Active vs. Passive Management: Does Active Have a Future?

[0:00] JD: Welcome, everybody, to another episode of Retireaholics. [0:04] Chad: Hopefully Brandon will get his shit together. My name is Marty Bird. I'm here with Chad Johansen, a guest [0:14] JD: to be named shortly, and everybody's favorite retireholic robe guy. He's back in his robe. He's back on the booze. [0:30] Mark: Can I. Can I say something? No. It's nice to be back. But also a big thank you to everybody who supported Maya and her Girl Scout cookie adventure here lately. I know I wasn't on last week, but JD Pumped it out. So thank you all. [0:47] David Blanchett: It's very much appreciated. [0:49] JD: Very good, Very good. I'm just breaking records. I wanted to support your dry Joe. [0:56] Mark: You haven't bought any cookies yet. [0:58] David Blanchett: So you don't support me. [0:58] JD: No, I haven't, but I just. [1:01] Chad: I like it when you're drinking, Mark. And I like you back in the rub. [1:03] JD: Okay, we've got a guest, and guess what? [1:06] Chad: Justin's not here. Justin snowboarding somewhere. So I'm gonna take over the intro. [1:13] JD: Here we go. [1:16] Chad: We are a lucky group of 401k nerds today, people. Our guest is basically the definition of an industry thought leader. [1:26] JD: Born and raised in Lexington, Kentucky, and [1:29] Chad: a graduate of Henry Clay High School, where he was voted by his peers most likely to write a whole bunch [1:37] JD: of boring white papers on financial stuff. Wow, those high school kids had some foresight. He is. He's known for and has set the [1:47] Chad: record for the most losses in his adult softball league as a player manager [1:53] JD: with a record of 0 and 42. [1:57] Chad: His teammates claim he was even worse as a player than he was as a manager. Hard to believe. Hard to believe. He used to have so many designations [2:06] JD: in his email signature. [2:08] Chad: Many wondered what he was compensating for. Did I mention the author of more white papers than Taylor Swift has hit songs? [2:18] Speaker E: Yes. [2:19] Chad: The dude loves himself a white paper. Surprisingly, he has a passion for wearing cow costumes at work for important meetings. [2:28] JD: Apparently, this has something to do with [2:29] Chad: his love of Chick Fil A. When it comes to drinking, he cannot handle his alcohol. Especially if drinking his beer from Das Boot. [2:40] JD: I want you to all be sensitive [2:42] Chad: to our guests today, okay? Mark, Especially you. [2:47] JD: He has some insecurities, you see. [2:50] Chad: Reason being is that you probably don't know this, but he actually has a twin brother named Brian and who, even though they are identical twins, most consider [3:00] JD: his brother to be far better looking. His twin lives in a better house, drives a better car, has a better career, and I'm even told has a better family. So, you know, just overall Way more successful in life. That's hard to swallow and makes family gatherings a little awkward. An executive, almost a decade at Morningstar. Yes. [3:23] Chad: He invented the five star system. No, I made that up. [3:27] JD: Drum roll, please. The managing director, head of retirement research, Prudential Global Investment Management, Defined Contribution Solutions, David Blanchett. [3:42] David Blanchett: That's actually quite the clever introduction. You got some actually spot on digs there. I was heavily involved in my previous previous employer, softball team, and it didn't go very well, So I heard. [3:55] Speaker E: 42. [3:56] David Blanchett: I think we won a few games. Technically, I was a terrible player too, so. Bad manager, bad player. Really a win for the organization. [4:04] Speaker E: They won the night. You weren't there. [4:06] JD: Probably. [4:07] David Blanchett: Probably. [4:07] JD: Yeah. Yeah. I mentioned in the pre show, I've [4:11] Chad: never had such an outpouring of people [4:13] JD: that wanted to share stories from one of our guests live. So we got a lot of them that reached out. But yeah, a lot of that stuff. Unlike some of Justin's where he makes it all up. [4:22] Chad: That was some true shit. [4:25] JD: Let's dive right into headlines, shall we? Headlines. [4:29] Speaker E: Brandon, wait. Set some stage. [4:33] JD: You're right, you're right, you're right. We're playing some games. Okay, David, we're gonna play some games today. [4:37] Chad: I wanna make sure you're aware of these games. We'll be playing Chat Bar Champion. So you watch that chat bar. You're gonna vote for your favorite into the finals. And then you know what happens out there. You guys are gonna vote for the winner. We're gonna be playing Acro Sin. So if you say an initialism or an acronym, you know, like your employer's [4:57] JD: name, which we've determined is one. Wait, who's that? Prudential Global Investment Management. You must drink from your nasty drink. Okay? Your pe. [5:08] Mark: I think my name qualifies as that today, by the way. [5:11] JD: You can say my name. Mark. [5:13] Chad: Maybe you want to give a quick pitch to the beer you're drinking today before I hit headlines. [5:17] Mark: Yeah, a pitch to Bud Light, who is probably spending $6.8 billion on advertising on Sunday at the Super Bowl. They have a new beer called Bud light. [5:27] David Blanchett: Next. [5:29] Mark: It's zero carbs for all you health conscious people like myself, 80 calories. [5:36] Speaker E: So if I drink, what's the content, Mark? [5:39] Mark: 12 of them. It's like having a burger. [5:41] JD: What's the. [5:42] Chad: What. [5:42] Speaker E: What's the alcohol content? Is it 4% or 5? [5:46] David Blanchett: Or 4? [5:47] JD: David's already done the research. [5:48] Mark: I was gonna say. [5:49] Chad: I don't. [5:49] Speaker E: I don't know. He probably wrote a white paper about it. [5:52] JD: He's Literally four sentences into the white paper. He was confused how it had no carbs. It really stressed him out. All right, let's go to headlines. [6:00] Chad: Headlines, please. [6:00] JD: Brandon, In researching our headlines are a [6:12] Chad: little podcast heavy today. But I'm not apologizing for that because I think podcasts are a great way to get some info in this industry. [6:20] JD: In researching you, David, I found out that Prudential Global Investment Management has their own podcast. It's called the Accidental Plan Sponsor podcast, [6:31] Chad: which I thought that was a pretty creative little name. Hosted by Josh Cohen. Am I getting that right? [6:38] David Blanchett: Yep. [6:38] Chad: There's like 15 plus pods there and [6:41] JD: David's in one of them. [6:42] Chad: So nothing here to discuss. I just want to let everyone know that they're out there. It's new to me so I subscribe so added to my list. So I'm excited about that. [6:51] JD: I got some inside info on another podcast. [6:55] Chad: Rick Unser of 401K. Friday's podcast. Tomorrow's episode that he drops because tomorrow is Friday, drops him on Mondays is Jerry Schlichter. [7:08] JD: So be his third. [7:09] Chad: I believe it's his third time. [7:11] Mark: It's not a surprise you didn't see his LinkedIn posts from I didn't know [7:14] Speaker E: he was dropping it though. [7:16] JD: No, I didn't see his LinkedIn post. So tomorrow he drops the 401k boogeyman. I have it firsthand from Rick that they talked to mutual fund windows probably because the recent Supreme Court stuff. [7:32] Chad: So that's kind of an interesting topic with Mutual Fund Windows. We won't dive into that today. But he's also, according to Rick Schlichter, still trying to angle on participant data and the improper use of it. And it sounds like he's not giving up on that one. He is going to keep pushing his angles towards that. So pay attention out there everybody. Big record keepers and investment firms. Schlichter doesn't like this participant data thing that's going down. So anyways, look for that comes out tomorrow. I'll be listening to it first thing in the morning. When does he. Does he drop that thing at like 1am or 6am or what happens? [8:12] JD: Fred? [8:13] Speaker E: J.D. my episode dropped at roughly 7am Pacific time. [8:19] JD: I could see you, Chad, just refreshing [8:20] Chad: your podcast app, waiting for it. [8:22] JD: When is my episode going to come out? Fred Bernstein has a new podcast. I forget what the fuck it's called. Oh, there it is. RPA Edge or whatever. Oh shit. [8:35] David Blanchett: Ooh, donuts. [8:37] Mark: That's fun. [8:39] Speaker E: Sorry. [8:40] JD: I actually like that acronym Retirement Plan [8:42] Chad: Advisor, which I think is a Good moniker for the advisors we work with. So he's got a new one and he's talking to Charlie Nelson, Nelson Avoya, [8:52] JD: and maybe I could ask. [8:54] Chad: I'll ask our guests about this a little bit. Charlie is obsessed, as is Fred through this podcast about this, the convergence. Right. Like 401k specific advisors, or as they call them, retirement plan advisors, getting into all things benefits and not just being a specialist. [9:13] JD: We've talked about this ad nauseam, but [9:17] Chad: it's interesting for me to hear Charlie from Voya talk about it being a financial services company that's publicly traded that is always looking for more growth. And I know that that's Charlie's role is find more growth. It dawned on me like, well, of course they've got a foothold in retirement plans. They're a financial services company. They are going to look to see whether they can have an impact on all things benefits. [9:42] JD: My question for you is, do you [9:45] Chad: think because you've been this analysis guy, you're in the analytics, you're looking at trends and trying to predict what's going to happen in our industry. What's your take on the 401 industry? Moving from 401 specific, which you spent a lot of your career looking at 401 specific stuff, investments, to a more all benefits type of approach. You think it's a good thing, a bad thing? How do you feel about it? [10:10] David Blanchett: You know, I don't know that I have strong. A strong, you know, take there. I mean, from my perspective, right. The 401k is a benefit that's offered to employees. So I mean, if, if I'm an individual that has access to HR within a company, why wouldn't I do more of that together? So to the extent it's good. [10:28] JD: Finish your thought, but you owe us a drink of burn. [10:30] David Blanchett: Oh, what did I say wrong there? [10:31] Speaker E: Human resources. [10:32] JD: Human resources. [10:33] Speaker E: Human. [10:33] David Blanchett: Good God. Okay, hold on, give me a second here. I would say generally positive, but no strong feelings at all. [10:39] JD: Yeah. [10:40] Chad: You're not against it. [10:41] JD: I thought you might feel a little [10:42] Chad: differently being as all these white papers [10:45] JD: and all the research and all looking at things. Yeah, very pure. [10:49] Chad: Good point. Chat to our industry that to now spread ourselves further and try to cover things like health benefits and try to cover things like wealth management would seem like polar opposite to what David does, which is drill very deep on a subject versus spread across. You're shaking your head no, Chad. [11:10] Speaker E: Well, I'm not saying no necessarily. I'm trying to figure out in the different lines of service that people are bringing to the table who is best suited to have these conversations. And I do think that the community that we all sit in is best suited to have these conversations around benefits. [11:28] Chad: I agree, I agree. [11:29] JD: And to back up David, I've always [11:33] Chad: felt like this is an opportunity. So we've talked about before. [11:36] JD: I'm not going to go too deep. [11:37] Chad: We've talked about on past episodes. But listen to Charlie on Fred's podcast because they're obsessed with it. [11:45] JD: And if the guy running Voya, or at least running retirement plans Voya is [11:49] Chad: obsessed with it, well, he's probably got a good finger on the pulse. [11:52] Speaker E: Well, and there's a reason. [11:54] Chad: Let's dive right into a first topic [11:57] JD: in researching Fuck Prudential Global Investment Management. Sorry, I went to your website and [12:05] Chad: the tagline, David, was the value of active management. That was the tagline. At the website you analyze numbers and trends. As I said, as I've already said, this push to passive in 401, I'm [12:22] JD: sure you've got some great numbers on that because we've seen all these flows out of actively managed funds into these [12:30] Chad: passive index based type investments. [12:34] JD: I think it's been fueled by what lawsuits and scrutiny around fees and a race to the bottom. [12:41] Chad: The value of active management. Do actively managed funds, David, still have a future in 401k. [12:49] David Blanchett: So I think so I think that to take a step back, there's no such thing as a passive portfolio. Right. So at the end of the day, even Vanguard's target date funds. I didn't say the acronym there. I wanted to, but I didn't. [13:04] Speaker E: Thank you. [13:06] David Blanchett: They're active. [13:06] JD: If you tell us that you don't [13:08] Mark: say it, it's like saying it. So don't do that again, dude. [13:11] David Blanchett: Yes sir. I will not do that. And so I take it a step back. There's no such thing as a purely passive financial plan. There's active decisions all throughout. Right. And so the question is, if you have a fee budget, an alpha budget, whatever it is, where do you spend it? I'm very aware that there's lots of research on the fact that fees are very important when it comes to the outperformance of investments, but actually one of [13:37] JD: the few levers that you can actually control. Right? [13:40] David Blanchett: Correct. I did some research, I don't know, it was 15 years ago looking at Vanguard's actively managed mutual funds because at the time they were an example of a company that was this dichotomy. They're, they're all talking about passive, but they have this Massive active shop. [13:57] Speaker E: Right. [13:57] David Blanchett: And if you look at, for example, this is just research, I'm not, you know, they did very well, right? They were very low cost active funds. There's other active shops that have, have done quite well. So like capital group 2. And so I just know this because I've done research on these companies for two decades plus. And so to me it's not so much a question of, of will act, is active doomed to lose to passive, it's what are you paying for the respective strategy? And so from my perspective, it's like it can work, but how much does it cost? If you're paying 120 basis points for a large cap blend fund, I don't know that's going to work. If it's 30 or 40 or 50 basis points for other areas, other sectors, it can start making a lot more sense. [14:44] Chad: Do you think that that was the world we lived in where, because all your years at Morningstar and all your work where an actively managed fund had a really big difference in price to an index fund and do you feel like [15:02] JD: the future then is to squash [15:04] Chad: that a little bit and somehow make those actively managed funds more affordable? Is that what I'm hearing from you? [15:09] David Blanchett: Well, so think about the average active fund in a defined contribution plan. They are so much better than the average retail mutual fund available. Right? They are institutional, they are selected by professional fiduciary. [15:23] JD: Right? [15:24] David Blanchett: I mean you think about defined benefit plans, there's some passive there, there's a lot of active there. They're picking kind of the best of. [15:30] JD: Sorry, sorry, David. [15:31] Chad: Let's put share class aside. [15:33] JD: Like, I understand that there's going to be a shares and R3s and R4s and whatever. I just listen. I mean like an institutional share class. I'm an actively managed fund versus an [15:42] Chad: institutional share class of a passive. What's that gap, by the way? Take a guess at that for me. I mean, if we're talking about large cap, like what is that, 40 basis points? 30 basis points? 50 basis points. [15:54] David Blanchett: So again, like, I think like, right, so what I was getting to is like that's all really important because the research on active management, right. Includes everyone. What's that? [16:03] Mark: Oh no, sorry, David. Apologize. [16:05] David Blanchett: Talking over those two. [16:08] Speaker E: For jd, I had two. [16:12] JD: Sorry, David, go ahead. [16:13] David Blanchett: Am I, am I behind as well? [16:15] Speaker E: No, it's just jd. [16:16] David Blanchett: Okay. And so I think that if I had to like pick a number, I would say it ranges from like 25 to 50 basis points. But it's like, I think the key Is always context. Right. So there are some very expensive, very terrible active managers out there that charge 120 basis points for portfolios that have very little true active share. There are others that cost. I'm just going to pick a number. If you're working with a really large DC plan that cost 30 basis points that have significant active share. Oh, did I do it again? What did I say? [16:52] Speaker E: Buying contribution. [16:53] David Blanchett: Oh, good God. And so I think the nuance here is important because that's part of the problem with a lot of the research is ignores the decisions that individuals that actually design and implement plans do where they're going to pick a quote, unquote, higher quality, lower cost active manager. [17:12] Chad: Okay, I agree with that. [17:15] JD: Did you original. [17:17] Chad: Let me ask you this then, Chad. Let me ask you though. The original question, Chad, was give me your thought first. [17:22] Speaker E: No, I was going to give you a thought. Justin posed the same question you are. Because I think that David danced around it really well, which is with access to more technology and more research and things being simplified in terms of how you determine what to invest in as an active manager, a portfolio manager, should there be compression? [17:41] David Blanchett: Yes. [17:41] Speaker E: In those costs. And that's what JD is asking is should we see compression in active management to where the spread between passive and active isn't as large as it is in the same share cost in the same institution? I said 31 basis points is what I figured the spread was. Typical active and passive portfolio. [18:00] David Blanchett: But I would contend we have seen a compression. I think that there is an emerging scale of large asset managers that don't have to charge, as they did historically, 100 plus basis points above what you see for a passively managed fund. Do you guys know this? When Vanguard first introduced their Standard and Poor's 500 fund, what was the fee for the fund? [18:31] Chad: I'm guessing we're not going to pretend like we know, but I'm going to [18:33] JD: say it was 30 bips. [18:36] Chad: God damn it. [18:37] David Blanchett: It was 43 basis points was the initial fee. And that's obviously come down dramatically now. They have different share classes. So I think we are moving to a place where there will be lower cost for all types of investing, whether it's active or passive. [18:51] JD: Well, here's how I'm going to summarize that then if that is happening and that's true, then I say David's answer would have been no, actively managed funds will not die in 401 plans going forward. Because what I really wanted to ask [19:08] Chad: was it seems to be a massive trend amongst financial advisors who are selecting core menus to go the Vanguard route, to go the passive route. And like I said at the start of this conversation, this is because of the lawsuits. [19:26] JD: And it seems like every one of [19:27] Chad: those damn lawsuits, that's the first thing they name is like, hey, there were cheaper funds available, so why wouldn't you protect yourself as a fiduciary and as the advisor and as the plan sponsor to. All right, well then let's just have a menu of the lowest cost fricking Vanguard funds so nobody can. [19:45] JD: So Schlichter can't point his dirty little finger at us. And I wondered if that was hurting [19:51] Chad: the Prudentials and the T Rose and the American funds and the list goes on and on. [19:55] Speaker E: I was just. [19:56] David Blanchett: Because I understand it though, the lawsuits aren't necessarily whether it's active or passive. It's the effectively the share class you're using within a given structure. [20:05] Chad: Sort of, kind of, but not entirely accurate. David, that's not true. [20:09] JD: I get that. And there are lawsuits around those share [20:12] Chad: prices, but there are definitely these lawyers that think that it, well, it should be a 5 basis point index fund. Chad. Sorry. [20:22] Speaker E: Well, I was just going to mention I've seen here recently quite a few of the record keepers that have been forcing their proprietary target date funds, which we all know my stance on that. I'm okay as long as they're meeting all the metrics. What they have done now though, because they're getting outbid by companies that aren't using an actively managed target date suite is they've created a blend now, so you still have to use their target date fund, but now all the blend categories in your nine style boxes are passive in nature. And so they've taken what was a 38 basis point active target date fund down to 18 basis points to try to compete with BlackRock and Vanguard and others. And it's winning a market share already. It's essentially all T. Rowe. It's still all Voya, but they're throwing in some of their passive funds to bring down the costs. So obviously we're going to tackle players play there too. [21:18] Chad: JD we're going to tackle target day [21:19] JD: funds a little bit later and so [21:21] Chad: we can get David to chime in on that a little bit. He seems to always get. [21:25] JD: You seem to be the go to guy on target day funds. I don't know why this is, but I feel like every podcast you go to, everybody, they all want to talk [21:31] Chad: to you about targeted funds. [21:35] JD: Yeah, we'll hit that. But let's do two things. Let's spin the wheel of ice, which [21:41] Mark: I lands on mark. [21:43] Speaker E: Oh, it's 100 going tonight with Justin being gone. [21:49] David Blanchett: Justin's still on there. [21:55] JD: Might as well double them up or. [21:57] Speaker E: Oh, yeah, get it, B. [21:59] Chad: You can't skip the double. [22:01] Speaker F: Okay. [22:03] JD: After your performance at the beginning of [22:06] Mark: the show, you should be drinking two of them. [22:09] Speaker E: Let's see. [22:09] Speaker F: I only have one. Let me run it. [22:12] Chad: This flies in the face of what I was trying to do. I was gonna then have him play listener line, but he's gonna be drinking. [22:19] JD: He's going old school. [22:22] David Blanchett: Oh, no. [22:25] JD: Atta boy. [22:27] David Blanchett: Attaboy. [22:29] Speaker E: He looks so thrilled right now. [22:31] Chad: Brandon, can you do two things at once? Can you play one of the listener lines? [22:35] Speaker F: I'll try. [22:36] Chad: Drink that. Okay. [22:38] JD: All right, everyone, we got a few callers been calling in. We definitely appreciate it, but you can do better. [22:42] Chad: So if you're tuning in right now, come on, call in the listener line. 1, 8, 3, 3, robe guy. And give us some fun stuff. [22:50] Speaker F: But this might be a mess. I don't have them labeled, so I'll just go ahead. [22:58] Speaker G: What up, Hulu? My question is, who came up with the name Retireaholics? I will get Rogue Guy, but we should. I think it would be interesting to talk about the origin story for the name Retireholics on your podcast. Excuse me. On your live stream. Take care. Bye. [23:18] JD: I love you, Webby. Brandon, I didn't tell you to play that one. Webby sent that one. Like, God, I love Webby, but I got two other. I didn't know that that was Webby. And none of us came up with the name Webby. To answer your question, it was. Actually, my recollection was it was a guy named Danny who worked for us. No. You're gonna say no. [23:39] Speaker F: Potterchin. [23:41] JD: Aaron Potichin. [23:43] Speaker E: Pot. [23:43] JD: We had a couple. Couple young dudes that work for us. We were drinking beer. Drinking beer one late day in Brandon's little server room. And, yeah, one of those young guys came up with a name. But, yeah, I didn't even tell you [23:57] Chad: to play that one, Brandon. [23:58] JD: Give me the other ones. [24:00] Speaker F: They're not labeled. So I just was going, I think [24:03] Mark: it's cool that people are interested in our backstory. [24:06] David Blanchett: That's neat. [24:07] JD: It's not people, Mark. [24:08] Chad: That's webby. [24:09] Mark: Shut up, J.D. let me bask in this for a [24:12] JD: little bit of his family that he should already know. [24:16] Speaker G: What's up, Retireaholics? This is Brad Bartels from California calling in. Longtime listener, first time caller. Hey, I just saw JD's post about the gas prices on LinkedIn and since gas prices in California are so out of control, it got me wondering whether the retireholics thoughts on what types of pricing and fees in 401k plans are out of control these days and what can be done about it. So those are my thoughts. I'll take your answer offline. Have a good one fellas. Thanks, bye. [24:50] Chad: What fees? [24:51] Speaker E: I like that question. [24:53] JD: Okay, good. I'll go to you. [24:55] Chad: What fees in 401 are out of. My first answer to Brad is probably CPA audits. [25:00] JD: Oh, I drink the certified public accountant audits are just out of control. I mean don't you guys just push a button on your software and pump out all. Why do you gotta charge 6, 7, 10, 15 grand? Come on. I'm just kidding Brad. [25:14] Chad: Just kidding Brad. [25:15] JD: Chad, what do you think? What's out of control? [25:19] Speaker E: I don't think there is anything at this stage out of control. There was a time period with some of the old manulife plans and some of the old programs that were definitely out of control. I don't run into that anymore. So I don't think I have a facet of this business that I will say is overpriced. There are some individuals that are overpriced but I don't think there's a component [25:41] JD: of the business that is as it relates to price. [25:45] Chad: David, anything Anywhere in the 401k space you feel like is wacky, like California's gas prices? [25:52] David Blanchett: I have no idea. So I mean one thing I know is that it looks like costs are going down. So it feels good to me. I don't know about the individual components. [26:02] JD: Chad, back to you. [26:03] Speaker E: Go out of the 401k space because I saw so much from David about he believes in planning and believes in people getting financial plans. And I made a comment online today that I think one of the issues with advisors that are trying to charge and should be charging for delivering a financial plan is that so many people get them free online and they believe that they're the same. They believe that that free online financial plan that they got in from plugging in a couple pieces of data is equal to what a holistic advisor that's spending time learning about your personal situation and creating a financial plan for is equivalent and it is not. But I think a lot of people would tell you that the cost of getting a financial plan written up is out of whack. [26:46] JD: I don't like it and it puts [26:48] Chad: me in an awkward position. But this show's about honesty and transparency. [26:52] JD: I love fricking David Case receiver statements. [26:57] Chad: That's a solid stab at this topic. I like that. Statements are out of whack. [27:03] JD: You know what I was going to [27:04] Chad: say, what about the spread on guarantees? What about the fixed rate? [27:14] Speaker E: There you go. [27:15] Chad: Those are two things that I think are not fair. [27:18] JD: And I mean, David, do you do [27:19] Chad: much research on guaranteed investment contracts and fixed contracts where, what, they're making 200 basis points, 300 basis points. [27:31] David Blanchett: So I mean, I haven't. Right. But I mean, to your point, that's how a lot of our keepers make money. And so this is part of the game. I don't, I don't know where those are today, but one thing that I don't like is pricing that's not clear. I think that one thing that's been very positive for the industry has been moving towards fixed participant, very transparent pricing. That's a huge plus when you're getting paid. Something that's not clear. I'm not usually a fan of that. [28:01] Chad: Is it guaranteed investment contract or guaranteed income contract? I don't know. [28:06] JD: I'm going with investment. [28:07] David Blanchett: I'm going to say I think it's investment. [28:09] JD: It's so true. I did want to say the acronym. [28:12] Chad: It sounds. [28:12] David Blanchett: I just said it too though, didn't I? [28:15] Chad: Didn't catch it. [28:16] David Blanchett: I did. [28:17] Chad: Policing yourself. I like it. Mark, any opinion, Any opinion on something out of control? [28:23] David Blanchett: I won't say it's out of control, [28:24] Mark: but I was going to throw something out there and say managed accounts. [28:27] Speaker E: Oh, I'm, I'm in. I'm in on that. [28:31] JD: Good one, Mark. In the post that they're referring to. The post that he's referring to is I posted my. I filled up my truck today in gas. I was like down to fumes and [28:42] Chad: it was like $167 to fill my truck. [28:46] JD: This was why you were, you were. Someone asked it cost that much to fill the Lambo and I told him that you were washing and waxing the Lambos while the truck. Brandon, we got another listener line. One more brands were like, no, we don't. [28:58] Chad: I don't know. [28:58] David Blanchett: So I, so I. [28:59] JD: No, no, no. [28:59] David Blanchett: We got to talk about. He said, my man said manage accounts. Right? Okay. So I think so there's a larger question here, right. About the value of advice. Right. So. And I think that in any corner of any market, there are going to be providers that charge too much. Okay. But if you look at like, like the robos of the world, whether it's you know, there's a whole range of robos out there that exist in the retail space. They charge between like 25 and like 75 basis points. [29:27] JD: Right? [29:27] David Blanchett: Is that a fair? Is that a fair? [29:29] JD: Oh God, awfully wide gap, but yeah, [29:31] Chad: I think that's fair. [29:33] Mark: Why are you doing that? [29:35] David Blanchett: I thought I said bips, but I said basis points. I'm forgetting. [29:38] JD: It's delicious. [29:39] David Blanchett: It's delicious too. [29:40] JD: It's bourbon. [29:43] David Blanchett: And so I think that managed accounts, so I have strong feelings, managed accounts and targeted funds, I think that they can provide exceptional value. But it's all about the comparison. So what are you comparing them against? Right, so target date funds and managed accounts are not substitutes. No one that uses managed accounts would have used a target date fund. [30:03] JD: Wow. [30:04] Chad: Answer to your question would have been I compare them to each other and you don't like that answer. [30:08] Speaker E: Right. [30:08] David Blanchett: But the problem is that's a terrible [30:11] JD: comparison because says you, not me. [30:13] David Blanchett: Well, but like 80% of participants that are in managed accounts would have self directed if they weren't available. [30:20] JD: I've been in many enrollment meetings where the choice is you decide are you going to choose your own investments? And most people say no, I want to turn it over to someone else. And so then the question is, well, will you do it in a target A fund or do you want to take it to this managed account service? That's the world I've lived in. But what the fuck do I know? [30:39] David Blanchett: A lot, I'm sure. [30:41] Speaker E: No, no. [30:42] David Blanchett: So this actually just came out with Empower a few months ago and we looked at using like 2 million plus participants, all these plans like how does acceptance of target date funds like differ for plans that offer managed accounts and those that do. And so how does individuals like how does acceptance change of these vehicles? And so we're trying to proxy is what is managed accounts a substitute for is it really fair to compare against targeted funds? What we found is about, we estimated that 80% of participants that are in managed accounts would have self directed had they not had it available. And so I think that's like an important proxy. Right? So I think that is it expensive? Well, compared to what like we estimate that like self directed portfolios have 100 basis point expected underperformance versus managed accounts alone. So ignore everything else out there and it can be valuable. So I think that the question about like is it valuable? Is what is your proxy? So we got, you know what's funny [31:40] JD: David, is so it's 50, I'll let you go here. Ted, take me two seconds 15 years ago when I saw people selling managed [31:45] Chad: account service, that's what they sold on [31:47] JD: was if you're left to your own devices, you're going to trail the market and do a shitty job. [31:52] Chad: So hire us. Sorry, go ahead, Jen. [31:54] Speaker E: It's the same narrative and I don't disagree with that. That is the narrative for target date funds as well. The reason why I agree with Mark's point, why I shake my head, David, is I have seen over the years too many people tout managed accounts as an option when it is nothing more than a glorified, if I even call it a risk tolerance fund. It is just simply a diversification of a series of investments. There's no tactical management, there's no active side of this. It is literally a diversified portfolio that they are rebalancing and they're calling it managed accounts. That's where I have my issue and it exists in every walk of Life. We talked, JD and I talked about today with 316 services. Now some people do a lot, some people do nothing, but they tout it 316 services. So that's my issue with the managed accounts that aren't actually managed accounts but are saying they are. [32:43] David Blanchett: And so like to be clear, like I am a, I'm a gigantic fan of targeted funds. Like they have done a massive benefit for participants in these defined contribution plans across the board. I mean, I mean moving from self direction to targeted funds has been spectacular, right? But some people need help. And the question, right, is what is the help worth? You know, what should it cost? And I agree that there aren't great plans out there, some are too expensive. But I guess to me it's around this idea of the value of advice and then you know, like its value is defined as how it helps someone accomplish their goals. And, and I just believe that the device is worth something. It can be worth a lot, but it depends upon what you would have done in the absence of that advice. And most people are great in target date fund, but some folks need help and I think that managed accounts can help them get that. [33:34] Speaker E: I don't think anybody could disagree with those statements that you just made. And I get asked all the time what am I doing with my investments by family, by friends. I tell them I pay an advisor to help me with it. And it's not that I'm paying them so much for the management of the investments, it's for the guidance around eliminating the fear from me, eliminating the behavioral decisions that I'm making and to help Me with all the planning side of things, not the investment side. And I think managed accounts can accomplish a lot of that too. It can take out the behavioral side of investing and allow people to be more tactical. Assuming that it is truly a, a managed account solution. You're by the way, you're touting of target date funds. You're shit. I'm going to blank on the name because you have so many good white paper names. You're clever with your names. Go wide, not deep. That was your white. Exactly. That was your white paper name. But I like that you're essentially saying, hey, we've narrowed the core menu for years, but now that we have target date funds, there's no need to narrow the core menu anymore. Like make it wide, allow for many options, don't have a whole lot of overlap. But go ahead and put 30, 40, 50 funds in there if you want to. Because the people who don't want to actively manage their portfolios, those are the ones that are going to choose target date funds or managed account services. I hadn't heard anything written like that in years. Well, ever for that matter. That was a good write up. [35:03] David Blanchett: So actually we have a piece that came out at my employer, Pruse Investment Management company that I can't say the name actually it came out this week and it's looking at the same thing. It's Looking at like 11,441 is it for one can acronym? It's not. It's tax code, not acronym. Looking at the same concept where you know, too many, I think too many plan sponsors buy into that dumb line that you have to have a small menu. Okay. I want people to stay in 401k plans because it is the best place for the mass affluent that can't get a high quality CFP advisor to help them plan out their lives. [35:42] Speaker E: Right. [35:42] David Blanchett: And so where I see managed accounts and all and the core menu working is keeping people in a place where they can get really good advice at a low cost to help them accomplish their goals. And I think that to your point, like the core menu, why not. What did I did something. [35:57] Speaker E: Certified financial planner. What's that you said? Certified financial planner. A little bit. [36:01] David Blanchett: Okay. Crystal's on top of this tonight. [36:04] Mark: I haven't kept up with some of [36:06] David Blanchett: the ackersons so I think that's where the value of this kind of comes out, comes in play is that is it really can help people that the alternative, it's always in life and everything in the research is what is the alternative? So what are you comparing this bad thing against and we've all seen it, the bad in the retail space can be a lot worse than the bad in a well run 401k space or [36:32] Speaker E: even a poorly run 401k space. There's so much governance there. [36:37] Chad: Brandon had me over on LinkedIn trying to reroute people over here, so I missed part of that. So I apologize if I go over [36:44] JD: something you already did. [36:45] Chad: But Danielle has got some comments there which I agree with. [36:47] JD: Which if you think about the Supreme Court recently, and I know that just because you say to have a larger core menu doesn't necessarily mean that any of those funds are bad and not reviewed properly. But it seems to me Supreme Court [37:01] Chad: would like us to have less funds that are more scrutinized and more heavily monitored than have a whole lot. So it's a liability in a sense. [37:10] David Blanchett: So you don't need more funds. You don't need all nine stylebox funds. There's no benefit to having three large growth funds, a large blend fund, a large value fund, have a few domestic funds, but then have inflation protected bonds, have commodities, have long bonds, have all the pieces that someone would say you need to build a better portfolio to incentivize retirees to stay in a plan. I mean so many advisors go after participants and say, hey, you can't stay in that plan because you can't build a good portfolio. Well, that's ridiculous. I think that the key is offering the right number of funds versus a lot of funds to give them the chance to diversify. [37:51] Chad: Well, this is another subject that we're going to tackle a little later, which is guarantees and income and dealing with like retirement. Because that's interesting how you want to keep people in the plan or you made those types of comments and therefore [38:08] JD: so give them more of those conservative [38:11] Chad: types of investment opportunities to do so. [38:13] JD: Which I would agree with you, I think 401ks have ignored. I mean even bonds, I feel like for the last 20 years everyone just obsessed over international funds and US equity funds and large mid small. And then it was like what bonds you want to put in? I don't know, let's throw in a money market and two bonds, whatever, fuck it. And that is a disadvantage to the person who's 60, 70 and pushing higher for sure. But there's a lot to unpackage there [38:40] Chad: with interest rates and bonds. [38:42] JD: And so we'll do that in a bit. But let's, let's have some fun. Let's play a game here in the retireholics world, David, just like your adult softball league, there are winners and there are losers in the 401k space. We're going to put up some images. You need to tell us who's a winner, who's morning start. And David, you're going to tell us why. So you're saying Morningstar knocks out FI360, they're the winner. Why so? [39:17] David Blanchett: I mean now I'm incredibly biased here, right. I worked for Morningstar for close to a decade. [39:23] JD: We are brand ambassadors of FI360. So fuck you. [39:27] David Blanchett: Oh, well, kind of. I mean, I mean, I think. Why? You know, Morningstar, they have recognition. They are a, a well known brand as a kind of, for lack of a term, trusted. Yes, that's who I worked for, the meat company. A trusted fiduciary that has, that has a wider recognition, you know, across the industry. And I think that gives them ways to enter environments that, that while FY3 exists today, Morningstar could do that too. So I mean if I just, I mean like, like they've just, they've grown phenomenally. I think that they got great potential. Like I think they can both succeed gloriously. But having worked there, having seen the people, I think that they can just keep killing it. [40:10] JD: I assume that would be your answer. [40:12] Chad: Let me challenge you. If I look at the 401k market and I look at advisors and what they use to service their clients, I don't see Morningstar being used all that much. Especially in my micro market, mid market area. I see a lot more of Retirement Plan advisory group or Fi360 and others. [40:35] JD: Now if I'm being fair to Morningstar, I think people might go there first [40:39] Chad: to see how funds doing and see whether what kind of stars has. But I don't know whether Morningstar is as prevalent in best practices amongst advisors. [40:50] Speaker E: They're not in our space. [40:52] Chad: Is that true? [40:53] David Blanchett: Yeah, I'm making a broad generalization of the companies and their ability to win and lose and survive in the long run. [40:58] Chad: That's fine. [40:58] David Blanchett: You have that right. [40:59] JD: Yeah, it's good. [41:01] David Blanchett: I think they can both exist in a very different environment and both be very successful. I'm just saying if I had like they were going to go at it at a given space, who I would pick? [41:10] JD: Aren't a lot of the Fi360 peeps People from Morningstar? [41:14] David Blanchett: They are indeed they are interesting. [41:17] Speaker E: JD One of the reasons why I think you don't see Morningstar as much amongst the advisor we're working within the 401k space is because Fi360 has pushed hard on the advisor community. Morningstar seems to push a little bit harder on the record keeping community. You know, the relationship with Voya and a few others. And I see advisors saying we want our own proprietary thing, not what's being offered through the record keeper. And that's why I think in the 401k space, I've seen more activity with Fi360, the Morningstar. [41:49] JD: Mark, you got a dog in this hunt? [41:52] Mark: Oh, well, I mean, when you're a brand ambassador for one, it's easy. But what I'm going to do is [41:57] David Blanchett: take a step back. Okay. [41:59] Chad: I'm gonna take a little neutral approach [42:01] Mark: here and go, I'm gonna base this [42:04] David Blanchett: off of the logo, the color, you [42:06] Mark: know, something like that, something different. [42:08] Speaker E: Right. [42:08] Chad: I like it. [42:09] David Blanchett: Morning star. I mean, by the way, stars come [42:12] Mark: out at night, so that's just dumb. [42:14] David Blanchett: You know David Thoreau's book, right. [42:22] Speaker F: Lucifer is the morning star. So [42:26] David Blanchett: thank you. [42:27] Speaker E: Right. [42:28] JD: Fi360. [42:29] Mark: I mean, Fi is on the periodic table of elements. I just had to look that up through Google. So don't ask me what the element is. I just know that it exists. [42:39] Chad: So I'm gonna go with [42:42] David Blanchett: FI360. [42:47] JD: Very nice. Very nice. And I wasn't joking. We are, we are under contract with Fi 360. So all our votes had to go that way. We, we support them. I'm not even joking. I tried to create a way around [43:00] Mark: it, but I could. [43:01] JD: Let's go. [43:01] David Blanchett: You made me vote against. Against two. Two entities I really like. I mean, I remember 20, 23 years ago, introduced meeting the folks from FY36. I was, I was so impressed. So, I mean, I think what they've done and how they've helped advisors embrace fiduciary has been spectacular. Was it like I'm, you know, I'm picking between two kids I like there versus no. Yeah. [43:25] JD: We will go down on the record that you said Fi360 sucks and is a loser. Okay, next image. Brandon, next image. [43:33] David Blanchett: Clickbait. [43:34] JD: Super hedging. [43:35] Chad: Justin. Super hedging. [43:39] David Blanchett: That's the same person. [43:41] JD: Wow, Good answer. We can move on from this. [43:47] David Blanchett: Like. Yes. Right? [43:48] JD: I mean, I was actually going. I was actually going to put Jesus [43:57] Chad: Christ in the other one, but I [43:58] JD: thought I might offend somebody, so I [43:59] Chad: was worried about it. Would that have offended anyone? Mark? [44:03] Speaker E: Yeah. [44:04] JD: I've done Mother Teresa. We've done different people with Fred, but Superman. Good answer, Good answer. [44:09] Chad: All right, the last one. Last one. [44:10] David Blanchett: Brandon. Wow. [44:17] Chad: So [44:21] David Blanchett: you Guys are killing me here. So two former colleagues, both similar roles. Well, I'll go with Walnut. I mean, he's, you know, I've known him better longer. I just. I'll just pick him. I think he's got an interesting new gig with income America. Faustino's great. They're both great. But this isn't fair. But you get me. Pick one. [44:42] JD: Olney's a winner, Faustino's a loser. I'm texting. [44:45] Mark: Didn't say that. [44:46] Speaker E: A little like, a little unusual too. Neither of them are here right now, so I immediately looked if they were in here right now. Neither of them are here now. [44:54] Chad: I think earlier, dad, who would you pick? [44:58] Speaker E: Me all the way. Like my homie. For sure. [45:02] Chad: Mark. [45:03] Mark: Well, because we had deep dish pizza with him. I feel like that's, you know, you. We bonded over that. Like, only like it's tough to go against the guy who invented bringing a cooler on to retireholics during Zoom with full of beer. [45:17] Chad: It was pretty dope. Was pretty dope. [45:19] JD: My vote should be for Wolney, but [45:22] Chad: I'm starting to really fall in love with Faustino, man. [45:26] JD: I was on a Zoom with him today and I was looking into his eyes and I felt my heart flutter a little bit. So I'm into Faustino. [45:35] Speaker F: Do you remember when he nailed Kasha Gugu at the end of our. When we played a song? [45:41] Speaker E: Yeah. [45:41] Speaker F: I'm sorry, I gotta go, Faustino. [45:45] JD: All right. Thanks for playing along. We appreciate it, David. We appreciate it. Topic number three, as I mentioned earlier, income solutions and 401k. And I think we could. Well, we can talk about what Woolney's doing if we want to. I mean, it's open. [46:03] Chad: It's open discussion what everyone wants to do. But can I ask Prudential, as an insurance company, they've got something in this space, right? Weren't you guys. Wasn't Prudential like, didn't they have a [46:17] JD: guarantee like back in the day and that kind of didn't work out well, which most didn't. But do they have something new today that I'm not paying attention to? [46:28] David Blanchett: This is a very complicated question. So. [46:31] JD: Good. [46:32] David Blanchett: Can I just. We'll just say. I will say. Okay. Yes. So the Income Flex is one of the Prudential products around for a long time. Right. So I'm sure everyone here is aware of this. This isn't. This is non public information. This is public information. But that, that is going with Empower, with the sale. [46:49] Chad: Say it again. [46:50] David Blanchett: So Empower bought the Prudential record keeping business. [46:53] Chad: Oh, that's right. [46:54] David Blanchett: Income Flex is a, is a product. [46:57] JD: They're taking it. They're going to take it. [46:59] Chad: Correct. [47:00] JD: Oh, cool. [47:00] Chad: This is a complicated answer that I love. This is good insight. [47:03] Speaker E: Okay. [47:04] David Blanchett: And so it's, it's going to be up to Empower to decide what they want to do with the Income Flex product post merger. [47:12] JD: But it wouldn't, wouldn't be like Prudential Global Investment Management without some kind of non compete or something. You guys have an insurance company base. You must be working on something. [47:21] David Blanchett: Well, so again, it wouldn't be my organization which goes by the. Yes, the investment management company owns Prudential. We would not create something. Could Prudential decide to enter the space again with something else? Well, of course they could. I think that if you watch the industry and you're aware where a lot of things are guaranteed lifetime withdrawal benefits. I want to say the acronym, but I can't have gone out of favor for a host of reasons. So I think there are other strategies emerging that will likely be more common in the future for the space versus what Prudential has offered historically, which Empower could still choose to offer going forward, but it would be on them to do so. [48:07] Speaker E: Chad, I was curious because I thought back in the day when Great west launched their Income Solution Screw foundation. Yes. Wasn't Prudential the driving engine behind that too? [48:21] David Blanchett: So I think so. Again, this is before my time, you know, like they might have, they might have been involved, but I feel like it was quasi white labeled. I think Michelle Richter was on earlier. She probably knows better than I do, [48:33] JD: but I want to talk about Institutional [48:37] Chad: Retirement Income Council as we do this, but go on. [48:40] David Blanchett: Yeah. So you know, I don't know the details behind the future. I think it was, it was. I know it was white label white labeled in a number of different environments. So the answer to that is yes. I'm not sure where. I think the larger question for me and for us is like what the future is. And Income Flex as a product is moving to Empower. [48:59] JD: Okay, got it. But let's go more general now. We got Wolnowitz doing his thing. Michelle is like the executive director of now, this kind of council, the Institutional Retirement Income Council. Brandon, I sent you a URL in your outlook in your email. I don't know if you want to pull that up. [49:20] Chad: Is that an acronym? [49:21] David Blanchett: I'm sorry, what was that? [49:22] Mark: Oh, yeah. [49:25] David Blanchett: Okay, okay, okay, okay. If you know what that stands for, I'll take a shot. [49:30] JD: What stands for you said it above you. [49:34] Speaker E: Universal life insurance. [49:36] David Blanchett: He's gonna say it. No. So, okay, URL. What does URL stand for? [49:40] Speaker E: Oh, URL. [49:40] Mark: Yeah, everyone just said it, by the way. So I'm giving you all one. [49:45] Speaker E: I did not. I did not. [49:47] David Blanchett: Yeah, you did. [49:48] JD: Okay, let's move on. Repeated it. Jared? [49:50] Speaker E: I don't know. I don't know. David, what is it? Because now I do. [49:53] David Blanchett: I have no idea. That's why I was asking. [49:54] Speaker E: So chat bottom, come up. Greg will come up. [49:57] JD: So you got Woolney doing his thing. You got Michelle bringing all these people together, which I'm assuming is like a [50:03] Chad: thought leader, kind of bring the industry [50:05] JD: together kind of thing, and figure out how we're going to lay the landscape. I don't know, Michelle, feel free to [50:10] Chad: write a long thing. [50:11] JD: And she says, yep, worst quick one. So good. What is your take, David? [50:16] Chad: And you focus a lot of your research on how retirees are going to fund their retirement. And by the way, can I say, saving money is easy compared to how [50:29] JD: you're going to withdraw from it. [50:31] Chad: Right? [50:31] JD: I mean, there's so many moving pieces and so difficult. So even though Pru may not have a product right now, as far as we know, or whatever, I mean, are [50:42] Chad: you a fan of this? [50:43] JD: Since you've run around and share your [50:45] Chad: thoughts and talk on podcasts? [50:46] JD: Do you believe in guaranteed income for 401k plans? [50:51] David Blanchett: So, you know, just to start things off, I'm a fellow at the alliance for Lifetime Income. Right. So. And I'm an adjunct professor at the American College. [50:59] Speaker E: Right. [50:59] David Blanchett: So I'm a. I'm a huge believer in the value of guaranteed income. I think that the retirement is incredibly complex and it's hard to figure out now. There's really some important nuances, though, when it comes to doing this in a defined contribution context that might. This might raise. I don't know. People have different takes on this. But. Okay, so if you buy a target date fund, and let's say that you should be very conservative, but you're invested aggressively, well, you should earn a higher return. You pay an implicit cost for being misallocated. It's not consistent with how you should invest, you should still get a higher return. A concern that I have about guaranteed income is that if it's providing a meaningful benefit and accumulation. So when you're 55 years old, that means you're paying a premium for it, you're paying a cost, you're paying a fee, Right? For sure, yes. But what if you don't need It. [51:55] Speaker E: Right. [51:56] David Blanchett: What if you only make $20,000 a year and you've got a huge pension benefit? Well, you know, what if your balance is $5,000? So I really. [52:04] JD: You just somehow stumbled into that option and clicked the button or something that's [52:08] David Blanchett: part of the default investment that's not personalized. And so I really like. I really like guaranteed income. [52:13] Speaker F: I love. [52:14] David Blanchett: I love guaranteed income. That is, that is. That is in the D.C. space, there's like, no surrender penalties usually. It's like highly efficient. It's like the dream come true. But I, I worry a little bit about products that are. That just give the same allocation to everyone. [52:29] Chad: I like to hear you say that. I think that's a. [52:31] David Blanchett: So, like, when you talk about managed accounts, like, I really do see a value. Like, so again, huge value. I, you know, love me some guaranteed income. But, you know, if you're an academic that's researched this, like, how is your first thing to do not to say, hey, you should delay claiming Social Security first. [52:47] JD: Right. [52:47] David Blanchett: If I know nothing about you, if you have not engaged with me at all, the first thing you should do is delay claiming Social Security. If you don't want to do that, I have another solution right. For you to possibly do. I don't. I'm excited about it. But, like, part of me is the. Is the academic nerd on stuff is like, is embedding a SPIA and a target date fund, which one of our competitors does. A good idea? That's a terrible idea. I never in my entire life recommend a plan sponsor to have a target date fund with the SPIA component because it's just silly. Delay claiming Social Security. Have it. Have an unallocated account that just exists and tell someone we're going to use this. Delay claiming Social Security. Right now, Social Security is a. Is a more effective spia, all things considered. Now there's different products that exist, and that's when things get weird. But, like, that's where the guaranteed income is more complicated because there are, like, there are costs to owning it, and you want to make sure the person that owns it needs it. [53:45] Speaker E: Go ahead, J.D. if you have a point on this same topic, but I have something else to add. [53:49] Chad: Well, I was just as usual, going to kind of position the opposite side of it, which I know David already knows, which is the people that want guaranteed income are not nerds like you. Right. They're not analyzing all the numbers. Someone's coming to them and saying, hey, look, they're conservative. [54:08] JD: Instead of you having to worry about [54:11] Chad: sequential Risk of returns. And when you reach age 70 or 75 or whatever it is and you start retirement and maybe the market tanks [54:22] JD: and literally gets cut in half and [54:24] Chad: that puts you at some massive disadvantage. What if I told you that you could lock in your highs and then [54:31] JD: now you can live your life knowing you're going to get this amount of money every year to live off of regardless of what happens to your account? I understand and I agree with you in theory, David, that a logical person, a smart person has to factor in the negatives to that, like what am I paying at age 55 for this period of whatever years and how does that drain on my account? But again, I think that people are simpler than that that are buying it. [55:00] Chad: And it's the class of you buying annuity, right? It's like a person who's anti annuity would say, well, why would you buy an annuity? Just invest your money intelligently and pull from it. [55:11] JD: And we won't talk about laddering bonds and all that kind of shit. We could in the after show because David's getting excited and they would say, [55:18] Chad: instead of doing it yourself, just chalk it over here, buy this annuity. You get this check every year and just live your lifestyle that way. It'll be a lot simpler. But I get there's two sides to the coin. But it seems like there's a big push here in 401. I'm sure Michelle would agree. I know he agrees. Yes, Chad. [55:36] Speaker E: Well, two things I was going to say. There's some really good questions in the Q and A and I want to get to them for the folks that pose them. [55:43] David Blanchett: Damn it. [55:44] Speaker E: And it might have to be in the after show. But what popped in my mind as David was talking that I'm genuinely curious about and for someone who kind of studies like he does and has access to so much information. What do you think? Or is this somewhere, who spends money? What percentage of people spend money on the decumulation phase of their life versus the accumulation side? I feel like people are willing to spend money with advisors to help grow, but they're not willing to spend money to get advice on how to pull that money out. [56:17] Chad: Really? [56:17] Speaker E: I would be super interested to see the difference in people that will pay for an advisor that will pay for planning when it comes to the accumulation side but not the decumulation side. [56:29] Chad: Can I ask you too, do you think that a 7 year old with $1.7 million doesn't feel a crazy need to have an advisor guiding them? [56:41] Speaker E: No. So perhaps I Should rephrase a little bit. I think a 70 year old that has 1.7 is still looking at investing that money because they don't need $1.7 million for the last 16 years of their life based on their life expectancy. [56:52] JD: Depends on your Lambo payments and what you got going on. [56:55] Speaker E: I'm talking more so about the person who blue collar, worked their life, was willing to be a part of a 401k, spend some money on it, but now they get there and they've got just enough to live off of, hopefully cover medical expenses, pull on Social Security through the rest of their life. They're not looking at leaving money behind for kids. [57:15] JD: They're not stopping off after the grocery store. They're not stopping off after the grocery store and walking into Edward Jones and saying, hey, I got $725,000. I need your help to figure out how I pull from this for the next. [57:28] Speaker E: Right. And we're talking about annuities, right? Which has to do with decumulation. And I think that those are folks that need help, but they're not willing to pay for it. And I'm curious if that stat exists out there and it might tell why folks are fearful of annuities inside 401 [57:43] David Blanchett: s. I mean, I haven't seen that. Seth, I've actually never heard that kind of hot take on the lack of desire to pay for advice. Because if you. When I think about, like, who should pay for advice, it's actually retirees, not someone who's, I would agree, 30 years old. I mean, 30 years old, say 15. Buy some term life insurance, put your money in a targeted fund. I mean, like, I can give you a really solid strategy in about five minutes. It's going to be relatively optimal. Okay. If you're 70 years old, like, it takes a lot more than that to even assume what I'm telling you is [58:15] Speaker E: the right thing to do. [58:16] JD: Totally agreed. [58:17] Chad: Totally agreed. [58:18] Speaker E: But that. Okay, I think people are missing it, David, if I'm being honest. [58:22] David Blanchett: What do I say? What do I say? [58:23] Speaker E: Hold on, hold on. No, hold on. [58:31] Mark: Jeez. [58:33] Speaker E: Hold on. [58:35] Mark: Okay. We have a very. We have a very dedicated chat bar. And I was told, my sources have told me that single premium immediate annuity was said four times. [58:46] David Blanchett: Okay. They lie. They all lie. [58:51] Mark: I had to Google that hack, so I knew what it meant. [58:54] JD: Let him catch up on his penalties. Chad, your vote for chat bar champion. [59:00] Speaker E: I'm. I'm going with someone who is hot early, died off late because apparently he was watching a show instead of watching this show. But Hackler gets my Jesus. [59:10] Chad: All right, Mark, if that's your true [59:13] Mark: vote, no double up. I don't double up. [59:15] JD: All right, who's your vote going? [59:17] Mark: Brett Schoffner. [59:19] Speaker E: Oh, that Brett was Shop, right? I was. I figured as much. [59:23] Mark: But, well, if it's not, I definitely called him Shop, and that's weird, man. [59:27] Speaker E: So Brett's got your vote. [59:29] JD: I haven't paid attention to a single [59:31] Chad: thing in the chat bar. All right, David, who's your vote for chapter champion? [59:35] David Blanchett: So I'm going to pick Justin Morgan just because I know that he's the person that called in and talked a bunch of crap about me before the show. [59:41] Chad: He might have. [59:42] Speaker E: Might have been his. Cute. His question and answers are really good. [59:47] David Blanchett: Yeah, I mean, so, you know, we're [59:49] Speaker E: gonna get to that. [59:50] JD: All right, well, I'm just gonna back up Hackler. I want to back up Hackler, and I got it. [59:55] Chad: What's going on on LinkedIn? What is Katie doing to me? [59:59] JD: Okay, Brandon, you got three people. I believe Hackler. And I will say that Hackler's comment [1:00:08] Mark: about Chad looking like a tennis player hadn't yet. Hello with that one. [1:00:13] JD: But you know Hackler, Justin, and who? [1:00:18] Mark: Brandon, can you queue up a Hackler laugh for me? On in four seconds. [1:00:25] David Blanchett: Thank you. [1:00:26] Chad: Brett Schoff, the chaffan eater. Hackler and Justin in the finals. [1:00:34] JD: Hackler's got a few mugs, too. [1:00:36] Chad: I'm guessing. [1:00:36] Speaker E: Getting close. I think [1:00:41] Chad: Hackler. [1:00:42] JD: I've been grinding on the range. Chad was at the golf course today. [1:00:47] Chad: It's on like Donkey Kong this year for the golf tourney. [1:00:51] Mark: I played with Chad's brother last week. [1:00:54] Speaker E: Yeah? [1:00:54] Speaker G: Who won? [1:00:55] Speaker E: You were my brother. Who won in that? [1:00:57] Mark: I'm pretty sure I did. [1:00:58] Speaker E: You smoked him? [1:01:00] Mark: No, didn't smoke him, but I won't. [1:01:04] Speaker E: Pulled out quick. [1:01:06] JD: Hackler is chapter champion. Hackler, remember, you and Jason cannot pull your mugs. To get the fifth mug, you must collect all of your mugs on your own. [1:01:18] Mark: This is not a pulled account, son. [1:01:20] JD: Let me know what mug you'd like [1:01:22] Chad: in the chat bar. [1:01:22] JD: And I've got your address, biatch, so I know where to send it. [1:01:27] Speaker F: I wanted to. I wanted to vote on that one, but you guys didn't let me. [1:01:33] Mark: You're the one who creates the rules, buddy. [1:01:35] Speaker E: I know who. [1:01:37] Speaker F: Larry KAVANAUGH over on LinkedIn. [1:01:40] Mark: Oh, we didn't know about that. [1:01:42] Speaker E: Does that work over there? I don't see it over there. [1:01:45] Speaker F: I guess he can't be voted on because all These people. Sorry, Larry, you got to come over to Zoom. [1:01:50] JD: LinkedIn Live sucks. Okay. [1:01:54] Chad: Thank you for being our guest, Mr. [1:01:59] JD: Morningstar. We appreciate it. [1:02:02] Speaker E: I was. I was worried, David. I was genuinely worried that you were a little too button up for us. [1:02:10] David Blanchett: For sure. [1:02:10] Mark: Hey, that's like saying, hey, David, I thought you're gonna be a complete nerd, and I am a complete nerd. I was gonna say, I thought he [1:02:19] Speaker E: was gonna be too uptight. [1:02:20] Mark: David, we. [1:02:20] David Blanchett: We all are. [1:02:21] Mark: Honestly, dude, we all are. Like, that's just the thing. [1:02:25] Chad: Speak for yourself, Mark. [1:02:27] JD: All right, well, if you join us, [1:02:29] Mark: you're the biggest nerd. You just grew a beard and long hair to be like, oh, I'm not a nerd. But if you were your true self, you would be a total nerd. By the way, these beers go down real easy. [1:02:41] JD: So good to have Mark back. If you join us in the after show, David, we can expand on some [1:02:46] Chad: of these subjects a little bit. [1:02:48] JD: And if you don't join us in the after show, everyone knows what's going to happen. [1:02:52] Chad: We're just gonna talk shit about you. [1:02:54] JD: Audience members, thanks for tuning in. [1:02:57] Chad: And even if you're out there in LinkedIn Live, thanks for tuning in. We appreciate it. And all you that showed up tonight, thanks again. Oh, shit. Guess what? [1:03:05] JD: Sorry, Webby. [1:03:06] Chad: Next week. Taking the week off. [1:03:09] JD: No show next week. [1:03:10] Chad: You guys get Thursday night off. [1:03:13] David Blanchett: What? [1:03:14] JD: I'm taking my wife. [1:03:15] Speaker E: Time. In two years, I'm taking my wife [1:03:19] JD: to an Eddie Vedder concert in la. And I said to Brandon, should I let the boys run the show while I'm at the concert? And Brandon goes, they suck at that. Just. Let's just take. [1:03:32] Mark: We couldn't have Unservillin because he was real good. [1:03:36] JD: No, we're gonna. [1:03:37] Chad: We're gonna take a break. [1:03:40] JD: That wasn't a joke. [1:03:41] David Blanchett: He was. [1:03:42] Mark: He was probably better than Chad. [1:03:45] JD: We'll be right. We'll be back next week. We've got a guest who, believe it or not, comes from the police department. [1:03:53] Chad: We're gonna have an actual police officer on the show the week after. [1:03:58] JD: Police officer? [1:03:59] Speaker E: Yep. [1:04:00] David Blanchett: Why? [1:04:01] Chad: You'll find out. [1:04:01] JD: I don't know. [1:04:02] Chad: We're gonna have a different kind of conversation. Yeah. So thank you. [1:04:06] JD: Thank you, David. Thank you. Thank you, everyone that tuned in. Thanks, everyone. We appreciate it. See you in the after show. I gotta go to the bathroom. Brandon, play.