Bill Schories: 401(k) Reform & DCIO Strategy | Retiroholics

[0:00] JD: So let's get started. Yes to chop our champion. Yes to Acro sin. Of course I know our guest knows how to play both of those games. So if you're new here and you don't know how those two games work, Acro sin or chat bar champion. Well, sucks to be you. Justin, can you intro our guest? [0:20] Chad: Sure thing. [0:23] Justin: Guest today is a former collegiate athlete who holds a record as alma mater of Niagara Agricult Falls Junior College for the longest volley in badminton and being the only student throw to knock out a tennis judge with his racket. He's one of the longest. [0:38] Chad: JD that got me off guard. [0:39] Bill Schories: Sorry, totally took me off. [0:40] Chad: He's one of the longest tenured people [0:42] Justin: in the industry with one of the shortest resumes. He got a start in 93 with AV pension trust operations. After torn ACL sideline his NFL career, he joined the Oppenheimer team in 99 where he started on the sales desk before moving to an external role in 2003 where he spent the remaining 16 years of his life there. While at the desk on the 34th floor though of 2 World Trade center, he thankfully survived the horrific events of 9 11. Fast forward to 2019 when Oppenheimer was acquired by Invesco. He earned the title of national sales director for the DCIO Market. So for over the course of almost three decades, he's had four jobs. Bill, I think most of us did that by 25, so cheers to you, my friend. [1:24] Bill Schories: Nobody else so high. Yeah, but thank you. [1:27] Chad: Well, you climbed to the top now. So. [1:32] Justin: Ladies and gentlemen, the national sales director of Invesco DCIO Market, Bill Shores. [2:02] JD: Bill Shore is Justin. Justin, welcome to the show. Everybody out there, you know what to do. Rate Justin's intro on a zero to ten scale. And Justin, I love this idea of you making up shit in people's intros. Continue on. [2:18] Justin: Damn it, J.D. it's not supposed to be private, man. [2:21] JD: Oh, well, when you go so far as badminton and hitting people with tennis balls, I think it's apparent, but I love it. I gave you a 10, mark. Ruff. Mark gives him a 2.13. Okay, let's go straight to Headlines. And we've got Brandon back today, guys. So Brandon, can you. Can you play the Headlines intro graphic for me? [2:46] Chad: Oh, Jesus. Again. [2:59] JD: He literally recorded that. That son. [3:03] Bill Schories: Wow. [3:04] JD: That was a straight up recording. All right, Headlines, let's go to Nirvana. And a little story that came out. Apparently. Mark, everyone out there, do you remember the little naked baby on the album cover? [3:20] Mark: Yeah, that was such a great album. And of course I remember. [3:23] JD: Oh, that guy, Spencer Eldon is his name. I guess he's 30 years old now. So he was four months when that picture was taken. And he's claiming, hey, this is Nirvana using child pornography, man. Like I, I want some money. Pay me people. I think he's sued like 15 of them. Yes, Justin, I'm out. [3:43] Justin: It's complete bullshit. Because he celebrated the 25th anniversary of reenacting that photo. [3:49] JD: I was going to ask you guys some of that. I was going to ask you some of that, but yes, thanks Justin. He has defin cashed in on that quote unquote fame over the years. I think Justin brings up the most valid point. It seems that, that this guy over the years has cashed in on this fame. I believe he even has a Nirvana tattoo on his chest or something. And so, yeah, it seems to me without knowing anything about it, that he's run out of some money and trying to figure out how he could. [4:20] Bill Schories: I'm surprised it took him this long because the kids that sang Another Brick in the Wall got money, you know, a few years ago from Pink Floyd. So I thought he would have sued right after that. [4:31] JD: The kids that impressive. Is this a joke that's going over my head? No other brick in the wall is just a photo of like a brick wall. Wasn't it with a spray in the song? [4:40] Bill Schories: In the song the kids are singing. [4:42] JD: Oh, no way. Yeah, yeah, yeah, yeah. [4:44] Bill Schories: So they wound up getting royalties because they sued. [4:48] JD: Mark, trivia question. How much do you think Kurt Cobain sweater that's in that picture went for at a recent auction? [4:56] Mark: $2.2 million? [4:57] JD: I don't know. Someone looked it up. I have no idea. Okay, let's move on to other 401k related headlines. John Sullivan has a recent podcast out. The most fantastically fantastic podcaster in the 401k space, you know, behind others like Rick Unser and Josh Idso and whatever, did a interview with Teresa Gilarducci. I hate last names. Shore is Gil or Duchy. Like can't people just have normal fucking last names? And. But it was really interesting and if you haven't checked it out, I really think you should. It's about 16 minutes and apparently I actually wasn't aware of this woman till now. And let me be clear as we kind of attack, or at least I attack some of her points tonight. She's very smart, she's dedicated her career to these concepts. She's a self admitted, you know, scholar, you know, she's not a. She's not in the industry, so to speak. She just thinks about it a lot and does things and works with very smart people and by the way, is a much bigger deal than all five of us combined. So total respect to her. But she is the anti 401k person in a way. Chad, I know listened to the podcast and immediately chimed in on Retireholics, a group chat, saying, let's get this this woman on the show. Because he was. His blood pressure was so high, I'm assuming. And Mark and I were kind of like, no, she'll kick the crap out of us if we bring her on the show. But what I'd like to do today is something a little different. I'd like to grab three different audio clips from the podcast. I'll have Brandon play them for you one at a time and then we'll discuss as a little fun little family discussion around the campfire. Okay. To kick it off, John Sullivan asks her, you once called the 401k an immature, underdeveloped child. Do you still feel that way? And this is what she said? [7:07] Teresa Ghilarducci: Absolutely. And I think that it will never grow up. So it is a child that will never be mature. The system can never meet the nation's needs for retirement security. It works well to create what I've been calling the tale of two retirements. It is a system for the past 40 years that have let the privileged create a good retirement. [7:36] JD: Nice one, Crystal. Nice one. [7:40] Chad: It's two points for Crystal already. [7:42] JD: Crystal pulling up neck and neck with gga. That's a drink. I'll drink for that. Where's my vodka? Okay, Bill, I'm going to go straight to you since you are the valued guest here. First, what do you think she means by immature as an adjective to describe 401k? And then second, do you agree with her? [8:04] Bill Schories: Yeah, I mean, I take her use of the word immature as that we still have more work to do. That's being diplomatic about it. You know, if I go to the other side, it sounds like she's being condescending and, you know, combative with the industry, but I would prefer, you know, to think that she's just saying we still have work to do. What's. What's interesting to me, you know, is that she says it will never meet the needs of the nation's needs for retirement security, but she gives no definition of what the needs are or how to achieve them. So there's a lot left open by that she, you know, taking shots at us as an industry that we still have work to do, but doesn't provide any definitive goals that she has in mind and how to achieve them. [8:51] JD: When I listened to her, if I could try to define her goals and maybe these are too simple, but I feel like she felt like the coverage gap was one. I feel like she feels like because the 401k has only gotten about 50% of people out there that we. That it's failed and therefore it's underdeveloped and. Or immature. And then I want to go to you, Chad, here. She also mentioned that the. What did she say that the. Not the rich people. What was the word? She is the privileged. The privileged have made this thing work again to this coverage gap. So my question to you is how do you feel about those two points? You know, this lack of. Oh, wait, sorry. A third one is she wants decumulation. Right. Which is a fair statement. [9:36] Bill Schories: I was just answering that sound bite. I could expand on the rest of the. [9:39] JD: I'm sure you can. Going to spend some more time on this. That's what I sound like when I have beer in my mouth and I haven't swallowed yet. [9:47] Chad: And that's kind of Bill, to your point there. I was kind of wondering how deep I should go with this answer because she does talk about some of this. She talks about how she felt the pension system was a better version of what we're trying to do now. And recreating that with heavily heavy decumulation in the end would be a big step for our industry. She did. She mentioned in terms of the 401k being a child, she was heavy on coverage. That was the primary point that she tried to make there. And me, J.D. trying to read through the lines what. I think if you sat her down and forced her to give you an answer of what she would create. If she had that magic pencil, I think she would come back and tell you it is. What is it? Australia. That has it. It's a. It's a. [10:30] JD: We're going to talk about it. We're going to talk about it. [10:32] Chad: Okay. [10:32] Bill Schories: Yeah. [10:33] JD: I'll have her describe her solution. So that's a good segue, Chad. I like that. I want to ask Mark first before we go to that segue or the next clip from her this tale of two retirements that she talks about. You know, the privileged being able to use 401k is their advantage, but not the. You hate it when I use this term. So I'll use it today. But not the rank and file. Right. The employees get left behind. I mean, is that True. In Mark's pessimistic viewpoint of the world, you work in the micro to small market, these are the people you work with. Do the 401k plans not work for them? [11:10] Mark: No, I just, I disagree with that. I think that maybe the, as you like to call them, rank and file don't have, maybe they just don't do enough early enough because there weren't enough people like there seem to be now who are looking at this in a [11:34] Chad: bigger picture perspective and trying to get [11:36] Mark: more people going and more options out there. I would just say that it all boils down to a lot of things and her points are somewhat valid to say, okay, maybe people who make more money can save more. That's great. But retirement is relative, right? If your retirement looks like A, mine might look like B. So it's just about like we always say, people engaged, getting. So no, I don't think that rank and file get left behind. But yeah, I think that they, they don't have a carrot. If there's something not there going in on their behalf to get them incentivized to save, they may not and they're going to, they're going to be in a bad position later in life when other people who didn't have that, who had more money could, could do more. [12:19] JD: I think that, I think the question, Chad, we'll get to that. I think we can get to like design and the carrots for owners. And towards the end here, let's, let's go to her clip because I think the next real build out here to this conversation is, is beyond this debate is okay, well what should the vehicle be? Right? So if it's, if it's not 401k and you've got a better solution, then what is that solution? And she explains quickly her concept here. Brandon, we can play this second clip. [12:48] Teresa Ghilarducci: So what's my proposal with the latest version of this is a thrift savings plan for most people. The thrift savings plan for your listeners who don't know but they probably do is the sort of the 401k plan for federal workers. So federal workers have an advanced funded, defined contribution like plan where they have a very limited choice of mostly indexed options, actually all index options and they are automatically put into it and the employer, the federal government automatically contributes. So we have very little opt out even among low income workers. In the thrift savings plan it's well managed with a heavy hand from the administrators. So that the choices, you really can't go wrong with the kind of choices you have and the way it's structured, older people invest in something called the guaranteed fund, the G fund which is appropriate for their age and risk profile and younger people invest in more aggressive options. Options, you know, that's, that's what we all want. And then they smoothly fulfill their, you know, their work obligations, retire and there's an easy deaccumulation option. [14:03] JD: Chad, how do you feel about government run plans? I mean you like heavy handed things, right? [14:12] Chad: Yes J.D. i do. I just wrote in the chat bar. I don't. I did not hear until she mentioned decumulation anything that she stated other than the name of the plan type being different than what the 401k plans are offering now. [14:28] JD: Okay, I left out one part there that in that clip. In her defense she does believe that the government should take the employer match on so so the government would give a match to the employees. She used the 1 to 3% in her own words or whatever Congress approves but that was kind of the bandwidth she gave 1 to 3%. [14:50] Chad: In my mind too when I hear much about the thrift savings plan world and the way in which she describes it throughout that podcast, it continues to lead me back to Social Security. We're going to essentially have no opt out rate. People are going to be forced in. Someone's going to be making a contribution on your behalf as well, which our employers do and there's going to be money there for you. In this case she's saying it's invested in index based funds which is what the vast majority I think 401ks are doing now. But I hear very little difference in her statements there than to what we are all trying to accomplish now. Trying to bridge the coverage gap, keep costs low, offer proper investments for people whether you're younger or need a G fund. I don't think that's an acrosin a G fund as she described which obviously flooded in our industry at this point. [15:44] JD: Mark, you could ring him up, I'd be fine with that. He called it himself. Guaranteed. Guaranteed fun was what she said. Guaranteed. [15:51] Chad: That is an abbreviation, not an acro sin [15:56] Mark: there Chad, the fact that you [15:59] JD: self police something, that's not your decision. Bill. Bill. When I hear her describe her solution it takes me back to the days of black and white TV and like makes me think of like government brutal architecture like I there's so simple like she wants to like we're going to do this and you're going to put you in these five funds and, and it's and it's and she even used the. Which she probably shouldn't use in the future now that she wants to get advice from a bearded drunk guy. But the heavy handed descriptions, probably not a good one. It like scares me the other way. Here we are in a 401k world where I feel like we're constantly evolving. If I could use her analogy of maturity, like geez, we're going from age 8 to 12 to 14 to 16 to 19. Like we're tacking on lots of new things, lots of new technologies, lots of new investment options. Does it, how do you feel about her solution? Does it seem cutting edge or does it seem going backwards? [16:56] Bill Schories: It seems going backwards a little bit. JD and listen, her ideas are noble and they're well intended, but I think she's letting her idea of what in her mind is perfect be the enemy of the good that we've established over the past 40 years. What we have is working and it's working well. It's not 100% perfect, but doesn't work for everybody, granted. And what she I think is proposing is a way to find those forgotten participants or people, the forgotten eligible employees that aren't participating in their plans by auto enrolling them into the government TSP plan. I didn't hear her mention if they would have the ability to get them up. [17:37] JD: Mark, what is that? What is that? Just tax saving plan. [17:41] Bill Schories: Riff savings plan. I got to do my penalty drink. [17:46] Mark: Oh, nicely done. [17:47] JD: Remember, you can always finish your thighs. [17:49] Bill Schories: But I don't remember her saying anything about opt out. And if those employees can opt out, that's not very different than what we have now. [17:58] JD: Right, a good point. [18:00] Bill Schories: And then as far as the investment options, she says that it will work out well, but there's a huge opportunity cost that will be impacting everybody in these plans by not being able to invest in more than five funds. Now, I know there's a bunch of people that think passive is the be all end all, but the object of the game isn't he or she who pays the least. The object of the game is he or she who retires with the most. And if you look at active and international and fixed income especially, it's not even close compared to passive. So I would advise against. [18:36] JD: You're such a bitch, Mark, because you do it in the chat bar. Yeah, fuck you. [18:41] Bill Schories: Oh, okay. I would want a mix of active and passive in any plan. I think that option is crucial on investment gains. [18:50] JD: Good for you. I didn't even think about it through the lens of an investment person like to hear her talk about the limited investment menu, I just feel like when she looks at our industry, she thinks like we're so archaic in terms of investment options. Like we've got so many great options. I feel like we almost have like too many options. Like it's, it's not like it was 20 years ago, but I'm sure she's aware of that. [19:14] Justin: I kind of taken from that along from her comments and tell me if you guys think otherwise. But her main concern was, was obviously the people who can't afford to save, right, that are making, you know, living paycheck to paycheck and we all know that say there's a population of people like that. So I kind of, you know, likened what her complaints were towards that. And yes, she has problems with, with 401k for sure. But Chad, you also brought up Australia's. Was it superannuation or new Asian, whatever it's called. It was really interesting and I've actually proposed, you know, plans for Australian companies and I, when she was talking about the, the company's having a greater role to play here, I actually like that a lot companies over there, they're required to give 9% to every one of their employees, which can help bridge that gap for sure. I do see some value there. But yeah, it's not something we do here. [20:10] JD: You guys are perfect. I was kind of hoping to play this last clip and discuss that because I think you're right, Justin, in terms of her answer right now. Bill brought it up, by the way. You said that she's worried about people who can't save enough. Well, her solution doesn't solve that because whether you have an employer match or a government match, it's still going to be hard for those people to pony up their own money. So that's, that's not the issue at hand. But where I do like some of her concepts is your Australian reference. If, if we could like get the government to pony in money for regular 401k plans these days and, or mandate employers to put in money and then this will be an interesting conversation. Let's have it after her last sound bite because now it's kind of like you're just moving cheese around a lot, right? I mean, you're moving cheese around. Like, is it, are you going to [20:56] Chad: get it through social somewhere? [20:58] JD: It's yeah. And so, but, but it's, it's, it's, it's worth it for us to keep our minds open to new solutions. Brandon, let's play the final clip and Then we'll wrap this up with a little combo. [21:09] Teresa Ghilarducci: They all tell me that the defined benefit system was better. Maybe it wasn't great for brokers, you know, or for advisors, but the defined benefit system where employees couldn't get out of it and they had a, an annuity paid at the end of their working life, was actually better. And that turns out to be true in the data. [21:31] JD: Bill talking about, we're talking about her solution. We're talking about pension plans, we're talking about 401k. I mean, should we be going back to pension plans? Did we make a mistake when we headed to 401k? [21:46] Bill Schories: Ask the employees of Studebaker what happened to their pension plan. Going backwards is not the case. This concept of the good old days when everybody had a defined benefit plan is not factual. I think it's only around 18 or 19% of employees actually received in the private sector received a pension because their companies either were taken over, went bankrupt, or they changed jobs and lost all their benefits. And that's what led to ERISA was talk about it. [22:18] JD: Talk about a coverage gap. Talk about a coverage gap. [22:20] Bill Schories: Exactly. Now they have nothing. Erisa, no, I think he's got three. [22:26] JD: Huh. What's the, what's the defined benefit guarantee and benefit. What's, what does it start with? Pension guarantee. [22:35] Chad: Pension, yeah. I would be, I would be really curious and I forget the term that she just used, but she said that the statistics or the numbers show it. I wrote down a note earlier. I would be really interested to see the percentage of income replacement for the privileged folks versus the percentage of income replacement for those that she would term not privileged. Because I feel like there is a coverage grab. I'm not denying that, but I feel like if you look at the way our current system is set up and the way the pension system set up in the past, that today is no more beneficial for the privileged than the pension system was. [23:14] Bill Schories: It's obviously much higher. There's in doing enrollment meetings for years, you know, if you're making 30,000 a year, Social Security will replace close to 40%. [23:24] JD: Nice, David, nice. Brandon. Brandon, you gotta be watching that chat bar. Find that JAG picture. Sorry, Bill. [23:31] Bill Schories: No, that's okay. Yeah. And if you're making 90,000, it only replaces about a quarter of your income. So, you know, and that was Mark's point earlier. Everybody's retirement is different. And we've always been in a situation where the low income earners don't have a lucrative or luxurious retirement. It's not a birthright to have that. It's just something we all strive for and to have the government step in and supply it, I think it's not the way to go. [23:58] JD: I think. Chad, go ahead. I think you're going to like this. As I started to feel defensive about her comments and her thoughts, I started to look in the mirror at the 401k industry and 401k plans and were these really designed for the privilege? And I started to think like, wait a second, it's kind of neat the way we design some of this stuff. And don't get me wrong, it could be improved. But to force, especially in the small micro market, to force. And that's what she's talking about when you talk about coverage gap, right? To force business owners to put in a safe harbor or to put in an extra contribution to bump up their own savings in the profit sharing is really kind of ingenious. Like you're putting this carrot in front of the privileged, to use her term, to force them to give money to their employees. Like it's not a bad idea. And so maybe we just need to see that to fruition or tweak it a little more. Because I'm all for getting more people into the plan at the lower level, but I'm not thinking that our current way can't make that happen. [25:05] Bill Schories: If we make the retirement savers credit refundable with, you know, and the tax savings that can be had, there's incentive there. And then if you throw on, you know, with the match, if that doesn't get people in and then the state plans, I don't know how much more we can increase coverage, you know, with what we've done, people always opt out. [25:26] JD: Hackler's got a great point. Like cash balance plan aside, like, you know, putting away 50, 60 grand isn't necessarily, it doesn't help the privilege. Like these things are kind of a little low for them. But Chad, you're going to wrap this subject for us. I mean, current design, current incentives for owners, current design options that are available out there. I mean, is it such a bad world? [25:48] Chad: No, I don't think it's a bad world for the owners and I don't think it's a bad world for the employees either. In the way we have this system structured, it's designed to help people save. It is designed to force employers to give something to the employees. The amount that they have to give to the employees is dictated by what the privileged is trying to save themselves. The age and the income variance. What I Do think we have an issue with is coverage. And someone had just mentioned up there that employees are 12 times more likely to participate in an employer sponsor plan than they are to save on the outside. Nobody's debating that. I love that California has implemented Calsavers. I completely agree that. What I don't agree with is taking what we are all doing and trying to push it into another government offered system. We have Social Security already. People talk about how that's failing. We don't want to. And she talks about this in the conversation. I don't feel that us relinquishing this, the private side of this business, to the government, to our government is the right next step for this industry. [26:58] Bill Schories: I see the costs exploding over what she might be projecting, JD because let's say she implements a plan where employers can say, okay, I'm going to put my employees in the TSP and the government's going to match 3%. All the existing. I'll finish my thought. All the existing plans out there that are matching 4% might say, well, the heck with this. You know, it's only a 1% difference. I'm shipping my plan. My employees can get 3% from the government. [27:29] JD: That is phenomenal advice. You gotta be really careful when you start to try to do new things. Those might impact old things. And that's a, that's a good point. I'm Chad. This is time for the Chad yellow notepad moment. I'm an advisor out there. I want to walk away with an actionable takeaway. You know, what can I do? What have I been taught by this topic, Chad? [27:53] Chad: Geez. By an advisor walkway. The first thing I wrote down was naked kids equal money. Don't know if that was a good takeaway from the beginning part of the conversation. [28:02] Mark: Chad, you want to get rid of [28:03] JD: that note real fast? Burn that note. [28:09] Chad: Here would be my takeaway from what we just heard is none of us should be complacent and believe that what we have right now is what should be here 20 years from now. We all need to be willing and open to listen to what other people have to say and to continue to evolve and better not only what we're doing for the employees, but what we're doing for this industry as a whole. There was a mention earlier that in the chat bar that this business is still seen in a negative light, that we're trying to climb out of that, that hole that we've been put in for a long time, even though there are many of us trying to do what is right. [28:48] Mark: All those privileged people. [28:50] Chad: All those privileged folks. So we need to continue to be open and say that what we're doing now may not be right for the future. And we need to continue to personalize this business and try to help people. [29:00] JD: Love it. [29:00] Chad: Be the takeaway. [29:01] JD: That's a long note, Chad. [29:03] Chad: That wasn't a note. [29:04] JD: That was a new day. Come on, Bullet. [29:08] Chad: Okay, I'll be quicker next. [29:09] JD: Next time a good one might have been. [29:11] Chad: Look up. [29:12] JD: Don't. Don't post naked when you're a four month old baby. Okay, let's spin the wheel of ice. Let's spin the wheel of ice. It's like a tweak. [29:20] Mark: So many characters and you have to [29:21] Chad: use hashtag [29:24] Bill Schories: integrity wheel. [29:27] Chad: Oh, he's been watching. Go to the integrity wheel. To me, it gets on a hot streak. JD is on the streak now. [29:38] JD: Safe. It's been a while since a. Since. What do we call them? We don't talk about Frozen Maker. Okay, topic number one. I was like, when Brandon. We need Brandon to talk more. I get excited when I see topic number one. [29:54] Justin: If we really want. If we really want frozes, Brandon should do two froze followed by one. [29:59] Chad: We don't really want froze. Okay, I don't need to go to bed at 8 o' clock after these [30:03] JD: shows as I pound this beer. Bill. Defined contribution investment only. What is it? And then to back it up, because I didn't know what it was early in my career, I was like, what the heck are you talking about? When I use that acronym. And to back it up, how can advisors and TPAs best use their local defined contribution investment only? Oh, dang it, peeps. Yeah, okay. And how can they take advantage of them? I will go to vodka. Then I'll pound this go. The floor is yours, Bill. [30:38] Bill Schories: Well, don't take advantage of them in the sense of the word that there's a misconception out there that the defined contribution investment only consultants are there as a credit card. I've heard it on the show. I've heard it at conferences. That is being abusive and looking at this side of the industry as a resource to be exploited rather than a resource to form partnerships with the way that. [31:06] JD: But I love those steak dinners. I love those steak dinners. No, you don't. [31:09] Mark: No, you don't. [31:10] Bill Schories: The steak vendors are there for true partners and people that have earned it on both sides. You know, throughout my career, I've recognized that advisors don't want to see me. They don't. No advisor goes to the office saying, gee, I hope A wholesaler knocks on my door today. That's the one thing holding me back is my inability to find a good fund. I hope somebody solves that for me. That that's not what you should be doing. If you're out in the field wholesaling, you have to find how you're going to become a partner with that advisor and make him or her want to take your call, want to take your meeting over and over again. I position myself as a product agnostic employee retirement income security act consultant. I don't care where they do their business, whether it's nationwide, Empower, Transamerica, adp, whoever it might be, automatic data processing, Whoever it may be. My job was to help them find plans, win plans and keep plans, whether it be through 5,500 in depth reviews and dives, competitive information coaching sessions on how to present to boardrooms and demonstrate their value. So the industry as a whole is really looking to partner with advisors to be product agnostic consultants. And in return we're asking for one or two fund slots in the menu. It's a very competitive space but we're there for the advisor and our record keeping partners. [32:44] Chad: JD there was a comment just made so we should, in case it wasn't clear the defined contribution, investment only, I would state that that is an individual with an investment company that's job is to make sure they get positions inside retirement plans. Fair. Okay. [33:05] JD: There's some positions and, or, and, or assets. Yeah, yeah, yeah. [33:09] Chad: Positions is obviously you want assets and you're looking for transfers but I think positions is what most are pushing for. They want to be on that core menu, they want to be in that target date suite, so forth. [33:19] JD: 100%. 100%. [33:21] Bill Schories: And it has to be earned. [33:23] JD: And like Bill was answering, which is kind of classic, which Bill and I talked about this before. It's kind of similar to us. Like Bill runs, what is it, eight, nine people across the country, these wholesalers in different regions, these suit and ties that are running out there doing this. And to reiterate what he said is I think he's teaching them, hey, your value is not to show up with a fund sheet and say we've got the best large cap value fund out there. Their value is kind of like yours, Chad and Justin and Mark is to get in there and say how can I help you succeed? How can I help you be stronger in a point of sale? How can I help you retain your clients through better presentations on how things are going. How can I keep you up to date on regs and stuff. So let me ask you, Bill, to dive a little deeper. If I'm an advisor in some geographic area like, I mean, how many defined contribution investment only people should I be partnering with and do I just give them a call and shoot them an email and you know, I mean, how does that work? [34:25] Bill Schories: Yeah, if I were in the advisor space, I would look to partner with three or four at the most. You can't be a good partner to 10 people. So pick the three or four of the fun families that you know, you prefer, that you respect, that you like the way they manage their assets and contact their wholesalers. I almost went on the acronym and see what they have to offer and if they don't meet up to your standards, put them on the side, go with another one. [34:54] JD: Will the T row guy get or T row person get mad at me if they, if he or she sees me out with the Invesco person, like is that going to be a problem? [35:03] Bill Schories: It should motivate them. [35:06] Chad: That's a sales director right there. [35:08] Bill Schories: It should motivate them. Absolutely. I mean you have to earn the partnership. It has to be mutually beneficial. That is the pure definition of a partnership. No advisor is going to walk out of a finals meeting and say if I only had a good large cap value fund, I would have won that. That has never been said. But hey, if I didn't know about the retirement savers credit, if I didn't know about health savings account and the benefits that they can provide and different strategies for, you know, adult children that can no longer be claimed as a dependent. If I didn't know about, you know, new comparability, you know, this is where you can partner with a product agnostic consultant to guide you and say, hey, you don't have to move a plan to win a plan. You can keep it where it is, go for, you can move it down the road. But Bill, all these coaching things about winning business. [35:56] JD: But Bill. And then Chad, I'll let you kind of wrap this little segment. But Bill, you know what could really inspire them to do well in their job as an advisor is if you know, really expensive bottle of wine and [36:09] Chad: around at a great golf course, steak maybe. [36:14] Bill Schories: Well, listen, that's not. [36:17] JD: Chad, did you want to wrap this one up? [36:19] Chad: Yeah, I was going to say from my perspective, Bill, when, when I tell advisors to search out defined contribution investment only partner, I tell them two things they should be looking for. One, that you know, you trust and believe in the fund methodology behind it, good investments. The second is you look for someone who's super knowledgeable, because I do believe you're a, you're an agnostic resource that has so many different tools to leverage from the different record keeping keeping providers, from the different TPAs. And there's been some fantastic. Ah, damn. Yeah, I heard you, Mark. There's been some fantastic relationships that I think have helped advisors grow their books quickly because they find the right person and say, help me figure this crazy business out. [37:05] Bill Schories: Right. And that dynamic changes as you go up market. The elite advisors out there don't need the consulting as much because they're getting the support from the home office because they've accumulated the knowledge for 20, 30 years to become successful. So the partnership takes a little bit of a different dynamic and becomes more of what's in here around competitive information and the tools and resources that our firms provide. So it shifts depending on the advisor that you're speaking to. [37:35] JD: I guess we'll call that the. That was the Chad, the Chadwick yellow notepad moment and a good one. [37:43] Mark: You can't. That was not, that was not at all. [37:46] JD: Give us, give us one Chad and like, like eight words or less. Take away from that. [37:51] Chad: Dude, I just gave it to you in 20 seconds. [37:55] JD: No, Mark said no. [37:56] Chad: Advisors with, using, with leveraging a defined contribution, investment only person. [38:02] JD: They're good. Great. [38:03] Mark: So if we, if we can stay on the topic just for a second longer. I'm just wondering. You obviously, like we said, getting a sliver of the fund lineup is where they want to be. But again, we live in a world too. I would call that like in our world, like a startup plan. Like we want those small plans too. We want to get those off the ground. But a lot of guys are looking for takeovers, right? Big thing too would be, hey, maybe you have an underperforming fund that we offer over here so we can get this and get that fund replaced by us and transferred over. I mean, that's what I'm just curious. Is that the money generator for these guys? What are they hungry for? Because being in a lineup is one thing. What if, what if they're one of 35 funds that nobody cares about? They don't want to be in the large. You have 10% of assets going into that. Maybe that's high. [38:55] JD: I don't know. [38:56] Mark: Depending on plan. But what are they really looking for? [39:00] Bill Schories: From the wholesaler point of view, doing this for 20 years, I didn't look at individual plans. The advisor is my client. The third party administrator is my client. So if you came to me with a startup plan and wanted my assistance with it, I would gladly do it because I'm going to be there for the next piece of business that comes down the road. I partnered with three third party administrators in my territory for 20 plus years and work with them on advisor selection, coaching their advisors. Yes. To get funds in the menu. That's what pays, you know, that's how I earn my paycheck. But it's a long term game. You just don't do it for one plan at a time. You're building partnerships over the long run. So you do the little things that add up over time and then you just become their go to guy for anything. When they pick up the phone they can call anybody. When I was at Oppenheimer and then later in Vesco, they could have called MFS [39:54] JD: and Bill. Drink up Mark. That's a fair answer from him because I can make the same comments about you guys like will, will Mark get. Will Rogue Guy get paid more if next week he sells a $10 million takeover? You will. But you don't drive your everyday Monday through Friday focused on that. You go out, you support advisors no matter if it's a startup or 200k. No, he doesn't. Of course not. [40:21] Mark: Guys, I get a phone call. What is this? No, no. Hang out. [40:26] Bill Schories: And there's, there's capacity issues, Mark. So you have to be selective. But with the right advisors who you know are doing business with the right third party administrator shops who you know will be good partners. You can't be myopic and look out for the one trade that's putting your own interests first. And if you're going to be successful at this. Because everything we do is built on trust and relationships. You can't put yourself first. You have to put the advisor or the third party administrator or your record keeping partner first. The numbers take care of themselves. If you do that. Yeah. [40:56] JD: Scoreboard will take care of itself. I totally agree with that. Sometimes I just feel like only I can say that as a small business. You know, local small family owned business. How dare you say those same same things as this large Invesco company. But no, that's not true jd. They can run their practice the same way you've run yours. And those concepts you're talking about are true to the core. They work. Yeah. It leads to success. It works. It works. So I love it. I love it. Let's break it up with a little bit of fun, then we'll head back to a subject. No fancy graphics here. I just want to play a little Nirvana trivia. It's kind of a Nirvana theme that's going on here. So I've got some Nirvana questions for each of you. I'll start with you, Chad, because I know what a hip alternative music guy that you are. [41:45] Chad: I know it all, Chad. [41:48] JD: Nirvana trivia question to you and audience. Go ahead and chime in your answers as quick as you can, Chad. You know the drill. Don't look at the chat bar for this. What is the name of the Nirvana song? This is an easy one, Chad. That has high school cheerleaders. And it's a music video. I mean, it doesn't get any easier, but I knew you'd get it wrong, [42:14] Chad: so I thought I'd ask you about a girl. [42:20] JD: Nice guess. I love it. I love it. [42:22] Chad: I feel like three Nirvana songs. [42:24] JD: So as. As Mr. As Mr. Schmedium put in the chat bar. You got it correct. Smells Like Teen Spirit. Phenomenal. Iconic video, Chad. As. As. As my partner and work, my brother in 401k, I command you, friend, do [42:45] Chad: not phone a friend. No music related to me. [42:47] JD: I command you to watch that video some point in the next 24 hours and soak it in. All right, Mark, we're going. And if you just get this within, like one year on either side, I'll call it a victory. Okay, one year on either side. What year did Nirvana release their first album? [43:12] Mark: Oh, God. [43:13] Chad: First. [43:14] Bill Schories: That way. [43:14] Mark: Hold on. [43:15] JD: First album. I'm not the chat bar first. [43:17] Mark: I'm like, like non major label. [43:21] JD: No, I'm first album. [43:23] Mark: All right, because I'm gonna go 89 you. [43:26] JD: Such a cheater. Yes. I'm not looking. Okay. Congratulations, Mark. 1989. 1989. [43:34] Mark: Honestly. My first. My immediate guess was, honestly was 91. For some reason that just popped in my head. [43:39] Chad: So why Nirvana theme, by the way? Why is this a Nirvana theme tonight? Am I missing something? [43:45] JD: Well, we talked about the baby's penis earlier, so I just wasn't sure if, [43:49] Chad: like, Bill's really into Nirvana. [43:51] JD: No, no, Just having fun. Okay, having fun. Coincidentally, 1989, the same year I graduated Harbor High School in Santa Cruz, California. Justin going to you. Oh, shit. I didn't write the answer down, but I remember it. [44:09] Justin: What's the question? I'll Google it. [44:10] JD: What is Nirvana's best selling album? I remember. I know. [44:14] Mark: Never mind. [44:15] JD: Yeah. What? Why? No, answer the question. You can't. Never mind. [44:20] Chad: That's the goddamn [44:24] JD: funny. A little mini who's on first version. That's all. Congratulations, Justin. Great job. Great job, Bill. I'm going to take it easy on you since. Since you're a defined contribution investment only guy from New York, I'm going to go true or false for you. Not that those types of people would be any less intelligent than other people. That's. I just felt like you wouldn't know about grungy, like music where people died of. Anyways, [44:53] Bill Schories: thanks. [44:55] JD: Where's Bill's question? True or false? There were at least five different drummers in the band before David Grohl. [45:05] Bill Schories: False. [45:07] JD: No, the answer is true. It's true. How is it just trip as I looked online too and it's like there's some like don't quote me on this but like they had like 17 different band members over the course of like. Yeah. And you kind of. You think of the ones. But so anyways, check that out. If I'm wrong, there was one time I as a fun fact, I was at a conference, a 401k conference, and I went up to Jeannie Fisher. I really didn't know her that well. And you guys were with me or at least one or two of you were. And I said, hey, answer this trivia question. We'll give you retire holic swag. At the time, no one really knew who we were and she didn't really give a shit about the swag. And I asked her about the height of the needle in Vegas or something and. And she answered and I said, no, you're wrong. And she was pissed at me and she's like, no, I'm right. And I'm like, no, you're wrong. And literally for two days she was telling me, no, she's right. And. But she was wrong. She got the question wrong. [46:02] Chad: So anyways, thanks for sharing that. Jd. [46:05] Mark: How does that have anything to do with what? [46:07] JD: I don't know. It just came to my mind and sometimes I like to wing things. Bill, I've been in some fiduciary review meetings and I know you have too. And I know that you actually sit in on some non related to your job just as an individual helping out. But I've been in some big ones and my advisor uses say a retirement plan advisory group methodology or a. We never solved this 1. A. 362 letters before. 3 hundred and sixty. Is that an acronym or not? [46:43] Bill Schories: It's not an acronym. We've decided that on an earlier methodology. [46:46] JD: Thank you. And so let's imagine just a fund is ranked from 0 to 10 just to keep it simple. And I've sat in these meetings and the Plan sponsor, the decision makers, the chief financial officer. Apparently I'm still sober. This is good. Says. Says, hey, look, I get all this stuff, but here's a fund that's a seven. Why don't we replace it with a ten? I don't understand. I care about my employees. I'm trying to act in their best interest. I want all tens on this bitch. That wasn't what they said exactly, but you get my drift. How does the advisor respond? Bill? [47:28] Bill Schories: This could be a length of response, but I'll try to contain container. The tens, the sevens, the twos, those are all representative of what's gone on in the past. The job of the advisor is to have the best fund lineup for the participants going forward. And when we do investment reviews, the quantitative side is a measure of what's gone on in the past. But the role of the advisor is to add the qualitative side. Chad did a really good job of this a few weeks ago when Carrie Ohm was on about talking about advisors becoming more reliant on the home office and are at risk of reducing their intellectual capital and adding value to their clients. This is where the advisor really needs to step up and add value. Because you're right, the initial reaction of the general population is why don't we have all 10s? What are we doing with the 7? So when we look at the fund choices in the core menu, the first step is to define what purpose that asset class serves. So let's look at an example. Large cap value. Why do we have large value in a plan? Well, most people would say that's our conservative equity play. But over the past 12 years, growth has been in favor 10 of the past 12 years. So what's happened is a lot of large cap value funds have drifted into the blend space and the ones that stayed true to value are now scoring 7 instead of 10 because they didn't chase performance, they didn't take on the additional risk. [49:02] JD: Style drift. [49:03] Bill Schories: Yeah, style drift. Taking on more risk. You see it in far and large growth where your far and large growth fund will have a large exposure to emerging markets. Well, the plan probably already has an emerging markets fund. So if you have a 7, the advisor has to explain why it's a 7 and why it makes sense. The robos out there, the automated 321s that are acting as co fiduciary for thousands of plans, will provide the scores, but they don't provide the why. That's the value of an advisor is telling that committee the why. The 7 makes sense going forward because 10 may have taken on two risks. 10 may have drifted from its objective a little bit. The 10 might be doing something different than what its intended purpose is for that asset class. And that's why you need an advisor to be able to articulate the goals and objectives of each asset class. And that's why the investment policy statement and I see a lot of advisors do this upscale, top of the market advisors doing this where their decision making is made by the scores. Well, you don't need an advisor if that's the case. I can get a high school kid to say look at this report which ones pass or fail. You know. Oh, those are. These go to 11. [50:19] JD: You know Chad, you got a different. You got a different. Let me interrupt our guest. You got a different take on this? [50:26] Chad: No, not necessarily different. I was going to say it would be interesting to look and see how many sevens outperformed tens moving forward over the next two year period. For example, how many fives out before the tens. [50:41] Bill Schories: You can do that. You can do that. Looking at what happens to five star funds on morning. [50:46] JD: Yeah, same kind of thing. I kind of have a, I kind of a slightly different take. Go ahead. Sorry. [50:51] Chad: The only other thing I was going to mention is a personal story with an advisor who I felt like made the most compelling argument as you were doing there Bill, to not just following the numbers. This advisor sat into a fairly large plan and when they were asked that question like why do we need you if you're simply using a methodology, the advisor sat back and said you need me for the intellectual capital that is supporting the methodology. So what do I do on an annual basis is I sit with all my money manager, my fund partners and we discuss the investments that I think I'm planning to use my portfolio for the next 12 months. And we talk about where they see this going. And he said often I get to sit with the actual manager themself of that mutual fund and I get insights that I otherwise wouldn't be getting. That is why you want me on this plan? Yes. Am I using the metrics to help keep us on track to follow an investment policy statement? Indeed I am. But I'm also spending a significant amount of time educating myself on where they are intending to go with this fund moving forward. And I felt like that was the best answer I heard in 10 plus years. [51:57] JD: I like the two messages here. And part of that Chad is prior notepad takeaway here. But I like the active advisor that plays a role in it. And you're not just using that methodology. I think that's cool. But when I was confronted with this, and it's happened a few times in my career, my answer was simpler. And it was kind of like, look, you have an investment policy statement and you have to follow that investment policy statement. I mean that's a big, big deal. And so your investment policy statement references a certain methodology, right? And so whether it's a 10 or a 5 star or Sherry mentioned that 3,6F I can say it FI 360, kind of does it a different way. It doesn't matter. The point is, is that your investment policy statement says, hey look, when a fund drops below a certain level, we'll look at it for review. And if it drops below that for a certain period of time, then yeah, we'll consider removing it. But the reality is that those rankings, Whether it's a five star, a color or a 0 through 10, it could measure expense ratio, it could measure management tenure. It can measure all kinds of things that aren't necessarily backward looking or performance looking. Like performance is a certain part of it, obviously qualitative, quantitative. And so my point is, to your point, Chad too, is that just because you're a 7 doesn't mean you're going to underperform a 10. And so to that plan sponsor, I say a 7 is almost as good as a 10. It's met the requirements of your investment policy statement. And that's your job, which you do not want to do, but you do not want to do is create a habit of moving funds that have not fallen below your investment policy statement requirements just because you're chasing 10s or 9s or whatever, that's a bad habit to start. [53:53] Bill Schories: And what every advisor should do is when you're recommending removing a fund, also give the plan committee a reason to keep the fund. It shouldn't be all we have to remove this fund because of the next three things. Also give them a reason to consider retaining the fund. And the key word JD you use with the investment policy statement is consider replacing, not we will replace. And so many advisors out there use the investment policy statement as the decision maker. It's supposed to guide the decision, not make the decision. [54:23] JD: Because shouldn't paint you in a corner either with a. [54:28] Bill Schories: It should be general because if what you're doing can be replaced by an app, you're not long for the, for the business because everything's becoming automated so you have to bring the qualitative stuff to the table that they can't get from a robo that they can't get from an app. Otherwise they're going to go that way. [54:45] Chad: Interesting thought that pop into my mind, JD Regarding the tens versus the sevens. And I'm gonna. I'm gonna make a sports analogy because you guys know how my mind works. If you came to me and said baseball, Chad, you have to pick a hitter that is going to perform the best. [55:00] Justin: The team. [55:00] JD: The team. Go team, go sports. [55:03] Chad: Thanks, Mark. You have to pick a hitter that's going to perform the best over the next month. If I see a hitter has been hot for the last month and they've hit.500, I'm not going to pick them to be that person for the next month. [55:16] JD: I would. [55:17] Chad: Statistically, it has shown us they're not going to know. You're right on the freaking season when [55:21] JD: someone's due or they're not do I got you? Yeah. [55:23] Mark: So when the roulette goes all black for the last nine rolls, you pick red and then you promptly lose all your money. [55:33] Chad: Don't bring back bad memories for JD [55:35] JD: Mark, I think Sherry saying maybe hot doesn't exist in the financial markets, which maybe I'm going deep into her comment. But this, this, this topics yellow pad notes has been brought to you by Bill, who will step in for Chad because he said, hey, if you're going to remove a fund, also give them a reason to keep it. Well said, Bill. That was. That was solid stuff. Let's go to chat bar champion. And Chad, since you look eager, you can vote first. [56:05] Chad: Most points on my board right now is Crystal. [56:08] JD: Crystal. Okay, I'm going to go with Daniela. Moist, but she's left. I know. Oh, can't. Right. She's gone. All right, I'll punt to Justin. [56:21] Justin: I was going Crystal too. [56:23] Bill Schories: Sorry. [56:23] JD: Okay, I'm gonna go. I'm gonna go. Gigi. And I'll drink for that. I'll go. Greg Greenfield. Mark. Yeah. [56:33] Mark: I'm Greg. All day today. Greg. [56:35] JD: All day. And Bill as our. [56:37] Bill Schories: As our honored special guest, he had me at hello. With stories with shores. I'll go with Greg. [56:45] JD: Lovely. What was the Tom Cruise movie you had me in? Hello. What was that called? Show me the money. [56:53] Chad: Yeah. [56:54] JD: All right. Brandon. Those are our God. He's quick to the trigger. That is quick to the trigger. Put those in while Brandon puts us in. [57:06] Justin: Sorry, I was looking for that. [57:09] JD: Crystal. Greg. Crystal and Greg, I think, right? Yep. [57:14] Chad: Yep. Okay. [57:15] Mark: Yeah. [57:16] JD: It's a man on the woman. Head to head match. Vote it up, people. Vote it up. [57:26] Mark: Thanks, Brandon. [57:28] Chad: Jeez. [57:31] JD: Have I ever told you on the show that sometimes I have to pee? [57:35] Chad: I have to be real bad right now. [57:36] JD: JD and the winner is the greatest of all time, Greg Greenfield. [57:47] Mark: Look at how close that was. Geez. [57:51] JD: Solid. Solid. [57:53] Mark: One vote. [57:55] JD: All right, Bill, thank you so much. Thank you for joining us and giving us your thoughts. Everyone out there that tuned in, you know we love you. Thank you so much for spending this time with us. You know what they say, Mark, I didn't mean to steal your thing there. Actually, that came off quick to the trigger. Brandon's as sober as I am right now. I'm about to get drunk in the after show. What they say is the after show is usually the best shit. So if you've stuck around and hopefully Bill will stick around with us and we'll just figure out what we're going to talk about. Brandon, play us off some music. Everybody, thank you for tuning in. I'm gonna go to the bathroom, and then we'll kick off the after show. [58:43] Chad: What is this? I don't know, but I got a tea.