The Long View
The Long View
Jun 26, 2019
Josh Brown: 'Standardize the Process, Personalize the Advice'
53 min

Our guest on this week's episode of the Long View is none other than Josh Brown, CEO of Ritholtz Wealth Management. Brown's story is unique and inspiring. He began his career as a broker but grew disillusioned with the industry's skewed incentives and practices, eventually pursuing a career as an independent Registered Investment Advisor. Along the way, Brown managed to author an acclaimed book, Backstage Wall Street, and build an enormous following around his blog, "The Reformed Broker," as well as his twitter handle, @reformedbroker. Now he oversees Ritholtz's day-to-day operations in addition to his other duties, which include serving as a regular contributor on CNBC, as a member of fintech firm BrightScope's advisory board, and most recently as a technical advisor on the Showtime hedge fund drama Billions.

Introduction and Background 

Origin Story
"A personal crisis." Josh describes the epiphany he had in leaving the brokerage industry for the advice business after 10 years (1:20-3:41).

"It worked immediately." How the Reformed Broker blog was born and led to a chance meeting with Barry Ritholtz, which gave rise to an RIA (3:42-5:21). 

The Advice Business
"If they haven’t figured it out by now, they probably don’t want to." Observations on how the advice business has changed (5:22-7:29).

"Brokerages in name only." Why wirehouse clients aren't necessarily being ill-served by the system (7:30-8:09). 

Lending: The key difference between a fee-based account at a Wall Street wirehouse and a fee-based account at a traditional RIA (8:10-10:34).

How to Provide Financial Advice
Telling the client "no." The difference between pushing product and offering advice (10:35-12:16).

"It's recreation; it's not a necessity." Helping clients to scratch an itch without putting their financial plans at risk (12:17-14:53).

"Financial planning is the highest calling within our profession." Ensuring clients get past the firm's public persona and truly buy into its plan and approach (14:54-16:46).

An ensemble approach to delivering advice to clients: The anti "eat what you kill." (16:47-18:58).

How to Build an Advice Firm
"Barry and I don't spread out a map like Napoleon and start sticking thumb-tacks in it." How Brown thinks about strategically expanding the firm (19:04-20:45).

"If somebody comes to us in a rush, it's probably a bad situation, and we don't want anything to do with it." The advisor recruitment and weeding-out process (20:46-24:23).

Portfolio Construction and Asset Allocation
"You're going to lose money. It's gonna happen. There's no way around it." The firm's approach to allocating assets and setting client expectations (24:24-27:33).

Tactical asset allocation's role in their process: "We don't believe in investment alpha using tactical." (27:34-29:33) 

"What if you had a tactical model that almost never did anything?" How they built their tactical-asset-allocation overlay to help manage client behavior (29:34-33:13).

"I hope it underperforms, because most of our clients' money is not invested in tactical." (33:14-35:03)

"Every client is different, but their needs are not." Implementing a scalable asset allocation (35:04-37:08).

"You want to be wrong in such a way that it's not going to be catastrophic for the end client." How Ritholtz sets capital-markets expectations (37:09-38:41).

Managing Client Assets
How Ritholtz approaches assets that clients bring in with them: "You've got a human being with their own issues." (38:42-40:58) 

"The longer I'm doing this, the more stuff I want to take out, not add." Brown explains why they err on the side of excluding various types of investments from client portfolios (40:59-42:33).

"Our clients are here because they want us." Brown says fee pressure hasn't been an issue for the firm (42:34-44:22). 

The Future of Advice
"You're being judged on the portfolio, you should get paid on the portfolio you recommend." Brown is dubious of clients who aren't willing to pay for advice as a percentage of assets under advisement (44:23-46:50).

How a chocolatier's success reinforced the importance of consistency in client interactions: "Standardize the process, personalize the advice." (46:51-50:25) 

Bogleheads On Investing Podcast
Bogleheads On Investing Podcast
bogleheads
Episode 027: Cliff Asness, host Rick Ferri
Dr. Cliff Asness is a Founder, Managing Principal, and Chief Investment Officer at AQR Capital Management, a quantitative money manager overseeing $186 billion in assets as of December 2019. Prior to co-founding AQR Capital Management, he was a Managing Director and Director of Quantitative Research for the Asset Management Division of Goldman, Sachs & Co. He is an award-winning researcher on quantitative investment strategies and has authored articles for many publications, including The Journal of Portfolio Management, Financial Analysts Journal, The Journal of Finance, and The Journal of Financial Economics. Cliff received a B.S. in economics from the Wharton School and a B.S. in engineering from the Moore School of Electrical Engineering at the University of Pennsylvania, graduating summa cum laude in both. He received an M.B.A. with high honors and a Ph.D. in finance from the University of Chicago, where he was Eugene Fama’s student and teaching assistant for two years. This podcast is hosted by Rick Ferri, CFA, a long-time Boglehead and investment adviser. The Bogleheads are a group of like-minded individual investors who follow the general investment and business beliefs of John C. Bogle, founder and former CEO of the Vanguard Group. It is a conflict-free community where individual investors reach out and provide education, assistance, and relevant information to other investors of all experience levels at no cost. The organization's free website is Bogleheads.org and the wiki site is Bogleheads® wiki. Bogleheads sites are operated by volunteers who contribute time and talent. Donations help defray operating costs. Since 2000, the Bogleheads' have held national conferences in major cities around the country and currently meet in Philadelphia in the autumn of each year. There are 56 Local Chapters in the US and three Foreign Chapters that also meet regularly. New Chapters are being added on a regular basis. This podcast is supported by the John C. Bogle Center for Financial Literacy, a non-profit organization approved by the IRS as a 501(c)(3) public charity on February 6, 2012.
59 min
WEALTHTRACK
WEALTHTRACK
Consuelo Mack
Medicare & Lockdown: Better than Ever? (U.S.)
According to Medicare benefits expert, Dr. Katy Votava COVID-19 has altered several aspects of Medicare coverage and procedures. She will tell us what’s different and how to take advantage of the changes. She will also help us meet the deadline for Medicare’s annual enrollment period which ends on December 7th and allows medicare beneficiaries to evaluate their Medicare Advantage Plans and part D, prescription drug plans, and shift to different providers if it makes sense.  Votava is a Medicare expert who advises individuals, small businesses, and financial planners from her healthcare consulting business, GOODCARE.com. She is also the author of Making The Most Of Medicare: A Guide For Baby Boomers, now in its 7th edition and an Amazon bestseller. It is a straightforward, easy to navigate guide to Medicare which is a very complex multi-part system that frequently does warrant annual updating by its beneficiaries. An estimated 90 percent of Americans pay too much for their Medicare coverage.  WEALTHTRACK # 1722 published on November 27, 2020 More info: https://wealthtrack.com/how-covid-19-has-changed-medicare-coverage-and-procedures-with-benefits-expert-katy-votava/ Medicare.gov – The official U.S. Government site for Medicare 1-800-MEDICARE Shiptacenter.org – The State Health Insurance Assistance Program (SHIP) site that directs consumers to free Medicare counseling and assistance Eldercare.acl.gov - Eldercare locator, a public service of the U.S. Administration of Aging, connecting you to services for older adults and their families. 1-800-677-1116    Making The Most Of Medicare: A Guide For Baby Boomers: https://amzn.to/33mW4Rs --- Support this podcast: https://anchor.fm/wealthtrack/support
19 min
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