Episode #117: Steve Lockshin, AdvicePeriod, “We Think the Estate and Tax Planning Levers are the Most Important Levers to Push on for Clients”

Episode #117: Steve Lockshin, AdvicePeriod, “We Think the Estate and Tax Planning Levers are the Most Important Levers to Push on for Clients”


Guest: Steve Lockshin is a Founder and Principal of AdvicePeriod and former Chairman of Convergent Wealth Advisors, a company he founded in 1994.  Steve helped pioneer the independent advisory industry, building one of the largest independent RIAs in the nation. Steve is widely known for his contemporary approach to wealth advisory as well as his estate-planning knowledge and is a frequent speaker on both topics. He memorialized his concerns about conflicts of interest in the industry in his guide for consumers, Get Wise to Your Advisor.

Date Recorded: 8/10/18     |     Run-Time: 1:04:31

Summary: At Meb’s request, Steve walks us through his professional background in the financial services industry. It’s an interesting story, reflecting how wealth management has changed over the decades.

Meb picks up on a term Steve used in describing his early years – “producer” (referencing an advisor) – making the point that if advisors were expected to produce revenue to the degree that “producer” was their name, it pointed toward a potential conflict with the client’s goals. Steve agrees, noting that the conflicts of interest in the business are challenging. He offers us an example using a mortgage payment scenario. If a client allocated capital toward paying down a high-rate mortgage rather than toward funding his equity portfolio, that debt paydown would benefit him, yet would decrease the advisor’s AUM, hurting the advisor’s personal revenue. Given this, the advisor may not be incentivized to make recommendations that are always in the best interest of the client.

Meb asks for more details about Steve’s fee structure at AdvicePeriod, and why it was set up that way. Steve walks us through the details, noting that their fee structure largely emanates from the value they bring. So, their fees are always clear and capped.

This bleeds into a conversation about an advisor’s biggest value add. Meb wonders if it’s estate planning and tax issues, or if it varies. Steve answers by first referencing portfolio construction, asking a question – if we take the top quartile of advisors, what does Meb think they’d produce, over a 20-year period, in true alpha above the market? Meb answers, basically 0%. Steve agrees, noting portfolio construction is not the real source of advisor alpha. Instead, he points toward taxes as a huge source of real value. He concludes saying “Turning that tax dial is a huge return for clients” and “We think the estate planning and tax planning levers are the most important levers to push on for clients”.

The guys bounce around a bit here, discussing high advisor fees, and how the industry was able to hide them for years… the biggest problems Steve sees with new clients when they bring over their portfolios… and how the general advisor/client process works. But from here, the conversation turns toward how one might find a great wealth manager. It’s challenging, as laws prohibit client testimonials, and as Steve says, most clients don’t know which questions need to be asked. He gives us a few examples of good questions:

  • What will your fees be if I tell you that you can’t use any of your own funds?
  • How often would we meet?
  • What software will you use?
  • How much access to information will I have?
  • What’s your transparency level?

Next, Meb asks how things look going forward on the investment advisor side. Steve tells us that as soon as info becomes accessible and digestible by investors, we’ll see people behave differently. We’ll keep seeing fees come down, and transactional fees will go away. And when moving your entire account from one group to another becomes a matter of just a few mouse clicks, we’ll see a massive shift.

Meb asks when we’ll see an “automated Lockshin”, meaning when will wealth management become automated? Steve thinks it’s far closer than people think. He references Google Duplex, which is basically a computer speaking to us, yet fooling the human on the other end of the phone into believe he/she is conversing with another real human.

There’s way more in this episode: Steve’s favorite private investment right now… how tax planning is the biggest alpha generator out there but doesn’t receive the emphasis is deserves… how the industry goes out of its way to complicate things for investors… Vanguard Life Strategy Funds… and of course, Steve’s most memorable trade.

Comments or suggestions? Email us Feedback@TheMebFaberShow.com or call us to leave a voicemail at 323 834 9159

Interested in sponsoring an episode? Email Jeff at jr@cambriainvestments.com

Links from the Episode:

  • 0:50 – Welcome Steve to the show
  • 2:08 – Highlight of Steve’s career and his origin story
  • 6:29 – What’s wrong with wealth management and how AdvicePeriod is different
  • 9:10 – AdvicePeriod’s nontraditional fee schedule
  • 12:11 – Advisors’ biggest value adds for clients
  • 14:11 – How clients respond to AdvicePeriod’s fees
  • 17:43 – Process for onboarding new large clients
  • 21:31 – Best process for finding a solid wealth manager
  • 23:33 – Get Wise to Your Advisor: How to Reach Your Investment Goals Without Getting Ripped Off – Lockshin
  • 25:45 – Yelp for wealth managers
  • 27:16 – Feex.com
  • 29:13 – The evolution of the fund space
  • 32:51 – Anything that will accelerate changes in the wealth management space
  • 34:37 – When will wealth management become fully automated
  • 38:39 – Client interest in cryptocurrency
  • 40:53 – A look at some of the projects on the private side that Steve finds exciting
  • 44:44 – The importance of tax efficiency
  • 47:04 – “Do You Pay Taxes? Then Avoid Dividends and Do This Instead” – Faber
  • 47:34 – Simplifying the information about a client’s portfolio
  • 51:34 – What hacks/tips help clients maintain good investing behavior
  • 55:26 – Best questions to ask when clients are choosing an advisor
  • 56:37 – Get Wise to Your Advisor: How to Reach Your Investment Goals Without Getting Ripped Off – Lockshin
  • 56:51 – AdvicePeriod.com
  • 58:46 – Opportunity Zone Tax Legislation
  • 59:45 – Steve’s most memorable investment
  • 1:01:20 – Steve’s experience flying
  • 1:03:20 – Frank Abagnale Google Talk
  • 1:03:40 – Contact Steve: AdvicePeriod.com, Steve@adviceperiod.com

Transcript of Episode 117:

Welcome Message: Welcome to The Meb Faber Show where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas all to help you grow wealthier and wiser. Better investing starts here.

Disclaimer: Meb Faber’s the Co-founder and Chief Investment Officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com

Meb: Welcome, podcast listeners, it’s full-on summertime and I know none of you are working which is good, which means you’re listening to the podcast on the beach somewhere. Today, we got a great show for you featuring an investment adviser extraordinaire. He’s been on all the top adviser lists like Barron’s, he’s also a notable FinTech investor, recognized industry entrepreneur. On top of that, he’s co-founded AdvicePeriod, which is on a mission to reinvent wealth management. We’re thrilled to have him on the show. Welcome, Steve Lockshin.

Steve: Thanks, Meb. It’s a pleasure to be here.

Meb: See, it was kind of a shame we didn’t drag you into the studio. We’re local and I’ve been coming into the office just because it has air conditioning. My house doesn’t have air conditioning, it’s sweltering here in Los Angeles, but glad to have you on. Are you in L.A. currently?

Steve: I’m in L.A., hiding in the air conditioning because somehow, the humidity that I worked so hard to escape from the East Coast has followed me to the West Coast. So, but I’m always happy to come to your space, it looks great down there.

Meb: Well, Jeff and I can relate. We’re both from North Carolina, so I spent many summers in Winston-Salem and other places. I love the East Coast, the South, but do not miss that humidity. All right. So, we got a lot we’re gonna banter about today. And I don’t particularly love doing this in general where we just start off and say, “Tell me your background,” but yours is actually a pretty interesting storyline because it kind of walks people through the evolution of the wealth management industry and how it’s changed in the past 10, 20, 30 years.

So, I thought it might be interesting to have a little highlight reel of, kind of, the Lockshin origin story. And we can, kind of, go off in many tangents over the course of that and kinda arrive at the AdvicePeriod story, but why don’t you take us back to the beginning?

Steve: You make me sound like Old Man Times.

Meb: Yeah.

Steve: Yeah. It’s funny because I think, and we’ll talk about this some more, I think it’s the Wild West again right now and when I first got into the business, it was a bit of the Wild West. So, I think we’re going through another seminal moment. But the history was I started interning for one of the top producers at what was then Legg Mason, he’s the top producer, and then Smith Barney, and then now, Morgan Stanley, and fell in love with the business. But I didn’t like working at the brokerage firm. So I ended up going into the insurance business working with a guy who is a very large producer and predominantly focused on corporations and the forward compensation and estate tax stuff.

So, my love of tax, which will play out through the entire story, really started at the beginning. So, this is, you know, straight out of college. In any event, one day, one of my clients said, “I know you’ve got a background in investments and I wonder if you can help me consolidate all my stuff, get started on a number of public companies and you get stuff all over the place,” and that was the foundation for what became a family office. I didn’t really even know what a family office was at the time. And I started working for this individual, this was 1989. 1994, we said, “Wow, there are a lot of other people that need this kind of solution where we sit on the same side of table as the client, let’s start offering this service.”

And I didn’t really think about what the right size was, but with the tax-focused, I was thinking about larger clients. It was just as easy to hear no from somebody with $2 million as it was with someone with $200,000 or $20 million as $2 million. So, we went after larger clients focused on estate planning and started our first RIA, learning basically without anything to follow. From there, another adviser asked us if we could help them and we started leasing out our back office and that became the foundation for Forging [SP], which was our outsource solution for reporting and other firms that wanted to offer research. That grew, we ultimately sold that to a financial holding company that also owned a bank in Florida, kept doing what we were doing, and grew the business.

2017, we sold it to City National Bank, which is what got me out to Los Angeles, and kept doing the same thing. We wanted to be independent advisers, client first, but a few things started happening kinda post ’08. And even pre-08, I’d move towards fewer active and certainly more diversified portfolios mainly as a business protection mechanism but also for diversification for clients. So, our rule was, if it wasn’t an index or it wasn’t a fixed income, a conservative fixed income instrument, no more than 10% of our client’s assets could be in it. And then, kind of, post-08, wanted to move more towards passive, liquid, simplified, and focus on what we thought was the big dial, which is taxes, and structure.

And let’s just say, the bank, when they bought us, we looked one way and they wanted us to look that way forever and I wanted to continue to evolve. And we had a very nice separation and I started AdvicePeriod. And, I guess, the end of the evolution to bring us today is, it was tough to come up with a name where you could find a URL and trademark the name. And I was, after going through hundreds and hundreds, I literally was sitting in my childhood bedroom one night and I’m thinking, “I just wanna call it a name that describes what we do. We just wanna give advice, period, that’s it,” and it came to me. And that, really, is our business. It’s a business of advice and we try to be the on-caller in the advisory business. So, hope that wasn’t too long of a walk down memory lane but…

Meb: It’s perfect because, you know, it’s funny, you started out talking, and we’re gonna get into kinda wealth management in general here in a second, but you started out talking about the old school reps where the topic description was producer. And that already, you know, shows, like, kind of, like, one major conflict, which is, for a lot of the businesses, these advisers are meant to be producing as much revenue for the company, but often, that’s a direct conflict with the in-client who you’re charging. And so, you have a comment where y’alls mission is to reinvent wealth management. So, talk to me a little bit about, like, kind of, what’s wrong with wealth management and as you look around the landscape. Talk to us a little bit about, you know, AdvicePeriod, and how you guys are different.

Steve: Well, what I think is a challenge in the industry is the existing conflicts of interest. And one of them, and you just highlighted in the term producer, is having purely an AUM-based fee. And I don’t have as much of a problem with it on the asset management side because that’s part and parcel of what you’re supposed to do, and if you make the assets grow, you share in the benefit, and if they don’t, you share in the losses. But when you’re on the advisory side, there’s some inherent conflicts of interest that show up. And the simple example I always use with someone is, you know, clients got a 5% mortgage and/or it’s gonna reset to 5% and they’ve got a pretty conservative portfolio.

And it’s a better solution for them to, perhaps, pay down that mortgage, certainly, a part of it isn’t deductible, and get the equivalent of call it a 5% tax-free bond with no volatility by paying that down. If you’re on the side of the business and let’s say you work in a major wirehouse where you get compensated for assets under management, you’re immediately gonna hurt yourself because you’re taking money out of your assets under management and you’re paying down that note. Worse yet, if you happen to have sold the note because a lot of the financial institutions are now banks and brokerage firms in one, you’re taking a double whammy because that’s gone and the assets are gone.

So, there’s a big conflict that exists and most people tend to focus on how they’re capped. And if you’re capped on AUM, you spend all your time focused on gathering assets, not on what is gonna drive the best result for my client. And we can go on on a whole bunch of different areas from the client portfolio looks like the adviser’s portfolio, not what fits the client or how advisers make decisions and rationalize that. And so, we’ll take it wherever you want it, but my biggest issue is around conflicts of interest and lack of transparency.

Meb: So, talk to me a little bit about you all have a slightly different fee structure and tell me, kinda, a little bit how that works and why you think that’s a bit more ideal for investors and maybe a little bit background about your company as well. Are you servicing really small clients, really big ones, only a handful? Maybe just a little more color on how you all work.

Steve: You know, with respect to the company, we have no minimum. And we have to think of it as two divisions of the company. We have the lab, which is my group and it focuses typically on the ultra-affluent clients, is very tax-focused, very estate planning focused, and that doesn’t really kick in until you have $30 million or more anyway and it runs up into the billions. But that will also describe part of our fee as we go through that. And then, we have a business where we support other advisers that wanna use our platform, and many of them have clients in the hundreds of thousands into the tens of millions, but for the most part, let’s say the average is in the $1 million to $5 million range for them. And they have different needs.

We try to use technology as much as possible to keep expenses down for the clients and charge them a fee that is appropriate for the level of complexity and the level of value that we bring. So, the fee structure emanates from that where we know that doing asset allocation for somebody with $10 million is no different than someone with $100 million, it’s probably no different than someone with $1 billion, etc. And we know that that is probably true for just about every facet of the services that we provide and arrive to the conclusion that, one, we wanted a very clear relationship with the client that we get paid $X to do Y services and that fee should vary based on the level of complexity, the level of effort, and the level of value that we bring.

And we also didn’t want the issue of having to go through, let’s say, in 2008, where our revenue’s down 20% but our efforts are doubled because of what’s going on. That isn’t good for managing a business and doing a good job for your clients. And we also felt that every single category we provided should have a cap on it for the reasons I mentioned earlier. So, it used to be that we could eyeball and say, “Here’s what we think the right fee is,” but we ultimately put it into a program and have continued to refine it a bit, but we can sit with a client and answer a series of about five or six questions and it will spit out a fixed fee. And based on that fixed fee, that will become the relationship fee and has a 3% escalator on it to cover wage inflation. And once that relationship is established, we then represent the client 100%.

We’re indifferent about how much assets we have under management, we’re indifferent about whether they’re all stocks, all bonds, all we care about is they get the best possible outcome for their situation. So, we think it better aligns our interest with the client.

Meb: And of the, kind of, fee breakdown, do you consider, and it seems like from the remarks you’ve made already, what’s the biggest value-add? Do you think it’s the biggest time you spend, is it on the, kind of, estate tax planning side or is it, kind of, vary?

Steve: So, I’ll ask you, since you’re a student of asset allocation history, if we take, not the outliers, not the top 5%, but if we take, let’s say, the top core tile of advisers and we just say, “What do you think, over a 20-year period, through asset allocation or manager selection, you can earn in excess return, you know, true alpha on a portfolio? What do you think is a reasonable number per annum?”

Meb: Well, zero. With fees, probably negative.

Steve: Exactly, okay. So, clearly, you are that student. Well, most advisers, when pressed, particularly those that are selling active, will come in around 50 to 100 basis points. They think, “Yeah, if I can pick a better manager, we can make some good decisions, I can add 50 to 100 basis points of value.” You and I are of the same mindset that there probably is no real alpha. There’s risk premium, etc., but maybe no real alpha that’s left. That’s a lot of money compounded, but the estate tax rate’s 40% and the income tax rate in California, depending on what bracket you’re in, is in the 30% to 50% plus range. So, turning that tax dial is a huge return for clients and it doesn’t change the nature of their portfolio.

So, there’s no increase in risk, no change in liquidity, but there is an immediate or a very tangible outcome that starts in the 20% to 40% range and goes up from there and compounds. And so, we think the estate planning and the tax planning levers is the most important lever to push on for clients.

Meb: To back up for a second, this is my normal conversation which jumps all over the place, but we spend a lot of time thinking about clients and how to keep them from doing really dumb stuff and to, sort of, come up with a lot of behavioral nudges or tricks or systems so that they can, kinda, stick with it. And one of the things that’s interesting to me about your approach is that one of the most brilliant things Wall Street’s ever done, and I’ll extend to financial advisers and everyone else that charges a percent fee, is you never really see it. And so, we often talk about, you know, the average mutual fund, 1.25%, the average adviser, another percent, that’s 2.25% per year that just get skimmed off and people don’t mind because they don’t see it.

But the one thing that I’m curious to hear if you’ve had any pushback or I’d love to hear how clients have responded is you’re actually…so, we used to always say, for clients, if they had to go carry a briefcase full of $20,000 or $100,000 or $500,000 a year to their advisers instead of it getting, kinda, fee’d off, they would probably never do it because that would be a lot more painful than it getting, kinda, behind the scenes. So, it’s interesting to see you, kinda, move to this model where you guys are actually…you know, it’s actually a number. Has there been any sort of reluctance to that? Or how do you guys approach that whole topic?

Steve: That’s kind of like technology in the investment adviser space. The stories that are made up are made up by the advisers about the experience they don’t wanna have. So, when I used to hear, because we’re paperless and all of our client interactions are either done online or done on an iPad. And in the beginning, advisers, even one of my partners said, “Well, clients don’t want that. They want something in front of their face. They wanna be able to write in the book.” We quickly disproved that theory and showed clients the electronic approach and they loved it and so, we went in that direction. It’s the same thing with the fees. People think, and we’ve probably told ourselves and created an urban or industry myth, that if you go ask somebody to show up with a suitcase with hundreds of thousands of dollars, that they’re not gonna want to do it.

But I’ll invert the question on you and anybody to think about this, when we go to buy things as consumers, we wanna know that we’re paying a fair price and we’re getting a fair outcome. And I used to say, around cars, when you would go to buy a car, the arrangement that was, kind of, agreed upon but not said is, “I know I’m gonna get screwed, I just don’t know by how much, and my job is to narrow the gap and the car salesman’s job is to widen the gap.” Elon Musk changed that, and some of the other car companies, by having very transparent, non-negotiable pricing. And that’s where the way I think it ultimately should go and that’s what we try to do.

So, I can sit in front of a client and say, “I’m gonna save you at least 10 times the value of my fee the first year. So, if you don’t think it’s worth it, then you shouldn’t engage us. And if we’re not adding value afterwards, you should fire us. But here’s the fee and I wanna make sure I’m making a profit on it without gauging you.” The irony is, we often tend to be less expensive than the traditional route and deliver a lot more. And that’s a mix of both tax and, kind of, what we focus on and not making the simple unnecessarily complicated but addressing the complicated and making it simple.

Meb: You know, I think you and I may or may not, I think, but I think we do share a little bit of philosophy on, kind of, automating the asset investment process which, you know, would freeze up a lot of time to be doing a lot of other things, a lot of headspace. But, kind of, walk me through…you’ve met with hundreds, probably thousands, of potential clients and I imagine most of them, kinda, come as a hot mess, you know, to your firm. Maybe some, you know, have a button-down approach, but we often talk to individuals, institutions, and almost no one seems to really have a plan, often when we talk to them. Talk to me to, like, kind of, what are the biggest considerations, you know?

Your guy comes in with $10 million, $50 million, $1 million, what are the things you see that are, kind of, the major drivers where they’re the big muscle movements to helping them? Is it that they have consistently terrible structural portfolios? Is it that they have no financial world view estate put together? Kind of, what’s the kind of big-picture process on a lot of the newbies?

Steve: Yeah. I mean, it changes based…it’s circumstantial, but acting certainly from big categories, the large clients. So, let’s just take off the highest value add but also highest likelihood of opportunity, are the very, very wealthy people because the number of decent estate planning attorneys, and I don’t mean people who…there are lots of very, very smart, capable, and technically accurate attorneys, but many think in a linear fashion and don’t put together…don’t MacGyver together a bunch of simple vanilla techniques to have an outstanding outcome. So, I don’t think there’s any reason anybody should have to pay any estate taxes because it’s fairly easy to plan around all of them if you have a decent amount of time and some flexibility. So, that is the number one thing.

And I can say to somebody, “Well, send me your trusts and send me your balance sheet and I’ll identify the opportunity straight away.” And it’s that easy if you know where all the moving parts are. So, the key is…someone was telling me today, you know, “Henry Ford had an engineer that wanted to charge him a ton for something and he didn’t wanna pay for it. And after a few more years of losses, he called that engineer back in, the engineer gave him a bill that said, you know, $2 for turning the screw and $2 million for knowing which screw to turn.” And that’s part of what we do there, and again, it’s making that complex part of their planning seem simple.

At the smaller end, there are things that are important that include just saving more and spending less, or restructuring some debt so that it’s tax efficient, or getting them to make the hard choices. We had some folks in here the other day that the hardest decision and they knew was the right decision, was to get them to sell their property in New York because it would solve all their problems. They’d have no debt, it would put more cash in the bank, it would pay off all their other debt, and they just couldn’t get there emotionally. And solving that problem for them, showing them the numbers, was what they needed. And again, it was fairly easy for us.

So, it’s not that there are bad portfolios and people are…you know, if somebody walks in, they’re 99% in emerging markets and 1% in MLPs, they’re gonna be in some mix, probably with higher cost stuff that they need, that becomes fairly straightforward, but there are solutions that are online that will help them with that. We just, kind of, make it as digestible as possible.

Meb: One of the biggest challenges, and maybe you have a solution for this, we’ll get to some your FinTech and tech ideas later but, you know, a lot of people that we talk to that are looking for a financial planner, estate wealth manager, all those things put into one, the problem is such a massive amount of noise and choices. And maybe walk the listeners through, who are listening here and you’ll probably get lots of phone calls and emails after this, but walk them through, like, what’s the best way to go find kickass wealth manager, you know? I mean, in my mind, it’s the same way people try to find a doctor where it’s word of mouth, they may go look them up on Zocdoc, like, how does someone find a really killer wealth manager that even start the process of, say, they’re selling their business for $10 million bucks, how do they go about it?

Steve: Yeah, it’s a problem. And you stole my analogy which is it’s like finding a doctor. And how do most people find doctors? Which is, they ask their friends and they will typically get an answer that is, “I really like my doctor,” and unfortunately, that is a function of bedside manner as opposed to ability because there’s no real way to figure out whether they’re doing a good job or not, or they’re getting good advice or not. It’s only when you have a real medical emergency, you know, it’s cancer or it’s something that is unique and you need a special surgeon or physician to figure it out that people put in the homework that’s required to make a decision around their physician.

Unfortunately, dealing with your finances is a lot like you are finding your primary care physician. It’s just, the house isn’t on fire, it’s not something that if I don’t take care of this today, it’s gonna have a problem tomorrow. They are where they are in that given moment and so they go and they ask their friends and they find someone that they like. And when we ask folks about it or we talk to folks, and the story I told about in my book, true story, one of my longest clients, when he came in, he says, “We used to do a performance analysis for folks when we first started. We’d take in all their information and we’d run performance on it for three years looking backwards and tell them where they can improve.”

And he said, “I’ve got two guys, I really like one guy and I really can’t stand the other guy. So, if you can help me by giving me the evidence so I can fire the guy I don’t like and give it to the guy that I do like, that’ll really work out for me.” Turns out the guy he liked was doing a horrible job and the returns were terrible and he was charging about 2% a year, and the guy he didn’t like was doing a great job, just had a lousy personality. So, the challenge today is there is no good methodology. Even parents, which I love and have been the beneficiary of being on their list, still has the challenge of not being able to audit people’s returns or find out how many good financial plans did you do last year.

As you know, we tried to put something together years ago that would become a good housekeeping seal of approval and we thought there were certain things that were important in that, like no conflicts of interest in running a real business and having certain elements all of which were auditable and measurable, and that was gonna be our mechanism. So, today, my advice for folks is kind of, like, the Warren Buffett advice where he says, “People ask me what to do, I tell them put their money in inexpensive Vanguard funds and just forget about it.” My advice, for the most part is there are a couple Vanguard life strategy funds that will probably cover 95% of the population.

There are robos like Betterment that will cover 95% of the population and ask the right questions, these are all low cost and tax efficient, and use those, and potentially, decouple that from finding a good financial planner. If you can’t find a good financial planner, then I would decouple the fee from the product to make sure that there aren’t conflicts of interest and hope you’re getting some good advice. But people need to know what questions to ask and I think it’s incumbent upon us to try and help them understand what those questions are.

Meb: And I think there’s an opportunity. I don’t have a good solution yet but one of the challenges in the investment adviser spaces is can’t have testimonials in there. So, a lot of the rating, sort of, sites don’t really necessarily work for financial advisers. And on top of that, it’s a little hard to do in our world too because people may just conflate investment returns or short-term stuff with potential like quality. I don’t know. Like, if anyone can solve this problem, it’s you. So, I think, trying to come up with some sort of Yelp for financial planners would be an incredible offering but I just don’t know of any that would end up coming up having a good business model. I know BrightScope was doing some stuff there but they have since sold the business and moved on. So, I don’t know. I think that should be on your plate, Steve, at some point.

Steve: The challenge with Yelp is it’s the blind leading the blind. Yeah, I mean, it’s just, you got…there’s an attorney here in town, I won’t say who it is, that has an unbelievable book of business and it’s all because somehow they got some very large clients and those large clients told their other friends about it but this attorney does a horrible job with the clients. And nobody knows better because nobody’s asked the question and they don’t know what question to ask. And so, that, I think, is the challenge with Yelp. I do think there is a way to do it, as I mentioned, it’s just, there has to be enough momentum so that people can get there. There’s even, you know, one of my favorite things [inaudible 00:27:26] about is FeeX. And 99% of people never heard of FeeX. I don’t even know if you’re familiar with FeeX.

Meb: I love FeeX and you can talk a little bit about it. Because, listeners, you go to the website, you type in a symbol, and it kicks out highly correlated or similar fund at a much lower fee. But we have one of the lowest cost asset allocation ETFs in the industry, so I love it because almost any asset allocation mutual fund you type in, it kicks out our symbol as the one you should buy. So, is it feex.com?

Steve: Yep, exactly. And you hit the nail on the head.

Meb: Did I get the description right?

Steve: Perfectly. And you actually can hook up with your username and password, it’s read-only, it’ll pull in your whole portfolio and analyze the portfolio, and tell you where your opportunity set is. And the only measurable tangible evidence with respect to outperformance or underperformance, historically, seems to be fees. The fees are too high, the preponderance of underperformance is very, very high. And this helps you understand, just like you said, where are the lower cost solutions? And even, how do I find the fund to switch into or even just tell my adviser, they have a button on there, tell my adviser to switch me into lower cost funds. So, it’s a good tool and I think, probably, the first step for folks to manage the experience they have is to make sure their fees are low and their taxes are low.

Meb: Is there a business model for FeeX or is that just, kind of, done as a service to the community?

Steve: There is a business model. I think it’s been challenged. You know, we don’t want spent too much time on it, but it’s like anything. Brand matters, and if you haven’t heard of it, it’s one of my favorite thing to ask people in the industry about because most haven’t heard of it, then, you know, you may be the smartest person in the world but if nobody listens to what you have to say, it’s not of a lot of value. And they need to be able to get the word out in order to be around 10 years from now.

Meb: You know, the fee thing is interesting because I agree with you, like, the number one mistake I see people that come to us, you know, one, is they have what our buddy, Josh Brown, describes as mutual fund salad where they have like 30 mutual funds and it’s just a mess and you can’t possibly discern what that actual end result in portfolio looks like, and they’re super expensive and tax inefficient. But talk to me a little bit about, kind of, where do you see the world going with this recent news? Fidelity just came out with the first totally zero-fee fund, I think, first. As you look out on the horizon, kind of, what do you think about the evolution of the fund space, you know?

We have a lot of transition to ETFs, first time I sat down with you many, many years ago, you were selling the amazing benefits of automated portfolio management, and this particular was with Betterment. What’s the landscape look to you on the investment side going forward?

Steve: I mentioned earlier in the discussion that it feels like the Wild West again. And so, you know, let’s use the 10 to 20-year time frame because, you know, we’re probably approaching 30 years from when I first started in this. I think that a few things will be true. The number one thing that I think will be true is that as soon as information becomes both accessible and digestible by consumers, so if you think iPhone and the iPhone was one of the first devices that did not require an instruction manual, it was intuitive, so it was very digestible and people could figure out how to use it. When that becomes the case with information around your portfolio, or information around fees, we’re gonna start to see people behave differently.

And that is the only thing that will change in the industry because the industry’s enjoying a very nice payday for the last five or six decades where, I think, something like 7% of U.S. GDP is financial services and something like 50% to 60% at its peak, and I think, as low as 35%. But still, a third to half of U.S. GDP profits comes from financial services. So, there’s a massive transfer of wealth from the many to the few. And that’s not really what’s best for us as investors, it’s not what’s best for us as a country, I think. But, you know, off of that pulpit, I think the other thing that’s gonna happen is, at some point, not only will we continue to see fees in funds come down possibly because of technology, possibly because of competition, we’re also gonna see transactional fees effectively go away which we are today with Robin Hood and some of the other institutions.

And they do make money in other ways. As we all know, they make money from security lending and flow, and things of that nature. But blockchain, when it makes its way or whatever the future version of blockchain is, when it make its way in the financial services and moving your portfolio from one institution to another is as easy as moving your telephone number today is from AT&T to Verizon. And for the older listeners, you all remember that you couldn’t do that, you know, 20 years ago. It was a nightmare, you had to get a new phone number. Well, when that happens and moving your account is effectively ubiquitous, we’re going to see a massive shift in the financial services industry to probably that which favors consumers better because they will start voting with their feet.

So, it will be the intersection of those two things, accessible, digestible information, and the ability to move towards that outcome, the better outcome, as a result of the information in an efficient and simple way.

Meb: One of the things I marinate over beer or tea or coffee about a lot is I love this trend. And we’ve written a lot that it’s a wonderful time to be investor and these are very positive trends for investors is the low…the fees and costs to be an investor are just dwindling and dwindling. Do you think there’s any sort of, we call it like a Netflix Blockbuster moment, where the old style of these 2% mutual funds, overnight, just, kind of, goes out of business or is this something that’s just…it’s gonna take 20 years, it’s gonna take 30 years of people dying, and getting divorced, and passing on assets? Like, how…is there gonna be any catalyst for this to, kinda, accelerate, this trend?

Steve: I don’t see, and I guess, looking in the rearview mirror, when there were opportunities for this event or event like things to happen, whether it was a 2008 or really the explosion of the robos, certainly, in the industry, and even all the Wall Street firms have robos now, they’re just, again, aren’t marketing them. I don’t see something that would push everyone over unless there is a, you know, flashing red light that, “Hey, put your data in here and it’s gonna let you know that you’re being taken advantage of and push this button to a better outcome,” I just don’t see that happening so I think it’s going be an evolution. And the other challenge is it’s a cottage industry.

And so, we’re all humans and there are buyers for everything and somebody is going to believe someone’s story about something and still be stuck in those expensive, or poorly performing, or conflicted outcomes. I think that will persist, probably, forever, it’s just gonna continue to be diminished until it’s a smaller part of the equation.

Meb: And so, the interesting part to me is that so, as this evolves and as the technology…you’ve been involved both on your own companies and as an investor in many of these technological innovations, at what point do we get the automated Lockshin? And what I mean by that is a lot of the value adds that, you know, you talk about, at what point can you type in, you know, this entire conversation and they say, “Okay. Well, you need to sell your house in New York,” or, “Hey, you need a guarantor trust,” or, “Hey, these are the steps?” Like, is that something you foresee in the coming 10, 15 years building, or becoming a part of, or is it so far away that it’s not even close? What’s the look over the horizon on being able to automate the ultimate Lockshin adviser in software form?

Steve: I think it’s way closer than people think. So, two examples, did you see the announcement when Google came out with Duplex? Which was the conversation it would have with, like, a person call up a restaurant and make a reservation, you’d think you’re talking to a real human. So, that technology exists today and is only gonna get refined and we’re seeing the beginnings of it. And so, there’s a couple things that relate to the human factor. One is, people, believe that empathy is required as part of the equation. And I believe empathy is required as part of the equation and people do business with people they like. If the computer can exude empathy, it’s going to do it, and particularly with machine learning, it’ll probably do it faster and better than we will and even have.

Think of, you know, a thousand years of being a psychologist. That kind of data being eaten up by the computer and effectively reacting in a way that if we didn’t have the knowledge, we might not react. Or take it one step farther where it’s reading your Apple Watch and noticing your pulse rate or your pulse ox and knowing that it should simultaneously adjust the outcome based on where your stress points are. So, all that technology exists today. And then, if you look at the advice area, most advisers use financial planning tools because it does the math for them and simplifies. Or if you look at estate planning where, when robo came out, you know, the cry of most advisers is, “Well, you know, it can’t replace humans, it can’t do things like estate planning.” It’s not true. It can do things like estate planning. In fact, it’s all rules driven.

Everything that’s in my head can be put into a computer and it can run through the rules. And if you tell it your answer is A versus B, it turns left, and it’s B versus A, it turns right, and you get the idea. So, I think it is way closer than people think it is. And obviously, the scalability that is extreme, that could potentially be the event, I just think the adoption of it will be very, very slow, just like the adoption level of electric cars. It makes complete sense, and autonomous cars, but it’s gonna take probably two decades in order to really permeate society. I think the same is true with technology and financial advice. But the human, really, won’t need to be a major factor in the future, I think.

Meb: Good. Sounds like you’re working on it already. I’m ready to chip into the series day around when you’re ready to do it, you know. It’s funny though because…

Steve: We only accept Bitcoin.

Meb: Yeah. We had considered launching a HODL ETF and there’s a particular route that I don’t understand why any of the ETF issuers aren’t using. And, HODL, for the listeners who aren’t familiar with crypto, is an acronym for, in the crypto world, for holding onto these cryptos. Anyway, but there’s a route you could get an ETF out that I don’t understand why none of these guys have tried to do where it could get out in two weeks. Anyway, neither here nor there. How many of your…quick aside, how many of your investors and client base are asking and interested in crypto space? I imagine it’s died off a little bit since January but still people are pretty…

Steve: I’ll just say, it depends. When it was, you know, tulip bulb phase, it was…a conversation just came up but it would typically, and hopefully, we trained the clients to think about the right things. It would go something like, “I shouldn’t be looking at these things, right? But I just wanna ask to make sure I’m not missing something.” So, it wasn’t, “Why aren’t we more in these?” But, as of late, I think there’s been enough in the press and on TV and the volatility has been evident enough that I think, at least, the kind of clients we deal with see it as still, kind of, speculative, and are not pushing to be in crypto.

Meb: That would be fun to watch. I’m kind of universally hated by all the Litecoin people because I had sent out a tweet when I was with…I was [inaudible 00:39:37] buddy Jeremy Schwartz in Switzerland that he was planning on launching, joking obviously, he was planning on launching a Litecoin ETF. And the whole Litecoin community went crazy over it and then got really angry when they found out that that wasn’t the case. But no, going to go back to automation, you know, it’s so interesting to me because every time…I mean, look, I’m supposed to be an expert in this and the asset allocation world and all that investment stuff, but on the day to day, just even personal finance, I mean, talking to so many friends and people in this world where, like, so many suboptimal decisions people are making. Just very basic, basic stuff.

And I think people would love to be able to, kinda, just, “Hey, let’s ask the computer. Should I do X, Y, Z?” And it seems like something that 10, 20 years from now, we’re gonna look back and be like, “I cannot believe we used to do that just discretionarily on our own. Like, what a crazy way to go about it?” The same way that, for having implemented myself and for clients, I can’t fathom why anyone would not use an automated investing solution. In my mind, it’s such a, “Why would anyone go back?” But that’s just me.

Steve: I think you make sense. I agree with you.

Meb: Yeah, preaching to the choir. All right, what else we got here? So, talk to me a little bit about what you get involved with on the, kind of, private investing side. I know you’ve had, kind of, a full tech stack of investing in a lot of early-stage companies, anything got you particularly excited these days? Anything that you guys are building over in the Lockshin labs? What’s going on in that world?

Steve: Yep. The answer’s yes on all those fronts. My still probably favorite investment right now is Quovo, and not just for what they do on the data agg side but really how they’re thinking about what to do with data. I mean, we were already talking about…

Meb: Explain Quovo for listeners.

Steve: Quovo has basically been able to create a set of systems, some are direct pipes into the institutions but the majority of it replicate the consumer logging in and even deals with multi-factor authentication, and then pulls all that data down and provides it in a consolidated manner to folks like us or other financial institutions that wanna use that data for anything from performance to transactions to accelerating ACATs to validation. Like, when you register at your bank and they know it’s you or you wanna put a connection between two financial institutions. So, that’s what Quovo is. And they were a de novo company just a few years ago and so they’ve been able to benefit from the latest and greatest technology.

The good news is it’s been well received and so the amount of data that’s flowing through it is fantastic and is growing at a rapid pace. And with that data and the fact they’re running new architecture, there is a host of things that we can do from predictive analytics to solving things like identifying estate planning opportunities for advisers who don’t think about it. And so, that continues to be a very, very important part of, let’s say, the investment portfolio of mine, but more importantly, I think, the hub of so many different technologies around it that we use and will use. But things that we invested in and that we’re excited about, one is a company, we’ll probably roll this out that is the first I’ve seen of its kind.

The guys came in to visit with me and were basically illustrating that they can do tax loss harvesting in ESG and run a Parametric-Aperio type solution and there’s a number of those out there. And I think they’re great and it’s one of the few forms of alpha, I think, that exists. It’s tax alpha for portfolios and I think tax loss harvesting is important. But what I asked them for and no one had been able to do was a pure householding solution. And that householding solution needed to consider not just across entities and family members but also across taxpayers and estate planning. And so, that has been built and we’ll roll out the MVP in mid-September and we’ll use it ourselves and with my partner, Marty Bicknell, and try it to see if it actually does what we want it do.

But it is hyper-fast in converting clients because you put in your username and password, it pulls down everything you’ve got. We’ve uploaded the portfolio we want it to be in and it will tell you the most efficient way, from a tax and estate planning perspective, to reallocate the portfolio. And we consider things like charitable, etc. So, that, to me, is exciting for two reasons. One, it’s gonna cut the manpower and work hours on those things down tremendously, you know. For our clients, it can take days, sometimes, to manually enter information, now it will take, you know, enter your username and password. And then, no more Excel when it comes to figuring out how to get from where they are to where you want them to be. So, that, to me, is one thing that I’m very excited about.

Meb: And just real quick before we move on the next one. So, the in-client on that one would be adviser or there’ll be individual offering as well?

Steve: We haven’t contemplated an individual offering but, theoretically, there should be. The problem is the client wouldn’t know what portfolio to put it into, theoretically, if they’re not adept at asset allocation. But they might say, “I like the Cambria portfolios and I wanna convert from where I am to Cambria portfolio,” it would tell you how to do that. So, it could have an end user outcome, ultimately, but the initial launch will be to advisers to help them better serve their clients and save time.

Meb: It makes sense to me. We talk so much and I, kind of, relentlessly talk about this on Twitter where, you know, people focus so much, probably 90% of their attention, on investment performance, funds, and strategies, and then, maybe second, I don’t know, it would be fees of the actual management fee. But, you know, the taxes is such a major, major component but it’s hard for people because they don’t necessarily see it, you know, they see the nominal returns. And we’re seeing robo or not presentation where they were just eviscerating mutual funds saying, you know, “Many of these that are high fee have like a 80 basis point drag compared to other funds.”

But the challenge is that it’s the least sexy and most boring but probably, like you mentioned, biggest alpha generator there is but hard for a lot of people to get their hands around because it’s hard to demonstrate that easily to clients and to investors. Whereas, if you just say, “My fund was up 30% last year,” it’s a lot easier than that anyway. And end of route.

Steve: Yeah. And that’s one of the challenges. So, one of the things I hope we did well was, on the output page that an adviser share with the client, it does highlight the benefits of doing it this way so they can actually focus, not on trying to sell them the sexiness of high return but the benefit of being tax efficient and improving their situation and see what the potential outcomes is for that. So, that, if it goes the way we hope, hopefully, it will be a good tool for us and for advisers and hopefully push the industry forward a little bit.

Meb: I would use that. Today, I mean, we did a white paper, we’re talking about, you know, people love dividend and high dividend investing, but in taxable accounts, particularly for high net worth investors, it can be a really suboptimal approach. And so, the asset location of a lot of these approaches is really important as well. So, investors, think about it. It’s an important thing. All right, on to number two.

Steve: I’m signing up as an alpha customer now.

Meb: Please.

Steve: So you can be a tester for us. And just another think, you know, we ended up creating…I believe I can do probably 90% of my job if I have one piece of paper, or I shouldn’t say paper since we’re paperless, one screen, that has the following things on it. And we built it in Excel and used it for a few years and refined it and now we’re actually putting it on the web for our clients, but it does two things. One is, I just wanna see…I know clients wanna see, “What does my family wealth look like in aggregate? And don’t tell it to me by large cap, small cap, I wanna know investment assets, personal real estate, commercial real estate, company options,” whatever my entire universe of financial is, the way that the consumer thinks about it.

The next big thing I wanna know is how liquid or illiquid I am because that’s something to focus on for folks so that the choice of what they need to do stays on their side of the fence and not the bank’s. And then, the last thing is, for the large clients, “What’s in my estate and what’s out of my estate and what’s the impact?” And then, behind that, are every single entity and ability to slice and dice. And the outcome of all of this, if you plug the estate plan in right, is a dynamic model that moves all the boxes around so you can see what someone’s estate plan looks like. And if you say, “I wanna cut Jimmy out of my estate and Meb into my estate,” and you make that change, it dynamically updates everything. And so, that was something we had to build manually.

Of course, anything that you can build in Excel, we can effectively put on the web. And after a few years of using it and refining it, we’re putting that out there. I’m excited about that because that, to me, is the first step in building out the algorithms to start having it automate the estate planning fees and tell people, “If this, then that. If this, then that, behind that,” and effectively, with a series of questions, being able to come out with the ideal outcome, which is no different to what we do in our heads, but now the computer will have the model and you can democratize it.

Meb: And is that the same sort of thing that’s gonna be mainly for advisers? Is it gonna be…how do you see this, kind of, come into market as well?

Steve: Probably, for us first, and then what we really talked about doing is releasing it to, let’s call it “the good guys.” So, you know, the folks that we think are gonna use it properly and not use it as a weapon to sell something that the client might not need. And so, we’ll roll it out to those advisers, and again, see if it starts to propel people in the right direction. But more than anything, it’s just a massive time saver for us and allows clients to see things in a very, very simplistic fashion. And, you know, one thing we haven’t spent a lot of time on is, I think one of the big issues in the industry is the industry goes out of its way to overcomplicate things for consumers.

And that is probably the first line of offense that needs to be fixed, is if we can make that complicated stuff simple. It just doesn’t serve those who are trying to say, “You need to pay me a lot of money because I’m gonna explain this to you,” and that’s what we’re trying to do, is use these tools to make things simpler.

Meb: I love the old John Bogle quote where he says he puts half his money in stocks and half his money in bonds. That way, he spends half his time worrying he has too much in stocks and half the time worrying he has too much in bonds. And I think that’s, sort of, just…and he continually does a lot of these updates where he looks back at…I mean, talking basic 60-40 and very simple allocations and how much better they do than so many of these really complicated high-fee products. And the kind of slight segue about, you know, this entire conversation, listeners, notice how much of it, you know, despite Steve being the expert on the topic of investments, you know, so much of the end result of being, kinda, planning focused is not just about the investment returns.

And so, does this change the conversation a little bit with your clients? So, you’ve had these over decades, at this point, various market cycles, ’08, dotcom bust, the booming 90s, everything else. You know, one of the biggest challenges in our world, as advisers, is keeping investors from harming themselves and the behavioral side of panic and chasing hot investments. Has the planning focused changed that to have people better comply? Or are there any other tricks and ideas and systems that you put into place that you think have helped over the years? Because, as a public fund manager, we really don’t have any choice because people just continually behave very poorly in public assets where they chase returns. Any concepts that also may be useful to advisers or individuals when thinking about how not to do a bunch of dumb stuff with their portfolios, and potentially, client tricks as well?

Steve: Yeah. I mean, a couple come to mind. Proactivity versus reactivity. So, we go out of our way to remind clients, you know, every month, we send out a simple email blog that says, “Here are the returns of the major indices and here’s the return of a bunch of simple portfolios.” And three of them are Vanguard life strategy funds so they’re, you know, one ticker funds, and the other two are just agg mixes. So it goes from 40-60 up to 80-20 in stocks versus bonds ratio, just so they’ve got something to compare against. And then, down on the bottom, there are a couple bullet points about why it’s important to stay the course. And there’s some stuff on the SPIVA, you know, active versus passive, just reiterating the difficulty that active has had in outperforming passive over the last decade or so.

So, that’s part of the proactive piece. If you take one step farther and look at what some of the robos have done is they’ve actually started monitoring behavior. So, back to using Betterment again, they actually went far enough to notice when someone was changing their allocation, and then automatically calculating the tax impact, and then serving up to the client, “Hey, are you sure you wanna do this? It’s gonna cost you $XYZ in taxes and the stat that I recall is that asset allocation change is down by about 80%.” And then, the other thing is part of what you’re doing, and I mentioned the Vanguard life strategy funds, if you have everything in one fund, you don’t really worry about it if you think about it as a diversified portfolio and you know that you’re gonna ride the wave.

And that has actually been effective for me and for a lot of clients, so I have no problem putting clients in a one security portfolio if it’s diversified in the way the things that we’re talking about are diversified because I’m not out selling that I can pick the best of everything. I don’t need to. I’m happy to be the market, and be diversified, and let capitalism do its thing.

Meb: You know, there’s a couple gems in there that you mentioned. One is that people, I think, just behave a little differently with a lot of these target date or lifecycle funds. And the same thing with some of the retirement accounts for the dollar cost averaging in. I think a lot of the research has shown, in general, that the behavior is better there than in some other areas. But it’s funny you mention that about the One Fund because I can’t tell you how many advisers I’ve spoken to that actually say the opposite, and maybe it speaks to your business model, because so many say, “Well, Meb, I can’t just put my investors into one fund because then what will they be paying me for?” But once you, kind of, transition to the model where…

Steve: That’s it.

Meb: …you’re doing all these other things with the, say, planning and everything else, then that’s actually not that challenging of a conversation. That’s funny, I’ve actually never heard anyone say that. Usually, it’s the exact opposite. What else? All right. So, we’re gonna start winding down, I love it’s Friday afternoon, you and I are the only people apparently working this summer. Jeff, sorry, Jeff is upset. He’s in here. He was forced to come in here as well. My autoresponder shows that not a single person is working. But a couple more quick questions and we’ll let you go, I promise. So, let’s say someone’s convinced, after this conversation, they say, “Okay. I gotta get my act together, I clearly am focusing on the wrong things. I wanna go chat with an adviser.”

And let’s say they contact you guys, but if not, they go talk to the local adviser, what’s, like…like put them on the right path. What’s a couple of the main questions they should be asking just to, kind of, help them along? So, if they looked up on Yelp, they looked up on the FPA website, they found a couple advisers to interview, what’s a couple of just assistance questions that you like hearing or you think people should ask and also you could also include questions to definitely not ask that are the wrong way to send you down the path, too?

Steve: Yeah. And there’s a host of them and some of them lead to others. So, you know, the two thing, it is a free resource. It was in the book I wrote to help investors try and find a good adviser. Chapter 8 was all the questions to ask and the answers. And then, we ultimately just turn this into PDF so they could send out to advisers and they could keep the answer key for themselves. So, it’s on the adviceperiod.com website, it’s also on lockshin.com. They…

Meb: Or you can buy the book on Amazon, the name is “Get Wise to Your Advisor: How to Reach Your Investment Goals Without Getting Ripped Off” Is that right?

Steve: Exactly. Yep. I’m happy to send you those and if you wanna use them anyway, that’s a free resource for consumers to ask questions.

Meb: We’ll add all this stuff to the show links, contact information, websites, all that stuff. So, listeners, you can always find that stuff in mebfaber.com/podcast. Okay, keep going.

Steve: So, it’s how do you get paid? You know, are you commissions or not? What licenses do you hold? If they hold an insurance license, it’s probably because they intend to sell insurance. And so, those kinds of things will help define what they’re going to focus on. One of the questions I like to have folks ask, you know, when they’re dealing with folks that are notorious…I’ll pick on Goldman for saying one thing and doing another which, “Oh, yeah, we can be completely open architecture,” is ask them, “What will the fee be if I tell you you can’t use any of your own funds?” And so, narrowing down the opportunities for the advisers to wiggle out of the facts and embed things, we talked about fees being embedded, those are the kinds of questions that I encourage people to ask.

Understand the team, how often we meet, you know, what do they really provide in services and define that. What software do they use? What’s my access to information? How much transparency? So, all those are the questions. And I think there’s enough on there, which is the reason we created the questions and answers that people won’t remember, and yet, they still are gonna make decisions based on how they feel when they leave the meeting. I would always encourage them, send the questions out before you meet with someone so that it helps define…you know, if someone gives you a referral, send out the referral and say, “We’ll come talk about this when I get in,” and it will change the nature of the conversation.

Meb: Very cool. I love it. Have you guys started getting any questions about the new opportunities on tax legislation yet or is that still kinda too early?

Steve: Lots.

Meb: Lots?

Steve: Lots of questions.

Meb: Are you optimistic about it or you think it’s interesting? What’s your thoughts?

Steve: I think it’s interesting. I think it’s got a lot of potential. I think it’s still early, the regs aren’t out. This is another example of where the industry is manufacturing product and demand around something they don’t even fully understand yet and I think it’s gonna create some real problems for consumers that get going early. So, for us, we’re still taking a wait and see approach. The tax advisers that we really respect are taking a wait and see approach, but we’re trying to understand what will be available.

Meb: I was really optimistic that, or hopeful, I should say, not optimistic, that you could potentially get public stocks, work public stocks into that, but that seems to not be the case which was such a bummer. I was hoping. We’ll see. What’s been, over your career, what’s been your most memorable investment? It could be stock, it could be a good one, it could be a bad one, it could be baseball cards, bubble gum, whatever it is. Anything come to mind? Most memorable investment?

Steve: I have a couple. So, probably my most memorable investment and best story is, when I first worked for that family, I was running a tiny bit of the money myself. And I remember I’ve always been a computer geek, and I went to CompUSA, and on a door, it said, “Intel Inside,” and when I went into the back and I was looking at computers, it said, “Intel Inside.” And I opened a magazine that said, “Intel Inside.” So I went and I bought long-dated Intel options. And it was right before inflection point and there was the biggest percentage return I’ve ever seen certainly to date, and probably for a long time. And it was exciting because it was the Peter Lynch, you know, buy the stuff you love, the Toys “R” Us story, which was very cool.

And then, things like I invested in Betterment, you know, right after they launched and it was an unbelievable return. And so, being on the front edge of stuff is exciting and those are the kinds of things…Flextronics was another one. I built my entire house back in Maryland with Flextronics profits and I just went in a little early before they went public and it just skyrocketed from there. So, I’ve been lucky.

Meb: It’s funny because I remember I used to email you every time that Betterment would get marked up. I would say, “Steve, you see this valuation they’re going off at?” You said, “Yeah, I know, Meb. I know.” You still behind the cockpit? You still flying?

Steve: Yep. Yeah, yeah. Still flying a lot.

Meb: Where are you going? How often do you do that?

Steve: Well, I swore, when I move out here, I was only gonna go between a trapezoid of San Diego, San Francisco, you know, kind of, Vegas, and Scottsdale, but I’m now finding myself back all over the country. But more than anything, I’m trying to go to Cabo as often as I can.

Meb: I love Baja, Mexico. I’ve been many, many times in. Have you have you been to the…it’s in Northern Baja, but the wine country down there, are you familiar with this?

Steve: No.

Meb: So, outside of, like, Rosarito Ensenada, it’s to the east. It’s called…I’m gonna murder this, it’s like Guadalupe Valley and it’s like a Mexican Napa of 50 years ago and they have world-class restaurants and world-class hotels. Still dirt roads, but it’s one of the coolest places you can go on the planet. And for us, it’s a couple hour drive. For you, pretty sure, a plane flight. I don’t know where you would land in that area but some of the absolutely most stunning wineries, and so check it out. But I have spent a lot of time down in Baja, what a wonderful place.

Steve: I need to go check that out.

Meb: One more idea for you. I just watched this in the past week, and as a pilot, you’ll appreciate it. They have the Google speeches, I forget what it’s called, we did one once, but where people go…Google Talks, and the guy, the “Catch Me If You Can.” Have you ever seen that movie with Leonardo DiCaprio?

Steve: Yeah, I’ve met him.

Meb: Oh, awesome. So, that guy gave a speech, I forget what his name is, at Google. Have you ever heard his whole story? The real story?

Steve: Yeah, yeah. He spoke at our YPO chapter a couple times.

Meb: There you go.

Steve: [inaudible 01:03:37]

Meb: Yeah. And it’s the coolest and it’s nothing…I mean, it’s similar, obviously, to the movie, but he gave a speech at Google that’s about an hour long, we’ll add it to the show notes. You’ve probably already heard the whole story, but he is such a wonderful public speaker and the story is so…even more fascinating than the movie. So, anyway, if you’ve got an hour to spare, listeners, check it out. Steve, it’s been a blast. Where can people find…I think we’ve mentioned it, but what’s the best places to find more info and people wanna reach out to you and give you all their hard earned money? Where should they go?

Steve: Adviceperiod.com or steve@adviceperiod.com is the easiest way to reach me and I’m always happy to hand out referrals if folks need it or help any way I can.

Meb: Awesome. Steve, thanks so much for taking the time today.

Steve: Thanks for having me on and always a pleasure.

Meb: Listeners, you can find the show notes at mebfaber.com/podcast. We’ll all add these links, Steve’s papers, ideas, suggestions, ways to talk to an adviser, dumb questions not ask, great questions to ask, all that good stuff. If you’re loving the show, if you’re hating it, leave us review on iTunes, Jeff reads every one. I promise we read them all. Thanks for listening, friends, and good investing.