Target Date Funds Broken? Tall Can Talks Debuts

[0:01] JD: All right, so we're going to play. We're going to try a new little format today and we'll see how it goes. But like most things in retireholics history, it'll evolve over time and we would love to get some of your feedback. And you know that, Mark, that all the good things in retireholics, a lot of them have come from the chat bar at times and their ideas. So maybe they'll have some input on our little format today. [0:24] Mark: And if the chat bar tells us to never do it again, are we going to listen? [0:27] JD: No, we'll try it a few times. [0:28] Mark: All right, so basically, just screw them. [0:30] JD: Tall can talks is the deal. We're going to be drinking tall cans and talking 401k. We're still going to play acro san and we are still going to name a chat bar champion. With that, I would like to congratulate last week's winner, Brad, nerdy cpa. [0:50] Mark: Does that count? That counts. [0:51] JD: Oh, yeah. Yep. And I got a bot. Hang on, let me finish this and I'll drink from the vodka. [0:56] Mark: Yeah. Brandon, you have to be on acrosant today. I need to focus. [1:00] JD: Brad, you have some food coming from Applebee's Grill and Bar, which really made me smile when I saw there was an Applebee's by his house. I mean that's a classic brand, you know, I figured there'd be lots of options. So he's got the brew pub pretzels and beer cheese dip. Yum. Coming to his house, he's got the new, new from Applebee's Brew Pub loaded waffle fries. Those looked very locale and delicious. I saw this thing that looked horrible. It's a quesadilla burger. Horrible picture. So I bought it. [1:36] Mark: Looked great, by the way. Two great things, not good combined [1:42] JD: the whiskey bacon burger, which is basically just the biggest, gnarliest loaded burger that they had. And then I saw there was kids corn dogs. So I got you four of them. Four kids corn dogs. They come with a milk and an applesauce. So apparently you'll get 4 milks, 4 applesauces, and then to wash it all down, new sugar dusted donut dippers. So congrats to he's here, Bradley's here, wife and son will be happy. Perfect. It's, it's. [2:17] Mark: I freaking love you. [2:20] JD: A nice smorgasbord of different stuff. You know, let's see. And so we will, we will be naming a chat bar champion. Oh, I owe a swig of vodka at the end of the show. Oh, okay, you don't need to drink it that gnarly. [2:39] Mark: No, yeah, you do. [2:40] JD: And we will be spinning the wheel of ice as well. Okay. Two 401k pros head to head. And that's me and you, Mark. In a deep. At least for today it is. In a detailed discussion, sometimes a debate, [2:55] Mark: it's not really head to head. Right. It's more. [2:58] JD: It can be, it can be, but it doesn't have. I'm not gonna force you to debate with me if you don't, if you don't like something there. [3:06] Mark: J.D. let's be honest. There's no debating with you. You're very one track minded. [3:11] JD: Each contestant will come to this. This bout, this discussion, this potential debate with one and a half topics. We'll figure out more what that means, each not knowing what the other plans to discuss. So you do not know what I want to talk about today and I do not know what you want to talk about today. We're going to ask you, the audience after each topic to vote on either. If it was a debate, who won it. If it didn't get debatey, then maybe it's who is your favorite? You know, was it JD or was it Robey? And that's where did you get more value from? Or maybe you're just voting on, you know, who you like more. I don't know. But. But we will ask you all to vote after each of the big topics and the winner mark will get 10 points and then you will ask you to vote after each of the smaller half topics and the winner will get five points for those. So there's 30 points on the line if we tie. [4:04] Mark: You could have like told me this ahead of time. [4:06] JD: Just saying if we tie, the tie will be broken by filling up a retireholic smug all the way to the top with beer. And. And we will race to pound it. And the winner of the race will. [4:21] Mark: I'm not prepared for most of this. Just gonna put it out there. [4:25] JD: You must have that on hand. I'm. [4:26] Mark: I. You told me to bring a tall can. I did that much. Okay. Which by the way, that was hard enough. [4:32] JD: So that is how we will break the tie. To kick off the surveys though, I would like all of you out there in the chat bar to vote right now. Who do you think will win this little thing we got going on tonight? Will it be Roby or will it be JD Put your votes in if Brandon's ready. Just throwing this at Brandon. [4:53] Mark: Okay, chat bar. You're not funny. You're not funny. They're not here. Okay. [4:57] JD: That is funny. Chad. Foreign. Let's see how these come in. [5:04] Mark: Should, should we tell everybody what actually happened? [5:07] JD: Sure. [5:08] Mark: You can kind of Justin and Chad. I don't want to tell them or [5:13] JD: we don't tell them. Oh, it's pretty tight. But we'll give Robbie the win. [5:20] Mark: I appreciate that. That's very kind of everybody. [5:24] JD: But a slight edge to Roby. Okay, okay, time out. Let's. [5:28] Mark: Okay, let's just get so they. So they'll stop asking. Justin is in like Rome or Italy or something. [5:35] JD: Okay. [5:36] Mark: He's. He's vacationing, he's doing his thing. Chad is. I think he's at like some event for work. Okay. So they're, they're busy. But this show was meant to be just two to start. I got hand picked to be the first one on it. So let's just move on. They're still part of the team. Yay. Done. [5:56] JD: Nobody's been fired or quit. So that. Here we go. First topic. Okay. And the way this should work is I'm gonna kind of set up the topic and then we'll take it from there. Okay. I used to internally dismiss almost like think like an advisor was kind of dumb when they would tell me that they were anti target date funds, you know, and they would. And the reason why they would bring this up, Mark, is they would say, look, not every 40 year old has the same risk tolerance, right? And in my little 401k brain I would be like, yeah, but what are you gonna do? Go sit down with 1,000 people in the course of a year and try to help them with a custom portfolio, you know, at all your 401k plans. Like you're not being realistic. And therefore I have always considered myself a pro target date person. Like I would defend target dates as, as a great tool and investment option within 401k plans. I've been doing some research and it's possible. [7:04] Mark: Am I, am I starting your timer? [7:07] JD: Do I have a timer? Yeah, timers. [7:11] Mark: Your. Your cans will deplete as you. [7:13] JD: Okay, yeah, start them. We're on topic one. Shit. Our cans are depleting. I feel immense pressure now. [7:21] Mark: Your can hasn't changed, so I'm. [7:23] JD: Let's be slow. I'm sure it'll be slow. So I am now, after some research, kind of sliding the other way a little bit. And that's the conversation I want to have with you today. [7:34] Mark: What kind of slide are you making to or through? Just curious. [7:38] JD: I'm almost to the Point where I don't even know if that even matters so much as I look at the numbers. But let me first establish the importance of this conversation. Target date funds are a big deal, if you didn't know. Morningstar says that roughly $1.8 trillion are invested in target date funds. Most 401k plans, 98% include a target date fund option. That's according to Vanguard and also according to Vanguard. And this one kind of seemed odd to me, but these are Vanguard's plans. 80% of all 401k participants are invested in a target date fund. That's nuts. We. When I look at the general market, I see things more like 40 to 50% of all 401k assets are in target date funds. And I know that's been changing a lot. But regardless, you cannot argue that they're not a big deal and they are crucial area to our business, to our industry, and they deserve a shit ton of attention. Scrutiny research, Whatevs. Okay. To set another little context, Morningstar. Oh, there goes the beer. Morningstar reports that the five largest target date families are T row, Vanguard, Fidelity, and American funds. Actually, that's four, isn't it? [8:55] Mark: Yeah, I was gonna say there's one missing there. [8:57] JD: I must have left the other one off. [9:00] Mark: So there you go. [9:01] JD: So, Mark, do you think target date funds are something that you can prudently tell clients and advisor partners about with pride? I mean, do you do that when talking to clients, advice advisors? [9:15] Mark: Okay, that's not exactly where I thought your question was going to be going, by any means. And then, by the way, because this is a serious debate ish type topic, I was taking notes. Okay. So I was halfway listening. And so it kind of, kind of caught me off guard with your question there, but. Well, very simple answer there is. Yes. Okay. And the reason being is, again, I'm very specific when I talk about the plans that we are primarily involved in, which are going to be along the smaller side of the market we're dealing with. Again, I don't know, this year for me, 75, 80% startup plans. Okay. And also advisors who aren't necessarily the most focused in this arena and they would like to have a little bit of help selecting the investments. And they work with the record keepers. And obviously. What am I getting at here? Record keepers want you to use target date funds. Hell, they want you to use their target date funds because then you're going to get better pricing because now they're making the comp on both sides, both on the assets and Also on the investments. Okay? So obviously when they're sending out proposals, they're including in most cases, their proprietary target date fund. Okay. Now do most advisors look at that and go, maybe I should use another one? Or maybe I should consider alternatives. Or maybe I need to look at some scoring methodology to determine what's best for my client? No, they're not. Right. Again, segmented into the smaller market, not necessarily upper market, where advisors are more proactive on the investment side. I'm dragging on my answer here because I thought these beer can. I didn't know mine was going to move either. I thought I could just get past yours. But I now realize that we both just have time to talk. So this is very different than I thought it was going to be. So that's. My answer, is yes. Yeah. [11:18] JD: And that's an honest answer. Of course. And I would have answered the same way before I dug in and did a lot of this research I'm about to share with you. I would have said, yeah, target day funds are a cool thing that offer a lot of simplicity and opportunity for both advisors and their clients. But, Mark, what if I was to tell you that maybe their methodologies are a little up? You know, maybe the way they go about allocating their portfolios to equities and fixed income and cash isn't working out that well. What if I told you the unthinkable has happened, which is I'm stealing. I'm stealing from Ron Serz, who we've talked about before. What if I told you that people nearing retirement have lost more in their target date funds than those who will retire decades from now? Meaning a 2020 fund that is supposed to be kind of protecting you, you know, at your two years past retirement now is actually losing more money than a 2060 fund, which is for that 30 year old that's going to retire. Wouldn't you go, holy fuck. What do you think about that? [12:29] Mark: Yeah, No, I think that's. That's counterintuitive to what target date funds have been sold as. Right? Which are, hey, the closer you get to retirement, the less exposure you have to equities and the more conservative your investments get. That's sort of protecting you without you having to do anything. But what I'm always a proponent of is you're a consumer at the end of the day, just because someone tells you that doesn't mean that you're. You have to just go and go, oh, great, I'm taken care of. No, you, you should pay attention to it. You should look into it. [13:03] JD: I love. [13:04] Mark: Go on. [13:04] JD: No, that's fair. But. But I want you to really slow down and look at this and. And understand how up it is. And to. To Webby's point. Yeah, it's funny. When I saw the August 19 date, the first thing I did was go kind of look at the overall stock market and see what that date looked like. And if anything stuck out to me, and it definitely was the. It was at the top of the frame. First recovery in our debt. Now, we've since fallen down below that, and this article came out two or three days after it. So I don't know if Ron Serge was. And I think that's good that it came out two, two, three days after. I don't think he was really trying to time something. He was just dealing with the most recent data. But it was at a little peak, which would mean that, yes, since then, for a variety of reasons, as the stock market has fallen more, this is probably less. But let me help you out, Webby. I did some research on my own instead of just looking at. At this stat here. The one year return as of yesterday for the Fidelity Freedom 2055 fund was negative 21%. Now, I don't really care about the 2055 fund. That's for a younger person, right? 35, 40 years old, something like that. Someone check my math. And so I don't mind that that fund goes down because the stock market's going to gone down, and it's been tough. But what if I told you that the Fidelity Freedom Fund 2020, the one that you retired two years ago, that the year to date return for 2022 ending yesterday is negative 19.56. So the 2055 fund is down 21%. And grandma's retirement fund 2020 is down 19.56%. Bro, that's not good. Here's what you're looking at here. This is. [15:02] Mark: Okay, that's. That's one fund. [15:05] JD: Oh, I can go on and on. Yeah, great. Let me. Let me tell you this. Let's go through a handful of them. Let's look at Vanguard BlackRock T row and American Century. Vanguard 2020 portfolio is down 17% year to date. BlackRock 2020 portfolio down 17.73%. T row down 17.78%. American Century down 16.94%. Kind of weird how they all are completely tracking each other. No, if I gave you their port, their. Their act, their US Equity, they're non. Oh, they're non United States Equity. And their fixed income, you'd see that those four funds are, are pretty damn close to each other in terms of the numbers that they're using. And I, so anyways, I get to my, my point here. [16:11] Mark: These, I think I know your point. Yeah. [16:13] JD: Put aside the 2055 funds, I don't care about that. But the ones that people invested in that retired two years ago, this is not working the way that it's supposed to work. And so my question to you and everyone out there is why is that the case and is the methodology up about it? Well, I'll tell you why it's happening, Mark, in case you don't know. It's happening because we're in an environment where with high inflation and interest rates that are at next to zero before this all happened, we are now in this situation where we're rising interest rates and bonds are inverse to that. And at the same time we're dealing with inflation to the tune of, you know, people can't even agree on that number. And so it's, it's kind of a. And then you talk about recession and this in the stock market, it's like all these three things coming together at the very worst time. And so the bonds, the fixed incomes that were in these funds. And to give you a taste, the 2020, it looks to be the average of like everyone's like north of 55% in terms of their, their fixed income exposure in these 2020 target date funds. So they got more than half of their portfolios, these fixed incomes, and they could be one year, three year, five year, seven year, you know, types of durations. But what they're supposed to be there for is to protect that account in down markets. And it just hasn't happened because of all those things. Those are IOUs. And so I think that as an industry we're letting down. I don't think you can walk up to a plan sponsor right now and just willy nilly tell them how prudent target date funds are and how they're such a great solution for them because they're fucking over some people that are close to retirement. [18:04] Mark: Okay, well what's the alternative? [18:06] JD: You old people? Old people? Well, I'll steal from Ron Serge's book. [18:13] Mark: I'm glad you asked before, before you answer that. I'm just thinking you're looking at a snapshot. You said year to date numbers, right? True. What was it prior to that? [18:24] JD: Right. [18:25] Mark: Are these just chomping into maybe some pretty good gains over that run we had for the past few years? Are you being short sighted? To these funds because of the recent absolute nutty volume volatility we've had. Well, and can somebody. Could somebody themselves go out and pick their own funds within the core lineup to beat those returns? How are the other funds performing in the lineup that they have access to? Right. We're only given so many options when we are an employee or a participant in the plan. Okay. So in my mind, I don't know how to accurately kind of combat some of the things you're saying, because everything is very exclusive to the participant in a lot of ways. [19:15] JD: Well, you had two big questions there. One was, was it fair for me to use 2022 year to date? And my answer to that would be, yes, it's fair for me to use that because it's been a down market. And what we want to see is our target date funds that are 2022, that are supposed to be less risky because they've got 55% fixed income. Are they weathering a down market as it would be compared to a 2055 fund? And the answer is no, they're not. [19:43] Mark: To your example, the answer is no. Right. [19:46] JD: The reason why they're not is because they use fixed income, and they're getting by. Fixed income. If you asked Ron Serge, he. An article we actually covered on the show a long time ago, but he would say that you should use things besides bonds, besides fixed income, and use more like. Like not guarantees, stable value type of stuff. And he uses, like, the government. I'm blanking on what the government plan's called, but the government plan, the federal thrift savings plan, doesn't use as much fixed income and bonds. [20:20] Mark: Those sounds so exciting. [20:22] JD: By the way, they use rift. They use things more like stable value. And so shouldn't we, as an industry be looking at this and going like, okay, let's answer Mark's question like, we're letting down grandma. Should we be using stable value? Should we be using some type of cash derivatives? Should we be using, like, guarantee stuff like slash insurance? Don't shoot me. You know, like, oh, don't we owe it to those participants to give them a better solution that actually works when the markets are going down? Hackler says stable value. I'm just quoting Ron Serge. My point is, something's got to be done. We can't just sit here. You might. I thought you were gonna say mark, well, maybe this will change. Right? We're in a weird scenario right now with inflation and the. The federal reserve bringing up interest rates. So what happens when those things start to change? Like, interest rates at a certain point will get to the top and then they'll start to ease those types of things, and the whole environment might change. I thought about that, and then I think to myself, like, some of these target date funds in their 2020 flavor have like $45 billion in them. And if you look at that and you go, well, half of that 45 billion is in fixed income and actual bonds in different durations. 1 year, 3 year, 5 year, 7, year, 10 year. Like, they can't get rid of that shit overnight. It's going to take them years to start replacing them with more profitable bonds. And so. And I never run a mutual fund, so I know what the fuck I'm talking about. Really? [22:01] Mark: But, yeah, at the end of the day, I hear what you're saying, but my brain isn't necessarily going to be like, oh, I'm an investment expert. Let me figure this out. My thought here at this point is, what does the reaction need to be? And who's responsible for it? Right. We've got multiple parties involved. A, you've got your participant who may be in that type of investment. What should they do? Okay, you've got the advisors who are putting these investments, or at least allowing for them to be in plans. What should they be doing? And then you've got your sponsors and committees. What should they be doing? So my question back to you is, should they? Well, J.D. and your magic wand. If it was a perfect world and you couldn't get rid of target date funds, because it sounds like maybe you want to go a different direction, what would you recommend to somebody if they knocked on your door and asked you, what should I do now? My target date has failed me, quote unquote. Using your words, at this point in the down market, what should I do? [22:56] JD: It's funny. Everyone in the chat bar is referencing investing 101. Are you guys. You guys aren't listening to me. This didn't work the way it was supposed to work. So if you took your securities test for your series six or your seven or whatever, what you were taught was that when markets went down, you know, that bonds would hang in there and protect you. And that's not fucking working, you guys. And so to answer your question, Mark, I don't think that we just have to accept it and embrace it. And I see other people in there saying, like, well, you don't switch now in the middle of it. I totally understand that. But you, you cannot stay with a product that's not working and have this happen again. 10 years from now, 15 years from now, 20 years from now, like, you've got to make some changes to it is my only. [23:41] Mark: So you're change. So you're looking directly at the investment company. [23:44] JD: I'm looking at hero American Country BlackRock. And, and I'm saying, hey, you got. And I'm sure they're trying, but you guys got to come up with something. [23:52] Mark: By the way, there's some really smart people who make those right? I. I would hope, I assume, like way smarter than you and I combined times a million. [23:59] JD: But no, it's not true, Mark. [24:01] Mark: Yeah, yeah, it is. [24:03] JD: No, it's not. It's not fucking true. You don't, you don't. They don't understand what they're doing and they're using old practices that aren't working. And when you start to dig into how they're doing it, Mark, because it's all available for you, you can look online and see exactly where they're investing. You can see the types of bonds that they're buying. They're all doing the same fucking thing. They're all cloning each other and they're all falling over their own selves and making the same mistakes. This is what I'm saying. And we'll move on. [24:28] Mark: So you're. So you're fed up. You're fed up with Target Dates. [24:31] JD: I just don't think the old JD is right. I can't go to a client tomorrow and just be like, oh yeah, these are awesome. Like, you should use these. I feel like a disclosure needs to happen. And if you read some of these articles, what Ron Serz would say and the people that are anti Target Date Fund, they're gonna tell you that, well, we've already seen lawsuits around. We've got the BlackRock Target Date Fund lawsuits, but you're going to see lawsuits, you're going to see really upset people that are losing their money. We didn't even get into sequence of returns and that kind of stuff. And what this, what this mistake, what this negative 19% does to grandma or grandpa who just started off in their deal? There's plenty of alternatives, Web. We could look at guarantees. We could look at different types of layering of bonds. We could change legislation to allow us to lay, like, not be stuck in a certain. I mean, there's all kinds of that. We can need to think outside the box and find different ways to do it. What I don't. I honestly, without trying to play this up, I honestly don't understand how anyone in that chat Bar could be comfortable with those numbers that I just showed you. [25:44] Mark: Well, now I'm just curious to know what plan design consultants is going to do with our own target date funds that are available in our own plan because of what you just said. So if. [25:55] JD: If I had a. [25:56] Mark: That committee meeting should be fun. I'm glad I'm not a part of it anymore. [25:59] JD: If I had a 65 year old participant, I'd be very wary of them. Just, Just. [26:06] Mark: Well, you're get. Dude, you're getting there. You're getting there, so you bet. I'm assuming you're not in a target day fund. [26:12] JD: And hey, lastly. Sorry, didn't we talk about this like three years ago? We talked about the fact that we were at zero interest rates. [26:23] Mark: Just like everything that just keeps coming back. [26:26] JD: Well, no, I was just wondering like when they were gonna. [26:29] Mark: Perfect science. [26:30] JD: All right, audience, you're gonna vote for Marker I to get 10 points. Even after I just lambasted everyone and. Yeah, however you want. So who gets 10 points? Roby or JD? And then we'll move on to your topic, Mark, which I'd like for you to set up. And are we. [26:50] Mark: Should we spin the wheel while people are voting? [26:53] JD: Yeah, sure, let's spin the wheel. It's a little gnarlier when there's two of us. [27:09] Mark: Or three. [27:10] JD: I like that. [27:10] Mark: That's perfect. That couldn't have gone any better. Even better. [27:17] JD: Come on, people, I need you to vote. Look on your screen. Find the browser. Vote. I want one more vote to come in. At least one more. This. [27:29] Mark: This isn't fair. Again. You won that. [27:31] JD: Okay. No, you got it. [27:32] Mark: You got it. That's not fair. [27:33] JD: Mark's up 10 points, but it was close. [27:36] Mark: Brandon on the wheel. Obviously Chad and Justin were still there. What happens? It lands on them, then just nobody drinks. No, I took them off. Oh, I thought I saw Justin's name. Never mind. Okay. Oh, well, he's on the wheel. It's just. [27:48] JD: It won't land on him. [27:50] Mark: So it is rigged. You mother. [27:52] JD: No, he can make those. Not applicable. [27:54] Mark: Oh, I have to go get a glass. All right. [27:59] JD: Okay. Mark me up with what you would like to talk about. [28:03] Mark: Okay, well, I'm coming at you. The question straight off the bat. Yes or no? Okay. And I also teed up with our boy Fred Barnstein. Just Barnstein. Sorry. He is real talk. I enjoy it. Okay. The reason why I enjoy it is because it's. It's quick, it does give some really good topics, but then he also leaves behind some that maybe he didn't talk about. So again I, I enjoyed going there for some, some news. Well, he just agreed had one come out yesterday on the 28th. And so since I was really prepared and taking care of this in advance, I went through that one. But one of the articles from wealth management.com, the headline is this. And so I just want you to answer this question and I'll change the title. The title is plans to change 401k advisors at historic High. So hold on. My question is JD, do you think plans to change 401k advisors are at historic highs? And all I want is yes or no right now. Yes or no? [29:16] JD: Yes. [29:17] Mark: Okay, so let me, let me give you some statistics. Okay. And these statistics come from a survey done by Fidelity titled. It's actually kind of a corny title, I'll be honest. Fidelity Plan Sponsor Attitudes Survey. Yeah, I don't know. To me that just was like, that's kind of laughable. But okay. So a couple of statistics Fred pointed out from that survey include 35% of sponsors replaced their advisor last year. Okay, 35%, 35%, 47% said that they were considering making a change to their advisor. Okay. That was up from their last survey which was done from 40, 34%. Okay, so a 13% increase. [30:13] JD: That's a big jump. [30:15] Mark: So why do you think another question time for JD Why do you think there was a jump? What do you think led to the respondents to this survey thinking that they were either a going to change it or had changed it? [30:31] JD: There a couple of things. One, sometimes I don't like surveys because of the way people position the questions. And so it takes away from some of the values you always have to ask yourself like, okay, well think about the actual question and what people's options were to answer it. [30:49] Mark: Right. [30:49] JD: But that being said, the one that you mentioned, you know, considering replacing my advisor sounds like a pretty on point question to me. And if there's a jump that's significant, which it surely has been, I think that that seems pretty relevant to me. Why I'm going to go with the old we're in the age of information now. Like I'm going to go with the people are, are smarter now. They're, they pay more attention to things. They've been through their fiduciary review meetings. They've seen some things going go down. They've changed vendors from time to time. Just a more educated, more aware consumer who when asked that question is maybe thinking to themselves, you know, if a good advisor could Come along, you know, I'd be interested because my guy or girl has been doing the same thing for a while and it's kind of boring and I don't know whether I'm getting value from. So yeah, I think just straight up being more aware and, and volatility. Well, when was the study done? I think volatility in the stock market always creates the interest and if the grass is greener somewhere else, even though that may not be true. [32:04] Mark: All very valid and good points. Maybe you've read this article. See, this is what happens because I know you're well read, but. So Liz Path, who's quoted in this article from Fidelity, she's the defined contribution investment only head of sal, okay. She says, and I quote, drivers of advisor value are increasingly employee focused. So if advisors work with sponsors to help improve employee outcomes, provide financial assistance and guidance to participants and improve performance on plan investments, they can better demonstrate their value. Okay, so, okay, so going back to you, it kind of sort of overlaps with some of the things you were saying, but to your points from earlier because I agree, I see that headline and my thought is changing advisors. Wow. I do this day in and day out and I'm really not seeing this massive change of advisors. I'm seeing it in a different area of the 401k business. Not necessarily all this advisor transition. So we continue to dig a little deeper into Fred's points. He does the same. So he goes on to say that plan sponsors are looking for any kind of paraphrases, advisors who have more experience. Okay, because plan sponsors want help with transition. And then he uses the words that set me off the deep end, that 60% of plans are looking for financial wellness plans. And I'm just, I can't handle it anymore. So now I'm like, okay, what, what's the basis here? What are we going through? And then my, again, my thoughts are going, this is a Fidelity survey. What are the true metrics behind it? Again, going back to your point, JD of this was done for a grouping of plans sponsors of just over 1200. Okay. I think we both know, but that is a very small number in the world of 401k plans. Okay. I go on to say that most advisors in the biggest area of where they're being solicited, plans are being solicited are between 50 million and 240 million in assets. Now I'm going, this is, this is not, this is not what I'm looking for. This is untrue. Okay, because why? Well, now I'M going to dig a little deeper and I'm going to go over to John Sullivan's 401k specialist article. Okay. [34:37] JD: Where he references, I got to dig a little deep. [34:40] Mark: References a bright scope survey that shows there's 100, 602,401k plans. How many of those plans do you think were between the asset size of 50 and 250? I'm just curious. Give me a number. [34:54] JD: 50 and 250. I don't know. Half. [34:58] Mark: No, no, it's literally 7,000 plans. [35:05] JD: Okay. [35:06] Mark: There are 550,000 plus plans below $10 million. [35:12] JD: Well, you need to know, you need to know that that's a great filter you need to put on your own brain, Mark, as in anyone who's, who plays in the like micro small market. You're going to read a lot of like big points that people make and stats they throw at you and they all seem to focus in the big space, you know, and forget about where a lot of the plans actually are, which is in the small space. [35:33] Mark: Okay, so I have an answer to this obviously, because this is my question. But now my, after kind of looking at all this is seeing the headline of 401k plans changing their 401k advisors at a historic rate. I asked you if you think that's true or not. Okay. And also this inclusion of wellness, I know you're sort of a proponent of that as well with the convergence and all that, but what do you really think in terms of. Because I believe. No, sorry, let me tee this up a little better. I believe next year, in 2023 there is going to be a massive transition or change in 401k plans. Something amongst the providers or service folks who are involved is going to change. Who do you think that's going to be? [36:27] JD: Wait, who do I think that's going to be? [36:29] Mark: Yeah. [36:30] JD: Massive change. [36:31] Mark: I'll give you the, I'll give you the, yeah, the, I guess the multiple choice. Do you think it's going to be advisors? Do you think it's going to be record keepers? Do you think it's going to be third party administrators? [36:44] JD: No, I don't know what you tell me. I don't know where you're going. You tell me. Record keepers. [36:50] Mark: I believe that the, it's the record keeping community that's going to see this historic change in plans. Okay. And I'll, and I'll give my thoughts and rationale as to why. I think it has a lot to do with the, the employment statistics that we see out There with people looking for jobs, AKA not necessarily looking for jobs and moving around and, and this whole idea of how that's working that we're losing service people. Okay. Headcount numbers are going down, it's harder to maintain. And also salespeople. Okay. Though they're moving a lot right now. So I think that the support functionality of the record keepers has seen a slight decline and thus a lot of these plan sponsors, what they're really looking at and what they're really trying to do is find ways to find providers who are going to offer them more and their advisors are just a piece of that. They're going to have to help them navigate that change. But I don't think that we're going to see a historic change in the advisor community based upon this small subset of plans. [38:04] JD: Yeah, I like where you're going with this. I, I don't necessarily agree with Fred as, as much as I am a proponent of wellness and bringing planning to the participant and monetizing the, the participant. I, I do see though that there, I've said this before. I guess I'm going to counter myself right now. Remember when I was talking about the clients that I've met with and they've expressed to me what they wanted and every time it seemed to me they wanted more help for the participants. You know, planning help, wealth management help, savings help, like non 401k stuff like wellness type stuff. So I do think that, that that shift is there and that there is some potential opportunity for these, this convergence and these advisor shops that deliver all things. But I also do agree with you in that a lot of them right now are looking to their record keepers to do it and I used to hate that. But if nationwide principle and power can step up and provide some things that still loop in the advisor, I see how that might work in the smaller market. So I'm kind of all over the map. But I guess I'm going to go back to. I do think plans will change hands because of this new desire for these other types of services. So. So I agree with the article and I agree with the concept that convergence and new services will, will win new business in 2023 and beyond. [39:37] Mark: Disagree. [39:38] JD: Okay, again, let's see what the audience thinks. Audience, I think that's a decent debate there at the end. What do you think? Who wins? [39:47] Mark: Well, I had, I had a lot more notes but I tried to be real fast that time clicking down there. That butt can moving really with you. I'm not gonna lie. [39:55] JD: There's like reading my, my brain right now. I'm getting nerdy. Chad versus Silent Jackler. [40:01] Mark: All of this. All of this. [40:04] JD: That's good. Hackler. Maybe one week it could be Hackler versus Webby Robe. Everyone just loves you. Everyone's favorite retireholic robe guy. This stupid poll guys are all of you. That's a landslide. Mark wins that. [40:26] Mark: This is such a. I, I love all you so much. It was, it's just, it's just fun. [40:31] JD: So Mark's got 20 points. So I basically can't even catch you with the half topics now. You've, you've, you've won the game, but we'll move on. [40:40] Mark: Are we going to our 0.5? Is that our half. Our half topic? [40:44] JD: Two more little half topics. And here's where I'm going. I'm going after the suits again. I'm going after the whole suit and tie thing. So a little more kind of less, you know, investment, less kind of predictions of record keeper, but just good old fashioned fashion, if you will. I'm tired of the suit and tie. I know I'm a California guy, but New York, Boston, Merrill Lynch, Morgan Stanley. H. You guys are annoying the out of me with your east coast suit and tie. Wall street financial advisor. I'm jealous of the financial planner brand and vibe. So if you look outside, outside of 401k, you look at planners and you see like the cool conference they did in Huntington Beach. And I met with a planner recently. I was trying to see if he'd be interested in doing 401k stuff. And he works out of his van life with his wife and his two kids and he's like a van life advisor, traveling around the country helping different people. That's kind of hipster and cool. I also think that if you, if you. I've been tuning into a lot of podcasts, shows that are non 401k but they're financial services. Alex. [42:03] Mark: Yes. Alex Jordan. Yes. [42:05] JD: The perfect example I'm talking about. I've been tuning into a lot of these and they are far further down the path of, of loosening this and being cooler than we are. And 401k is like somehow just behind it all. And examples. Mark. Remember when we were in Arizona and it was 100 degrees out and we showed up to do our show and it was, it was like one of the first conferences we went back to and I thought, oh, people are going to be relaxed. Like there's going to be some jeans. I mean, it was all black suits. Am I wrong? [42:39] Mark: No. You're right. [42:40] JD: Black and blue suits, it was intense. And then the failure. [42:44] Mark: Remember that I was, that I was wearing shorts and flip flops. [42:47] JD: Yeah. [42:49] Mark: And you weren't, by the way. [42:51] JD: Not the, not the failure of, but the, the, the great attempt by wealth at work to have the, the T shirt and jeans kind of protocol for dress code at their conference, which I would say didn't really work. Tons of people still wearing the suits and ties. So why am I, why am I upset by this? Because I Surely you're gonna suit made me look fat. [43:15] Mark: No, no, no, your face does. [43:18] JD: Because surely I think you're going to agree with me here, Mark. But why I'm upset is it's not just about the clothes. It's about the mentality and it's about the image. It's about this whole Wall street vibe of like trying to impress people with big words and fancy clothes and, and big paychecks and that you understand the markets and all this kind of stuff. And it's hurting our brand, I feel like. And I'd much rather see us go down the path that I'm seeing these planners go down. You know, these, these other non 401k advisors to be more like your next door neighbor and your buddy and that can, but just happens to have a passion for finance and these types of things. And I would just love to see 401k go that way. And every time I think we're making some progress, I end up at some industry thing and I get smacked over the side of the head again with no, we're not. We're all still this way everywhere I go. Let me tell you, let me ask you, am I off base, like, or do you agree with me that the suit and tie is still dominating 401k? [44:24] Mark: I, yes, I agree 100%. Now I will say that it's, it's getting better than it was. If I, if I want to take any positive spin to this is that there are people who have committed to being, I guess, more authentic because we use that word a lot, but more authentic to who they are and wearing what they want to wear. But it's not universally adopted. And I think some people find security and dressing nice because it does give them that sense of like, I stand for something, I represent something thing. I, I am successful at. [45:05] JD: Lester. Lester says professional. [45:07] Mark: Yeah, I, I don't know if it's like their Clark Kent kind of thing. I don't know. But I, I, at the same time, I feel like people could loosen up just a Little bit. [45:19] JD: Faith just stole the words right out of my mouth. I wanted to respond to Lester and be like, bryant, what you wear does not make you what you are. Like, what you wear does not make you professional. [45:31] Mark: Like if you feel like a professional basketball player has to wear a jersey. So. [45:36] JD: But it, it does not make you professional. It actually is the opposite in my mind. [45:41] Mark: It shows me what happens when your can runs out. [45:45] JD: It shows me transparently that you're trying to be something that you're not. Can I tell you something else? I've been on a lot of fiduciary review meetings throughout the last six months for hundred million,$150 million, 300 million types of plans. And I go backwards hat and a T shirt. And I got news for you. These are banks and professional companies. And this, the chief executive officers and the chief financial officers, they love me for it. They don't think I'm unprofessional. They think I'm straight up. And I'm not trying to trick them into thinking on again. [46:21] Mark: You're also the owner of the business. Just gonna say like a little different. [46:26] JD: Well, I'm done with that one. [46:28] Mark: Yeah, I, I agree. I, of course I do. Dude, I wear a robe on our show. Like of course I agree. You know that I'm not necessarily the counter to that where maybe if you had a advisor sitting across here who worked for a Morgan Stanley and Merrill lynch, they would have other comments to that. Again, maybe they feel more comfortable. That's their second skin. I don't know. But if, but at a conference again, I really think conferences should ban suits. And I don't care if you're male, female, ban professional dress code. Just ban it. Like you're in like especially in Vegas. You're in Vegas or somewhere. Like just dress like you would if you were going to go vacation with your family. Like that's the dress code. Just be you. Why can't that be okay? You're out of. You're sitting down all day. Like, come on, dude. All right, well to me it's not. [47:24] JD: It's not just clothes. It's also how you talk and how you act. [47:27] Mark: But are we supposed to, are we supposed to vote on this one too? [47:29] JD: They don't need to vote. Yeah, go ahead, let them vote. But I can't catch you. But maybe I can save some kind of my self esteem. All right, vote Roby or JD on [47:37] Mark: the last topic, we have basically the same answer. [47:41] JD: It's only for five points. It doesn't have to. They could just be because they thought you said it better. [47:46] Mark: I think, I think you're going to get this one for sympathy votes, right? [47:49] JD: I think you get all yours for sympathy. [47:51] Mark: Didn't you say we had to prove, we had to prove the tall can was empty? [47:57] JD: It's hard for me because I'm drinking from two of them. All right, JD Gets some. Great. Thanks everybody. Appreciate the sympathy, though. [48:04] Mark: So you're up. [48:05] JD: Last one. [48:06] Mark: Okay. So I didn't know you were going to go kind of industry related. Honestly. I'll just be quick about this. My first, my first thought was almost going back to my lamer game days where I was going to say, why do weather people go into the storm when there's a storm and to film it? I don't, I still don't get that. And by the way, I'm saying that because, yeah, storms, current events, hurricane Florida, my, I'm seriously, my, my heart goes out to the people affected. And obviously if you have family or anyone you know out there, like, I just hope everyone's okay at the end of the day. So I'm not here to like say anything negative about that, but I just wonder like, when there's a tornado, like, why does somebody run to it to film it? Doesn't make sense. But industry related. I'll go a different angle because I did have to. [48:51] JD: I'm happy to. [48:52] Mark: Going. Yeah, going, going down the path of. Again, keeping with, with Fred and his real talk. Did you see the, the, the securities and Exchange Commission fine that Morgan Stanley had to pay of $35 million for their data security breach? I did this one, so it's actually kind of laughable. And I have. Honestly, JD I don't really have a question here, but we're just going to talk about it because I won. So they, they tried to dispose of like hard drives and computers and they, they turn that stuff over to a company that literally they hadn't vetted out that what do they do with this stuff? And so a lot of the equipment got like resold and had all this customer and client data on it. And so they got a huge fine for that. But the best part about it, and Fred quotes it in his, on his thing, like 42 servers went missing. So $35 million for a security breach sounds like a lot of money, but not to a company like Morgan Stanley. But then when you read about what actually happened, it's very laughable. Then I'm like, we're over here as an industry touting cybersecurity and talking about all these things to protect participants. I'm like, this happens and it's barely a blip on the radar and it impacts millions of people because there wasn't any misuse of data that they know of yet. This just happened like four or five years ago. It just, I don't know, it baffled me. I'll throw out a question to you, jd. How do we dispose of our computers and is my data going to be shared with somebody when we get rid of our servers and hard drives? [50:39] JD: You know, Brandon, go. I was just going to say do you want to see the. [50:43] Mark: I take a drill and I drill [50:45] JD: through the hard drives. Yes. [50:48] Mark: Look at, look at family owned business taking better care of their it. Ah, son of a. Security than a multi billion dollar company. [50:59] JD: I thought you're. I thought that article is interesting the way you described it because you think so much about like cyber security and this is like just straight up, you know, physical hands, tangible stealing security. Not. It's not happening over the, the world wide web. You know, they're just misplacing their servers and their files and stuff. So. So that's interesting to me. But yeah, Brandon drills through him. I always felt like, God, what is. Does he really have to do that? Like does people really want our. But he does. I feel like I've really gotten into Webbies under his skin, man. He's. He's trying to dig up all this data. [51:33] Mark: Keeps throwing target date fun stats at you. It's great. [51:36] JD: Webby, can I please counter you and be like you can go out there and find one or some that have taken a different approach that are doing okay, but it doesn't lessen my point. I was naming big time leaders in the target date fund business. Those are big household names that all have those same types of returns. So I don't care if you go out and dig up some that do, that's great and maybe we can learn some from them. But I'm just talking about the fact that the industry as a whole and some of the bigger players are fucking up for people that are in retirement and. Or close to it. Less vote for chat bar champion. We need to nominate someone in there. You know what, as much as I get, I'm actually gonna put Webby in for his passion and jumping in and doing the research and trying to call me out on some. So yeah, I'll throw Webby in there. He deserves it. [52:34] Mark: Yeah. I'll be honest, I didn't do a great job of paying too much attention. I did see a few active folks Webby was very active. Hackler was. Their faith was rocking it. But I'm gonna go with Ed DeMarino. He did great today. Good call. [52:48] JD: Good call. All right, you out there in the audience, you are gonna vote for the chat bar champion, and they will get all kinds of ridiculous food delivered to their home next week. Yeah. Only two. [53:00] Mark: Only two. There's two of us here. Hack, dude, do the math, buddy. [53:07] JD: Mark, it's been fun hanging out with you, having this discussion. You brought a lot of passion to the show. I appreciate it. You did research, you took notes. Maybe you could do that every week. [53:21] Mark: No, this was too much work. I like my. My standard approach. [53:26] JD: Can't wait for the Justin Chad battle. You know what you don't want? You don't want the Justin Robe guy show. We've tried that before. [53:37] Mark: That'll just be me and Justin talking about old stories from our childhood. [53:45] JD: Webby's still going. JD Point income funds. It's not about greater. I. That was. That was Ron Serz's thing there. I've realized that it's not greater. That was shocking, though, to see that that was even a thing at one point in time on August 19th. It's not about greater. It's about just looking at the number and being like, oh, my God, look how close it is. I mean, just looking at it going like, negative 20 versus negative 17 is enough for me to have my jaw on the ground. Webby, I'm excited to send you. I'm gonna work hard at yours just based on your little attitude today. On today's show, you're gonna get something really fucked up for food wise next week. I don't know what, but I'm going to look really hard. [54:31] Mark: Just. Just. Just send him like, like buffalo wings from, like, a wing spot that's like, the most ridiculously spicy that you can't even tolerate. I like it. [54:41] JD: Something like that. And maybe with a little note that says, target date, funds suck. Okay, thank you, everyone, for tuning in. I already said thank you to Mark. Thank you to all Brandon's efforts on trying to throw those cans together. It timed out pretty well, actually. And if you've got any advice for the improvement of this type of format, we'd like to throw it in from time to time. And I think it might be fun to even have, like, people in the industry hop on here and fall. And we just need to carve out the rules a little more, you know, kind of evolving a little bit. Chad versus Justin. Love it. Hackler. I'm down for that it's perfect. So, yeah, we'll see how it goes. Because I thought this could be a total failure. I'll give it a C minus, which means we can improve. We can make this work. So thanks to everybody out there, and, yeah, peace out, bro. We are the retireholics. We are changing the retirement plan industry.