oil I had in places like Germany and the fact

249
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\\xa0that they sort of got through that not unscathed but

250
00:12:40.300 --> 00:12:43.700
\\xa0you know, the the avoided the apocalypse

251
00:12:43.700 --> 00:12:47.000
\\xa0right the gasoline apocalypse over the course of the

252
00:12:46.600 --> 00:12:49.300
\\xa0winter right that it was relatively mild. So

253
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\\xa0I think that from that perspective markets sort

254
00:12:52.600 --> 00:12:55.600
\\xa0of said rewarded International developed

255
00:12:55.600 --> 00:12:58.900
\\xa0businesses with valuations that

256
00:12:58.900 --> 00:13:01.400
\\xa0seemed a little more reasonable than the

257
00:13:01.400 --> 00:13:04.000
\\xa0valuations in the US. Yeah, that makes a lot of sense and thank you

258
00:13:04.200 --> 00:13:07.900
\\xa0for that. Yeah, and and I would call I would suggest that

259
00:13:07.900 --> 00:13:10.200
\\xa0Emerging Markets are in a similar but

260
00:13:10.200 --> 00:13:14.300
\\xa0different position right again a little more financially

261
00:13:13.300 --> 00:13:16.300
\\xa0robust in terms of the underpinnings.

262
00:13:17.300 --> 00:13:20.100
Of those companies relative to where we\'ve seen Cycles where people

263
00:13:20.100 --> 00:13:23.100
\\xa0are risk off and and sort of beating down

264
00:13:23.100 --> 00:13:26.200
\\xa0in price. I think anytime you have a lot of volatility people are

265
00:13:26.200 --> 00:13:29.700
\\xa0hesitant to take a bunch of risk. So Emerging Markets

266
00:13:29.700 --> 00:13:32.800
\\xa0could be a little more volatile as you would expect but

267
00:13:32.800 --> 00:13:35.100
\\xa0I think from evaluation standpoint there\'s room to run

268
00:13:35.100 --> 00:13:38.600
\\xa0as well over time relative to the US let\'s let\'s

269
00:13:38.600 --> 00:13:41.300
\\xa0look at the other side of the coin and talk a

270
00:13:41.300 --> 00:13:44.500
\\xa0little bit about bonds because that\'s been quite the Hot Topic lately. We\'ve been

271
00:13:44.500 --> 00:13:47.900
\\xa0getting a lot of inquiries from advisors and investors alike

272
00:13:47.900 --> 00:13:50.700
\\xa0about the fixed income market. So give us

273
00:13:50.700 --> 00:13:52.300
\\xa0a little perspective of what\'s happening in.

274
00:13:53.500 --> 00:13:57.300
Global fixed income right? Well, if you recall 2022

275
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\\xa0was a historically bad year

276
00:13:59.500 --> 00:14:02.900
\\xa0for Boston certainly, right as as fed as

277
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\\xa0the FED raised interest rates are not just the FED but central banks

278
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\\xa0essentially around the world except for the Asian

279
00:14:08.500 --> 00:14:11.100
\\xa0China and Japan those central banks not quite

280
00:14:11.100 --> 00:14:14.600
\\xa0as much but globally central banks at the

281
00:14:14.600 --> 00:14:17.600
\\xa0impact of course of challenging the yield right

282
00:14:17.600 --> 00:14:20.900
\\xa0and as we know yield in price or are sort of inverse Lee

283
00:14:20.900 --> 00:14:23.300
\\xa0related and so as yield was pushed up by raising

284
00:14:23.300 --> 00:14:26.900
\\xa0rates price came down and and it had a pretty dramatic

285
00:14:26.900 --> 00:14:29.900
\\xa0impact across the yield curve

286
00:14:29.900 --> 00:14:32.400
\\xa0and that was globally as well the United

287
00:14:32.400 --> 00:14:32.400
\\xa0States.

288
00:14:33.200 --> 00:14:36.400
2022 pretty much a very bad. No good year for

289
00:14:36.400 --> 00:14:39.400
\\xa0Bond holders rolling into the first quarter

290
00:14:39.400 --> 00:14:42.400
\\xa0a lot of those same sort of macro dynamics that

291
00:14:42.400 --> 00:14:45.400
\\xa0we talked about with equities was

292
00:14:45.400 --> 00:14:48.500
\\xa0true to fix income as well the expectation the bond

293
00:14:48.500 --> 00:14:51.800
\\xa0market pricing that they think the FED will essentially

294
00:14:51.800 --> 00:14:54.600
\\xa0be done at some point this year raising rates

295
00:14:54.600 --> 00:14:58.100
\\xa0had the impact of markets rallying

296
00:14:57.100 --> 00:15:01.300
\\xa0to a degree and then of course when there

297
00:15:00.300 --> 00:15:04.100
\\xa0was volatility injected because of banking issues

298
00:15:03.100 --> 00:15:07.300
\\xa0you continued to see a pullback

299
00:15:06.300 --> 00:15:09.700
\\xa0on the the yield

300
00:15:09.700 --> 00:15:13.000
\\xa0right? So at at some points we saw for instance

301
00:15:12.200 --> 00:15:15.400
\\xa0the the 10 year get up over four and we

302
00:15:15.400 --> 00:15:18.500
\\xa0saw a pullback as yields come down then of course prices go

303
00:15:18.500 --> 00:15:21.400
\\xa0up. And so you saw a nice robust kind of response over

304
00:15:21.400 --> 00:15:24.500
\\xa0the first quarter of prices coming up for bonds that had

305
00:15:24.500 --> 00:15:27.500
\\xa0the impact and that was true for treasuries and corporates

306
00:15:27.500 --> 00:15:30.400
\\xa0and international bonds, right? So across the

307
00:15:30.400 --> 00:15:32.900
\\xa0Spectrum you had sort of a nice performance.

308
00:15:33.300 --> 00:15:37.100
For bonds for the first quarter. And again, it\'s unusual

309
00:15:36.100 --> 00:15:39.400
\\xa0for fixed income and Equity to look and

310
00:15:39.400 --> 00:15:42.100
\\xa0behave very similarly. That was one of

311
00:15:42.100 --> 00:15:45.700
\\xa0the things that was so unusual about 2022, but there\'s still

312
00:15:45.700 --> 00:15:48.500
\\xa0sort of Behaving the same way based on the same Outlook

313
00:15:48.500 --> 00:15:51.500
\\xa0that at some point interest rates stop going up

314
00:15:51.500 --> 00:15:54.500
\\xa0or stop getting ratcheted up by central banks.

315
00:15:54.500 --> 00:15:57.100
\\xa0And so that Dynamic is is kind of

316
00:15:57.100 --> 00:16:00.700
\\xa0floating all the boats to this degree and so

317
00:16:00.700 --> 00:16:03.500
\\xa0fixed income has had a robust first quarter.

318
00:16:04.400 --> 00:16:07.700
Remains to be seen how the rest of the year plays

319
00:16:07.700 --> 00:16:10.400
\\xa0out and and you know, frankly we

320
00:16:10.400 --> 00:16:13.200
\\xa0continued to see the a deep

321
00:16:13.200 --> 00:16:16.200
\\xa0inversion in the yield curve, especially at the

322
00:16:16.200 --> 00:16:19.100
\\xa0very shortest end of the O curve relative to the

323
00:16:19.100 --> 00:16:22.700
\\xa010 year. And as you know that has historically sort

324
00:16:22.700 --> 00:16:25.300
\\xa0of been a warning sign of

325
00:16:25.300 --> 00:16:28.600
\\xa0potential economic stress recessions right

326
00:16:28.600 --> 00:16:32.100
\\xa0as an indicator and it has remained it

327
00:16:31.100 --> 00:16:34.100
\\xa0inverted for some time now

328
00:16:34.100 --> 00:16:37.900
\\xa0and that inversion has only gotten deeper on the shortest end. So,

329
00:16:37.900 --> 00:16:40.200
\\xa0you know again you would want to continue

330
00:16:40.200 --> 00:16:43.700
\\xa0to watch that and be cognizant of it. I think the takeaway

331
00:16:43.700 --> 00:16:46.500
\\xa0from this is much like with equities. It\'s best

332
00:16:46.500 --> 00:16:49.200
\\xa0to be sort of broad based Diversified. You never

333
00:16:49.200 --> 00:16:53.000
\\xa0know what part of the Yoke curve is gonna move relative to this and

334
00:16:52.900 --> 00:16:56.800
\\xa0it\'s good to have exposure

335
00:16:55.800 --> 00:16:58.600
\\xa0not just us treasuries, but

336
00:16:58.600 --> 00:17:01.200
\\xa0the corporates and not just us bonds, but the international

337
00:17:01.200 --> 00:17:04.300
\\xa0bonds that there are benefits built into the pricing of all

338
00:17:04.900 --> 00:17:08.400
And as we start to see a decoupling of Central

339
00:17:07.400 --> 00:17:10.400
\\xa0Bank activity, yes, they\'ve been

340
00:17:10.400 --> 00:17:13.700
\\xa0acting pretty much in concert, but at some point central banks

341
00:17:13.700 --> 00:17:16.800
\\xa0start to peel off right and they get back to focusing on

342
00:17:16.800 --> 00:17:19.100
\\xa0the handling kind of

343
00:17:19.100 --> 00:17:22.300
\\xa0their domestic concerns. And as they do that it will

344
00:17:22.300 --> 00:17:25.600
\\xa0have varying diversification impacts for bonds

345
00:17:25.600 --> 00:17:28.500
\\xa0around the globe the way stocks and bonds behaves

346
00:17:28.500 --> 00:17:31.300
\\xa0in 2022 with similar and then into this quarter. We\'re

347
00:17:31.300 --> 00:17:34.500
\\xa0seeing some decent returns globally across those two

348
00:17:34.500 --> 00:17:37.800
\\xa0macro asset classes. We\'re seeing

349
00:17:37.800 --> 00:17:40.300
\\xa0some of a mixed bag that last Factor investors

350
00:17:40.300 --> 00:17:43.400
\\xa0from a factor perspective, right? But let\'s

351
00:17:43.400 --> 00:17:46.200
\\xa0shift a little bit and talk about factors for a moment.

352
00:17:46.200 --> 00:17:49.300
\\xa0We\'re a factor investors are listeners The Avengers that

353
00:17:49.300 --> 00:17:52.300
\\xa0we work with our have clients invested in

354
00:17:52.300 --> 00:17:55.500
\\xa0these Factor portfolios. What did we see from a factor standpoint

355
00:17:55.500 --> 00:17:58.800
\\xa0in the first quarter of 2023 if

356
00:17:58.800 --> 00:18:01.400
\\xa0you think about the factor of value, it\'s just the the

357
00:18:01.400 --> 00:18:04.300
\\xa0cheaper stocks outperform the more expensive stocks over time and as

358
00:18:04.300 --> 00:18:04.500
\\xa0you know,

359
00:18:04.800 --> 00:18:07.800
We had a long run where that wasn\'t true. Right we\'re

360
00:18:07.800 --> 00:18:10.300
\\xa0growth stocks were just outperforming value to the

361
00:18:10.300 --> 00:18:13.200
\\xa0point that everybody was sort of Naval gazing wondering his value

362
00:18:13.200 --> 00:18:16.800
\\xa0dead. Does this even make sense anymore? And and what

363
00:18:16.800 --> 00:18:19.400
\\xa0we sort of looking at it determined was

364
00:18:19.400 --> 00:18:22.400
\\xa0no actually values kind of in line with what it\'s always done. It\'s

365
00:18:22.400 --> 00:18:25.300
\\xa0growth. That\'s so unusual. Yeah, right and that we\'re

366
00:18:25.300 --> 00:18:28.300
\\xa0back to the story about the large tech stocks and get over evaluation. Right?

367
00:18:28.300 --> 00:18:31.900
\\xa0And so last year was a great year for Value, right? Even

368
00:18:31.900 --> 00:18:34.500
\\xa0though it was down right value outperform growth

369
00:18:34.500 --> 00:18:37.800
\\xa0by a good 20% Oh, yeah, absolutely and it

370
00:18:37.800 --> 00:18:40.700
\\xa0was sort of that Snapback to recognition of

371
00:18:40.700 --> 00:18:43.300
\\xa0hey one of my paying for right and and these things

372
00:18:43.300 --> 00:18:46.200
\\xa0have gotten incredibly overvalued on the

373
00:18:46.200 --> 00:18:46.600
\\xa0growth side.

374
00:18:47.300 --> 00:18:50.500
And so it shouldn\'t come as a surprise then if there\'s a reversal of

375
00:18:50.500 --> 00:18:53.600
\\xa0that Dynamic that value might underperform growth

376
00:18:53.600 --> 00:18:56.500
\\xa0over the first quarter. And of course, that\'s what we observed right

377
00:18:56.500 --> 00:18:59.300
\\xa0that value underperformed growth. It was

378
00:18:59.300 --> 00:19:02.300
\\xa0those large kind of growthy names that took off and and so that

379
00:19:02.300 --> 00:19:05.700
\\xa0that factor shows up and demonstrates

380
00:19:05.700 --> 00:19:08.300
\\xa0that thighs right. So again kind of

381
00:19:08.300 --> 00:19:11.600
\\xa0the academic research that smaller cap

382
00:19:11.600 --> 00:19:14.400
\\xa0names tend to outperform larger cab

383
00:19:14.400 --> 00:19:17.800
\\xa0names over time rolling into the first quarter large

384
00:19:17.800 --> 00:19:20.500
\\xa0caps outperform small caps, right again being led

385
00:19:20.500 --> 00:19:23.500
\\xa0by that large growthy and so small caps

386
00:19:23.500 --> 00:19:26.800
\\xa0tended to underperform in general. What\'s interesting

387
00:19:26.800 --> 00:19:29.300
\\xa0is across factor is

388
00:19:29.300 --> 00:19:32.300
\\xa0one of the reasons you want to hold small caps isn\'t necessarily the size

389
00:19:32.300 --> 00:19:35.300
\\xa0Factor premium associated with that because

390
00:19:35.300 --> 00:19:38.700
\\xa0that\'s come under some scrutiny of

391
00:19:38.700 --> 00:19:41.400
\\xa0Lee as academics kind of look at that. Say what

392
00:19:41.400 --> 00:19:42.200
\\xa0do we actually getting here?

393
00:19:42.900 --> 00:19:46.000
But what really expresses itself

394
00:19:45.300 --> 00:19:48.500
\\xa0in small camp names or all the other factors, right? So

395
00:19:48.500 --> 00:19:51.100
\\xa0the reason you\'d want to hold a small cap is not just

396
00:19:51.100 --> 00:19:54.200
\\xa0because you get a benefit versus large caps, but because you get

397
00:19:54.200 --> 00:19:57.600
\\xa0a really strong value signal a really strong momentum really

398
00:19:57.600 --> 00:20:00.200
\\xa0strong quality, right all of these things. And so if we

399
00:20:00.200 --> 00:20:03.300
\\xa0look at small caps the performance of small caps for

400
00:20:03.300 --> 00:20:06.700
\\xa0the first quarter, you actually got to really strong quality signal

401
00:20:06.700 --> 00:20:09.700
\\xa0in small caps. So again a reason

402
00:20:09.700 --> 00:20:12.400
\\xa0why you want to have a multiple exposures for your

403
00:20:12.400 --> 00:20:15.400
\\xa0factors not just pick any one of these right so small

404
00:20:15.400 --> 00:20:18.400
\\xa0caps under form large caps, but quality did really well inside

405
00:20:18.400 --> 00:20:21.300
\\xa0small camps that makes up the next category is

406
00:20:21.300 --> 00:20:24.400
\\xa0momentum. And what\'s interesting about markets that are sort of

407
00:20:24.400 --> 00:20:27.500
\\xa0whipsawing one way or the other that momentum tends to

408
00:20:27.500 --> 00:20:30.400
\\xa0have a tougher time in markets where the signal is really

409
00:20:30.400 --> 00:20:33.100
\\xa0hard to pick up where there\'s a lot of whipsawing effect up and down on the

410
00:20:33.100 --> 00:20:37.000
\\xa0other way momentum tends to kind of get whipped around with that.

411
00:20:37.700 --> 00:20:40.200
Eventually when markets start to pick

412
00:20:40.200 --> 00:20:43.300
\\xa0up Trend whether that\'s down for a significant period of

413
00:20:43.300 --> 00:20:46.500
\\xa0time like in 2022 momentum does well or up right

414
00:20:46.500 --> 00:20:50.000
\\xa0for a significant period of time and so you

415
00:20:49.200 --> 00:20:52.400
\\xa0would expect momentum to kind

416
00:20:52.400 --> 00:20:55.400
\\xa0of settle down as markets kind of settle down

417
00:20:55.400 --> 00:20:59.600
\\xa0and we see less whipsawing and more directionality. However, and

418
00:20:59.600 --> 00:21:03.300
\\xa0I mentioned it earlier with small caps quality this idea

419
00:21:02.300 --> 00:21:05.000
\\xa0that there may be

420
00:21:05.200 --> 00:21:08.800
\\xa0a flight to Quality in times when the

421
00:21:08.800 --> 00:21:11.100
\\xa0there\'s a lot of volatility. Well one of the

422
00:21:11.100 --> 00:21:14.800
\\xa0reasons you see that is because higher quality earnings tend to

423
00:21:14.800 --> 00:21:17.400
\\xa0hold up better in downturns. They have a premium

424
00:21:17.400 --> 00:21:21.300
\\xa0associated with them and we saw that very clearly quality

425
00:21:20.300 --> 00:21:23.200
\\xa0was one of the areas that outperformed the market

426
00:21:23.200 --> 00:21:26.200
\\xa0over the first quarter and that was true not just in the

427
00:21:26.200 --> 00:21:30.200
\\xa0US but internationally as well interestingly in

428
00:21:29.200 --> 00:21:33.500
\\xa0Emerging Markets value quality

429
00:21:32.500 --> 00:21:35.600
\\xa0and low volatility did quite

430
00:21:35.600 --> 00:21:37.600
\\xa0well so value was still doing well in emerging.

431
00:21:37.700 --> 00:21:40.700
Markets again a reason why you\'d want to diversify

432
00:21:40.700 --> 00:21:43.400
\\xa0your Factor exposures not just in the US but

433
00:21:43.400 --> 00:21:46.900
\\xa0internationally as well and minimum volatility was

434
00:21:46.900 --> 00:21:49.800
\\xa0a contributor in us but lagged Market

435
00:21:49.800 --> 00:21:52.500
\\xa0beta on the whole a broadly

436
00:21:52.500 --> 00:21:55.900
\\xa0Diversified Factor exposure was I\'d

437
00:21:55.900 --> 00:21:58.700
\\xa0say depending on what your tilts are helpful on

438
00:21:58.700 --> 00:22:02.200
\\xa0the downside when Market was volatile, but lagged

439
00:22:01.200 --> 00:22:04.900
\\xa0Market beta to a degree for the

440
00:22:04.900 --> 00:22:07.500
\\xa0first quarter where it outperformed in

441
00:22:07.500 --> 00:22:10.400
\\xa02022. So again factors are a

442
00:22:10.400 --> 00:22:13.500
\\xa0long term investment. You wouldn\'t do it on based

443
00:22:13.500 --> 00:22:16.700
\\xa0on one quarter, but we we watch the horse race, right? Yeah.

444
00:22:16.700 --> 00:22:19.200
\\xa0Absolutely and I think a point that you

445
00:22:19.200 --> 00:22:22.400
\\xa0you said that really resonated with me is the notion of how these factors work

446
00:22:22.400 --> 00:22:25.800
\\xa0together right size and quality you mentioned

447
00:22:25.800 --> 00:22:29.200
\\xa0and so having a diverse portfolio

448
00:22:28.200 --> 00:22:30.700
\\xa0of integrated factors.

449
00:22:31.500 --> 00:22:32.800
maintaining that for the long term

450
00:22:34.200 --> 00:22:37.400
Should reward you over the long term. Yeah, and that\'s the

451
00:22:37.400 --> 00:22:40.800
\\xa0expectation. There are lots of factors out

452
00:22:40.800 --> 00:22:43.800
\\xa0there that have been identified in the academic literature when you

453
00:22:43.800 --> 00:22:46.400
\\xa0selectively go out and pick a handful of

454
00:22:46.400 --> 00:22:49.500
\\xa0those factors. The expectation is every single

455
00:22:49.500 --> 00:22:52.500
\\xa0one of those is going to be a positive contributor to

456
00:22:52.500 --> 00:22:55.400
\\xa0your portfolio over time, right you you

457
00:22:55.400 --> 00:22:58.300
\\xa0wouldn\'t necessarily pick one that you thought. Well, it\'s gonna be a loser but we\'re gonna hold on

458
00:22:58.300 --> 00:23:01.100
\\xa0to it, right you\'re picking all of these different factors of the

459
00:23:01.100 --> 00:23:04.700
\\xa0expectation that each one of those is going to be a

460
00:23:04.700 --> 00:23:07.300
\\xa0positive contributor over a period of time when you

461
00:23:07.300 --> 00:23:10.400
\\xa0weave them together you sort of iron out

462
00:23:10.400 --> 00:23:13.400
\\xa0the highs and lows of any one particular factor and

463
00:23:13.400 --> 00:23:17.100
\\xa0you get that very nice steady stream of

464
00:23:16.100 --> 00:23:19.500
\\xa0return into your

465
00:23:19.500 --> 00:23:22.300
\\xa0portfolio. That\'s generated by those Factor exposures. Yeah.

466
00:23:22.300 --> 00:23:25.400
\\xa0It\'s the old the old adage we\'re going for singles and doubles

467
00:23:25.400 --> 00:23:28.200
\\xa0not home runs, right? Yeah. Yeah exactly. So let\'s

468
00:23:28.200 --> 00:23:31.200
\\xa0talk a little bit about factors and fixed income and then

469
00:23:31.200 --> 00:23:34.100
\\xa0we can take a look at some of the the factors overseas.

470
00:23:34.100 --> 00:23:37.800
As well, but I do want to spend some time on some of

471
00:23:37.800 --> 00:23:40.100
\\xa0the headlines. So why don\'t we

472
00:23:40.100 --> 00:23:44.000
\\xa0talk a little bit about us fixed income factors? Sure. So

473
00:23:43.600 --> 00:23:46.200
\\xa0as you know, right fat factors are

474
00:23:46.200 --> 00:23:49.800
\\xa0not an equity only thing. In fact, we see factors across

475
00:23:49.800 --> 00:23:53.600
\\xa0all different kinds of assets fixed income Commodities

476
00:23:52.600 --> 00:23:55.400
\\xa0housing real

477
00:23:55.400 --> 00:23:58.400
\\xa0estate, right all these I the concept of value for

478
00:23:58.400 --> 00:24:01.500
\\xa0instance and the concept of momentum right anything that has a price associated

479
00:24:01.500 --> 00:24:04.400
\\xa0with it stores can demonstrate these sort of

480
00:24:04.400 --> 00:24:07.200
\\xa0factors. And that\'s true. In fact fixed income the way we

481
00:24:07.200 --> 00:24:10.400
\\xa0think about factors and fixed incomes specifically is is kind

482
00:24:10.400 --> 00:24:13.400
\\xa0of interest rate risk, which is time, right? So think

483
00:24:13.400 --> 00:24:17.300
\\xa0about what we talked about with the yield curve inversion

484
00:24:16.300 --> 00:24:19.400
\\xa0and what was going on on the short end versus the

485
00:24:19.400 --> 00:24:23.500
\\xa0long end what we\'ve observed in the

486
00:24:23.500 --> 00:24:26.200
\\xa0past. Let\'s call year was a really

487
00:24:26.200 --> 00:24:29.800
\\xa0strong interest rate risk lack

488
00:24:29.800 --> 00:24:32.600
\\xa0of benefit that you got for sort of being paid

489
00:24:32.600 --> 00:24:34.000
\\xa0over time, right?

490
00:24:34.100 --> 00:24:38.300
And in theory, right you should get paid to hold

491
00:24:37.300 --> 00:24:41.100
\\xa0over time because there\'s less certainty

492
00:24:40.100 --> 00:24:43.500
\\xa0about what the future holds so you demand a

493
00:24:43.500 --> 00:24:46.800
\\xa0premium to hold something over time to lend over time. And

494
00:24:46.800 --> 00:24:49.200
\\xa0so when you have the short end

495
00:24:49.200 --> 00:24:52.500
\\xa0of the curve come up that tends to impact that interest

496
00:24:52.500 --> 00:24:55.500
\\xa0rate sets that risk that sensitivity because you\'re

497
00:24:55.500 --> 00:24:58.800
\\xa0not getting paid over time. You\'re getting paid actually on the

498
00:24:58.800 --> 00:25:01.700
\\xa0the shorter end potentially. So when you

499
00:25:01.700 --> 00:25:04.800
\\xa0see a pullback of rates,

500
00:25:04.800 --> 00:25:07.700
\\xa0right and price is going up you\'re seeing

501
00:25:07.700 --> 00:25:10.800
\\xa0that benefit playing out through the first quarter as well credit risk

502
00:25:10.800 --> 00:25:13.300
\\xa0is just the difference the buildup over

503
00:25:13.300 --> 00:25:16.300
\\xa0the risk free rate treasuries to account

504
00:25:16.300 --> 00:25:19.200
\\xa0for hey, you know a corporation has more risk than a government

505
00:25:19.200 --> 00:25:22.500
\\xa0and I should be paid that difference. And so you\'re investing

506
00:25:22.500 --> 00:25:25.200
\\xa0up and down the various yield curves that

507
00:25:25.200 --> 00:25:28.900
\\xa0build up on that and in this case credit risk really as

508
00:25:28.900 --> 00:25:31.900
\\xa0a factor wasn\'t a very solid contributor

509
00:25:31.900 --> 00:25:33.200
\\xa0for the first quarter slightly positive.

510
00:25:34.100 --> 00:25:37.200
The the show really has been frankly for the

511
00:25:37.200 --> 00:25:40.500
\\xa0past 18 months were interest rate risk is in

512
00:25:40.500 --> 00:25:43.500
\\xa0terms of factor Premia in your portfolios.

513
00:25:43.500 --> 00:25:46.500
\\xa0And then Market is is again just Market

514
00:25:46.500 --> 00:25:49.800
\\xa0beta which is a buildup of all these different factors expressing themselves.

515
00:25:49.800 --> 00:25:53.200
\\xa0So on the whole positive Bond performance

516
00:25:52.200 --> 00:25:55.500
\\xa0being driven by changes to

517
00:25:55.500 --> 00:25:59.500
\\xa0the the yield curve in many cases and some

518
00:25:58.500 --> 00:26:01.400
\\xa0expectation that Bond markets are looking ahead

519
00:26:01.400 --> 00:26:04.600
\\xa0and pricing for a cessation of rate raises

520
00:26:04.600 --> 00:26:07.500
\\xa0by central banks. So so my expectation would

521
00:26:07.500 --> 00:26:10.200
\\xa0be for for fixed income investors again much like

522
00:26:10.200 --> 00:26:13.400
\\xa0Equity potentially more volatility here, right? The

523
00:26:13.400 --> 00:26:16.400
\\xa0the rodeo is not over the big bull riding

524
00:26:16.400 --> 00:26:18.200
\\xa0could yet be to come so

525
00:26:19.200 --> 00:26:22.400
You know stay patient the the benefit here is

526
00:26:22.400 --> 00:26:25.400
\\xa0there\'s return associated with fixed income

527
00:26:25.400 --> 00:26:29.500
\\xa0to a degree. We haven\'t seen in 15 years. And so

528
00:26:29.500 --> 00:26:32.700
\\xa0let this play out. And again, these Factor

529
00:26:32.700 --> 00:26:35.600
\\xa0exposures are the expectation is over time. These are

530
00:26:35.600 --> 00:26:38.100
\\xa0going to be a additive to the returns that you

531
00:26:38.100 --> 00:26:40.700
\\xa0get from the bond market you had mentioned this in some of your previous comments.

532
00:26:42.500 --> 00:26:45.400
Factors perform differently geographically too

533
00:26:45.400 --> 00:26:48.500
\\xa0right like value in the US might give you a different return

534
00:26:48.500 --> 00:26:51.300
\\xa0versus value and the international develop during the

535
00:26:51.300 --> 00:26:54.500
\\xa0Emerging Markets Arenas. So I think there\'s diversification story

536
00:26:54.500 --> 00:26:57.600
\\xa0there. Can you comment on that, please? Yeah. Well, yes, of

537
00:26:57.600 --> 00:27:00.100
\\xa0course and and I sort of made a comment

538
00:27:00.100 --> 00:27:01.300
\\xa0about as

539
00:27:02.300 --> 00:27:05.500
central banks become decoupled and start to operate a

540
00:27:05.500 --> 00:27:09.000
\\xa0little more independently that it has an impact on the

541
00:27:11.300 --> 00:27:14.600
local economies in all of these different markets as

542
00:27:14.600 --> 00:27:17.200
\\xa0an impact on their currencies. And so

543
00:27:17.200 --> 00:27:20.600
\\xa0when you think about fixed income the benefit that you get from

544
00:27:20.600 --> 00:27:23.300
\\xa0not only where you hold on

545
00:27:23.300 --> 00:27:26.500
\\xa0the curve and and the amount of credit that you\'re willing but that

546
00:27:26.500 --> 00:27:29.900
\\xa0you\'re going to diversify the various curves

547
00:27:29.900 --> 00:27:32.300
\\xa0that you hold and the where you

548
00:27:32.300 --> 00:27:35.900
\\xa0are on that across geographies and

549
00:27:35.900 --> 00:27:38.200
\\xa0then take into account the impact that

550
00:27:38.200 --> 00:27:42.200
\\xa0currencies might have right and so we know for equities

551
00:27:41.200 --> 00:27:45.100
\\xa0the the volatility signature

552
00:27:44.100 --> 00:27:47.100
\\xa0of equity is is so robust that

553
00:27:47.100 --> 00:27:50.600
\\xa0you\'re you tend to be willing to hold the volatility of

554
00:27:50.600 --> 00:27:53.900
\\xa0fluctuations and currency in in

555
00:27:53.900 --> 00:27:56.000
\\xa0fixed income. It tends not to pay you to do

556
00:27:56.200 --> 00:27:59.400
\\xa0that. And so I know for instance

557
00:27:59.400 --> 00:28:03.100
\\xa0that here at Cemetery you folks hedge back

558
00:28:03.100 --> 00:28:07.000
\\xa0to the dollar sure and that takes some of that volatility out,

559
00:28:06.600 --> 00:28:09.400
\\xa0right? And again, I think that\'s a benefit

560
00:28:09.400 --> 00:28:11.000
\\xa0for Factor investors because what you\'re

561
00:28:11.200 --> 00:28:14.300
Is less volatility associated with fluctuations currency and

562
00:28:14.300 --> 00:28:18.000
\\xa0you\'re getting maybe stronger signal from these these

563
00:28:17.200 --> 00:28:20.900
\\xa0different sources of return across

564
00:28:20.900 --> 00:28:23.400
\\xa0different markets and they\'re all going to be hitting at

565
00:28:23.400 --> 00:28:26.700
\\xa0different times. Once the sort of the global economy

566
00:28:26.700 --> 00:28:29.200
\\xa0comes unpegged to what\'s going

567
00:28:29.200 --> 00:28:33.100
\\xa0on fighting inflation. Yeah until I think it\'s a perfect diversification story

568
00:28:32.100 --> 00:28:33.300
\\xa0and

569
00:28:34.100 --> 00:28:37.600
we have a saying here that the only free lunch and investing is diversification. And

570
00:28:37.600 --> 00:28:40.900
\\xa0so we tout that investor should be embracing that Casey.

571
00:28:40.900 --> 00:28:43.400
\\xa0Thank you so much for joining us that concludes part one.

572
00:28:43.400 --> 00:28:46.600
\\xa0Please feel free to access other podcasts

573
00:28:46.600 --> 00:28:49.000
\\xa0that we have done and they can be

574
00:28:49.400 --> 00:28:52.600
\\xa0accessed anywhere you get your podcast. So please join Casey and

575
00:28:52.600 --> 00:28:56.000
\\xa0I for part two and our next series symmetry Partners

576
00:28:55.700 --> 00:28:58.800
\\xa0LLC is an investment advisor firm

577
00:28:58.800 --> 00:29:01.700
\\xa0registered with the Securities and Exchange Commission The

578
00:29:01.700 --> 00:29:04.600
\\xa0Firm only transacts business in states where it

579
00:29:04.600 --> 00:29:07.500
\\xa0is properly registered or excluded or

580
00:29:07.500 --> 00:29:11.200
\\xa0Exempted from registration requirements registration of

581
00:29:10.200 --> 00:29:13.600
\\xa0an investment advisor does not imply any

582
00:29:13.600 --> 00:29:16.400
\\xa0specific level of skill or training and does

583
00:29:16.400 --> 00:29:19.100
\\xa0not constitute an endorsement of the firm by the

584
00:29:19.100 --> 00:29:22.300
\\xa0commission. No one should assume that future performance of any

585
00:29:22.300 --> 00:29:26.300
\\xa0specific investment investment strategy product or

586
00:29:25.300 --> 00:29:28.300
\\xa0non-investment related content made

587
00:29:28.300 --> 00:29:31.800
\\xa0reference to directly or indirectly in this material will be

588
00:29:31.800 --> 00:29:32.400
\\xa0profitable.

589
00:29:33.400 --> 00:29:36.500
As with any investment strategy there is the possibility of

590
00:29:36.500 --> 00:29:39.500
\\xa0profitability as well as loss due

591
00:29:39.500 --> 00:29:42.300
\\xa0to various factors including changing market

592
00:29:42.300 --> 00:29:44.700
\\xa0conditions and/or applicable laws.

593
00:29:45.300 --> 00:29:48.900
The content may not be reflective of current opinions or

594
00:29:48.900 --> 00:29:51.600
\\xa0positions. Please note the material

595
00:29:51.600 --> 00:29:54.300
\\xa0is provided for educational and background use only

596
00:29:54.300 --> 00:29:58.000
\\xa0moreover. You should not assume that any discussion or information

597
00:29:57.800 --> 00:30:00.800
\\xa0contained in this material Services the

598
00:30:00.800 --> 00:30:04.400
\\xa0receipt of or as a substitute for personalized

599
00:30:03.400 --> 00:30:05.700
\\xa0investment advice.

\\xa0

Listed in: Business

Choosing the Right Financial Advisor | Part 2: Which Professional Credentials are Most Important to You?

1
00:00:07.500 --> 00:00:10.500
\\xa0to part 2 of choosing the right financial advisor. This

2
00:00:10.500 --> 00:00:13.100
\\xa0is Tom Romano with unfiltered finance and I\'m back

3
00:00:13.100 --> 00:00:16.200
\\xa0here with my guests. Mike store senior Regional director at

4
00:00:16.200 --> 00:00:20.000
\\xa0symmetry partners and Peter laponis financial advisor

5
00:00:19.200 --> 00:00:22.200
\\xa0and cfp at Apollo wealth. Thank you for joining us

6
00:00:22.200 --> 00:00:25.400
\\xa0gentlemen, so go Peter certified financial

7
00:00:25.400 --> 00:00:28.400
\\xa0planner see FP Mike. I\'m

8
00:00:28.400 --> 00:00:31.800
\\xa0asked this question to you because Peter is a cfp. What

9
00:00:31.800 --> 00:00:34.700
\\xa0are the credential what other credentials that investors should

10
00:00:34.700 --> 00:00:37.200
\\xa0be looking for as they\'re going through this process of choosing a

11
00:00:37.200 --> 00:00:40.500
\\xa0financial advisor. I mean cfp certainly is one of them sure. There\'s

12
00:00:40.500 --> 00:00:43.200
\\xa0you know, I mean I come across a wide variety

13
00:00:43.200 --> 00:00:47.500
\\xa0of different advisors and that have different different designations

14
00:00:46.500 --> 00:00:49.300
\\xa0and it and sometimes it

15
00:00:49.300 --> 00:00:52.400
\\xa0depends on it depends on you know, what type

16
00:00:52.400 --> 00:00:56.400
\\xa0of work they\'re doing for the client. It may not always be, you know

17
00:00:56.400 --> 00:00:59.400
\\xa0cfp, but most of the advisors that I\'m working with their

18
00:00:59.400 --> 00:01:01.500
\\xa0certified financial planners, but there\'s

19
00:01:01.900 --> 00:01:05.000
there\'s SEMA, you know, which is a certified Investment

20
00:01:04.500 --> 00:01:07.800
\\xa0Management associate, I

21
00:01:07.800 --> 00:01:10.500
\\xa0believe and that I look

22
00:01:10.500 --> 00:01:13.500
\\xa0at CFA and see Sima as kind of two different

23
00:01:13.500 --> 00:01:14.300
\\xa0designations that

24
00:01:15.500 --> 00:01:18.200
Are are very strong. I mean these people are incredibly smart.

25
00:01:18.200 --> 00:01:21.700
\\xa0They pass a lot of tests to get where they are. But I

26
00:01:21.700 --> 00:01:24.500
\\xa0look at the see the SEMA and the

27
00:01:24.500 --> 00:01:27.300
\\xa0the CFA which is a chartered financial

28
00:01:27.300 --> 00:01:31.100
\\xa0analyst as more geared towards Investments to

29
00:01:30.100 --> 00:01:33.300
\\xa0a certain extent. So they\'re if you\'ve

30
00:01:33.300 --> 00:01:37.000
\\xa0got an advisor that is more seamors or CFA oriented.

31
00:01:36.500 --> 00:01:40.300
\\xa0I think you\'re probably you could and Peter

32
00:01:39.300 --> 00:01:42.900
\\xa0you can correct me if I\'m wrong lean more

33
00:01:42.900 --> 00:01:45.800
\\xa0towards them probably approaching it from an investment perspective.

34
00:01:45.800 --> 00:01:49.100
\\xa0Whereas I think a cfp is

35
00:01:48.100 --> 00:01:52.100
\\xa0going to approach the relationship from everything

36
00:01:51.100 --> 00:01:54.400
\\xa0that Peter just talked about in terms of how they

37
00:01:54.400 --> 00:01:57.200
\\xa0want to how they want to work with you moving

38
00:01:57.200 --> 00:02:00.300
\\xa0forward Investments are important no doubt, but I think from

39
00:02:00.300 --> 00:02:03.700
\\xa0the standpoint of the approach if

40
00:02:03.700 --> 00:02:06.200
\\xa0you\'re looking for a planner, you know a cfp is

41
00:02:06.200 --> 00:02:10.000
\\xa0where you want to be if you want someone that\'s more focused on. Okay, I\'ll construct

42
00:02:09.300 --> 00:02:12.800
\\xa0a portfolio for you, but I think Sima and

43
00:02:12.800 --> 00:02:15.300
\\xa0CFA tend to lose tend to

44
00:02:15.400 --> 00:02:18.200
Themselves more towards investment only to a certain

45
00:02:18.200 --> 00:02:21.400
\\xa0extent now that\'s not every single or CFA but I think from that

46
00:02:21.400 --> 00:02:24.400
\\xa0perspective those types of designations. Those are the ones that I come across

47
00:02:24.400 --> 00:02:27.700
\\xa0primarily obviously, there\'s other designations with

48
00:02:27.700 --> 00:02:30.400
\\xa0the insurance realm that you know, you like a

49
00:02:30.400 --> 00:02:33.200
\\xa0chfc that would be which I

50
00:02:33.200 --> 00:02:36.400
\\xa0I don\'t even remember that. It\'s a chartered leave its chartered Financial

51
00:02:36.400 --> 00:02:39.700
\\xa0consult consultant, right which is different than a chartered financial analyst

52
00:02:39.700 --> 00:02:42.400
\\xa0which is kind of interesting but you know, they\'d be focused more on

53
00:02:42.400 --> 00:02:45.500
\\xa0and probably the insurance side of the investment process.

54
00:02:45.500 --> 00:02:48.200
\\xa0So I come across a lot but I would say

55
00:02:48.200 --> 00:02:51.900
\\xa0that I feel comfortable saying it that the

56
00:02:51.900 --> 00:02:55.400
\\xa0cfp is the designation where you know, mostly you\'re

57
00:02:55.400 --> 00:02:58.600
\\xa0going to be getting more of a planning approach. Whereas I

58
00:02:58.600 --> 00:03:02.200
\\xa0think the other designations might lean towards something else within

59
00:03:01.200 --> 00:03:04.700
\\xa0the whole scope of planning but more,

60
00:03:04.700 --> 00:03:07.100
\\xa0you know designated or specific on that

61
00:03:07.100 --> 00:03:11.000
\\xa0side sure. I think it\'s important, you know, individuals professionals

62
00:03:10.500 --> 00:03:14.000
\\xa0regardless of the industry having credentials after

63
00:03:13.400 --> 00:03:15.400
\\xa0their name shows that they\'re

64
00:03:15.400 --> 00:03:18.600
to the business. They\'re probably lifelong Learners,

65
00:03:18.600 --> 00:03:23.000
\\xa0which is something you probably want to look for in a financial advisor. And

66
00:03:21.200 --> 00:03:25.300
\\xa0I would agree with you a cfp

67
00:03:24.300 --> 00:03:27.600
\\xa0is probably the starting point. However, the

68
00:03:27.600 --> 00:03:31.000
\\xa0the SEMA the Cima in the CFA,

69
00:03:30.200 --> 00:03:33.900
\\xa0which I would agree are more investment driven.

70
00:03:35.700 --> 00:03:38.100
Um working with a firm who has a cfp has the point

71
00:03:38.100 --> 00:03:41.300
\\xa0of contact Peter, but that doesn\'t mean you don\'t have access to

72
00:03:41.300 --> 00:03:44.500
\\xa0cfa\'s and seamas as well. Right, correct. And

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\\xa0that\'s that\'s part of the teamwork approach here that you

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\\xa0know behind the scenes. I know that there\'s cfas working on our portfolios.

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\\xa0So so I think

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\\xa0you could see someone with another non-cfp designation

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\\xa0but is what\'s their firm like do they have a team behind

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\\xa0them is maybe they have a a young hire

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\\xa0a new hire coming out of college who\'s studying

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\\xa0for his or her cfp and that\'s their parent plan

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\\xa0who works on the financial plan. So I mean to I think

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\\xa0you might be doing a disservice just because

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\\xa0someone doesn\'t have cfp understand more about what\'s

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\\xa0what\'s going on at the firm and not just

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\\xa0the designation. But I do agree having a designation and you

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\\xa0made you reminded me. My continuing

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\\xa0ed is coming up and it\'s it\'s comprehensive. I\'ve

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\\xa0got I\'ve got a lot to do several hours to to

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\\xa0keep

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Cfp designation current I\'ve

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\\xa0got to do some continuing education requirements online. Yeah, me

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\\xa0too. Thanks for the reminder. I would say I didn\'t

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\\xa0mean to say that, you know, the cfp is definitely starting point. But Peter

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\\xa0brings up a great point that you when you visit with these cfps. They

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\\xa0do have those other.

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People in their organizations that cover those parts

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\\xa0of the planning process for them from that standpoint

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\\xa0So and I\'ve met many cfps that have their SEMA or have their CFA as

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\\xa0well. So depends on who I\'m speaking with, but there\'s there\'s a

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\\xa0wide variety of different designations and some have won

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\\xa0some have many or some have, you know, more than one right? So something

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\\xa0that you would recommend investors look for as they\'re gonna

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\\xa0go through absolutely. Absolutely. Absolutely. Yeah Mike we

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\\xa0for all the cfps out there yet. We\'re definitely the top

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\\xa0designation. No doubt about no doubt about it. We can

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\\xa0leave it at that. Very good very good. So I

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\\xa0have a few more questions and this has been great gentlemen, but

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What are some of the resources online resources

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\\xa0right, you know, I don\'t think people use phone books

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\\xa0anymore to find Financial professionals. What are

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\\xa0some of the things my gear you\'re working

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\\xa0with thousands of advisors. Like how do you how do you

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\\xa0go about and find an advisor that that you would want to work with

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\\xa0a professional level but not only professional of

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\\xa0us person maybe from even personal standpoint where can

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\\xa0investors go? Well they can they can you

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\\xa0know go online and you know, there\'s a couple of different organizations that

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\\xa0are out there that you could look at like the Financial Planning Association is

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\\xa0a great place to start that\'s that\'s a

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\\xa0big one National Association of

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\\xa0personal financial advisors is another great site

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\\xa0as well the certified financial planner

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\\xa0board. You can go that route as well. I mean,

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\\xa0that\'s probably the best place to start you can find someone in your general area

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\\xa0that could help you there. There\'s another firm out there

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\\xa0XY Planning Network which is which

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\\xa0is a pretty good tool for to search for fee only.

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Financial advisors you mentioned, you know

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\\xa0word of mouth or referrals from from your friends

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\\xa0or family that may be working with a financial advisor. So all of

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\\xa0them are great great ways to to identify some of

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\\xa0that you might want to work with at least get the opportunity to interview them to see

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\\xa0if they would be a good fit for you. Yeah. I think there\'s a lot of great resources online,

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\\xa0you know, one of the things that Peter and

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\\xa0I talk about quite a bit is you know working with someone

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\\xa0who understands you someone who\'s working with

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\\xa0other investors like me.

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Right in a lot of times if someone has a very specific need or

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\\xa0specific sort of outcome. They\'re

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\\xa0looking for they can identify the right Financial professional

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\\xa0by not only looking at those websites, but

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LinkedIn Facebook. Look, who are these?

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\\xa0Look who at the who these advisors are look at

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\\xa0the circles that they\'re in right? You know it a funny story my parents

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\\xa0who are not great investors. They were

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\\xa0both School teachers had a pension but when they were looking for

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\\xa0financial advisor, they didn\'t look any

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\\xa0further than you know, the Connecticut Teachers Retirement Financial

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\\xa0advisory. It was a really long name like

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\\xa0that. I know I\'m butchering it and talking it right but they will

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\\xa0work Connecticut Teachers that must be the guy that we work with without even

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\\xa0thinking twice about it, but they knew they felt comfortable and

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\\xa0they trusted that the this particular individuals working

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\\xa0with other, Connecticut Teachers.

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Here to add to any of that Peter. I mean, I think that

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\\xa0you know, I\'ve had done. Oh my

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\\xa0second cap. We have pulled that one back.

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I won\'t ask that question better.

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All right.

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so Peter

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You know, I\'ve talked about this it it\'s a mutual

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\\xa0interview between an advisor and an investor the investors making

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\\xa0a choice, but the advisors making a choice as well. So talk

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\\xa0a little bit about that process if you will.

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Yeah, I think that\'s that\'s a great question. And I definitely

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\\xa0encourage people to come up with a

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\\xa0list of questions and interview multiple

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\\xa0advisors definitely. But yeah, when when

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\\xa0I\'m meeting with with a New Prospect, I\'m interviewing

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\\xa0them as well. And there\'s things I\'m I\'m looking

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\\xa0for I want to make sure that number

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\\xa0one there. They\'re gonna be happy working with us. I\'ve

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\\xa0told people who I refer to

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\\xa0them as Gunslingers. They want to pick stocks. They want to

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\\xa0be in and out of the market they want they want action and I\'ve told

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\\xa0people I go I don\'t think we\'re gonna be a good fit. I\'m a

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\\xa0nice person. You seem like a nice person you seem to get along but

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we\'re going to have different philosophies and and I want

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\\xa0you to be happy and I don\'t want to waste your time and I

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\\xa0don\'t want to have my time wasted and so I\'ve had to tell people I just don\'t think

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\\xa0that this is necessarily going to work. Um, also there\'s

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\\xa0when I start to hear people talk and I say this

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\\xa0to clients

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and Prospects I start to get a gut feeling about what\'s

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\\xa0going on. And when I start to hear about things like

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\\xa0well a lot of debt, you know, you\'ve got

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\\xa0and not good. You don\'t have good financial habits.

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\\xa0You\'re spending all your money. You\'ve got

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\\xa0a lot of debt a lot of bad debt. It\'s one thing to have a mortgage your car

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\\xa0payments. Those are those are necessary. We\'ll call those

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\\xa0good debt necessary debt. We start talking about large student

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\\xa0loans. We start talking about large credit

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\\xa0card balances.

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I may not be able to work with you. I you may be better off going

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\\xa0and having credit counseling done first because I

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\\xa0can maybe give you some pointers but I\'ve

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\\xa0had to unfortunately tell people that we may

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\\xa0not be a good fit. There wasn\'t a whole lot I could do because they

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\\xa0just they just didn\'t have the assets. They needed to get really the

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\\xa0basics of their budgeting or spending plan

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\\xa0down and start to work on that debt. And that\'s not something we\'re

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\\xa0necessarily.

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Working on it\'d be more of sort of a credit agency

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\\xa0helping them to kind of get that square away. Absolutely. You

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\\xa0mentioned working with, you know, other sort of

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\\xa0financial professionals that you you work with

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\\xa0other.

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Financial professionals as well. I mean maybe not direct financial

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\\xa0advisors, but tax advisors and things like that. Oh, definitely.

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\\xa0I like to say that the analogy is I\'m

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\\xa0I\'m sort of the quarterback or I\'m your

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\\xa0your primary care physician if we need to bring in a specialist,

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\\xa0you know cardiologists so forth

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\\xa0weekologists.

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So but I\'m working with.

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I\'ll work with the client\'s attorney to talk about their state plan

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\\xa0work with a client\'s accountant or CPA to

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\\xa0talk about if we need to do some rebalancing in the portfolio before

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\\xa0I do any of that.

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And start triggering capital gains. I want to make sure that the accountant is

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\\xa0on board with it and we understand what the

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\\xa0ramifications are of those actions or in

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\\xa0actions because the last thing a client wants is a

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\\xa0surprise attack time. There\'s something psychological about

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\\xa0a big tax bill staring you in the face and it\'s

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\\xa0one thing to not know about it and have to

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\\xa0pay it. It\'s another thing. All right, you know what we knew about this, but we know why we

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\\xa0did it. So I\'m constantly working with

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\\xa0with other Professionals in helping clients

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\\xa0with taxes and in legal issues.

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That\'s fantastic. Yeah, so that\'s another thing that investors should

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\\xa0be looking for. Is there a true team approach? Maybe not even under the

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\\xa0same roof under the same corporate umbrella if you will but making

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\\xa0sure that the advisors acting in that quarterback capacity

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\\xa0and has the right Specialists for

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\\xa0those needs that might be outside of the scope of

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\\xa0what the advisors doing on a day-to-day and that could be another point

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\\xa0of reference for a client. If you have an accountant who

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\\xa0you\'ve been working with for a long time and you happen to like him

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\\xa0or her in the way that they work maybe they could be a place

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\\xa0where you could go to get a referral.

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Because I\'m in all likelihood that that CPA

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\\xa0or that attorney is has some

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\\xa0type of relationship with a financial advisor and could give

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\\xa0you a couple of places to go. Yeah, I think that\'s a great

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\\xa0great piece of advice there. All right.

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\\xa0I want one more topic here because this comes up a

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\\xa0lot and it\'s the notion of compensation for financial advisors.

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\\xa0I\'ve heard individuals say

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\\xa0that I don\'t pay my financial advisor or anything. He does

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\\xa0it for free sure right there is

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\\xa0there\'s a problem this industry, I think with transparency at times and

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\\xa0there\'s a number of different ways financial advisors are

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\\xa0being compensated. I didn\'t like frankly I think advisors should

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\\xa0be fairly compensated. They\'re doing really good work, right?

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Depending on the advisor. Of course, Mike tell us

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\\xa0a little bit about the couple of different.

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Fee structures or compensation structures there are for financial advisors.

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\\xa0And if there\'s one that you would recommend over

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\\xa0another I\'ll rattle them off because it\'s a

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\\xa0lot of different ones. There\'s feel only which we\'ve talked a little

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\\xa0bit about there\'s fee-based. There\'s Commission

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There\'s retainer.

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There\'s subscription. There\'s

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\\xa0another one I\'ve heard that I know is out there not as

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\\xa0popular but it\'s there and there\'s flat fee.

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\\xa0So there\'s a number of different ways that advisors are

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\\xa0compensated and the one

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\\xa0of course in my line of work and in terms

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\\xa0of what I do on a daily basis working with us, I come across primarily

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\\xa0not always I would say fee only

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\\xa0in fee based or the two that that primarily I work with

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\\xa0although there are there are others that are

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\\xa0less. So like a retainer I\'ve seen I\'ve come across that

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\\xa0but I say primarily it\'s fee only and fee-based that

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\\xa0I typically work with advisors and you know,

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\\xa0I\'ll let Peter elaborate but I\'ll just say generally that fee only would be

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\\xa0just be be charging, you know,

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\\xa0a fee for services. It could

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\\xa0be it could be a flat fee or could be a fee based

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\\xa0on assets under management that the investor might have with that advisor

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\\xa0fee base is is kind of

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\\xa0a combination of the only and commission if you will it has

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The concept of building on assets but also the advisor

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\\xa0has the ability to offer commission-based

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\\xa0products that would follow outside of the fiduciary scope.

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\\xa0I believe Peter and so those are the two that primarily

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\\xa0I see in my kind of interactions with

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\\xa0advisors around the country. Yeah, I think most of our listeners are

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\\xa0probably falling into the fee only fee-based camp

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\\xa0or the commission side right there. There

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\\xa0are a number of different fee models out there in compensation models

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\\xa0and I think they all have their pros and cons but you

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\\xa0just said something that I\'m gonna ask Peter O\'Brien on

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\\xa0right?

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We talked about fiduciary.

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If you are paying a commission.

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Is your advisor acting as a fiduciary necessarily? Yeah,

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\\xa0if you\'ve your your fee only your

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\\xa0being charged in a fee for your advice and

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\\xa0and whatever the the Investments would be. Where\'s fee-based

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\\xa0you could be receiving commissions.

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On investment products. It\'s sort of

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\\xa0I guess I\'ll use the term hybrid approach. So it\'s

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\\xa0a gray area. They I don\'t

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\\xa0know if because we don\'t do that here, you know,

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\\xa0we don\'t have commission based investment products. It\'s strictly

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\\xa0putting people into no load low cost

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\\xa0mutual funds and ETFs and we are being

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\\xa0paid a fee based upon those assets under management. We don\'t

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\\xa0have commissionable investment products to sell and if

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\\xa0you\'re if an advisor is doing that.

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I don\'t think they can put themselves out there as

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\\xa0as a fiduciary necessarily.

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Yeah, I think that the commission side I\'m not

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\\xa0knocking it. Just calling it

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\\xa0what it is. It\'s it\'s rot with conflicts of interest and

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\\xa0you just said something that I think would would mean

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\\xa0a lot to our listeners, right?

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these

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percentage of assets fees paying fees you\'re paying

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\\xa0for advice in that fee stays the

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\\xa0same regardless of the investment product. It\'s a

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\\xa0with your charging 1% regardless of

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\\xa0the advice you give you earn five you earn that one percent rather.

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commissions

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Is in compensation for advice it\'s compensation

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\\xa0for selling a product and that product

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\\xa0has to be suitable not necessarily best interest.

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Okay, so that I think that\'s something that people

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\\xa0don\'t understand outside of this industry. You

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\\xa0know, there\'s two ways two major ways

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\\xa0that advisers get compensated fees versus commissions and

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\\xa0one other point that I\'ll make about fees and correct

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\\xa0me if I\'m wrong gentlemen if you\'re charging fees on assets.

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If the asset level goes up the advisor

337
00:16:49.600 --> 00:16:52.900
\\xa0gets paid more the asset level goes down. I

338
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\\xa0mean the percentage stays the same but the actual dollars change, so

339
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\\xa0I think that it actually aligns the interests.

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Of the investor and the advisor using a fee model

341
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\\xa0for Susan commission model where someone might

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\\xa0be asking you to buy a product that you may not necessarily

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\\xa0need.

344
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Correct. And that\'s that\'s the thing. We you

345
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\\xa0start talking about different.

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Whether it\'s Insurance products investment products that have commissions on

347
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\\xa0them.

348
00:17:20.700 --> 00:17:23.500
Now all of a sudden it could be suitable. But if product

349
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\\xa0a May pay

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00:17:25.300 --> 00:17:28.900
X percentage products B may pay X

351
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\\xa0percentage plus something on top of

352
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\\xa0it.

353
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A non-fiduciary advisor is probably

354
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\\xa0going to go to product B because it\'s going to pay him

355
00:17:38.400 --> 00:17:41.000
\\xa0or her more and it\'s a perceived conflict of

356
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\\xa0interest. I\'m not saying that every person out there who\'s earning a commission is

357
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Is not acting in good faith, but there

358
00:17:48.500 --> 00:17:51.600
\\xa0is there\'s a potential for that conflict to be there. Sure. It\'s

359
00:17:51.600 --> 00:17:54.900
\\xa0it\'s all things being equal right? It\'s they\'re gonna pick if it\'s

360
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\\xa0if it doesn\'t necessarily hurt the

361
00:17:57.500 --> 00:18:00.500
\\xa0client and all and the Investments are relatively the

362
00:18:00.500 --> 00:18:04.100
\\xa0same they\'re going to gravitate probably towards the higher commission product.

363
00:18:03.100 --> 00:18:06.400
\\xa0Not that it\'s a bad thing. But that\'s the conflict of

364
00:18:06.400 --> 00:18:09.000
\\xa0interest that we talk about right isn\'t necessarily in the best

365
00:18:09.300 --> 00:18:12.600
\\xa0interest of the client. Yeah, and I think investors don\'t need products as

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\\xa0much as they need advice. Yeah agreed. I totally agree.

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\\xa0We were talking the the other

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\\xa0day just that the the meetings we were we were at and

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\\xa0and the model the way it was is you

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\\xa0had insurance companies or investment firms sort of

371
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\\xa0sitting at the top designing product and starting

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00:18:30.900 --> 00:18:33.400
\\xa0to push that product down to advisors who would

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\\xa0then push it to clients down at the bottom and really our

374
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\\xa0model is where we flip the script.

375
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The client is at the top and the client comes to the advisor.

376
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And we then go out to the product manufacturers to

377
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\\xa0find the the best product the best solution for

378
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\\xa0for the client to make as part of

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\\xa0their financial plan. So I think that\'s that\'s a big difference there.

380
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\\xa0We have nothing proprietary and we are acting in the best interests

381
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\\xa0of the client looking for a best of breed approach. And

382
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\\xa0again, usually it comes down to well, what

383
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\\xa0are the fees associated with that and that\'s another great piece of

384
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\\xa0advice for clients.

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Understand who you\'re paying and what you\'re paying

386
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\\xa0them and what for?

387
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Whether it\'s mutual funds inside your 401k or

388
00:19:15.400 --> 00:19:18.800
\\xa0something inside if you have an IRA through your bank

389
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\\xa0understand what it what it is and and

390
00:19:21.500 --> 00:19:24.500
\\xa0how it works. You\'re the one paying it and and understand how

391
00:19:24.500 --> 00:19:27.400
\\xa0all of that works and a lot of times people don\'t realize

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\\xa0that because a lot of times things are are not

393
00:19:30.500 --> 00:19:33.300
\\xa0apparent you got to do a got to do a little bit of digging to understand

394
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\\xa0what those those fees are inside of certain products.

395
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\\xa0Yeah. Absolutely. No, no what you\'re paying and I think

396
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\\xa0that there are some compensation models for

397
00:19:42.200 --> 00:19:45.700
\\xa0advisor out that they\'re a little bit opaque if

398
00:19:45.700 --> 00:19:48.600
\\xa0you will but as an investor

399
00:19:48.600 --> 00:19:51.600
\\xa0working with the financial professional transparency matters,

400
00:19:51.600 --> 00:19:54.200
\\xa0and if someone\'s not being transparent, then there\'s

401
00:19:54.200 --> 00:19:57.000
\\xa0probably not a lot of trust there in this business is built on trust.

402
00:19:58.100 --> 00:20:01.300
So yeah, I have to disclose everything to everybody up

403
00:20:01.300 --> 00:20:01.700
\\xa0front because

404
00:20:03.300 --> 00:20:06.300
It\'s coming out. It\'s coming out of the account and they\'ll see it right on the statement as

405
00:20:06.300 --> 00:20:09.600
\\xa0a line item to the penny. Yeah, exactly, except a

406
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\\xa0penny.

407
00:20:10.200 --> 00:20:13.700
Absolutely. Well gentlemen, thank you so much for your time. So I

408
00:20:13.700 --> 00:20:16.400
\\xa0just want to kind of recap because there was so much great information

409
00:20:16.400 --> 00:20:19.500
\\xa0that the two of you shared if you\'re an investor

410
00:20:19.500 --> 00:20:22.300
\\xa0out there if you\'re one of our listeners and you\'re looking to work with a financial

411
00:20:22.300 --> 00:20:25.500
\\xa0professional or if you\'re looking for maybe a second opinion a couple

412
00:20:25.500 --> 00:20:28.100
\\xa0of things that that Peter and Michael had talked to us

413
00:20:28.100 --> 00:20:31.400
\\xa0about today. Make sure you ask the question. Are you acting

414
00:20:31.400 --> 00:20:34.600
\\xa0in a fiduciary capacity? Probably the most important question to

415
00:20:34.600 --> 00:20:35.700
\\xa0ask a financial professional.

416
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Number two. What is your financial planning process? Right

417
00:20:39.100 --> 00:20:42.200
\\xa0the value proposition of a

418
00:20:42.200 --> 00:20:46.200
\\xa0financial advisor should be based on that planning process. And

419
00:20:45.200 --> 00:20:48.500
\\xa0since you are paying for advice, I think a great

420
00:20:48.500 --> 00:20:51.300
\\xa0question is what is your investment philosophy? How do you see the

421
00:20:51.300 --> 00:20:54.400
\\xa0world work? How are you going to advise me based on that investment

422
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\\xa0philosophy

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When it comes to credentials, I think looking for any credential

424
00:20:58.300 --> 00:21:01.100
\\xa0makes a lot of sense after a person\'s name. But if you\'re

425
00:21:01.100 --> 00:21:04.100
\\xa0looking for a true financial planner, the cfp designation is the

426
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\\xa0one that that our guests recommend.

427
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Look for people that work with people like

428
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\\xa0you look for advisors that are working with people like yourself

429
00:21:12.600 --> 00:21:15.900
\\xa0and there\'s a lot of resources out there. Mike mentioned

430
00:21:15.900 --> 00:21:18.600
\\xa0Napa. There\'s the advisor\'s website. Of

431
00:21:18.600 --> 00:21:21.300
\\xa0course Facebook LinkedIn are great ways to look at how

432
00:21:21.300 --> 00:21:24.200
\\xa0these advisors are working with

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\\xa0people that may or may not be like you and let me throw another resource

434
00:21:27.200 --> 00:21:31.200
\\xa0out there. A lot of investors don\'t realize that you

435
00:21:30.200 --> 00:21:34.300
\\xa0can Google broker check broker check

436
00:21:34.300 --> 00:21:38.000
\\xa0is a government website where tracks the history

437
00:21:37.100 --> 00:21:41.000
\\xa0of every single Financial professional whether they\'re SEC

438
00:21:40.600 --> 00:21:43.900
\\xa0registered or member of finra and you\'ll

439
00:21:43.900 --> 00:21:46.400
\\xa0see if there\'s any disclosures or anything like that

440
00:21:46.400 --> 00:21:49.400
\\xa0so broker checks are great way to see if

441
00:21:49.400 --> 00:21:52.200
\\xa0if there\'s any dings on the record of

442
00:21:52.200 --> 00:21:55.100
\\xa0the person that you\'re speaking to and then in terms

443
00:21:55.100 --> 00:21:58.700
\\xa0of compensation look for fees versus commissions not

444
00:21:58.700 --> 00:22:01.200
\\xa0to say that commissions are necessarily bad, but they

445
00:22:01.200 --> 00:22:04.100
\\xa0there could be some conflicts of

446
00:22:04.100 --> 00:22:06.500
\\xa0interest in there and a fee-based advisor.

447
00:22:06.600 --> 00:22:09.200
Even a fee only advisor is going to sit in the same side of

448
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\\xa0the table as you the investor. So Michael, thank

449
00:22:12.700 --> 00:22:15.200
\\xa0you so much for your time. Thanks Tom Peter. So thank you

450
00:22:15.200 --> 00:22:19.100
\\xa0for joining us here today. This has been a great conversation and so

451
00:22:18.100 --> 00:22:21.300
\\xa0for our listeners out there. Thank you for joining us.

452
00:22:21.300 --> 00:22:24.200
\\xa0We\'ll get you on the next one. And if you

453
00:22:24.200 --> 00:22:28.400
\\xa0want to look at any of our previous unfiltered Finance podcasts, they\'re

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00:22:27.400 --> 00:22:30.600
\\xa0available wherever you might be getting your podcast today.

455
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\\xa0So thank you till next time. Bye Cemetery Partners.

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\\xa0LLC is an investment advisor

457
00:22:36.600 --> 00:22:39.300
\\xa0firm registered with the Security and Exchange Commission

458
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\\xa0The Firm only transacts business in states where

459
00:22:42.500 --> 00:22:45.600
\\xa0it is properly registered or excluded or

460
00:22:45.600 --> 00:22:49.200
\\xa0Exempted from registration requirements registration of

461
00:22:48.200 --> 00:22:51.400
\\xa0an investment advisor does not imply

462
00:22:51.400 --> 00:22:54.500
\\xa0any specific level of skill or training and does

463
00:22:54.500 --> 00:22:57.300
\\xa0not constitute an endorsement of the firm by the

464
00:22:57.300 --> 00:23:00.300
\\xa0commission. No one should assume that future performance of any

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00:23:00.300 --> 00:23:04.400
\\xa0specific investment investment strategy product or

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00:23:03.400 --> 00:23:06.100
\\xa0non-investment related content.

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Reference to directly or indirectly in this material will be

468
00:23:09.000 --> 00:23:10.500
\\xa0profitable.

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As with any investment strategy there is the possibility

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00:23:14.300 --> 00:23:17.500
\\xa0of profitability as well as loss due

471
00:23:17.500 --> 00:23:20.200
\\xa0to various factors including changing market

472
00:23:20.200 --> 00:23:22.600
\\xa0conditions and/or applicable laws.

473
00:23:23.400 --> 00:23:27.000
Content may not be reflective of current opinions or

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00:23:26.600 --> 00:23:29.600
\\xa0positions. Please note the material

475
00:23:29.600 --> 00:23:32.300
\\xa0is provided for educational and background use only

476
00:23:32.300 --> 00:23:36.000
\\xa0moreover. You should not assume that any discussion or information

477
00:23:35.700 --> 00:23:38.600
\\xa0contained in this material serves as

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00:23:38.600 --> 00:23:42.400
\\xa0the receipt of or as a substitute for personalized

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00:23:41.400 --> 00:23:43.700
\\xa0investment advice.

\\xa0

Listed in: Business

Choosing the Right Financial Advisor | Part One: Work with Someone You Trust

1
00:00:07.400 --> 00:00:10.700
\\xa0welcome to unfiltered Finance. I\'m your host Tom romano.

2
00:00:10.700 --> 00:00:13.300
\\xa0And thank you for joining us this episode today. We

3
00:00:13.300 --> 00:00:17.000
\\xa0are talking about choosing the right financial advisor and

4
00:00:16.200 --> 00:00:19.400
\\xa0I have the perfect guests for this topic

5
00:00:19.400 --> 00:00:22.300
\\xa0joining us here today first and foremost Mike

6
00:00:22.300 --> 00:00:25.600
\\xa0store who is a senior Regional director

7
00:00:25.600 --> 00:00:28.100
\\xa0at symmetry Partners. I asked Mike to be

8
00:00:28.100 --> 00:00:31.700
\\xa0on the podcast because he works with thousands of financial advisors across

9
00:00:31.700 --> 00:00:34.200
\\xa0the country. He knows which ones

10
00:00:34.200 --> 00:00:37.200
\\xa0are doing the appropriate job and due diligence and

11
00:00:37.200 --> 00:00:41.200
\\xa0planning for their clients and the others who might be dare. I

12
00:00:41.200 --> 00:00:44.500
\\xa0say fake it Mike faking it and of

13
00:00:44.500 --> 00:00:47.800
\\xa0course a long time friend of mine Mr. Peter loponis

14
00:00:47.800 --> 00:00:50.900
\\xa0who\'s a certified financial planner and financial advisor

15
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\\xa0with Apollo wealth and happens to be

16
00:00:53.100 --> 00:00:56.200
\\xa0my personal financial planner. So gentlemen, thank you both for joining

17
00:00:56.200 --> 00:00:59.600
\\xa0us here today. You\'re welcome, Tom. Thanks Tom. Great to be here. I thought

18
00:00:59.600 --> 00:01:01.600
\\xa0this was appropriate topic for us to discuss.

19
00:01:01.900 --> 00:01:04.500
you know coming out of the pandemic I travel a

20
00:01:04.500 --> 00:01:07.400
\\xa0lot for business and I\'ve been on many planes

21
00:01:07.400 --> 00:01:10.400
\\xa0over the last few months and you know, whether it\'s an

22
00:01:10.400 --> 00:01:11.100
\\xa0airport or

23
00:01:12.400 --> 00:01:16.200
Are sitting next to someone on a plane and just bring

24
00:01:15.200 --> 00:01:19.000
\\xa0up some small talk and people understand

25
00:01:18.300 --> 00:01:21.300
\\xa0that I\'m working in the financial services a business.

26
00:01:21.300 --> 00:01:25.000
\\xa0And the first question. I always get is got any

27
00:01:24.200 --> 00:01:27.300
\\xa0tips. What should I be buying? What

28
00:01:27.300 --> 00:01:31.000
\\xa0should I be selling? Right? It\'s a very common question and for

29
00:01:30.300 --> 00:01:33.100
\\xa0years, my response has always been and I\'m

30
00:01:33.100 --> 00:01:36.400
\\xa0a firm believer of this is the best advice I can give anyone in

31
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\\xa0that moment is to work with

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\\xa0someone you trust financial planner financial

33
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\\xa0advisor that\'s working in a fiduciary capacity. I

34
00:01:45.300 --> 00:01:48.300
\\xa0have a number of reasons why I say that but

35
00:01:48.300 --> 00:01:51.700
\\xa0Mike I\'d love to hear it from your perspective. Why should

36
00:01:51.700 --> 00:01:54.300
\\xa0investors people planning for

37
00:01:54.300 --> 00:01:57.300
\\xa0retirement or for any other Financial need be working

38
00:01:57.300 --> 00:02:00.100
\\xa0with a financial professional? That\'s a great question.

39
00:02:00.100 --> 00:02:03.100
\\xa0I think you hit on it at the in your opening

40
00:02:03.100 --> 00:02:04.100
\\xa0remarks Tom is that

41
00:02:04.900 --> 00:02:05.200
You know.

42
00:02:06.300 --> 00:02:09.300
Having traveled the country for many

43
00:02:09.300 --> 00:02:14.300
\\xa0years working with a number of different types of advisors and meeting

44
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\\xa0with clients at the same time, you know clients have

45
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\\xa0different desperate needs in terms of when it

46
00:02:19.200 --> 00:02:22.100
\\xa0comes to financial Financial advice so they can

47
00:02:22.100 --> 00:02:25.100
\\xa0certainly learn about it on on a website if they

48
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\\xa0want to but I found that especially the

49
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\\xa0best advisors are working working with

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\\xa0clients and from that

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\\xa0perspective. I know who these advisors are.

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And I know they\'re doing a great job for their clients. And for me,

53
00:02:40.500 --> 00:02:43.400
\\xa0the one thing that comes to mind besides everything

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00:02:43.400 --> 00:02:46.100
\\xa0else at a financial advisor does because I think about it in

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\\xa0my own world is comfort and peace of mind, right? There\'s lots

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\\xa0of different moving Parts when it comes to planning.

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And and what you\'re going to do with your money for the long term and even myself

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\\xa0being in this business, I worry about am I making

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\\xa0the right decisions? So I think a lot of it comes down

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\\xa0to peace of mind and comfort. I think that that\'s high

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\\xa0level. There\'s a lot of you can drill down from there

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\\xa0but I think for most clients if you think about it, it\'s getting that

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\\xa0pressure off of you and bringing a

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\\xa0professional and to make sure that you\'re meeting your life goals, whatever those might

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\\xa0be sure. No, absolutely. I think what I\'m hearing you say, I

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\\xa0hear things like planning and long-term and Peter

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\\xa0I\'ll shift over to you. So

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\\xa0what I\'m hearing Mike say and I loved for you to plan

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\\xa0on this when someone asks me got any tips,

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\\xa0why is that the wrong question?

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well, I think

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the answer they\'re looking for everyone wants something

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\\xa0that\'s exciting and and sexy that

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\\xa0they can tell.

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Their friends. I think you\'ve used the term water cooler alpha or

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\\xa0Golf Course Alpha everyone thinks somehow because we\'re