Managed Accounts vs Target-Date Funds: Sage View Consolidation

[0:00] Chad: Smells good. [0:01] Speaker B: Yeah, it tastes good. Is there not more Mick Ultra up there? [0:05] Chad: No. Oh, there's those Mountain Dew drinks and then there's the Go Kart drinks and then there's some other random beers. But. [0:30] JD: Really, [0:32] Mark: I mean, of all people to show on the dance floor. It was me and not J.D. [0:37] JD: okay, I was. That was me on the dance floor. Welcome to the show, my 401k friends. My favorite 401k friends. We're going back to the standard deal. Straight to the headlines we go. Headlines. Brandon, you don't have time to mess around and banter for the pre show. Some of us got Little league games to get to. Are you allowed to go to Little League games after you've been drinking? Don't answer. Yeah, okay. This first one comes close to home. I live two doors down from the parents of Tony Franc. And the news has just hit. Sage View has acquired the founding team of retirement plan. No, I'm trying not to do the acronym. The acronym flows right off my tongue. Retirement Benefits Group, which is a Southern California firm. Plain Advisor magazine is where the article is. It's Tony Franchimone and Larry Dethridge they were going to bring along with them to Sage View. Corey McCarthy. Do you remember him? Justin? Yeah, he's a cool cat. We sat down with him when he was kind of beginning. [2:05] Speaker B: Just started like four months in. Yeah. [2:07] JD: So he's sticking with them on their way to Sage View. Winston Ventura, who apparently is more kind of like their wealth management side guy. And then Rachel hall, who's part of their team. Tony and Larry have 5.2 billion in assets under administration, also known as their 401k retirement plan side. And then 63 million in assets under management, also known as their wealth management side. This is the 9th acquisition since July of 2021 when remember this name. I've been bringing this up when Aquiline Capital Partners remember the conspiracy theory when they took majority stake in the firm. Sage via So9 acquisitions since July of 2021. And this is with Aqua Line Money. Sage you currently has just south of 2000 plans. They did not discourse discuss. They did not discurse. They did not discourse the terms of the sale. But it's supposed to close on June 30th. I like what Kush is saying here because that's where I was going to go next. Kush. If you know retirement benefits group, this might seem confusing because there's a lot more names. Kush is saying six partners give you. Shoot. What's the name? [3:38] Speaker B: Michael Kasner. [3:39] JD: George Frazier is one of them. And I think George Frazier was quoted in this article at the bottom by saying, Mike Kastner, thank you, Kush. As saying, hey, Justin. [3:48] Chad: Definitely that first. [3:50] JD: Oh, sorry. We are still. Wait, no, Mark, you're supposed to ignore when Justin says things. [3:58] Mark: I can hear him through the wall next to me. [4:00] JD: So bottom line is, within this firm, obviously these people kind of have their own books and they're free to kind of go with their own books if they want to. And according to George, the remaining retirement plan group people are still One Digital affiliates. They'll still continue there and continue doing business as normal. But they had not. Tony and Larry had not yet sold to One Digital. And I'm not even sure the rest of the people have sold to One Digital yet. I think they're still just an affiliate. Someone check my facts on that. But now Tony and Larry have cashed in and, and they are with Sage View, so it's pretty interesting, huh? [4:45] Chad: Yeah. Did you, I didn't hear. J.D. did you say how long Sage View has started this acquisition phase? Like how long ago was that they got the dough and the bag? [4:54] JD: No, they're just saying that since Aqualine took majority stake. And that was July of 2021, so two years. [5:01] Chad: That's what I was trying to remember back because they've made some, some big waves in the last, I feel like 12, 18 months that I didn't see them in that market before. You know, you had your hubs, you had your 1 digitals. I didn't see Sageview there. And now they're pretty constant. [5:16] JD: No, I definitely think you're right, Chad. I think you can start to add their name to that small list of what, for lack of a better term, we would call kind of aggregators or whatnot. National aggregators. And again this, because they got the pockets of Aqua Line and all the, the mysterious people that exist there. [5:35] Chad: You should give them a ring, JD See if they want like this massively blowing up. Awesome. Third party administrator shop. No, get some, get, get some, get some backing. No, they don't get acquired. They just get a minority shareholder for like 30 billion and then we'll just go out and spend it all. [5:53] JD: Yeah, I was gonna try to do the math. [5:56] Speaker B: Make some more. Make some more movies. [5:59] JD: I was, I was gonna try to do the math on, on what the price might be based on the number, but I didn't get time to do it. [6:07] Mark: So just guess, just guess. [6:10] JD: I just wanted to do an actual gas, but I don't know what do you think they're making. That's fun, Mark. Let's have some fun with it. What do you think they make on 5.2 billion in retirement plans? What kind of revenue are those two making on that? Take a guess. You know, I don't. [6:27] Speaker B: Plans. [6:28] JD: 5 mil? 10 mil. 5 mil? 5 mil? [6:32] Chad: I. I would have said more than that. [6:35] JD: 10 mil? [6:36] Chad: I would think so. [6:39] JD: Yeah. Sampo's here. I don't know. I definitely think they've sold for several million dollars. What's their EBITDA they pull from that? I don't know. I hate to guess. I hate to guess on those two guys. Kind of annual income, which is kind of like what they're. They're. That acronym I just used would be. [7:02] Mark: What you got there? [7:03] Chad: I don't know. What is that, jd? [7:05] JD: It's the crack in a tax. Oh, no. [7:08] Speaker B: Yeah. So just by that math alone, what do you think in 40 mil? Just if we went with five rev or. No. [7:16] JD: Who's saying 40? Who just came up with 40 million? [7:19] Speaker B: I'm thinking seven, eight times. And what's. What's the going rate right now? [7:24] JD: More than that? Yeah. [7:25] Speaker B: 10 times 13. [7:27] JD: But I don't think they're. I think they're more like. Yeah. 20 mil, maybe. [7:33] Chad: I would. I would think at least. [7:34] Speaker B: I guess it would be there on [7:36] Chad: that big of a book. [7:37] JD: I'll lock in on 20 mil. Maybe it's more. Speaking of horrible drinks, like the Kraken attacks Las Vegas. I would like everyone right now in attendance to please take a moment, cross your fingers and pray for James Douglas Carlson on the Wheel of Ice. Because if I lose again, I'm gonna be pissed. It's been like seven times in a row. Brandon, spin the Wheel of Ice. The wheel of. I can't be. [8:14] Chad: Gotta be. [8:14] JD: You can't. [8:15] Chad: Gotta be. [8:16] Speaker B: You just keep going the rest of the year. [8:20] Mark: No, that's Malort, everyone. [8:23] JD: Malort. [8:25] Speaker B: It's like Chad knew about this. [8:27] Chad: I did just hand you that. Hold on. Is it only Malort? Yeah. [8:35] Mark: What is this? [8:36] Chad: Oh, I thought it was Malort. Nice. [8:37] Mark: I thought it was like one of the. What do we used to. Combine makers. [8:41] Speaker B: Call the girls. Tell them to bring some wine down [8:43] JD: or some wines down. Cheers me. Can you. Cheers me. [8:45] Speaker B: Cheers. [8:46] JD: Pink. To the side. To the side. Okay. It's been a while. [9:00] Chad: Oh, Brandon got in it, too. Welcome, B. [9:05] JD: Okay. [9:07] Mark: Wow. [9:08] JD: I used to say I like that stuff, but it's been a while since I had it. [9:13] Chad: Mark, if you want to wash it down with the Vizzy that expired In April. Go ahead. [9:18] Mark: Yeah, alcohol doesn't go bad. [9:21] JD: Our boys, our boys. Nevin and Fred have a new podcast. They focus on managed accounts. Love, let me see. There's some interesting things they talk about here and I'd love to get your guys's thoughts on it. Manage accounts in 2021 grew by nearly 24%. But apparently not all advisors are fans. Nevin referenced a summit insider which is think a conference they do survey that they put out to financial advisors. And last year and this year more than half of the advisors surveyed called managed account services a negative game changer. And in years prior to that they actually answered that question in the opposite. They always answered it saying yeah, managed account is going to be this great thing for our industry but in the past two years the majority of them are saying no, no, this is actually a negative for our industry. When they, When Nevin asked Fred why he thought this was the case, he thought that maybe the fuel to the negative opinion was that there was a desire of advisors to make more money. And I think when he says advisors he's probably thinking of the bigger aggregator shops to make more money on these types of offering. He went on to say that if all you know is age and account balance when you're creating this managed account service, which I think a lot of them are built off that kind of basic data, then he thinks that it's hard to justify a higher fee. And then one more thing before I get your guys thoughts. Nevin used this term that I never heard before but I kind of liked and it wasn't his words. He was quoting someone else. He referred to manage account services as an expensive target date fund. In the negative it's like, oh, interesting. So Chad, we've talked about this before but it sounds like the industry as a whole isn't all gung ho about managed account services. Does this shock you? [11:38] Chad: No. And yes. In some ways I'm going to say no. What shocks me is the timing of the transition. Why now versus a two years ago, three or five years ago. The statement of it's an expensive target date fund is something that I've been arguing with you and others for a long time and I've always used the term if you have a tactical money manager that has leeway in their exposure and how much cash they had, then they're actively managing that portfolio, then I think that, that it could be reasonable to say it's worth the cost. The problem is many of the managed accounts that have come out lately are just what you described There an expensive target date fund. It's not actively changing the holdings based upon market volatility or where they see things. It's diversifying and often it's diversifying based upon the core menu investments. And then, and then they're setting up a few little suites like trigger points to what might change the holdings. But it's not practical in any way. [12:40] JD: You said that historically and I, I think it's kind of interesting because I think as someone who lived through a lot of Those managed accounts 15 years ago, sometimes the tactively. Sorry, what's the word Tactically doesn't work out so well I think a lot of times. So I don't necessarily know if I agree with you that just because someone's actively trying to change the diversification or the different investment holdings makes it all that much better. [13:11] Chad: What are you paying for? Tell me that. [13:13] Speaker B: What are you. [13:13] Chad: If it is more expensive and let's just make the statement it is. What are you paying for? I think what I versus some other. [13:21] JD: I think what, what Nevin and Fred and Evans even here now would, would they. What they were saying is what maybe you would pay for is. Is more data and more information and more customization. Not oh, I've got a magic ball and I'm going to figure out what asset class is going to work better over the next one year period. So that's, that's what I think and [13:43] Chad: I'm not disagreeing with that statement at all. But are you seeing that being done with most managed account services right now? Because I'm not. They're not gathering extra data, they're not getting deep in creating these portfolios there [13:58] JD: I think another reason why maybe the tide's turn is. And tell me if this sounds weird, I think 10 years ago when you talked about manage account service, at least for me I thought a lot about independent companies like Stadium and Clark Lansing and Scala and these different names that were out there and now it's starting to be like oh it's the managed account at the national aggregator. You know, it's not. And so maybe that's what's putting a poor taste in some people. When I say some people the advisor's mouse is like wait a second, this is becoming a proprietary thing versus just kind of an add on thing. [14:35] Chad: That would be my, my immediate thought as to why it's gained some popularity here. Most recent when, when I saw them in first starting the career they were as you described, an outside company that created a suite of holdings based upon what they thought was relevant. Now what it has become is a good way for the record keepers to get their fixed accounts in there. And so when you look at many of the groups that we work with, they're offering pricing concessions if you offer their managed account services because they know they're getting their stable value in, they're getting a large spread on that and then they'll load it up. Like many of them are loading them up with Vanguard or DFA on the back end. They're driving costs down their index base. They're, they're somewhat tactical but the goal is to get, to get their managed account in there. [15:24] JD: Well, I'd be curious. Nevin's here in the chat bar. Nevin, by the end of your podcast or you, you're in Mr. Reese's assessment of managed accounts. Did you join the 50% of advisors that thought that it was not a good thing or were you guys pro managed accounts? Are you allowed to say let us know? Nevin, where did you fall in that camp? Next, headlines and news. This one's a little old and I apologize if I was drunk and we've talked about this in a past show. Sometimes it shows blend together. Okay. It depends. Nevin. Really? That's your answer? Did we talk about Benetic, the platform shutting down? I don't think we did. [16:14] Chad: So I know we did but I don't know if we did on the show. [16:18] Mark: So Benetti, I haven't been here in a while so I'm not really sure [16:22] JD: Benetic, past guests on this show has shut down their platform. And this is the email that went out, I think it was actually about two weeks ago that this out. Can I just, can I just kind of take a moment to say if you go back to the episode, the, the man we had on was Ray Conley. Am I getting that right? Yeah, Ray Conley. And, and if you remember, I was drunk and I was hard pressed and I, I was a little bit confused about how he was going to turn a profit, how this is going to work out with everything that went in and so I don't want to say I told you so but. [17:03] Speaker B: But you did tell them I told you so. [17:05] Mark: I mean can we can we just at least be like feel sorry for the employees and the people that you know? [17:12] JD: Yeah, Mark, we don't feel sorry for people here. He'll pick by the way. I thought they actually built a great thing. [17:19] Chad: Yeah, it was just really hard to make it profitable. [17:23] JD: Yeah, they couldn't turn a profit on it. They were apparently waiting on some Big money from an investor to kind of bail them out. And that didn't, that kind of fell through in the ninth inning. And that was. [17:34] Mark: That investor was J.D. and then he sent him Monopoly dollars. [17:39] JD: What's my takeaway here? Every time we talk about this on this show, just because people are companies, just because they've got some investment money, just because they have a good idea doesn't mean that they're going to survive and thrive and stay in business. So we will continue to update you on companies that go kaputs because perhaps [18:00] Chad: that's a new segment for you, J.D. we, we had, you know, we did a few 15 minute or 10 minute or 5 minute, like look into a new tech that's out there. Maybe it should be you afterwards deciding whether or not they're gonna make it. [18:14] Mark: I don't know about that. [18:15] JD: Hey, the one that I love. [18:17] Chad: Controversy, Mark. [18:18] JD: The one that I love, that followed up on your old 401ks, which by the way, I still committed to brand. I'd go get my old tennis coach investments I have. I don't know how on earth those fuckers are making money. For sure. I'm infringing on drunk stock tips. Well, guess what? Well, guess what, Sampo, Why don't we go straight there? We're winging it. Let's go to drunk stock tips, shall we? Well, well, well. It's been a little while and to be honest with you, I keep Mark's stocks on my phone. I don't check in with them every day, but from time to time. And when I'm watching that famous TV channel that I don't know what the three letters stand for, that does financial stuff. I Cable news broadcast. I don't know what they're called. And I see one of Mark stocks is flying off the charts year to date or this and that. I always think of Rogue Guy, but today I had a moment kind of look back and I'm. I'm not gonna go through each and every. [19:41] Mark: Thanks. Thanks, Sampson. [19:42] JD: But can I. I'm gonna make one statement to you guys. Netflix, Apple, Twitter, Home Depot, Peloton Lair, Tesla, Bird, Disney Bed, Bath and Beyond, Budweiser. Every single one of those stocks has done what Rogue Guy said it would do. Beyond Budweiser, okay? Budweiser is the only one Anheuser Busch that has not like, you know, shot off from when Mark told you to buy it. However, if you remember, he was saying, look, this will blow over eventually, this whole Bud Light thing and eventually this company will get back to its mean so I'm going to leave that one out of the mix for now. Not that it's down in any crazy way. I think it's actually pretty flat from when you said buy it. But every single other stock, if you said it was going to be up, it's up. If you said it was going to be down, it's down. And by the way, some to the Tunis, some massive amounts, I mean, Netflix is through the roof. It was 199 when you said buy it. It's 445 right now. Apple was 142, it's 186. Twitter, we all know what happened there. Elon bought that and everyone cashed in. Kaching, Kaching, Kaching. I said I wasn't go through them all, so I won't. But you know what you were losing on before Mark, I would tell everyone, okay, but Apple, Tesla and Disney, they'll come around and, and Tesla for sure. For a long time we're like, okay, yeah, Mark said buy Tesla. It's not working out. Well, guess what, it's working out now. It's up from when you told them buy it. So anyways, killing it. Okay, today's stock, I don't know, Brandon, he probably doesn't have to show up, but it's, it is one of the, maybe the most hot performing stock year to date in all of the stock market. Does anyone in the chat bar have a guess? It's tied to artificial intelligence. At least it's big. Run. Thank you, Hackler. There you go. Okay, Roby. Hackler knows it's Nvidia. What do you say? Now? This thing has been on an absolute gangbusters terror. But I know that doesn't matter to you. To you, it just matters like what scents you smell right now or what colors you're seeing in your brain. I guess. [22:16] Mark: Yeah, like I said, I've seen the, the company name before. I live in the Silicon Valley, so I've driven by offices. I, I think I might even know [22:28] JD: people who have spouses who work there. [22:32] Mark: And they're good. [22:33] Speaker B: Really. [22:34] Mark: My assumption is that they drive a Tesla as well. [22:38] JD: Do you need to disclose any insider trading right now or anything like that? [22:41] Mark: No, I don't really talk to people. Yeah, I just kind of stay out of the limelight, so. Okay, so that, that being said, I've got nothing creative in terms of like why I think you should buy yourself. I'm being honest. I'm just gonna go. [23:00] JD: Artificial intelligence is going to take off [23:02] Mark: like everyone's talking about with my Gut. Well, yeah, I think that's an easy thing to say, that it's going to absolutely rule the world one day, and that's great. And be honest, didn't even know they're involved in that. So that's probably why it's going up so much. So what do I think's gonna end up happening with this stock over the next five years or so? [23:26] JD: You're kind of like watching surfboard shaper shape the board. You just stand back and you don't know how they're doing, what they're doing, or why, but you just watch. [23:36] Mark: Yeah, See, again, because I'm not that smart. I just wonder, like, how. How high can you go? Are they. Are they. Are they peaking right? [23:46] JD: Is this, like, high? [23:48] Mark: LeBron James should have retired six years ago. Like, are we at that point? But you know what? No, no, no. We're going for it. We're going home. You buy. You buy it. You just buy it, and you don't look back. And, you know, here's why. I'll say you buy it because their company name is spelled like it should be pronounced. And that's good enough for me. [24:17] JD: Okay. Wow. Nvidia's a buy. You heard here, people. [24:22] Chad: Isn't it up, like, 490% this year? [24:25] JD: It's up massive, yes. But you know what? [24:27] Speaker B: Mark's not alone. [24:29] JD: There are some very smart people that think like, yeah, yeah, yeah, but it's still gonna go, go, go in a big way. [24:38] Mark: It's like that word about saturation who say bitcoin will be a hundred thousand dollars a coin in three years, right? So I'd say that this is just. This is just that we're at the. We're at the bottom of the hill. We're still got a climb. [24:53] Speaker B: Oh, okay, let's go. [24:55] JD: It's been a big run, but Mark says still get in on it. There's plenty of upside. So there you go. I think it was Hackler on there saying he had it a long time ago. Or was it Samson, like Mark saying, it's still early, man. Get in. I guess those weren't his exact words, but it's going up buying tomorrow. Hackler. I just bought it right now, man. You gotta get it now, man, while it's hot. Okay, Brandon. Here's what I want to do, guys. But to kind of continue out to the end of the show. I got a bunch of topics, like, quick little topics, like, let's sing them, like, kind of flash fire, quick combo points, you know, like, things we can talk about quickly and I just throw them at you. If they're great, we have a good conversation, awesome. We stick with it. If not, we'll move on to the next one. No problem. [25:44] Speaker B: Problem. [25:45] JD: Okay. Brandon, do you. Did you get the Fidelity video that I sent you for the Solo Fidfolios? If you didn't, it's okay. [25:54] Speaker E: Welcome to Fidelity Solo. [25:55] JD: Let's watch this. Let's go ahead and watch this. [25:58] Speaker E: Welcome to Fidelity Solo. Fitfolios Customized investing. Imagine being able to invest in what matters to you. Your values, a specific theme, or perhaps the latest trends. Imagine all those stocks, your custom index, in a single basket. Trading and investing with just one click and monitoring all through a personalized dashboard. Now, how's that for easy? Ready to get started? Decide on a theme, choose a Fidelity thematic model researched and built by the professionals, and customize to make it your own. Or pick stocks to build from scratch. Then decide how much of each stock you want in your basket. Choose how much you'd like to invest, name your basket, and place your order. But wait, let's say after a week or months, you check the performance of your basket and decide you'd like to make changes. Go to your dashboard, select manage, and make your move. Perhaps you're making changes as the market's shifted. Just rebalance and we'll calculate the orders for you. And with one click, place your trade. When you go solo, it's easy to invest in what matters to you. Fidelity Solo Fidfolios, the next generation of customized investing. [27:24] JD: Ed DiMarino makes a point that would be interesting talking about. He goes, I like it won't be allowed in 401k, I suppose. I don't know about that. We can. And we'll have another topic that might kind of scratch that concept there a little bit. But what I want to ask you guys about is like, innovation in 401k and investing. Sometimes we kind of close minds. We think like, okay, you got these mutual funds, got these target date funds, manage accounts. I mean, there's, there's room for new kind of. The other thing you might want to comment on is would we. Do we really want regular folk kind of making their own mutual fund? Which is kind of how I see this. Like, do they really have the skills? Are the desires there? So I don't know, Mark, do you think. Do you think the average person is interested in kind of making their own here from the ground up? [28:23] Mark: That's pretty simple, man. If I can do it, they can do it. [28:26] JD: So, yeah, good point. [28:30] Chad: I mean, I mean, to be honest, [28:32] Mark: it's a little bit of skill, but a little bit of luck. But, you know, a little bit of [28:36] JD: skill, a little bit of luck. Chad, when you watch that video, did that excite you at all? [28:41] Chad: It did, it did. It did. Because it's something new in, at the fingertips of an investor. I mean, I believe what you said, JD Is the way I would describe it. Right. They're building out their own mutual fund. My question would be, and I'm looking on the Fidelity website, change the music [28:57] Mark: is all they should do is change the music. [29:00] Chad: It's, it's 4.99amonth, right? Because if you're, if you're picking 10 stocks inside your basket, then a set and you're doing small slivers, that's a lot of transactions. It's a lot of trades they're creating for each of those holdings. And I was trying to figure out what the, what the aim is for creating profitability on it. 4.99amonth is. It's not a lot. If people are making multiple transactions, they [29:25] JD: are solving a problem. Right, Chad? Like if, if you're interested in. Because usually if you're a investor and you focus with mutual funds, which is kind of 401k world. If you were to say to me, no, I, I saw someone in the chat talk about the self directed brokerage account, which I actually want to talk about tonight. But I might say to you, hey, to invest in a self directed brokerage account, that's going to be difficult because you're going to have to research a lot of equities from a lot of different sectors and you're going to have to kind of monitor them and know when to remove and replace and buy and sell and stay diversified. And when you really add it all up and you try to spread it across a diversified portfolio, that's a lot of man hours and a lot of work and a lot of time. And I think that's what Fidelity is trying to solve right here. It's like, no, you can still buy certain things and have some, some control over what's in your portfolio without having to spend 100 hours a week doing it. [30:24] Chad: Part of me feels like this might be a targeted technology for advisors more than it is the individual investor. If you're an advisor and you're looking to create these, you know, diversified portfolios with a suite of different stocks, this could be a great way to do it. [30:38] JD: I could see that tech pivoting to that. [30:40] Mark: So if, if, wait, so not using it as like let me do that to my account right now. Chad, you're saying doing it as like a, almost like a preparation before you go and meet with somebody. [30:54] Chad: No, like an offering. Like my advisor came to me and was like look, we're building this portfolio or, or you want to customize portfolio. You believe in these three stocks. So I believe in these six stocks. Since let's buy these nine stocks as part of the small basket. [31:10] Mark: Can I be the dumb one in the room and say that I can't believe that this didn't already exist? [31:16] JD: Well, we, you know, we're kind of behind when it comes to tech, believe it or not, financial services space. But yeah, to me, Mark, I kind of like what you just said. This shows me that there is new things that can happen, you know. [31:31] Mark: Thanks. Thanks Kush. [31:32] Speaker B: Yes. [31:33] Chad: You know someone said it'll fail. I think it was Ed said it won't work inside the or won't, won't make a big impact inside the retirement plan space. It starts with the word solo. My initial thought before I knew what it was was this is going to be a solo K style tool in that world where you have smaller total assets to be able to diversify in a good basket of stocks, that'd be great. A lot of those solo Ks are putting in 15, 18, 20,000 a year and they don't want to go out and buy 9 shares of Nvidia. So now they can do smaller slivers of seven or eight different stocks within their, their portfolio. I, I think that could be. [32:11] Speaker B: Do we get those, those owners asking like hey can I go invest in [32:14] Chad: stocks and whatnot all the time, especially space. [32:18] JD: Also there is some new like smaller 4.1k record keeper disruptors. I'm not sure if we talked about it on this show, but that are allowing participants to kind of like filter out sectors and things that they don't want. And I think this is more a I'll drink for it, like an ESG vibe for them. But you are starting to see this kind of let's put the steering wheel in the, in the investors hands and allow them to kind of filter things out and customize things. And so I don't know, part of me and I will drink. Hang on. But part of me thinks like I love the evolution. And then the pessimist to me is like look, these people just want to be told what to invest in. They don't, they don't want to put their hands on the steering wheel. [33:05] Chad: You know, that's the difference between the 401k space and the, and the individual investor which originally that's who this is target targeting. Right. Fidelity. Fidelity is saying this is who we want for sure. [33:17] JD: All right, let's take this kind of stretch to this next one which I think is a small, small step and I think Mark maybe missed this one when he was commenting on it. Like Mark, I'm sure you're aware of what I would call advisor created models. That's probably not the appropriate term but I'm going to use a record keeper that yes, might have target date funds or risk based funds but I as the advisor would like to create my own say aggressive, moderate or conservative portfolio portfolios. I will choose the underlying mutual funds maybe from the core menu or at least from the, the record keepers available investment options and I will decide what, what those are and how they work and what the breakdown should be. Do you guys see a lot? I think this trend started, I shouldn't even call it a trend. I think this started becoming available maybe like a decade ago. I think it's available on most record keeping platforms. I'm imagining very few advisors, especially in the micro market take advantage of this. But are you seeing this at all, any of you guys? [34:32] Speaker B: No, especially in our market. I mean it's so even what we're talking about right now, I don't see it having a big take rate on it by any means. Advisors just aren't wanting to do that, go to that level because it's, I mean they're not making any money on the plans. [34:43] JD: It was kind of a dud. It, it hasn't come to fruition in any. [34:47] Chad: The principal pushed it hard for a number, a number of years. I think it was retireview on their platform and, and there were certain broker dealers that were heavy, heavy leveraging it but I really have not seen many doing that in the last four or five years. JD There are a couple of shops that are but not widespread. [35:10] JD: The reason it came to the front of mind for me is I'm working on a request for proposal right now where Justin's helping me and this is something that is a necessary box to check like that because it's used right now. The incumbent and the advisor is going to stay on. They want to use it where they're going. So now I'm going to be the asshole even to this advisor on this plan, this partner of mine. Like really do we really need Joe Smith or Sally Watson advisor in any town USA is going to do a better job and any advisors in the chat are Come at me right now like tell me I'm an idiot. You're going to do a better job than Hero Price or American Century or Capital Group or Fidelity in, in your analysis and figuring out what underlying funds should be in an aggressive portfolio. Like that's where I've always got stuck on this is like why the fuck we want the advisor doing this instead of a large financial institution. [36:12] Chad: I'll happily fight you back on this and, and I'll comment to knowing remember my wife was a participant in one of their plans so I know exactly what they do and how they do it. They're using, they have an in house investment analyst and then they're using a series of T row analysts and Oppenheimer analysts and Fidelity and they're doing all the market research from those people that are creating the funds you're talking about. And then they're, they're creating their own portfolios but they're sending out quarterly letters to each participant stating this is where we believe the market is. This is why we've chosen to make these changes. This is why. This is the information we got from the Fidelity analysts on this emerging market. And that's why we've decided to change this out. Like it is incredibly thorough and as an investor it was very comforting to see the changes that they're choosing to make. Whereas in these other managed accounts or target date funds you don't get that just happens. You have no idea what's even happening. So I think what they're doing is great. [37:13] JD: It's funny, Daniela says it's basically what a wealth management advisors do. And funny enough, I mean that we're using an isolated situation here what Chad's talking about. But yeah, that's what these advisors are. They're not 401k advisors. They just happen to have this 401k plan. They're wealth advisors. But isn't it also true that a lot of wealth management advisors outsource this stuff? And by the way, Separate took my 15 million to a local wealth manager and he said to me, oh by the way, I'm going to manage this, but I'm going to outsource this to this much larger national or global company. Daniela says the whole point of the tamp, that's where I'm going, oh yeah, I would feel more comfortable with my 15 million with that. And I would be feel more comfortable with that advisor saying yeah, of course not, I'm not going to do it. I live here in any town USA with you. Like I'm just Like I'm going to sort. I'm going to outsource this to a much larger firm that specializes in this and they're going to do it, I say, no harm, no foul. Doing that. Like some. [38:27] Chad: I just feel like in your mind you're still thinking it's every, every advisor in in no town USA versus them leveraging the resources they have and getting this similar insight from. From analysts and then making their own choices. [38:42] JD: I think what I heard from you, Chad, is Hey jd, be more an advocate of the little, little guy or girl. Like instead of them being proprietary, they might be able to pull from a variety of intelligent sources and therefore have something unique. That's, that's well done. And by the way, I'm always looking out for someone who's smarter and I don't. I agree with you. You would think as disruptive as we are and as irreverent as we are, like I wouldn't just bow down to the fidelities and the. And the vanguards and think that they've all figured out the perfect magic potion and do stuff. I look like your buddy in, in Kansas, that John Ruth who's working hard on the fixed income stuff. Like there's gonna be like, you know, disruptors that do things differently and better and whatever. You're shaking your head no. Mark, what's up? [39:31] Mark: Nope. No, sorry. This is not even about what you're talking about, but Justin tried to act like he was gonna do Chad's penalty drinks and Justin drinking a spear, not vice. And I said nope doesn't count. [39:42] Chad: Yeah, I, I didn't expect to take off in the Lord. Yeah, I got a pitch to a bunch of 10 year. [39:50] Speaker B: That doesn't count. [39:51] Mark: Bring in the lefty. [39:53] JD: Hey JD. [39:54] Chad: I know this is on topic, but slightly off. We had an advisor back in the day and, and I kind of liked his strategy. Any, any, any client that was a smaller 401k plan. He was clearing through Schwab at the time and he was the master account. And then he would do. He would essentially manage every portfolio for each participant. He'd sit with them one on one, but then he would do all the trades himself on essentially a managed account. This is 15 years ago, but he would do all the trades himself through the Schwab master account that he had control of. And his clients loved it. Almost all of them were private wealth clients on the business owner front. And he was taking what he's doing for them and doing it on each individual participant in the plant. And he won a Lot of small market business doing that. [40:44] JD: Great debate, great debate. That's fine. Okay, so there's potentially some life in that. And you pointed out some of the pros. I've always been kind of a pessimist in that area. And we got a mixed bag in the chat bar. Like there's a lot of people that agreed with. My first pessimistic thoughts are like, of course not. I don't want to do that. It's not part of my job. And. But you make some solid points. Here's something I don't think, I don't want to say we've never talked about it because it's been a long time. But I don't think we've talked about this much at all in this show. And it's really relevant in 401k because even with us, like we probably have, I don't know. I told you so. 100 clients that use what I would call like trust accounting or an actual self directed brokerage account. Like instead of using what I, what I call a modern day package record keeper, they're at like Charles Schwab or something, something Ameritrade or you know, whatever. E Trade. [41:50] Mark: No, Yeah, I don't know that one slide. [41:53] JD: Okay. [41:54] Speaker B: Schwab just bought that other one and [41:56] JD: basically, although they could choose mutual funds in there and maybe most do, they could also trade equities and things. But what I'm talking about is a self directed brokerage account. Is it okay in a 401k plan? In the past I would tell you, and I learned this from my daddy when he taught me the business. My daddy taught me that, that you [42:23] Mark: know, it's a father's day job. [42:25] JD: It's not great for all participants because it's really more for the sophisticated. Right? Like, like you should really know what you're doing. You can get in a lot of trouble in a brokerage account buying the wrong share class or God forbid, trying to invest in equities and follow kind of rogue guy's strategy. Although that would work out well for you. So from a fiduciary perspective, from a modern day perspective, self directed brokerage account. They come to you tomorrow. Justin, an advisor, he wants to set it up and he says is this okay in today's day and age? Like, can I do this? [43:03] Speaker B: I, I don't see a problem with it. I mean whether, I mean the plan doesn't really take on the responsibility at that point when the participant chooses to go outside of it in our world at least it's Typically owner only plans for the most part that are wanting to invest like that. I don't, I don't get the issue with it whether they go through the plan or through, you know, Charles Schwab. What's the big. [43:24] Chad: What's the problem? [43:25] JD: We got one guy saying yes, he's a very smart guy and a pooled employer plan supporter. Him love you Rob. And then another guy saying yeah, it's okay as a sidecar but not a, not a brokerage account only it doesn't work. And I love that he brought up 404A5. That's. That is an issue with a lot of these brokerage accounts. There's definitely equal rights and benefits thing that happens a lot where they say, oh yeah, yeah, we're going to give brokerage accounts to the chief executive officer, the founder and the chief financial officer. But everyone else gets, you know, something else. I definitely don't like that. That's sketchy. Doesn't seem legal to me. [44:08] Chad: For JD for everybody tuning in, let's make sure. Sorry, go ahead Jess. No, no, I. [44:15] Speaker B: That's fine. Go ahead. [44:16] Chad: Let's just make sure they know the three options. One being the plan only has a self directed brokerage account option. That's. That's where all the money is going to go and how it's going to be used. [44:26] JD: And still very common to this day. [44:28] Speaker B: Yep. [44:29] Chad: And then the second would be you're. You're utilizing a record keeper for the core menu and then you're allowing an outside brokerage account for people that want to access it. Either you use either related to the record keeper, you're using a Schwab or an Ameritrade, something along those lines they have completely outside. And then the third is you have a number of these record keepers that have a brokerage account attached to it where the deferrals go to one location and then you move money into the self directed brokerage account and you buy and trade and sell there. That side of it, it is seamless. As an advisor, you get a singular feed. You can see the money that's in the brokerage, you can see the money that's in the core menu. As a third party administrator we can get a download of all the data. In some of them your advisor compensation is even deducted from the assets that hit the brokerage account. That side of it I'm pretty comfortable with. [45:23] JD: Okay, I'm. I'm not familiar with this name but, but Tim Thurston, thanks again for commenting. And by the way, comment to Everybody, although they can see it up on the screen. But so Tim says okay look, the question is, and I think he's right, it's how do you evaluate, you know, from a fiduciary perspective? So you're an advisor. You have a fiduciary review meeting with your client. You look at the large cap, the mid cap, the small cap, the what? All the investments that you're offer to the participants. Now you make a brokerage account available. Let's say you're a 50 person company and you've got seven people that are using the brokerage accounts. Don't you have a responsibility to look in and see like the same way you're looking in on the other 43 employees? You shake your head no. Chad, where the fuck did you get this, this freebie where you don't have responsibility anymore? Because I think that's a legal truth. [46:17] Chad: I think if you look under the Employee Retirement Income Security act and you look at what the obligations are for the investments that are offered. Go back to Fred Reich's support of Nationwide when he wrote their disclosure for going into the brokerage account window. Essentially you're saying look as a committee, as a fiduciary, we're not responsible for the investments you're selecting out here. We are not endorsing these. We are not scrubbing these. You are offering them. Yes, but you are not going. And that goes back to Guy's point of using a designated investment alternative. [46:50] JD: What is that? 401C. Is that what that guy's referring to? 401C. Am I getting that right? [46:55] Chad: I don't know. [46:55] JD: Ask Guy. [46:58] Chad: That was an issue. [47:02] JD: That's fee disclosure. 404C. [47:04] Chad: 404C. The 404C compliant is different. That's the number of alternatives you need to with proper guidance and information. [47:11] JD: But that's a guy said, he said no duty to view if there are three designated investment alternatives. And Guy tell me I'm wrong. But 445 is no 404 C. Yeah. [47:24] Chad: My point being I don't think as a, as a plan sponsor you carry that obligation for those that choose to go out there. [47:30] JD: Okay. [47:31] Chad: You always carry an obligation for what you're making available to the participants. But the individual scrubbing of the funds. I don't believe that exists in the brokerage account world. [47:42] JD: I think that it could get very gray area that if your job as a fiduciary is to act in the best interest of your planned participants. [47:53] Chad: No doubt we're saying two different Things though, that, that is very different. [47:57] JD: No, no, but what I'm saying is that if, if Schlichter or one of his peers gets a hold of this and gets somewhere and sees that participants are harming themselves and you made a decision to do it this way as opposed to another way. I think there's something there. I also feel like, personally, I don't see why we need this. Like, I, I think the self directed brokerage account is an archaic 1980s kind of thing when we were all infatuated with having more choice, more investment options, more flexibility. And I think we've led more towards a world now of like, less is more defaults, auto enrolls, boomer. I love it, so I'll shut up, but all right. It's still a thing. It's out there for sure. Oh, great, Rob, good point. There are some of these brokerage accounts that can kind of limit them because we didn't even get into that. We'll say that for another show, another day. What about, you know, penny stocks and, and you know, I forget the other fancy financial terms, options and like that, you know, like people, you can do that too and get in trouble. So. All right. [49:15] Chad: And I think the moment you start restricting, like let's say as a plan sponsor, you go in and say we're going to offer a brokerage account but we're going to eliminate these, access to these things, then I think you've carried oversight over, over what they can see in that brokerage window. And now you do hold liability. [49:35] JD: Claire, I've been going to bed at like 8:39pm since I got home, but. [49:39] Speaker B: Oh, you're lucky. [49:40] JD: I'm not going to go to bed at 6. Okay, how about the difference between a standard, what would you, what do you call a, A registered rep. That's what the industry calls them. Someone who works for a broker dealer and a wire house advisor, also known as Merrill Lynch, Morgan Stanley. I mean, I guess you could throw into that like Edward Jones and that kind of stuff too. [50:15] Chad: I wouldn't throw Jones and no. [50:17] JD: Whoa. Okay, tell me your thoughts, Mark. If I send you to a meeting to go meet with a normal, normal, a registered rep advisor that works for some broker dealer, Castra or whatever, and you got to go meet with them or you got a meeting tomorrow with some fancy name at Merrill lynch, are you coming in with a different perspective? [50:46] Mark: No, nothing, Nothing changes on my end. What, my, my job remains the same. [50:53] JD: Your job remains the same. But do you change your job based on your headspace? [50:59] Mark: My headspace no. [51:01] JD: All right, Justin, we'll kick it to you. Do you wear a fancier. You were a fancy. I'm gonna plead the fifth. Do you wear your fancier suit on the way to the warehouse? [51:10] Speaker B: They're just. No. All I'm saying. I'm being a dick right now. Let's be honest. [51:14] Chad: Sometimes you just. [51:15] Speaker B: You go. You have a preconceived notion about certain. Certain broker dealers and whatnot. No, not just now. [51:24] Chad: Hack. [51:24] Speaker B: I'm always one. [51:26] Chad: I think what Justin's trying to say politically correct. There are some broker dealers, some wirehouses, that really control the flexibility of the advisor, what they can do. Their advisors tend to be less sophisticated, difficult to work with. Yeah, that exists, J.D. and those. And. And I think that that's the. Probably a bad notion to have for some of those broker dealers. But it's true. I prefer. [51:55] Speaker B: Much more eloquent. [51:57] Chad: I prefer going the independent route, if you're asking me. And I do treat those meetings differently because I know everything we talk about in the broker dealer channel, those bigger shops, those wirehouses, is going to go through their internal person and then circle back to me. Whereas the independents are far better partners usually. [52:15] JD: Dampo's got it. He's like, I'll add the all to the beginning. All advisors are. But especially the ones in the wirehouses. Well, let me ask you this. Like, do you think when they go to a client, a plant, let's say plan sponsor, not an individual wealth management account, but when they walk into a $7 million plan, is there more value in having a Merrill lynch logo attached to their name or A Morgan Stanley vs. A Again, some other like random broker dealer that they probably never heard of? [52:55] Chad: Absolutely there is. If there's no existing relationship, then the backing of that large brand recognition is huge. The truth. As you all know though, most of the time there's an existing relationship in this space. Someone knows someone and there's already trust built regardless of the name on. On your business card. [53:13] JD: I thought. I would have thought you would have said the opposite. I. I would have said the opposite that I don't know if human resources, chief financial officers, these people. And remember, this is not an individual client with $10 million to invest that's somehow impressed by your Merrill lynch branch. This is a company and I think that. I don't know if they see value in those brands the same way. But. But you could be very. You could be right, Chad. I could be totally wrong. [53:42] Chad: I just feeling that. [53:45] Speaker B: Good. [53:46] Chad: Go, Jess. [53:47] Speaker B: No, I'd say I kind of get the feeling you're, you know, I'm in your camp on that. Jd, they, if you have that Merrell name or what and not not talking crap on Merrell or anything like that, we're just using an example. But they might not feel as, you know, they might feel like a dime a dozen rather than, you know, someone personal, you know, wrong. [54:07] JD: I'm always wrong. Justin, you're saying that like, couldn't it be a negative too? You guys like. [54:13] Speaker B: Yeah, I mean, they might not feel enough attention and love where from, you know, a, you know, private wealth guy or whatnot. They feel more taken care of and I'm not. [54:23] JD: Doesn't that seem more Wall Street? [54:30] Chad: No, I, I, I mean, you're telling [54:33] JD: me that's the one thing I said. I think that's a fact. [54:36] Chad: You don't think we know the inner workings. We know the inner workings. And so when you hear the name of a wirehouse, you have a notion, you have a thought comes to mind. When I think the average human resources person hears it, they think of the commercials. They see the brands they see they must be a big stable company. I saw research done recently that most people want to buy from a company they know will be there in 50 years. And so I think all of that holds true when that person steps in the room and they have no idea what independent registered investment advisor shop name that's on there or this Johansson, Carlson, Palme and McNeil Wealth Advisors sitting on the card, powered by Morgan Stanley. [55:25] JD: Like point Brian. Good point Brian. Like Lehman Brothers. No, no, you're right, you're right. What you basically just said is there is power in recognizable brands. [55:36] Chad: Guys, how many times you step into a meeting and when you're presenting and I'll use the big names, the Voya, the Hancock, the Empower, does somebody then go, who's plan design [55:50] Mark: all the time? [55:52] Chad: They don't, they don't know plan design, but they know those big names and they like the comfort of knowing those big for sure. [55:58] JD: Can you imagine our job if we had to run around the country and sell plan design consultants? The 401k plan where we were the custodian and the record keeper and whatever. Like that would be a very hard task, I think you for sure. Yeah, I don't know market right here, right now. I think you for sure need what Chad said, you need that brand recognition. All right, we got a little. [56:23] Speaker B: The face of the plan is still the record keeper. Well, not, it's not the advisor. [56:28] JD: Say that again. [56:29] Speaker B: The face of the plan to the participants, to the plan sponsor. Still the record keeper. It's that big name, right? This is not the advisor. [56:35] Chad: It's before these guys times. JD but remember to Justin's point right there when we started in, when I started in this space we. I used to have to step into meetings and remind clients that John Hancock wasn't holding on to their money, that it was actually in the market, that, that, that Ing wasn't holding on to their money. Yeah, because we were seeing. No, that's not. We were seeing businesses be acquired, some go under. There was a fearful time during that stretch. That's that, that, that carries some recognition. And then to Tim's point, yeah, it is preconceived or perceived security, not real security by being with those larger entities. And I, I agree the marketplace, the general human resources person doesn't know the difference, but they like knowing and seeing a name they recognize. [57:27] JD: We were, we were recently at the One Digital conference and I think we found out that One Digital is the chatty can help me out with it is the, the largest Now Advisor group in the country based on total plans or something. It was something like this. I was having a conversation with someone [57:48] Speaker B: else maybe I didn't hear that either. [57:50] JD: So they, they have this stat and I thought wow, that that could be really useful. I was having a conversation with an advisor over a beer. I was probably three sheets to the wind. How many sheets you need to be to the wind? [58:01] Mark: I don't know. [58:01] Chad: But if there's nine. [58:02] Speaker B: Well you were at least six. [58:04] JD: Yeah, maybe nine. Then nine sheets. And, and I was saying like hey, that's actually could work really well in a point of sale to say like look, we are the biggest. Even though you don't know my name, we are the biggest financial group in the country. And I think that that would bode well. So clearly I believe in the power of brand and that type of stuff. Okay, chapter champion. I am between the new guy that came around that I can't remember his name anymore, Tim Thurston. [58:33] Speaker B: Tim Thurston, yeah. [58:35] JD: And Brian Williams for a really intelligent. Not intelligent. A funny comment he made about having to take a shower after going to see a wirehouse after walking through a wirehouse and Will Hackler for basically getting back to his old kind of bread and butter, which is making me feel shitty about myself on a constant basis. And so I believe it or not, it's gonna shock a lot of you. I'm gonna go with Hackler because he made me feel shitty about myself and he's like my dominatrix. You know what I mean? Like, I like it. Hit me harder, Hack. Hit me harder. Oh, my God. You're next. [59:19] Chad: Oh, God. Dude, it was a good night from a bunch. Statin was involved. Thurston probably takes my vote. But I have to say, Hacket, it was a fun. It was a fun night with you poking back at JD the way you used to. There was like a Cl. Something. Clift was good too. I made note of Clift, but I'm going with Tim Thurston. [59:44] JD: Okay. Nice, Chad. Very nice. Justin made me think. [59:50] Speaker B: Yeah, I think I'm going Thurston as well. It was just. I felt. Honestly, I kind of felt like the. It was a little bit of a dull night. [59:56] Mark: And. [59:57] JD: And who is this I'm applying for? [1:00:00] Speaker B: Yeah, that's what I'm saying. He stuck out in my mind. Had some good points. I'm going in too. [1:00:04] JD: And who is this searching guy? He's a new guy. Right. [1:00:07] Speaker B: He's sorry. Heck, you got enough. Yeah, he's out of Texas. [1:00:12] JD: He hasn't been here a lot before. Or am I just drunk all the time? [1:00:16] Chad: Both. [1:00:16] JD: You got the final vote here. [1:00:19] Mark: Well, I don't think it matters because it sounds like Tim's gonna take it. [1:00:23] Chad: Unless you go hack. [1:00:24] Speaker B: Unless you go hack. [1:00:25] Chad: Yeah. [1:00:26] Mark: Yeah, I love Hack. He was. He had a single tonight, a couple strikeouts, kicked by a pitch. But I'm going Brian Williams. [1:00:38] JD: Okay. Yeah, Brian Williams deserves a little. All right. Okay. Okay. Okay. So tonight's chop. Our champion is the guy can't remember his name. Good for you, Tim Thurston, last times winner was Kush or Greg Kush. Greg Kush. Greg. [1:00:58] Speaker B: We are so far behind on this right now. [1:01:00] JD: Dude, no, he wanted to donate to past. [1:01:05] Speaker B: Oh, that was Kush. [1:01:06] Chad: Yeah. [1:01:08] JD: And I will reach out to her and figure out our best way to do that. [1:01:11] Chad: Yeah, love that Kush. [1:01:13] JD: If that means just sending like 150 bucks worth of like flowers and roses, we'll do that too. But let me reach out to Kelly and figure out the best way to do that. But that was a great idea. We will for sure do that. And I would love to check in on her by the way. She's been rock starring that audit minor and going off, so. That chick is awesome. Okay. [1:01:34] Chad: Look at Mark's got the patch. [1:01:37] Speaker B: We still owe Hack too, don't we? [1:01:39] JD: Yeah, yeah, a big one. But that's gonna take planning. Okay, we gotta go, everybody. Love you. By the way, Charlie Nelson was supposed to be our guest tonight. He needed to reschedule to another date. He will be there in the future, I believe. Our next show is with the The CEO of Of Smart, Jodon. I forget his last name, but he's [1:02:02] Speaker B: coming just like most of soyuj. [1:02:05] JD: See you guys. Peace out. Let's go. Thank you, everyone for tuning in. Thank you for being a part of the retirex family. We love you. Okay, Brandon, play some music. We got to go. [1:02:14] Chad: Bye.