Target Date Fund Design & Fiduciary Risk with Anne Lester

[0:14] JD: I've. I've done poems, I've done songs. Some have been good, some have been bad. You know, I've never done Chad. Never done a good old fashioned. I have done a haiku. I've never done a good old fashioned. Cheers or toast. Toast, as we call, which you we think we'd been would have done that we should have our own over the last 10 years. But here we go. Here's to the beer that goes into our belly. And cheers to Mark's robe because it's so smelly. And toast to nerdy Chad for calculating the numbers. And yes, to silent J for keeping his voice in slumber. But mostly cheers to the booze and the confidence that it provides. My only fear is that tonight's drunk text to Fred Reese gets no reply. Cheers. Welcome to another episode of Retireholics. It is the first Thursday of a month. You know what that means. Everything's in play. We're doing acro Sin. There's a Wheel of Vice. We're going to hit up some drunk stock tips. But none of that's important. What's most important is that we have a. Wait for it. Big baller guest alert, people. It's one of those shows. I'm thinking top three people we've had on the show could be top one based on how you're looking at this. But Justin, let everyone know who we got here. It's Justin's intro. Take it away. [1:55] Justin: Another big baller guest alert, my 401k peeps. We got former head of retirement solutions for JP Morgan, Ray Lily White lifetime award recipient and media commentator who's been featured on Bloomberg tv, Barron's shit, cnbc. I'll drink for that. Forbes, Wall Street Journal and more. [2:13] JD: Drum roll, please. [2:15] Justin: It's freaking Ann Lester. [2:17] Anne Lester: Wow. [2:18] JD: He just. [2:20] Chad: Negative one. He just read your post from LinkedIn. That was you guys intro. [2:26] Justin: Hold on here. Hold on. I knew this was going to be the response. When you see something that's just written perfectly, you don't mess with it and try to create lies about somebody and, you know, you just don't. What this is telling us, guys, let's be honest, is that, wow, wow, wow. Justin's incredibly nervous and you make Justin really nervous. And he was afraid. I think reading all that, like if I say something out of line, I might end up in a ditch. So I think that's just respect. [2:55] JD: Thank you, Mark. [2:55] Anne Lester: I. I think. I think, Justin. [2:57] Justin: It still sucked, though. [2:59] Anne Lester: Look at the gap, Justin, between the photo that you're showing right there and what I look like in real life. And you should feel just fine. [3:06] Justin: Oh, God. [3:07] JD: I think, Justin, I am getting hosed. I think, Justin, you. [3:11] Justin: I'll accept it. [3:12] JD: Missed a big opportunity. You missed a big opportunity because this woman is all over the Internet. There's lots of great tidbits out there about her. We'll dive into some of them later tonight. But we are honored to have you here. And I know that you have a book out. It's been out for a little while. Your best financial advice. But before we get into everything, I just wanted to kind of pick your brain for myself personally since you spend a lot of time focusing on personal savings and savings plans and stuff. So I have a question. Is it irresponsible to buy the same Lamborghini in three different colors? Because I'm really feeling this neon orange vibe lately and I'm waffling. But I've got someone like you here. So what do you think? Just kidding. Let's go to headlines. Headlines. [4:03] Anne Lester: It depends. Like how much do you value the orange? Is my question right back to you. Orange is important. I mean, mean, you know, have you [4:12] Chad: seen our company ethos? It's all orange. [4:14] Justin: What he's really talking about though is like the hot. The little hot wheels. He really just. He couldn't figure out which toy he wanted. So he needs your help with that. [4:39] JD: The first headline I want to go to is from our friends at Napanet. I'll drink. And it is. I don't. I don't. I mean the article is cool. I don't know if you all got a chance to read it, but that's not what I really want to talk about. What I want to talk about is Todd Keating of Leaf House is slowly and methodically becoming the op ed king of 401K. He is writing articles and he pours his heart and soul into. Uses big fancy words. And yet he challenges the status quo of our industry. Not something you would think a typical money manager338 type of dude would do. Chad, did you read this article? [5:31] Anne Lester: I did. [5:32] Chad: And you remember when we had him on the show in Tataritas. He knows so much more than investments. He. He blew my mind a little bit. His understanding of the third party administrator space, the record keeper space, the ins and the outs, the custodian. I read it just like everything else I've read from him before. It has me thinking. Which I think is what he's trying to get out of the just saying articles that he's writing. Thought I don't know if you can put him on the Mount Rushmore like you're trying to do, though, jd. You're trying to toss him up there with the big dogs. He's not. [6:03] JD: Ouch. [6:03] Chad: He's not there yet. [6:04] JD: Shots fired from Chad. [6:06] Justin: But you're saying there's. [6:08] JD: Catch me outside. How about that? Let me. Let me throw another shots fired on. I'm imagining Ann Lester. You have any idea who Todd, Katy, and Leaf House are? [6:18] Anne Lester: I read the. I read the piece, and I was just thinking. Because I do my homework, I was just thinking, you know, brand is not everything, right? That's his point. Brand is not everything. And. And yet if someone's got a real brand, it should reflect what they're doing and who they are. So as someone who spent the last three years branding myself, I was like, oh, that's a little uncomfortable reading some of what he said. But, you know, I think it's fair. [6:41] JD: I feel like when I read it, he was actually referring to the big brands and that we kind of cut them all a lot of slack and, like, we make big, important decisions based on, like, oh, well, that's just a big Fortune 500 company, so surely that's the right call here. And we don't. We don't pick them apart as much as we should and look at the little guy that's building up their own brand. So I don't know. I think. I feel like that's kind of what's my takeaway, which I think is very true. I think we cut a lot of slack for those big logos and brands that we're used to without really looking at what they're offering us. [7:16] Chad: I'll flip it a little bit, JD and say we're not cutting slack as much as we are giving them credit that maybe they haven't earned in years. And that's what his article continued into. Right, is that you have these big brands that have established themselves as trustworthy, dependable brands that have not evolved with the times, that are still using antiquated systems and communications, and yet we still look at them and they're like, that's the pinnacle that we want to get to, and maybe we're looking at that wrong. [7:44] JD: If they earned it evolve, they earned it 20, 30 years ago, and they're still. They're still floating off what they earned a long time ago, and we're not looking at them hard. Well, I definitely think if you look at the 401k world, you'd probably get a lot of nods from. I hate to say this, but the Quote, unquote disruptors, the guidelines and the human interests and the, the vest. Wells would probably love what you just said there, Chad, and what Todd's writing here, which is, yeah, let's stop cutting them so much slack for what they did 25 years ago and instead let's let's day and what's being offered. So he. [8:16] Chad: Which I think could be a topic for another day, but he also gets into what has worked in the past, may not be what works in the future. And if you're going to continuously try to do the same things that you've done in the past, you will die on the vine as well. And I think especially in the third party administrator side, that's what everybody does. [8:37] JD: Let's keep it moving because there's a lot of stuff I want to talk to Ann about. So let's kind of try to slide through these. But this one's important because I know that Ann knows who past guests on this show, Shlomo Benarti is. And this caught my attention a few years ago. I don't know how, but I just heard from someone who heard from someone else who heard from someone else that that someone had spent time at Shlomo's Fancy Modern designed $8 million home in, in Los Angeles, most likely Beverly H. Somewhere like that. I'm. I'm guessing at all these things. The value of this house and the location. This is all just me pontificating robe guy. But. But what I do know is that industry people show up there from time to time and they have these swanky little dinners with, I'm sure, very expensive bottles of wine. And what do we talk about that in the normal world, these secret societies like the Freemasons or Skull and Bones. [9:39] Justin: And you're not about to go to like, Diddy talk, Not who's going to say it. [9:44] JD: I did not mention Epstein and Diddy [9:47] Justin: is all I was thinking about. [9:48] JD: As you're saying that I did not mention baby oil. No baby oil. And you know, Schlomo. Do you think the attendees of these meetings in LA and Schlomo himself are sitting around and deciding our 401k fate? Are we simply pawns on their retirement plan chessboard? [10:05] Anne Lester: Okay, All I can say is if there have been these dinners, I have never been invited, so I don't know how important the people there could really be. [10:12] JD: Fair enough. [10:14] Chad: Look at you, man. [10:15] Anne Lester: I'm just saying. [10:16] Justin: But hey, that's what someone in a secret society would be trained to say. So [10:21] JD: first rule of Schlomo secret 401k society is. Don't talk about it. That's right. [10:27] Anne Lester: I think there's a lot to be said for smart people coming up with good ideas and talking about them. And I mean, you know, if they can get by and, and if, if you can get, buy in for all this stuff. I mean I've, I've been in meetings. I wouldn't call them super secret. They've been, they've been publicized. But you get 50 or 100 people, maybe show those events are a little smaller and you try to figure out some solutions and then you try to talk to more people and more people. I mean that's how you make change. [10:50] JD: It's definitely a, it's, you know, or [10:53] Justin: maybe they're just really into like, you know, underwater basket weaving or something. Right. You know, we don't really know if they're talking about super important industry stuff. They might just like crafts. [11:05] JD: You know, where there's, where there's smoke, there's fire. And you're right, it is a, it is not 150 people. It's a very small, minimal, cherry picked crowd of thought leaders in our industry. But I will back you up in all seriousness. Very cool to create an environment that is outside of industry conferences, board meeting type settings to really get some people together on what sounds like on their own free will to have some, what I'm guessing are some pretty like evolutionary conversations about what our industry might look like in the future. Because that's kind of Shlomo's vibe. He's very good at that. So all joking aside, they're probably having some big, big topics going down at those in secret size. We're jealous while they're wearing the hooded robes and standing around a pentagram or whatever. But same thing. [12:00] Justin: Oh no, I'm gonna, I'm gonna say that's, that, that's not, they're not important meetings. I'm gonna go complete opposite of that and say prove it. I don't think they're coming up with anything. They're there playing tic tac toe and talking about the weather. I, I'm, I'm calling. [12:16] JD: Okay. [12:16] Justin: Everything you just said, Roby, I want [12:19] JD: to have you introduce the next article if you could. I'm thinking you could get a creative with this. It's the one about. [12:27] Justin: Read any of the stuff you sent [12:29] JD: about this new pooled employer plan that's coming out. You wanna, you come up with something off the Cuftus. [12:38] Justin: If I say anything, I might be stoned to death. [12:42] JD: There you go. Let's be blunt. There's a new plan in town. I don't know. Yeah, okay. The. I'm gonna drink for this because I want to taste my vodka. [12:52] Justin: Oh, you just said a bunch of them. I didn't even catch you on that. And no, you didn't, you didn't, you didn't. [12:57] JD: The nacc, no idea what that is. Launches its first first of its kind, cannabis 401k solution. You and everybody out there knows I hate paps. Damn it. That was not intentional. But you know what? I'm going to actually give this one a pass. And not because of the weed. This one. [13:24] Justin: That's a lot. [13:25] JD: Everyone listening in. There's Desenso. This is a pooled employer plan as far as I can see it. Where I'm Jason Roberts and who's the other dude's name? Help me out. I did a debate with him for aspa. [13:40] Chad: Swisher. [13:40] JD: Pete Swisher. I'll drink. Hang on. And their company, group of plans. Sorry if I'm botching that. I think that's close. But what they are, isn't is an actual independent, fooled plan provider. They are not a record keeper. They are not an administrator. They are not a 338. They are a clean whistle, clean pooled plan provider helping this institution and an advisor put it together. I say, finally, this is the kind of I'm looking for. But Ann, let's go to you. Everyone wants to hear you talk. How do you feel about marijuana? No, I'm just kidding. What do you think about a pooled employer plan like this? And I don't know, do you have any, like, backstory on the legalities of cannabis and 401k? It's kind of interesting, but looks like we got a big plan for all these. [14:35] Anne Lester: Listen, I think the beauty of a theoretical pooled employer plan, she said avoiding the acronym is let's see how I do later. Is that it lets people join something that their employer couldn't do themselves. Right. So if you're, you know, struggling to get a bank account, you know. [14:56] JD: Yes. [14:56] Anne Lester: Regardless of what I think about the marijuana industry, you know, like, I think that's a great solution for the workers. And I just think, you know, everybody deserves the right to be able to contribute to a 4, 4 workplace retirement savings program. [15:11] JD: That's a great point. That's a great point. I hadn't thought about that point. Which is as an industry, they really struggle to get all the services that they need. You mentioned banking as one of the. [15:24] Anne Lester: Can they. Can they get Automatic payroll deposit anywhere. [15:27] JD: I mean, right? [15:28] Anne Lester: Like you don't want employees walking around, walking around with bags of cash. Like the jokes just keep coming, but it's not fair. Right? So, so to me, the pooled employer plan's perfect application is for, I think in general, employers who are too small, too distracted to, you know, running their day jobs to like put all the energy and time and effort it might take to set up a plan of themselves. And if you've got legal, legal hurdles to jump over on top of everything else, then like even better because everybody deserves a plan. [15:58] JD: I agree and I can't believe I'm saying it. [16:00] Justin: Go ahead who they're using for the bank or anything like that, because that was always a big one, always the issue. One bank. [16:06] JD: Yeah, I believe the article even talks about that, Justin. I mean it clearly. It talks about American Trust as the custodian and I believe the record keeper. Excuse me. Yeah, the custodian. No bank. Well, serving as custodian. American Trust is serving as sub custodian. That's a new word for me and probably knows what a sub custodian is. But. But they are the record keeper and [16:32] Justin: the third party administrator custodian that makes sandwiches. [16:36] JD: And then there's Green Check, Verified Inc. Handles AML and the Fin 10. I'll drink, but that's banking stuff right there. Chat or Justin. Yeah, they're mentioning all of that, which again, we'll move on. But an Anne probably hasn't seen this from me, but Anne, I just, I think old employer plans are disgusting. They're riddled with conflicts of interest and all this kind of stuff. So it's nice for me to finally see one where I feel like the entities, the conflicts of interest are fairly siloed. There's none of that happening here and I would love to see more of these out there in the industry and then I'd stop yapping about it so negatively all the time. [17:14] Chad: So let me add one point, JD which is around the cannabis side. We need to stop as an industry steering away from it because to Ann's comments, these are employees who are receiving W2s who have taxable income and for the most part don't have an option of sheltering. And we wrote, I mean Justin, you were our drug dealer, our drug dealer, plan seller and you did a lot of these for a while there because nobody else would. And our stance was always from our side as a third party administrator, our stance was always this could be difficult to set aside money for the business owners who have a struggle of claiming income because it's not a federally recognized business. But these employees receiving W2, there's nothing black or there's nothing more black and white than that. These are statutory employees and they should have an opportunity to save. [18:07] JD: And for all you that live in different states, you know, in California here it's. It's so commonplace. You walk down Main street and there's a really nice retail store with beautiful signage and a front desk at the front, and it just really well run. And that's just the tip of the iceberg. This industry is not what you might think of it. If you're thinking of Beavis and Butthead or something like, it's far more scaled than that. [18:35] Justin: God, I miss those guys. I really do. [18:39] JD: When I look at you, rub guy, I think of them, okay, who? [18:43] Justin: Which one? [18:45] Anne Lester: Which? [18:45] JD: I don't even know which one's which, to be honest with you. [18:48] Anne Lester: The platform. [18:49] JD: Beavis. Beavis. No, I don't know. Butthead. I don't know. Mark. [18:56] Justin: J.D. [18:58] JD: now let's go straight to Anne. I'm gonna go off the. I'm gonna. [19:01] Justin: I thought you were, I thought you were just about to spin the wheel. [19:03] JD: Well, let's do that. Let's spin the wheel and then we'll go to. Yeah, Roby. Roby. Okay. And this is going to sound very cliche. Roguy's gonna pound this smearing off ice. But you focus on me. I, believe it or not, I had my coffee this morning very early, got up and I jumped on YouTube and man, there's all kinds of podcasts with your face on them. I can listen to you talking to all kinds of people. And I jumped into a few and popped around and listened. And a lot of these younger people that are interviewing you love to kind of label you as this left Wall street, the chains and shackles of the corporate job to finally gain your freedom. And, and I, I guess I've seen some of that from you, but what, but, but I also look at you and go, no, no, no, no, no. That's not her. You're mislabeling her. She loved her years at. [20:11] Anne Lester: Where was it? [20:12] JD: John Pure point. John. Pure points, Morgan. [20:16] Anne Lester: And [20:18] JD: you had a phenomenal career of which we're going to get into. Of talking about a lot of stuff. So you seem like a bit of a contradiction to me. Like, are you the I'm breaking free of Wall street, that I'm a free woman doing my own thing, hoorah. Or are you more one of us corporate types? [20:39] Justin: One of us we love the industry. [20:45] Anne Lester: I think the best answer to that question is yes. [20:49] JD: Okay, expand. [20:53] Chad: That was a great political answer there. [20:56] Anne Lester: I loved. I loved my job. I love the people I work with. I got a. I shouldn't say I love my job. I love most, most of what I did every day. Like. Like, I remember having a conversation with my boss right before I left. And. And I said in all sincerity, like, I literally enjoy 85% of what I spend my time on. And I challenge almost anybody in the world to say that about their job. And I am right now, as I said earlier, sitting on Madeline Island, Wisconsin, having done day four of a writer's retreat, writing about my working on my second book. Second book, which I'm writing. And it's about how you find how you figure out when it's time to quit something. So I'm just kind of processing all that. And I guess what, what I'd say is. You have to figure out why you're doing things. And I have decided or realized it, you know, the ripe old age of I'll be 60 in a couple weeks, 10 days, that I was doing a lot of stuff in my life because I thought it was the right thing to do. And like, that's, that's a good reason to do stuff. But it wasn't. Ne everything I was doing wasn't necessarily because I wanted to do it. And what I am doing right now is 100 stuff I want to do. And I don't have anybody in the back of my head saying, because I should. [22:15] JD: I mean, it's again, cliche, but I wanted you to share that story a little bit. You know, corporate woman at the top. Adam, the company I just mentioned starts, or it's at the beginning of starting a target date fund that goes on and manage it and be very successful on all kinds of different levels, let alone the personal brand you have developed over time and speaking and all that kind of stuff. Like your, your career really kind of transcended all different types of areas. But at a certain point, you did get to a spot of like, I don't know if this makes me happy anymore. I heard of a. An over an hour and a half commute into New York. Maybe you had lost a bit of your. Your zing and your motivation to do things. And so I think there's probably people listening in that feel that way. I might try to counsel them to, like, do their best to improve what they currently have and make the best of that. But also a bold, confident decision like yours is like, no I'm gonna mix it up and I'm gonna try something different. So I, I guess maybe for all those people that are out there listening in, I sound like some kind of self help podcast or something. We are not that we're quite the opposite. We try to, we try to hurt people's feelings on this show, but I guess, what would you say to them? The, the leap that you took? It's been a few years now. By the way, how many job offers have you gotten in the last few years? Like real corporate job offers? A lot? [23:46] Anne Lester: No, a few. Yeah. You know, it's interesting. [23:49] JD: So, so was it a good decision? Yay or nay? [23:51] Anne Lester: Yeah. Zero regrets. I, I think I had one true moment of just saying, is it okay to swear? It's okay. Did I just do right? I, I, it was so I left like right in March of 2020 is like when we announced I was leaving. So there was in lockdown. Okay. And I was just sketchy timing. Timing. Right. That was totally random timing. But I was just sitting there just thinking, what the did I just do? And I had such a weird longing for the structure of my day. Like, I would wake up at 54 45, I'd be on the train. I had to walk out of the door at 5:55, I'd be on the 6:15 train. Like just machine, right? Boom, boom, boom, boom, boom. I'd get to my office, I'd get the omelette, I'd sit down, my schedule was there. I just ran through, you know, and [24:40] JD: you like, you liked that or didn't like. [24:42] Anne Lester: Well, there's some comfort in it, right? I didn't ever have to think about what I was gonna do next. And I, you know, I left. I, you know, I retired. [24:52] JD: Not to mention you were so, you were so big time. Like, your assistant would bring you your coffee just the way. Don't lie to me. [25:00] Anne Lester: And nobody ever. [25:02] Chad: You didn't ask about the omelet. [25:03] Anne Lester: Use that because I. [25:04] JD: Did you have a private elevator to your office? Was there a private. [25:07] Anne Lester: I did not have a private elevator. [25:09] JD: Sure. [25:09] Anne Lester: No, I did not. And nobody brought me coffee, but I would have. I, I, I found myself in, I don't know, April or May. Just like, I literally don't know what to do all day long. I mean, many of us felt that way in April of 2020, but, but I, I literally didn't know what I was going to do when I woke up. And it was scary. Like, you know what, you know, to think about it for, you know, the, [25:32] JD: the Bad decision you made and is at that time, you could have just kept your pay and still gone home and not done anything. And you could have done that. [25:44] Anne Lester: Yeah, but that wouldn't sit right. I don't know that I sat right. But. But I will say part of the reason I decided to leave when I did was because I was still having fun. And you've all seen them. You have all seen the people who have stayed longer than when they were having fun. And it's not good for anybody. And I had a. I had a fabulous team. I was the blocker stopping all of them from stepping into their next job. And I just thought, you know, I'm having fun. I could sit here for another 10 years doing the same things. I still enjoy it. I should stop now. [26:18] JD: That's. That's kind of cool, because you weren't at a low low. You almost are at a high. You're saying you're kind of leaving on top. You're kind of mic dropping it and saying, like, I'm gonna leave while things are still good. So that's. [26:32] Anne Lester: That. [26:32] JD: There's something to learn from that. That's kind of cool. [26:34] Anne Lester: Yeah. I'll tell you. I'll tell you what. I'll tell you the two things that kept going through my head. And I had a whole bunch of personal stuff happen to me in the couple years before I left. Like, I had my third diagnosis of cancer, and I'm totally fine. My youngest son went to college, and I had an empty. I mean, there's just all this, like, big life stuff happening. And I, I got it in my head that I really wanted to do a pilgrimage walk. And I was just obsessing about this pilgrimage walk, which I did three years ago, which is what this next book is about. [27:04] JD: And from the Swiss border of Italy to Rome, 500 miles. [27:10] Anne Lester: Yeah. Yeah. Jinx. Same jinx. [27:15] JD: Jinx. I drink. [27:19] Anne Lester: Yeah, I'm just, just saying. And, And I, I, I really wanted to do that and I really wanted to write the book that just came out six months ago. So for me, it was like I could stay where I am, but it's. It's going to be more the same. And while it's all good, I guess I do. I just like challenges. Right. [27:36] JD: Okay, well. Well, buckle up for tonight because we're [27:39] Anne Lester: gonna take weird being my own role model. You know, I recommend it. [27:43] JD: We're gonna take you back in the day because we've never had, as far as I can tell. I mean, we've had some money manager types on Here. But we've never had anyone that has actually started a mutual fund at the beginning. And more importantly for that, because we're 401k guys started a Target date fund. So I really want to kind of dig into that a little bit. J.P. morgan. I'll drink. It's 2006, by the way. Pension protection act is about to go down, which is going to solidify qualified default investment alternatives. And just the fucking takeaway Runway, the takeoff Runway of target day funds. I mean, you can look back now and think, of course, but did you see it at that time? And was that the thought of your employer was, oh, my God, let's make one of these things because we're about to get kaching this. We're gonna get so rich. It's crazy. [28:46] Anne Lester: No, I saw it. I. My. I did. I did. Listen, I saw it. I saw it as a probability. Yeah, I saw it as a probability. It was just so obviously a better way of doing things. [29:01] JD: And can you imagine plans before that? Like, that's. I mean, I guess we had asset allocation fund, like, risk space for a [29:09] Anne Lester: little while, which is what I was doing. Yeah, yeah. [29:11] JD: But this is definitely the 2.0 version of that. [29:14] Anne Lester: Yeah, yeah. And. And I. I remember. No, the. The firm as a whole did not buy into the concept. There wasn't much back then of a retail distribution salesforce. And the institutional guys all wanted to sell, like, you know, the next China private equity fund and didn't really want to engage in anything 401k. So they. I just remember being so frustrated in 2008, 2009, when we had like, literally the number one track record in the industry, and I couldn't get sales guys to pay. [29:41] JD: Okay, but. But somehow it gets the green light and you're going to do it. Was there an example for you to look at? Like, to be honest, I don't know who was. Who was the. Was there a Target Date Fund before? [29:54] Anne Lester: Yeah, yeah, there were a couple. So. So the firm now known by its initials, and that was then Alliance Bernstein, had just written a big white paper talking about how they'd done their glide path. And that because they knew that, you know, people should save 10 to 15% of their paych and would not touch their money until they retired, the right thing to do was to be super, super, super aggressive all along the glide path. And I remember reading this white paper going home on the train on New Jersey transit, and literally like bouncing up and down in my seat, muttering. And everybody on the train was like, oh, that lady's crazy. We're going to move away from her. Just, it was just like, people don't do that. People spend their money. So I, I, and I had these arguments with, with my fellow PMs on the team that, that, you know, they [30:40] JD: were like, we're like, shit. [30:43] Anne Lester: All right, sorry. [30:44] JD: You can always finish your thought. You know, but we call them portfolio managers on this show, not by their portfolio managers. [30:52] Anne Lester: My fellow money managers, you know, we really had a debate about the right thing to do and I, I just said, look, people, people don't behave like econometric models. People are not rational financial actors. And we need to take that into account. We can't assume all this money is staying in place because we know for a fact it isn't. Because if you've ever sat through any kind of meeting with the plan administrator and listened to the statistics about loans and hardship withdrawals and money leaving the plan and people just turning off their contributions, you know the money's not sticking. [31:28] JD: That's interesting. Are you getting this? She's worried about like rollovers and distributions and these kind of acts that are happening as she's building the fund. That's interesting. I, I would think it'd be okay for you to build a target, a fund based on the premise that it's a kind of start to end type of thing. You know, being beginning my career to the end of it. Like people would make sense of that, but you were more sensitive to that, that, that's not right. I, I thought you were going to take it another angle. I, I think today when you analyze targeted funds and you tell me if you think you disagree with me, but when I look at one versus another versus another, they all seem to follow the same similar strategy to me. Like it's very hard to find different asset allocation amongst these target dates. You could find some that are clearly twos and some that are clearly throughs, but they all seem to be a bunch of wimps to me. And they're all just kind of like doing what their neighbor's doing. I'd imagine in 2006 that's not an option. And so you're definitely got to be creative, entrepreneurial, like and create your own version. So a lot of pressure. [32:34] Anne Lester: We did that. But I'll tell you something else. The reason that I knew that people didn't behave like that was because I wasn't behaving that way with my own money. Which is, is kind of a lot about the book that I just wrote. [32:44] JD: You were like me, you were buying Lambas and fancy. [32:47] Anne Lester: Yeah, I was rehabbing an old Victorian house is what I was doing, and buying a lot of new windows. Same, same, same, same thing. Same thing. Discretionary spending. But yeah, I, I was a terrible. [32:58] Justin: I spend my money on way different things than you guys just gonna say, [33:04] Anne Lester: yeah. [33:04] JD: So I. [33:05] Anne Lester: No, it's. If you're taking that kind of risk on behalf of somebody else, should you try to maximize their upside or minimize their downside? And that's the big question I think target date fund managers have to answer. Twenty years in, people are converging around the same answer because everybody's trying to win on performance, which is the exact opposite way that we should be doing it or they should be doing it in the game anymore. But. But if your customers keep insisting on making decisions about who they want to buy based on performance, the rational thing for all these managers to do is to com is to converge on the same asset allocation. It's. It's frustrating. [33:44] JD: Interesting. I naturally thought that it was more a scenario of no one wanting to stick their neck out, whether that's in front or behind. Like, they just kind of wanted to stay the same as everyone else because God knows what's going to happen next, and they didn't want to be the one that shows on the negative side. It's not worth the risk of going for it in the big time. [34:05] Anne Lester: If you look at the compass that was. Was published by my former employer, she said, dancing around that acronym, I think, I don't know. I haven't looked at this stuff in four years. I swear to God. But I. When I left in 2020, there were still a lot of dispersion on, like, equity. Like, the two improve. Those are big differences at the end of the glide path. Like, you got some folks with 20 equity, some folks with 60. Those are big differences. So you should see. [34:30] JD: I'm sure we can find some. I just feel like when you pull a lot of the big names, you start lining them up. I'm like, oh, wow. A lot of them seem to be following the same exact STR strategy pretty much. But of course we can find some. [34:42] Chad: They believe they found the right strategy JD for that age range. They believe that they have, over time, figured out where they should be on this glide path. [34:52] JD: Let's ask. [34:53] Anne Lester: Or they're big because all the customers decided that was the right answer, and that's where all the money went. I mean, like, you can do this. [34:59] Justin: Well, it's. [34:59] Chad: We defaulted. [35:00] JD: Right. [35:01] Chad: I. I think if you look at the money that's Sitting in target date funds. I'll say the majority. I was gonna say the vast majority, but I'll say the majority is in there because we have defaulted participants into it. [35:13] Anne Lester: Yeah, yeah, but. [35:14] JD: But fiduciaries had. [35:15] Justin: There's a big reason. [35:17] JD: But fiduciaries had to make decisions on which one they were gonna put there to get defaulted in. And I would lean towards Ann versus you, Chad. Like, she's the one who's actually run these. And so she's saying. Being the target date fund. So she's saying that like. No, there is some. Political is not the right word. There's some. There's some influence. There's some influence on the decisions that go beyond. Just see Chad. Chad believes that everyone's doing the right thing. That. Oh, well, all the target day funds must choose that allocation because they've clearly done their research and it's the right thing to do. And. And it's not necessarily the case. [35:57] Anne Lester: So I'll. I'll tell you a story. When I joined the asset allocation team at J.P. morgan in 2000. [36:03] JD: Bring her up. But keep talking. Don't drink. Keep talking. [36:05] Anne Lester: I've got a drink. I'll forget. [36:07] JD: The man's name was John Pierpoint and get it through your skull, John. Pure point. [36:13] Anne Lester: My former employer. We were short equity because we thought equities were overvalued in 2000. And we were right. But it took a while, and by the time that we got right, we didn't have a whole lot of clients left. Oh, there's this. This. This is. We were running mostly DB money at the time. So it. [36:43] JD: Okay, God. [36:44] Anne Lester: Defined benefit. We were running defined benefit, pension money, not defined contribution money, mostly. But you can be right and. And not have a business anymore. So I, you know, is it political or. You're being chicken. [37:00] JD: Let's talk about writer. Let's talk about right or wrong. Can we. [37:03] Anne Lester: You know, in the long run, you wait. You can wait a long time for the long run to happen. [37:07] JD: Chad. Can we. I can't hear you, John. [37:10] Chad: They're jumping off the ship in that interim. And is that what's happening? [37:15] Anne Lester: These were. These were our pension clients who. After you, you run up two years of big time negative performance because your Underweight equity is 5 to 10% because you think the markets over. They're out, leading into the end of the Internet bubble. You're done. [37:28] Chad: So people. So, so glide path. [37:31] Justin: I always do. [37:31] Anne Lester: It wasn't a glide path. These were other. These were other. [37:33] Chad: I know. I'm just saying in general it could be a, a fear of we're being maybe too far ahead of the curve, that we're losing our customers during that stretch, even though we're confident this is the right way. You've got to be more dynamic short term than you are. [37:52] JD: It's not that complicated. It's. It's a performance game. How many defined contribution investment only suits and ties do you think are running around convincing advisors and their clients to invest in funds because of performance numbers? I don't know whether that's 10 year, 5 year, 3 year, or 1 year, but it's happening. No one actually looks at things as logically as they should and looks at, oh, standard deviation, oh, alpha, oh, this [38:17] Anne Lester: and that, like, or what's the philosophy of your company? And back to that question I asked. Are you trying to maximize the upside for your participants? Participants? Are you trying to minimize the downside? That's a big philosophical choice that you have to make as a plan sponsor, right? Are you trying to help people make a ton of money or you trying to help them avoid losing a lot of money? And you can't have it both ways. With asset allocation, you're either trying to get the upside, you're trying to protect the downside. And once you pick that, you have to be willing to live with the consequences, which when the market goes the other way, you're going to lose performance. [38:51] Chad: I think the asset allocation folks would be terrified to hear you say that. [38:55] JD: And, and also Chad and, and it wouldn't be a good retireholics if Chad and I don't argue a little bit. And he just chimed in in his little chat bar there and he said like, oh, those. We have investment tools for that. The, the retirement plan advisory groups and the Fi360. I'll drink if that's a thing. I think we've determined it's not. And the morning stars and all these tools that people are using to analyze funds are, are absolutely being used, but mind you not, there are still decisions being made about performance. Okay. And if, if you're blind to that, you're blind to that, bro. Like, it's happening. [39:33] Anne Lester: Go have a. [39:34] JD: Go have a steak dinner and an expensive bottle of wine. [39:37] Anne Lester: Percent People are making decisions on performance because it's really uncomfortable to stay and not everybody, because I know plan sponsors who don't, but not everybody. But, but it's really uncomfortable to say we made a philosophical decision and even though we're losing money versus is all the other stuff out there, we're going to hold tight because we think it's the right thing. And then what do you do when the class action lawsuit start? [40:01] JD: Yeah, it's a struggle. I. I get it on this vein and we can, we can move on a little bit. I hate to put you through this, but I got to ask you, like, so are you jumping? You are out. When, when do we get the huge rise in interest rates? You're. Yeah, you can talk about this. [40:18] Anne Lester: Okay. I was turning up. [40:20] JD: Yeah, you're out, out. So you're out. And target date funds start to face kind of a. A tsunami, you know, or a wildfire, if you will. They've got all this fixed income that's tied to these very low interest rates. And interest rates start rising very quickly. I mean, very quickly, because the Fed's trying to write things and target date funds take a big slap in the face in terms of performance. And, and most worrisome, it's the con. It's the conservative flavors of them, right. It's the ones that are closer to the end dates. What was Anne Lester thinking out of her former employer? Got her feet up on the, on the coffee table with her coffee in hand when that shit's happening. [41:07] Anne Lester: And Lester was thinking, yup, this is what happens when interest rates go up and, yup, this is going to rebalance. This is going to sort itself out in a couple of years, and as long as people don't sell in a panic, it'll be fine, is what M [41:20] JD: was thinking back to our original conversation. [41:23] Anne Lester: Asset allocation doesn't work sometimes. [41:28] JD: Love it. [41:29] Anne Lester: There's it. You know, all this stuff breaks down periodically and, and what you want to do when you're building a fund or building an asset allocation is understand how badly it's going to go wrong for how long, and try to be as mindful as you can about understanding, you know, what those wings look like. [41:50] JD: Although, can I challenge you on that a little bit? And obviously, I'm not a portfolio manager. We leave that to Robe guy on this show. You'll learn more about that shortly. But when interest rates are at zero and free money's flying around, it doesn't take a smart person to realize that eventually those rates are going to go up, up. And so you had zero down and [42:15] Anne Lester: zero a month for a long, long time. [42:18] JD: So it wasn't like, this is a shock that this is coming. I would have thought there would have been more preparation. [42:25] Anne Lester: The question is when? [42:27] JD: Yeah, well, in the future. [42:29] Anne Lester: In the future. So back to my point about being right two years early, it didn't matter. Because we didn't have any clients anymore. You could be right. And it's a really long, painful. [42:40] JD: Suffer for it. [42:41] Anne Lester: Yeah, you'll suffer for it. Like, I don't know what the team was positioned. Like, I assume they were a little short duration. But being a little bit short duration is not going to help you when rates go that fast. Right. It's just not so. And I think the thing that hurt the most about that rate rise was that it's like, it's like the viper you've nursed to your bosom betraying you. Right. The safe part of my portfolio went down double digits. Like, it's just an insult. Like if your equities had gone down like, like 11 or 12 negative return in equities, it's like, oh, it's not bad. [43:14] JD: Part of the game, part of the fixed income. [43:15] Anne Lester: It's like a betrayal. Right. [43:18] JD: Those poor old boomers, they were. [43:21] Anne Lester: Emotional pain of this was the betrayal that I think people who were taught to think about big stickers, they felt like. I didn't think it was surprising. [43:31] Chad: Like it was predictable. [43:32] Anne Lester: It was totally predictable. It was totally predictable. And you just don't, don't sell and it'll be fine. [43:39] JD: Yeah. Yeah. You guys, you get. I can't believe I'm saying this to Anne Lester, but yeah, we all get that and you get that, Chad, but when you're a 74 year old woman who's retired, that's. That is weird to say. What? My conservative investments are causing me a loss in a big way. Like I'm concerned, you know, I'm supposed to be the other ones, but we get it. But they don't necessarily get it. [44:07] Anne Lester: It. [44:07] JD: So I just thought it'd be fun to have you here to ask. [44:10] Anne Lester: Yeah. Listen, it's. [44:11] JD: It answered it perfectly. [44:13] Chad: All right. [44:13] Anne Lester: There's no perfect answer here. There's no right. It, it. Losing money sucks. I mean, it just sucks. And, and it sucks when you know that, that somebody's like livelihood is. [44:24] JD: And let me, let me make you feel better about it. [44:27] Anne Lester: Yeah. [44:28] JD: You've spent your whole life or most of your life in that role and with that pressure of making choices for other people's money. And I can tell you're a great person. You worked hard at it. [44:38] Anne Lester: It. [44:39] JD: I wish you had a time machine and you could go back to 2006 and in that time machine you could take Rogue Guy with you. Because when it comes to stock picking, Rogue Guy is a genius. This stuff runs through his blood. It's in his. I'll drink. It's in his DNA. He is just a mythical freak show when it comes to stock picking. It's time for drunk stock picks, people. Buckle up. [45:10] Justin: Cash rules everything around me. [45:26] Chad: That picture of you on the bill is just so good. [45:30] JD: Wait, I can't find my. [45:32] Justin: Yes, I. I still. Again, I'm. I'm not doing well, J.D. knowing that the one that I royally [45:40] JD: screwed up on is mine. That's okay. [45:43] Justin: Is the one that you're gonna owe a thousand dollars to charity for. [45:46] JD: And we. For. Since. Since April of 2022, we have been doing drunk stock picks. This is where Robe guy over there tells us all where to invest our money. And so, you know, if you'd like to take some of your John Pierpoint money and invest it, you should pay attention. He told you everybody to buy Netflix at 199. Netflix is at 706 right now. He told you to buy Apple at 142. It's at 225. He told you by Home Depot at 269. It's at 411. I could go on and on again. On and on again. He's had some losses. Let's be fully transparent here. We have done 29 stock picks in drunk stock tips, and he has been right 23 of the times and wrong on six. Unfortunately, one of those six is Cheesecake Factory, and it's gonna cost me a thousand bucks. But that's another story about the kids [46:47] Justin: that might have been intentional, to be honest. [46:51] JD: Let's see. We started this in April 2022. The standard in Poor's 500 is at about a 25 return over that same period. And Robe guy, he's rocked an annualized rate of return right now. 39%. And. And the alpha, I mean, it's got to be. I have no idea what the alpha [47:14] Justin: is, but it's very simple. [47:16] Anne Lester: It's really 39 -25. I don't know. [47:18] JD: Gotta be a low risk. It's gotta be low risk. [47:20] Justin: It's really easy when you don't have any actual money on the line. [47:23] JD: Line. So, Mark, we got a stock for you and for everyone out there today, for you to let us know what to do. I've got my E Trade account open. I'll drink for that. And I'm ready to. To buy or sell. You tell me. I'll short this if you want me to. This thing's got a market cap of $583.91 billion. [47:42] Justin: Don't know. Don't know what that means. [47:44] JD: Go on a 52 week high of 225 and a 52 week low of 135. Wowzers. A little bit up and down there. In 1992, when Anne started there, the stock price was $11.50. The ticker is I'll drink. JPM. John Pierpoint Morgan Robe guy. Is it a buy or a sell? How much money you got wrapped up in this? And you might want to like, you know, sit down. [48:16] Justin: This is unfair. This is uncomfortable. This is pretty uncomfortable. Can you tell me what they're at right now? Closing today? [48:27] Anne Lester: Last time I looked, it was 200 something. I don't know. 200? [48:30] JD: Yeah. Well above the 11.5 it was. [48:34] Anne Lester: Yeah, yeah. [48:37] Justin: This year. [48:37] JD: No, there's no drama around this fund. [48:40] Justin: Let me just delay this as much as I can. Yeah. Justin, tell me they're up close to 20 this year. Okay, well, I'm just gonna level this. [48:50] JD: I have 205. [48:52] Justin: I think that's a pretty good spot for them to be. [48:55] JD: Nice. And if you think, [48:58] Justin: you know, we talked about this earlier about two, four [49:01] Anne Lester: and a half years, like, I'm out. I'm out. [49:04] JD: There's a lesson in diversification right there. [49:07] Anne Lester: I will tell you that Most of my fellow managers of money and I eventually took a pretty disciplined approach to diversifying our portfolio systematically. [49:23] JD: Fair enough. [49:24] Anne Lester: There's a statement in there if you want to parse through all the weasel words. [49:26] JD: I don't. [49:27] Justin: I have to do too. [49:28] JD: High level. [49:29] Justin: I'm not smart enough to part through weasel words. Okay. I don't know. [49:33] Anne Lester: Basically. Basically you got a lot of risk in your employer and it's not a bad idea to just systematically sell stuff. Stuff. [49:40] JD: Of course. I have a good friend who's an employee at at Meta and got a lot of money there. And I'm always thinking like, yeah, you need to sift some of that out of there. You know, from time to time. Even though it's been crushing it for you. Sorry, Ro. Guy. J.P. morgan. I'll drink by ourself. [49:56] Justin: All right. I'm going off of. I'm going off of two things. One is as per usual and my. My only thing I typically go off of which is vibes. Okay. Vibes are. I'll say this. Vibes are not up. Vibes are not down with this stock. I'm actually. It's relatively boring. I kind of wish you would have picked something else more interesting, but I get it. You can't always be cool and hip. I'm gonna just say this. I'm Gonna say that this is a. This is your Tim Duncan. If you want a sports reference, this is your. The Fuji apple. You know, something that's just going to be consistent. You can always be supporting stock. [50:39] JD: A little supporting stuff. [50:41] Justin: Right. You gotta have some crazy, maybe high volatilities. You gotta have some tried and trues. And this is your tried and true that I'm not saying buy a ton of it. [50:55] JD: Yeah. A little bit of foundation. A little. If it's a little. [50:58] Justin: Little sliver, you know, going into glue. It's the glue keeping segueing back into way. When we started this conversation about what. What Todd said in his article. [51:09] JD: Right. [51:09] Justin: It's a brand and it's a brand that I think we still have this recognition for. And I don't see a fall off coming anytime soon. [51:20] Anne Lester: You. [51:20] Justin: You do a little. You do a little. Just a little sprinkle. Little. Little fairness there and then. And then you hold it. [51:27] JD: Well done. Okay, Can I just give a little shout out again to Chad Parks? My. My man love. I guess these days. I love how he gets ubiquity ret into his name, into the zoom. That's like marketing at its best right there. That's good. Okay. [51:44] Anne Lester: And [51:47] JD: maybe can you get back into the. The stock Robey saying, you know, put it in your foundation. I don't know. We'll move on. Okay. I. I need advice from you and thank you. Robe guy. Boards being on board. I know I've got three Lambos. [52:05] Anne Lester: It's like really grown up, you know, [52:07] JD: I want to do this. I want to do this. So just for the important people like me and you, like, let's pretend that robe guy and Chad and Justin aren't here right now. And so how do I get into this board gig thing? So you're sitting on boards. They want you to use your brain. You tell them what to do because you're smart and they pay you money. Sounds like a good gig, right? [52:28] Anne Lester: Yeah. Well, they don't always listen, but yeah, you get to. You get to talk a lot. No, it's. Listen, it's interesting. I think. I think I'm on the board of a company called Partners Group, which is a publicly traded Swiss private equity company. And I'm on the board of Human interest Advisory, which is the 338Fiduciary for Human interest, which is. [52:45] JD: I want to talk about that record keeper. [52:47] Anne Lester: Yeah, we can talk about that. And for me, I guess when I think about how I'm spending my time, I think about wanting to do the things that I always thought were important, which is one, help people get access to savings. And I think a company like a three like a human interest can help more smaller plans get, get. Like I said earlier, it's a fairness thing. You want as many people. [53:09] JD: We've had them on the show as possible. We've had them on the show. [53:12] Anne Lester: Second thing I care a lot about is getting good returns to people. And I think, and I always thought when I was running the target date funds at my former employer that more stuff was good. Diversification, private assets. Right. Those, those really do work over the long term and I'm a big believer in that kind of diversification and that's what I think partners group is trying to do and I support them in that. And then the third thing I care a lot about is helping individual people know that they can save. And that's why I wrote the book. So those are the three pillars of my stool, for sure. [53:45] JD: And so being on these boards is part of your, I'm going to call it your second stage of your career after leaving, you know, your main employer. I heard you say something on a podcast I thought was really cool. I'm probably gonna botch it, but of like being head in and hands out. Yeah, yeah, I thought that was cool. So robe guy, what that means is she gets to be involved in this company. This is my interpretation of that. And, and really give her advice, her counsel, her experience, be part of decisions, but she doesn't have to deal with the day to day, you know, like hiring, firing, talking to people, monitoring things. And so that was really interesting to me. I would love to know how much they pay you to be on a board, but I'm not going to ask you that here tonight. [54:30] Anne Lester: It's in their annual report. [54:33] JD: Oh, good. Yeah, great. Okay, I'll go look it up. By the way. Never mind. I'm gonna leave that out. Okay. Had nothing to do with you. I was going to talk about Brian Graff and his salary and that you could go look that up at the ASPA thing. So there I said it. Oops. [54:48] Anne Lester: Oh, you did it. You did it again, man. [54:50] JD: I was going to keep that to myself. Let's talk. [54:53] Justin: Where can I go see that before [54:55] JD: we talk human interest. Let's talk human interest and Smart United America at the same time. Okay, so isn't that an acronym? [55:05] Chad: Didn't we determine this? [55:08] Anne Lester: No, it's their legal name. I don't know. Is that an acronym? That's their legal name. [55:12] JD: And for something I'll drink. Okay. Successful Company out of the United Kingdom does really well with their pooled employer plan type that's over there decides they're going to come over here and crush it in the space has like north of $200 million, I think, in venture capital funding. You're sitting on there. You can check me on that number if you think you're sitting on their board. So I'm interested. And I'm not trying to, like, claim a slam dunk here. We had them on this show. We did, right? Or if I just talk over the years. I thought we had their guy on the show. We did. I remember questioning him, like, I don't see how this business model plays out for you. Like, I was a real that night, and I was like, I don't see how you're going to. [56:00] Anne Lester: Oh, Daniela, who should know, says you did not have him. So she said you just got shot. [56:04] JD: What's his name? Jordan or whatever. [56:06] Anne Lester: Jordan. Daniela would know, and she says you didn't. But anyway, go on, ask your question. [56:11] JD: And talking. I just been talking the whole time, and I'm like, I don't see how this is going to. We're supposed to have him, and then he had to cancel. Well, there you go. If he would have been on the show, maybe things would have turned out differently. So that thing went down. You're on the board of Human Interest Advisors, Kind of their. Do I call it their retirement investment advisor, arm of that. Whatever the investment. Any parallels between those two come. You probably can't tell me anything about that because you sit on the board. You're like a Go team cheerleader of that. Like, are you. Are you worried that Human Interest could follow down the same? [56:49] Anne Lester: Fiduciary burden is a heavy one, man. [56:52] JD: What's that? [56:53] Anne Lester: I said the fiduciary burden is a heavy one. No, I mean, there's a lot I. Listen, I actually got JP Morgan when I was still there. [57:03] JD: Keep talking. [57:05] Anne Lester: Ding, ding. I got to keep track of this myself. Otherwise it just. It just doesn't go well. It's how I keep myself accountable. My former employer took a stake in Smart, you know, way before they had a U.S. business. And when I retired, they asked me to join the brand new US Business that they formed. I think it's an interesting business, I think, you know, as a member of the US Board. What? [57:32] Chad: United States. [57:36] JD: Keep talking. You can add them up. You can have a little more later. [57:39] Justin: Have fun writing your book tomorrow. [57:43] Anne Lester: I already told them I'm too hungover to do anything. [57:48] Chad: Good prep. [57:49] Anne Lester: Listen, you. [57:49] JD: You. [57:50] Anne Lester: You you think if something's a good idea, you try to execute it. Sometimes it doesn't work out. I guess I just say I, I think the American and subsidiary of that company had a really great idea and I think, you know, got weird, it got weird there. It's complicated. It's complicated. I, I, I, I think when you look at startups it's, and this is something my husband has said, he's been involved with startups and angel investing. He's a ex pharmaceuticals guy and he left that industry because he just couldn't stand it anymore. But he was working with some startups in that space and he just said, you know, the most important thing isn't the idea, it's the execution team. Oh. And I think, I think I have a lot of confidence in the execution. [58:30] JD: Although I had a, I had a, I had a bit of a problem with their idea. Okay, Chad, you had a thought. And then I want to rip. [58:36] Chad: Well, I was just gonna say we've seen this and I won't throw names into the bucket but there's a company that we've had on here that I was incredibly high on. I still am for the idea and the thought. But the launch into market, their minimal viable product they launched with, with no real revenue generating in it has them in a position now where they've got some market share. They can't monetize it and now they're coming to their partners charging it, in my point of view, an arm and a leg. For what? [59:04] JD: That's a people problem more than an ide. [59:06] Chad: Well it was an execution problem. When they came to market they needed to have an appropriate compensation model in there for how they're going to float the company back. And I think the same thing happened with Smart and I think some, I won't say human interest is in the same bucket, but I think some of these disruptors are in the same space where disrupt it did not really create much of a, a way of monetizing. [59:31] Anne Lester: The second topic on this conversation tonight was the, the secret society that is trying to envision the future. Right. And I think when you look at disruption and you look at all of the inefficiencies we all know exist in the record keeping space and all of the inefficiencies that exist in the, the plan administration space. [59:53] Justin: Nice. [59:53] Anne Lester: And thank you. And, and we look at how hard it is to exchange information and how hard it is to connect and all of the stuff we know is theoretically possible about personalizing and helping people do a better job this, you'd look at all the space for innovation and you just go, there's got to be a better way. And a lot of people want to figure it out and I'll just say many of them are not going to work out out because that's just the way innovation works. So let me, you know, I think it's good to try and I had the huge amount of respect for, for the team at the startup whose board I was on that is no Longer has a U.S. subsidiary. And you know, I think they had an excellent idea and it's, it's frustrating that didn't work. [1:00:42] Justin: What United States again, you just, I [1:00:46] Anne Lester: did, I said [1:00:49] JD: a little bit of, a little bit of context and let's, let's go a little deeper on this one. So I am a, you know, second generation 401k family person, right. So I feel like if you poke me, I believe like industry blood. So I'm very protective of the 401k industry and all the people that are in it. And I'm talking about legacy people, you know. And so when I saw, and it's no secret to people tuning in here, but when I saw Guideline and even Veswell and, and Human Interest come to the market and all their little smaller cop, you know, copycat versions, I was a little pissed off because they were, they're coming from outside of my industry and I didn't feel like they really understood my industry. And at the same time I felt like they were talking a lot of mad about my industry that we were these like evil Wall street companies that were stealing all their money and yada, yada, yada. And I. So I was pretty offended. And so for years, and I was throwing them under the bus all the time, talking about, I mean, I mean, in front of live audiences when they were standing in the back of the room pointing at them and telling them they're dipshits. Well, I also thought their business models would fail because most of them came to market and ignored the advisor. And I don't want to get on a soapbox here, but human interest was, and I would say is still one of those. And Guideline was too. They've made some exceptions here and there, but their general business strategy was to cut out the financial advisor and go direct to consumer, if you will. And I thought that was a huge mistake and I thought they would never gain any traction. I'm wrong. They went payroll and interesting tens of thousands of plans. They're clearly bringing on new business to numbers that I never would have imagined. So I will take the, the loss on that. I was going to say the, the letter. I'll take the loss or doesn't count. [1:02:50] Justin: I think it would have been safe. [1:02:52] JD: I can say that I'll take the L on that and I'm still going [1:02:55] Justin: to ring them up just for fun. And you fell for it. [1:02:59] JD: But here's where I fight back and here's where Chad might get involved and love to get your input input when I do their numbers. And I won't go through it all. People have heard me do that on this show in terms of their total sales, their overhead, their staff, the investment in their firm. And. And when those investors are going to get their money back, which by the way, that, that little sand time thing that you turn upside down, the sand's running out of that for those companies. And as far as I can tell, and they've agreed when they've been on the show now some time has passed. They're not profitable. Profitable. They are not profitable at this point. If human interest is profitable, it's barely. And if that's the case, I still don't think that is especially now if you factor in all the money that's owed, you know, to, to pay people back. And so that's my question is, are these disrupting companies going to actually succeed and get to some end game? And when I say endgame, I mean are there investors going to get paid back in the. In an initial public offering or some other record keeper is going to come along and purchase them? Because it doesn't seem to me that they're getting a point where they'd be generating so much cash that this is all going to work out for everyone. And so my fear is, and I'll shut up, that they're going to fail in that sense. And all they've been is not a little gnat, not a little mosquito in my ear there. They've actually come in and turned over. They've knocked things over. They've made a mess here, made a mess there to my industry and all in a business model that was never going to succeed in the first place there. That's my soapbox ranch. [1:04:38] Anne Lester: Whoa. That's a lot. No, that's a lot. So I'm more than a lot human interest. I'll just say I'm not on the human interest board. So I have no visibility into that. I think what I see is 30 to 40% of Americans not having plans because startups are really hard to cover and really hard for advisors to cover because there's no revenue there, so there just isn't. Right. So I am supportive of efforts to try to figure out ways of creating economic models that make it less expensive to offer plans to those startup products. Plans, period, full stop. [1:05:19] JD: That's a great answer. [1:05:21] Anne Lester: If, if, if a startup record keeper who is focusing on the tiny little plans and trying to cover that market space, eventually to start making real money they're going to have to go up market and they're going to have to start dealing with financial advisors and large complex heritage plans which will inevitably be more expensive but also give them a lot more revenue. Revenue. So I think that's the scale game that any of these smaller startup, whether it's guideline, whether it's human interest, whether it's the one that that ceased to exist. They've got to figure out how they can maintain the simplicity. You know, when I was at JP Morgan, bring me up there, when I was at my former employer, we actually tried to set up a 401k in a box that you could offer to these really small plans. Make it simple, give them no options, you know, make it as simple and clean as possible. No advisor wants to cover that. Maybe the advisor is interested in maybe covering the business owner, but the plan itself. [1:06:20] JD: I'm gonna let Chad chime in here because I've been very verbose tonight and give you some context for Chad answers. We live in that space. Chad works with advisors every day that sell those very plans you're talking about. [1:06:32] Justin: So, so Justin. [1:06:33] Anne Lester: And then good on you for covering them because they need advice. [1:06:36] JD: Mark, you're here. Justin, you're here too. I didn't even know that. [1:06:40] Chad: Yeah, no, and, and I wrote it in the chat bar real quick. There have been changes legislatively that offer tax credits to these small businesses and advisors can be profitable in that space if they understand how to step into a client and say hey I'm five grand in year one and 50 basis points. That's what I need to deliver this solution to your employees. There are plenty of third party administrators and there are plenty of record keepers. [1:07:04] Anne Lester: Let's fact that's fabulous and I'm really glad to hear it and spread that. [1:07:07] Chad: But the distribution is small still. [1:07:09] JD: Yes. [1:07:10] Chad: And that's where I think human interest guideline especially that's the nut that I think that they have cracked so far going through the payroll providers to all of these small businesses and saying hey I've got a solution for you. The the ability to access is easy. We already have your payroll data and the Cost is minimal now out. [1:07:31] JD: But is it really? [1:07:32] Chad: But yeah, it, I mean, it is, J.D. if you break it down right now, which is why they're going to struggle, the cost is minimal. [1:07:40] JD: Human interests fees are, are not that minimal compared to emerging plan market pricing. And I'm saying I actually appreciate the fact that their fees are actually fairly normal and where guidelines are a lot lower in that sense. So. But it's not like they are totally changing the world in terms of fees. [1:08:02] Chad: And let me rephrase it. And maybe it's not clear what I'm saying. I'm not saying that they are cheaper than the industry. I think what we do is inexpensive. When you look at an employee benefits package and you think of the cost of running a 401k versus that of offering group health to a small business, the client's paying like 3 grand a year to run a 401k plan that is inexpensive to its core. And so what human interest and guideline and third party administrators around the country and small market 401k providers are doing is inexpensive in the grand scheme of employee benefits. And what I think that they have done better than anybody else up until this point though is they've gone into an area that they can penetrate and they've, they've accomplished that looking at the payroll side. Whereas all of us have looked at distribution and said we got to go to the advisor and the individual client. That is tough to scale. Very tough to scale. [1:08:56] JD: Lisa Buffington, how dare you say that? But I think you're kind of right in a weird way. Bank. [1:09:02] Chad: The problem is those solutions suck. Lisa, if you could have a good solution there and have that area of [1:09:09] JD: distribution, yeah, totally okay to have sucky solutions so long as people get access to a retirement plan. And your, your first answer was right, by the way. To defend human interest and the guidelines and whomever is in all those tens of thousands of plans that they've done and I think each of them are approaching God. Am I someone check me out there. 30,000, 40,000 plants, I don't know which is substantial. I mean they're, they're quickly approaching the largest providers in the space. And of all those plans, to your point, Anne. Spit it out, JD they are small plans. There are tiny plans. And so they are doing exactly what you said. They are making a difference in the coverage gap. So God, I should have a come to Jesus moment and stop like bashing them so hard. I'm just more worried about their business model. So we'll continue to have this Conversation. And someday I'm gonna wake up and read the headlines and something's gonna happen here and I'm gonna feel vindicated when. When something goes down. Because I just don't see the landing for these companies the same way I didn't see the landing for smart, which I still believe is not an acronym. But we'll see, we'll see, we'll see, we'll see. [1:10:31] Justin: Just think about how many Lambos you get to buy once you swoop up all of those plans. That. [1:10:35] JD: Yes, yes, for sure. And you want to take off or you want to play a quick game? [1:10:43] Anne Lester: I'll play a game. [1:10:44] JD: Let's go. This is a totally original game. [1:10:48] Anne Lester: You may regret this. [1:10:49] JD: It was invented by me. I had the epiphany one night and I just thought, wow, this would be great. It's called the Noper Dope game. So smart. Okay. And the way this game works is I'm going to ask you a question. It's more about pop culture things out in the world. And you're going to let us know whether you are dope for this thing or nope on this thing and why. Okay. I always start with you because you're our guest. I don't know why I came up with that rule. I just did. [1:11:33] Anne Lester: Cruel and unusual punishment. But I'm still getting that you're. [1:11:38] Justin: You're game. That's weird. Interesting. Interesting. [1:11:41] JD: I don't. I don't called, but it's that sun shield thing that you put in your window on your car, like on your dashboard, like to stop the sun from coming in. Like what. What is that? And why do people have them? Or do you have one of these? [1:11:58] Anne Lester: No, gross, gross, gross. [1:12:01] JD: They're just attacking you, right? [1:12:03] Chad: Well, it saves your leather. JD and your Lambos. You gotta put them up. [1:12:06] Justin: Would you have a six foot garage? You don't need that. [1:12:12] Anne Lester: No, no. [1:12:13] Justin: Call it a sun shade. [1:12:14] JD: JD Sunshade. Ann's against it. Chad. [1:12:18] Anne Lester: I don't live in Southern California either. I live in New Jersey. So it's only a problem a little different. [1:12:23] Chad: Ain't nobody got time for that. [1:12:24] JD: Justin, when you hop out of your truck and you walk into the store and you see one of these, do you think that's a winner or a loser driving that car? [1:12:31] Justin: I kind of give it a little giggle and be like, what a nerd. But hey, to each his own robe. [1:12:35] JD: Guy. Rob guy. What if they go or as I put graphics on it, like it's got Wolverine on it or Disney or some. [1:12:43] Justin: No, it's yeah, it's just incredibly lame. [1:12:46] JD: Okay, we'll move on. And this is one it's got. This did not come from me. A friend of mine asked me to include this in the noper dope game, so it does not come from me. Me drinking alone, Is that something that you're. [1:13:01] Anne Lester: I'm doing it now, so I don't know. What do I have to say to that one? [1:13:06] JD: You're doing it alone? [1:13:07] Anne Lester: If I'm with all my friends online, I don't know. [1:13:10] Justin: No. [1:13:11] JD: Wow, that feels good. Chad, what do you feel? You come home, the kids are gone, the wife's gone, it's been a hard day, and you got a few hours to yourself. Is this going to involve alcohol or. Not that. [1:13:28] Anne Lester: Probably. [1:13:29] JD: So you drink a lot. [1:13:30] Chad: It's going to be like a glass. Tequila is what it's going to be. [1:13:33] JD: Justin. Yay. [1:13:34] Justin: Or n. Having a drink, you know, just kind of relaxing like you said. Or getting drunk or drinking drunk alone is just. [1:13:41] Chad: No, yeah, there's something wrong with that. [1:13:44] JD: A very valid point. That's a very valid point. Once you cross a line, it becomes bad. You agree with that rub guy? [1:13:51] Justin: Yeah, it's. It's actually weird. I mean, I'll say that, like, if my wife's out of town and like, kids are, like, in bed and stuff, I'll always think about it. Like, maybe I should. No, I'd rather just go to bed. [1:14:05] JD: Or like, it's kind of loser status. [1:14:07] Justin: So I don't. And no, no, I don't judge. Whatever. I just always think, like, I. For some reason, I just don't. [1:14:14] JD: Rogue guy. I feel the same way. I've. [1:14:17] Justin: Wait, hold on. But J.D. wait, wait. Let's. Let's. [1:14:19] JD: Let's. [1:14:19] Justin: Let's not say that just yet because I'm going to fact check you right now. [1:14:25] JD: I've been drinking a lot of vodka in my free time and [1:14:30] Anne Lester: understand [1:14:34] JD: I've never watched instructional golf videos while drinking by myself. Let's see. Chat. Where did my. Where did my stuff go? Okay, An, I shouldn't have let it like that. That was a bad lead. Okay, an, let's go to the next one. Going to Princeton and playing the viola. The viola. Viola. [1:14:58] Anne Lester: Viola, Viola. [1:14:59] JD: Lynn, why is it a viola going to Princeton and playing the viola? Nope. Or dope. [1:15:11] Justin: I love. [1:15:11] JD: You're like Elon. [1:15:12] Anne Lester: It was. It was. It was the biggest. It was the biggest challenge of my life. And it was. It was. It was dope. [1:15:21] JD: It is dope. [1:15:22] Anne Lester: By playing rugby was even more for my success. [1:15:25] Justin: Played rugby I love our gangster Anne. [1:15:30] JD: I love that because that made it clearly dope. I wanted to emphasize the nerd Ivy League school vibe and. And. But I say I wish. Can you send us pictures? I want to see the rugby. [1:15:45] Anne Lester: Yeah, I can. There's a picture of me wearing a mouth guard with this T shirt that says Elegant violence. Stripping a ball away from somebody else. Yeah. [1:15:53] Justin: Yeah. [1:15:53] Anne Lester: My dad had it on his desk at work. [1:15:55] JD: I say you embrace that. I think that's actually gonna be my spirit animal for the next month. That's solid. Very solid. I got. [1:16:02] Anne Lester: I gotta see if I can get it out of my. My. My parents have it in there. [1:16:06] JD: Their. [1:16:06] Anne Lester: In their apartment. I'll be there next in a couple weeks. I'll see if I can find that photo and scan it. [1:16:11] JD: Well, I say you're. You're a baller. Robe guy. Went to Princeton. No. No. You went to Yale. It was Yale, right? [1:16:17] Justin: No, Harvard. [1:16:19] JD: Harvard. [1:16:19] Anne Lester: That other one. Whatever. [1:16:23] Justin: I. One time I. I did. You know, I did go there. I didn't like to the gift shop. They didn't let me in the doors, but I went. [1:16:32] Anne Lester: But you got one of those big shirts with the H on it. [1:16:36] Justin: Yeah. [1:16:37] JD: Okay, we are going to wrap with a little Chad bar champion. And how this. [1:16:42] Chad: Can I ask one lamer game? Because it's relevant to our topics today and it bothered me when I read it. [1:16:47] JD: Of course. [1:16:48] Justin: Hey, Chad, you know what? You said lamer game. That's my game. So you know what? Yeah, you can. [1:16:53] Chad: Sorry. Nope. Thanks, Mark. Thanks for giving me that green light. It goes back to the article that we had earlier with Todd Case. Reading and saying. Just saying. I feel like using that term means I can talk on you. Just saying. You suck at golf, Mark. Just saying. Is that appropriate? [1:17:13] Justin: Like, it's like saying. No offense. [1:17:16] Chad: No offense. Exactly the same thing. And I feel like it's a cop out when you're trying to be honest, but you don't want to be rude. [1:17:24] Justin: Yeah. [1:17:24] JD: Hey, I just want to say for the record that. Win it and I'll drink. Like, when it's whipping, it's not spam. When it's whipping, it's not spam. It's totally fine. Get going down in the chat bar. Yes. Let's back it up. Daniela. Hey, Mike. Whipping 15. Stop saying that, dude. October 17th. Check it out. You can go to HTTPs colon. Never mind. Yeah, you see it there. Look in the chat bar. I'll drink for that. Chat bar champion. Justin, your vote for chapter champion is. And what we're doing here is you're going to pick someone in the chat bar that you think has been the bomb tonight and vote for them to win because it's a big deal. [1:18:07] Justin: Samson, that was a lot of moments. [1:18:11] Chad: Justin. [1:18:12] JD: What? [1:18:15] Justin: I thought he said Justin too. He said no. [1:18:19] JD: No. Then I explained and the details of the show and's gonna go last. [1:18:23] Justin: Last. [1:18:23] JD: Chad. [1:18:27] Chad: It was tough tonight. I'm gonna go hack, though. Hack and Samso are battling it out. [1:18:31] JD: I'm going back. Those are high level, high ranking people. Robe guy. [1:18:37] Justin: I'm voting for someone as I typically do that I just. They're new to the chat bar and if they're not new, it's because I don't pay that much attention and I want to say this name. So I'm gonna say it and it's gonna be so much fun. 1. I am voting for Barbara Caraballo. [1:18:54] Anne Lester: Whoa. [1:18:56] JD: I don't recognize her. That's a new name. Yeah, and I wasn't paying attention. [1:19:01] Justin: Hey, Barbara, you're my best friend now. So there you go, Barbara. [1:19:05] JD: Drink for your. Oh, my gosh. At home, by the way, no per dope on. When you have a bottle of vodka, you just hold on to it like it's your little bunny and you're a child. I'm literally it. I am going to vote for Barbara too, because I would like to be besties with her. [1:19:23] Justin: No, no, no, no. You can't. Can't be. [1:19:26] JD: And I don't even know. [1:19:28] Justin: You already stole my game. [1:19:29] JD: You're not stealing my best friend. I don't know what she said in the chat bar because everyone, I apologize to you. I never read a word you said. I just didn't see it. And who's your vote for? Chap or champion? [1:19:41] Anne Lester: Champion. Okay. I was gonna say Daniella because I am a fan of whipping. [1:19:50] Justin: Whipping real good. [1:19:51] Anne Lester: But Barbara, Barbara, you have my heart. [1:19:55] JD: Okay, Barbara, it's settled. Barbara Caraballo. You are. Gotta roll your ass, Caro. [1:20:10] Justin: All right. [1:20:13] Anne Lester: You should check your emails more from [1:20:14] Justin: her on out here. On out. It's. It's Carabalo. We're not gonna abide by rules. [1:20:19] JD: Do me a favor. We're throwing a. We're throwing a curveball at you here. Yes. You're gonna get your thousand dollars into the chat bar champion rankings. [1:20:27] Justin: Thousand points. [1:20:29] JD: Points, points, points. What did I say? [1:20:31] Justin: Thousand dollars. Because we have to regulate this guy a little bit. [1:20:38] JD: But if you slide into my DMs and. And tell me your address. [1:20:46] Justin: Oh, God. [1:20:47] JD: Don't send you something very special if you ask Two weeks on our next Thursday night show. And it'll arrive right at showtime. And maybe we can unbox it together. So do Samson says don't do it. Okay. And I'm serious. Barbara Rhett, send me those. We'll get you something really special. An Lester, you have been on the COVID of magazines. You are. Hey, guys. So have we. As have us. [1:21:20] Anne Lester: Maybe the same magazine. I don't know. [1:21:22] JD: Yes, you are. Honestly. There we go. You're. You're an icon, I'm sure. And I hate to say this kind of. I don't like the whole, like, I don't like the whole, I think you're [1:21:37] Anne Lester: having more fun in your photo than I was. But it's okay. [1:21:39] JD: I don't. I don't like the whole. The whole pro female thing. Like, oh, you did great for a woman because that's you. You did great for a human in your corporate world and crushed things to the point where many of us can only, you know, aspire to. Like, that was huge. And so I really appreciate you spending time with us, someone who did some things that are so big as the things you did. And then also, you are now retireholics family. And so we wish you not that you need it, but all the luck in your kind of 2.0 version of speaking and book one and book two and the life that you're living right now. And by the way, your three cancer diagnosis, everyone out there knows or most you know, my wife is stage three treat breast cancer. I've been going through it for the last nine months. Chemo and all that kind of stuff. And so I connect with you on that level. And don't cry, J.D. don't cry. And so my point is, thank you for coming here and hanging out with us because you're way above our league. [1:22:46] Anne Lester: Anytime. This is a blast. [1:22:48] JD: We really appreciate it. We really. [1:22:50] Anne Lester: Anytime. Seriously, these are the conversations that we need to have have so that we can keep making things better. [1:22:58] JD: Sweet. And then you out there in chat bar land and watching on YouTube and Twitter SLX. I'll drink and whatever. Thanks for tuning in. We appreciate you. We'll be back in two more weeks for another episode of Retire Holics. And for the die hard fans, there may be a quick after show. We haven't done that in a while. We'll see what happens. And you do not have to stay for the after show. You can go chill if you want to not find better than fine. That'd be great. But there's no pressure. Thank you. Chris McDavid much love back at you. Still. Is he at John Hancock still or did he move somewhere else? [1:23:39] Chad: He's still there. [1:23:40] JD: You John Hancock little guy, you. I miss you. [1:23:46] Justin: What did you really say there? [1:23:50] JD: Okay, so thank you, everyone, for tuning in to the retireholics. I just said that. We're the retirehs. We are changing the retirement plan industry one beer at a time. See you next time or see in the after show, Brandon Place.