Episode #376: Jason Wenk, Altruist, “How To Make Financial Advice Better, More Affordable, And Accessible To Everybody”

Episode #376: Jason Wenk, Altruist, “How To Make Financial Advice Better, More Affordable, And Accessible To Everybody”


Guest: Jason Wenk is the founder and CEO of Altruist, an all-in-one financial advisor platform.

Date Recorded: 11/10/2021     |     Run-Time: 1:26:06

Summary: In today’s episode, we’re talking with one of the most successful fintech startups around! Jason is building an alternative to existing custodians with a mission to make independent financial advice better, more affordable, and more accessible. We get into some of the benefits to advisors and how they aligned their fee structure to benefit advisors and their clients.

Then we get into the future of financial advice. We touch on fees, mutual funds, ETFs and direct indexing, and some of the structural issues embedded within the financial services industry.

Sponsor: Public.com is an investing platform that helps people become better investors. On Public, ownership unlocks an experience of content and education, contextual to your portfolio, created by a million+ strong community of investors, creators and analysts. Start investing with as little as $1 and get a free slice of stock up to $50 when you sign up today at public.com/faber.

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 Justin at jb@cambriainvestments.com

Links from the Episode:

  • 0:00 – Sponsor: Public.com
  • 0:50 – Intro
  • 1:25 – Welcome to our guest, Jason Wenk
  • 4:50 – An overview of Altruist
  • 8:16 – The problem in the market that Altruist attempted to solve for advisors
  • 12:44 – Sponsor: Public.com
  • 14:06 – Taking Altruist from the initial brainstorm to a functioning company
  • 19:18 – The importance of design when building a company
  • 23:29 – Guiding principles that were designed into the product
  • 30:34 – Changing and updating features now that advisors have given feedback
  • 34:56 – Monetization and the unit economics of the business
  • 40:27 – Direct to consumer models and the power of distribution
  • 44:42 – Why transparency in the financial services industry so crucial
  • 49:06 – Jason’s thoughts, predictions and concerns about the future of financial advisors
  • 58:22 – Discussing US stock valuations
  • 1:01:50 – Why hasn’t anyone built a Yelp for financial advisors?
  • 1:10:20 – How much the industry may be disrupted by technological innovations
  • 1;21:54 – Jason’s most memorable investment
  • 1:22:45 – Learn more about Jason; altruist.com; Twitter @jasonwenk


Transcript of Episode 376:

Sponsor Message: Today’s episode is sponsored by public.com. Visit public.com/faber and get a free slice of stock or ETF up to 50 bucks when you join today. I’ll tell you why later in the episode.

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 is 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: What’s up, everybody. We’ve got a great show today. Our guest is the founder and CEO of Altruist, an all-in-one financial advisor platform. In today’s episode, we’re talking with one of the most successful fintech start-ups around. Our guest is building an alternative to existing custodians with a mission to make independent financial advice better, more affordable, and more accessible. We get into some of the benefits to advisers and how they align their fee structure to benefit adviser and their clients. We get into the future of financial advice. We touch on fees, mutual funds, ETFs, direct indexing, and some of these structural issues embedded within the financial services industry. Please enjoy this episode with Altruist’s Jason Wenk. Jason, welcome to the show.

Jason: Hey man, pleasure to join you, Meb. This is super cliché, a long time listener. Happy to be on your show, so, I’m stoked.

Meb: Yeah. Well, I’ve been harassing you long enough to get you on. The last time I saw you in person was either on a rooftop in Venice or in an attic in Venice, which used to be your office. Still is your office but it seems like you guys are moving. Which one was it?

Jason: I don’t know, there was like a…isn’t there like a crusty Mexican restaurant in Manhattan Beach? I think we had some beers there once too.

Meb: Oh, okay. All these in the real world events kind of meld together pre-pandemic. I’m out and ready to get out in the world, you’re applying a barbell approach, mazel tov. Congrats, man, you got a new one.

Jason: Thank you. Yes, winter, Rye Wenk joined the crew, October 18th. So, yeah, we’re super stoked to have a new one to the family. And then my oldest turned 21, October 13th. So, yeah, barbell accurately described.

Meb: Your oldest now old enough to have a drink, your youngest name sounds like a cocktail. You could have a tasting room or Jelena, we could go order that, it sounds like perfect fall, like a sort of smoky cocktail. I like it.

Jason: Yeah, you know. There’s lots of stories have to do with his name. But it’s a grass, it’s a wheat, it can be turned into alcohol. There’s all sorts of things. It’s actually the same grass that Augusta National uses when they play the masters every year. So, I didn’t even know that, someone’s like, “Oh, man, did you name him after the Masters?” I’m like no…It’s like, “Oh yeah, the whole Augusta National Golf Course.” I’m like, “Yeah, that had nothing to do with this whatsoever.” But we’ll make that a true story if he becomes a great golfer one day.

Meb: Perfect, I’m heading out to our farmland this coming weekend, we’ll see what the results of our wheat harvest were, speaking of grains. So, kudos to you, although maybe you’re just using this as an escape to be like, “Dude, I need some sleep, I need to go hide. I’m going to do a 5-hour podcast with Meb, so, I can take a nap and…” I did one podcast once from the hospital when I had my kid, for that reason alone. I’m like, “I got to do some work.”

Jason: Yeah, dude, you’re way more bold than I am. I think my wife would’ve come out of her painkiller-induced coma and actually strangled me.

Meb: Yeah. Well, feel free to use the excuse for as long as you feel necessary. Oh, by the way, another thing I forgot to tell you, you are a Michigan native, right?

Jason: Yeah, man. Born and raised.

Meb: I’m heading to Detroit for the first time ever next week, so, I’m going to have to hit you up for some travel agent guides.

Jason: Absolutely, man. A shout out for you and every listener you have, Foundation Hotel in Downtown Detroit, it’s awesome. An old fire department converted, its killer bar, good vibes, good location. So, if you don’t already have something booked, go to the Foundation.

Meb: Did I hear you say you grew up kind of in Farm Country or in the burbs or what?

Jason: No, farm. It’s the west side of the state, so, I was like 2.5 west of Detroit. The population of my town was about 110-120 people. Extremely rural, all farms as far as you could see. I tell the story that my first job I shoveled manure at a dairy farm, it was about a mile away from my house. And there was a goalie in between my house, and, so, I had to walk uphill both ways in the snow to shovel cow shit for a living.

Meb: Is this like Grand Rapids, Kalamazoo…

Jason: Yeah, like Northwest of Grand Rapids, yeah, for those who know that area.

Meb: All right. I was in Grand Rapids pre-pandemic. Great beer scene, by the way, up there. All right, well, let’s talk about something relevant. You’ve kind of done a lot of things in the advisory financial services, investment management world. We may come back to those later, I want to spend the majority of time talking about what you’re up to now. But before I lead in, how many financial advisers do you think you’ve talked to in your life?

Jason: That’s a lot. I mean multiple thousands, for sure.

Meb: Okay. Tell us what Altruist is, give us kind of the broad overview. And then we can start to riff on a few different topics that I think are timely and confusing and instructive for, not just me, but everyone. So, what are you guys up to over there, besides holding former bluegrass concerts in your office space was the last time I was there? It’s the coolest space…I mean we may have to take it over, you’re getting rid of it. We may have to swoop in.

Jason: We’ve outgrown it. It might be available next spring, and it is one of the coolest spots in Venice, California, so, for sure, but Altruist is a custodian for independent financial advisers. Unlike other custodians and entirely digital custodians, so, it has all of the tools that a financial adviser would need to give their client a really delightful fully-digital modern experience. And there are all sorts of like back office tools kind of just seamlessly integrated into the platform. And we do it all with a high degree of automation and modern technology architecture, which allows us to drop the cost Typically, most people, it’s like 80% to 90% cheaper than any other sort of combination of solutions that they have to do all sort of disinter-mediated today. And ours is this one seamless vertically-integrated solution at a super low cost and very easy-to-use. So, it’s been about 3 years since I started the company and today there are about 180 people on the team building this every day. It’s been a ton of fun.

Meb: What does everybody do, man? That’s a lot of people. You’re trying to burn some VC money or what?

Jason: I find, with financial technology, it’s very interesting, financial advisers, as they think about it, like most the tools built for advisers are pretty terrible. I would call them almost not real technology, they’re like homespun ideas and they’re like their nephew who studied computer science at the local state college to wrangle up a couple buddies and spin up like basically a macro’d-out Excel spreadsheet or something and they call it software, you know. But building really big meaningful infrastructure, it takes a lot of people. And specifically for the tech nerds that might kind of be faithful listeners. So, I’m sure you have a huge following of JavaScript engineers or something for the show. But it’s real, it’s a lot of infrastructure that you have to build for something like trading stocks. It’s not quite as simple.

And I should clarify too, you know, there’s all these consumer apps. I think most people think of like fintech, they think of like this consumer stuff you download on your phone and you can transfer money or buy and sell stocks or crypto or whatever. And we have to keep in mind that that’s a really simple product, in a lot of respects, because almost all of them only support individual accounts. Right? If I go to Coinbase, I’m just opening an account for myself. It’s a single-user account, there’s no like persona management. It’s very straightforward. I’m trading one security type, it’s very, very straightforward. Right? When you build a tool for a financial adviser, you’ve got the financial adviser, their staff, their customers. You’ve got 40 different account types, you have to support every single type of security. So, it’s a far more complex product to build. But the ability to impact people like on a much bigger scale is also a lot higher. So, it’s very much worth it. So, that’s what all those people are doing, we’re building really hard-to-build complicated financial technology.

Meb: What was the origin story? Basically just like you looked around and you’re like, “The state of affairs, the current offerings, just they suck,” was that kind of the takeaway? And I remember like, so, when we first started Cambria, I remember we used to have to fax our trades in. And by the way, users, I’m not that old, this was in like 2009 or 2010. Our custodian’s like, “You can’t email or upload these online, you have to fax them in,” I’m like, “what are you talking about?” like, “how is that even still a thing?”

And I remember going through some of the old custodians, and even recently, by the way, some of the legacy, I was looking at one’s newest kind of offering and I was like, “How is this that bad?” And I know why because it’s like any listener walk out to your garage and be like, “Why do I have all this?” Well, it’s because years of years of accumulation and fixing it versus starting new. I think I already answered your question for you, but was it basically you just like looked around and said, “I can’t take this anymore, this sucks. We have to do it.”?

Jason: If I wanted to put it real succinctly, I would’ve said it exactly like that. I’ve been in the space a little bit longer than you have, so, I started in the industry right around the year 2000. So, I am old I guess. But what I would say is that I kept sitting around waiting for someone to fix it, all those problems that you experienced in 2000, it was called 9 10 11, they were there in 2000. And I thought, “Well, someone will fix it eventually,” you know. And then, 2010, “Someone will fix it eventually.” 2015, by then, you know, we had tools like Robinhood and then it was like getting offensive. Right? I was like, “How the hell is it possible that an 18-year-old can open an account, put money in it, and buy like $10 worth of Tesla,” you know, “fractional shares on their phone in minutes?” But, if a financial adviser, if they went to an adviser…first of all, finding an adviser’s hard but let’s just say they could find an adviser, like the adviser, to try to do that for them would be like reams of paperwork back then. Maybe they had like DocuSign but probably not, you know, still probably like physical paperwork and physical checks. And like it would take 3 weeks. That’s crazy, you know.

So, eventually, that offensive reception to consumer-base fintech, it’s like, “Why is it that advisers are getting no innovation?” I mean it’s a really painful experience to open an account, fund an account, trade an account, build an account, like all these things were fragmented solutions. And, so, it was like you hit a point where you go, “Someone has to do it, might as well be me.” So, that was the genesis.

The bigger picture story too, I should just add is that I am really passionate about the value that a personal financial planner, personal financial adviser can bring. And I think the other thing that bothered me was, when I started in this industry, if an adviser was pretty successful, they might say, “Hey, I’ve got a $100,000 account minimum because I’m pretty successful and so much demand,” right, “I have to have a high minimum to filter out the surplus demand and make sure that I don’t get an out-of-control size client base.” And then that number became like $250,000, then $500,000, and then a million. It’s super common now for the best advisers to have a million or 5 million or even more, you know, so, that’s their minimum for a new client.

So, we’ve had 20 years of the best advisers becoming more and more exclusive versus more and more inclusive. It seemed to me that a big part of that actually is there are a lot of limiting factors for financial advisers. It’s hard for them to serve people, it’s hard to serve people at scale. And a big part of that was this infrastructure that was just brutally bad and needed some massive overall innovation. So, partly born out of personal frustration, partly born out of the righteousness of people need access to advisers. And there’s very little incentive for the incumbents to try to make accessibility a real thing. They like the minimums being high and things be clunky and shitty and expensive. And that’s not good.

Meb: Right. So, it’s funny because like I remember the first time sitting down…and there was four or five of these in the early days, but Betterment was a good example on the direct-to-consumer and just doing the onboarding, which took like literally 1 minute, and being like, “Huh, that’s interesting. This is very clearly a vastly better experience.” And then you go log into whatever, Fidelity’s Wealth Center, and ask them about even doing digital onboarding. And they’re like, “It’s coming,” you know, “next year’s rollout,” which was like 7 years…Fidelity, I’m sorry, I haven’t looked in a long time. And, so, you know, you had this sort of retail world passed by the adviser world, which is odd because there’s a lot of AUM in the adviser world.

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Meb: All right. So, what happened? Did you take out a white piece of paper, grab a couple friends, and say, “All right, let’s sketch out what this should look like. Did you already have an idea in your head?” And like, on the time line, what year was this when you guys started to go from brainstorm to reality?

Jason: So, my last company, I founded a company before Altruist, is called FormulaFolios, and it’s sort of a…you know, I’d call like a tech-enabled asset manager for financial advisers. So, I spent from 2011 to 2018 building that company and I made the mistake of thinking, “Hey, I’ll build a bunch of kind of front-end technology to take care of some of these friction points for advisers. So, we’ll make it easy for them to board new clients really seamless. Let’s make it fully digital.” But the mistake was I thought I could nest it on top of like the existing adviser custodians.” So, you mentioned Fidelity, right, Schwab, TD Ameritrade, the usual suspects. And there was like workarounds, you could kind of sort of make it work but it was not pleasant, it was not scalable. And interestingly, the business did really well. So, we scaled up, we were adding hundreds of millions of dollars in new assets every month.

Meb: I feel like this is every adviser who uses interactive brokers has this exact same sort of takeaway. They’re like, “I had to have cobbled together whatever software front-end because it’s like an impossible interface.”

Jason: It’s tough. You know, and I had a pretty big team and people like my like…you know, I was an engineer myself, you know, before getting into financial space and I had a 110-person team at my last company. So, it wasn’t like it was like this small endeavor, like a couple of dudes hanging out in the garage, you know, pounding the keys on the keyboard. Like we had a real team with significant dollars going into development. But, you know, you can only go so far. You know, it’s like, you know, you put like a rocket engine on a Ford Taurus or something, it’s still a Ford Taurus. That’s basically what we’re doing. We built all this sort of augmented tools and the base layer, again, I call it the infrastructure layer of the industry, which is the custodians. I mean just they were not designed to support it.

There are a couple like modern custodial solutions. I did an integration with one called Apex that a lot of people are familiar with. It was okay but the challenge with Apex…again, great group of people, love Bill and his team dearly, but they’re mostly infrastructure for consumer apps. Right? Like their core customer is going to be…like Robinhood was built on that and Betterment was built on that and PayPal’s, you know, trading was built…like these are their core customers. So, going B2B to C was definitely not in their DNA. And it’s like you’re still pounding a lot of square pegs in round holes.

So, the idea to start my own custodian started, you know, at FormulaFolios. I was like, “Maybe I should do this,” you know, “maybe I’m big enough,” you know, “maybe my own assets, 4 or 5 billion dollars in assets, is big enough.” But what I realized was that, if I did it through a TAMP, you know, the Turnkey Asset Management Program that FormulaFolios was, it would very much alienate advisers that didn’t want to fully outsource every single thing in their business. Right? Like they didn’t want to…because TAMP, by nature, like you’re giving some company, like Envestnet or AssetMark, right, these big companies, right, ultimately, they are now the tech stack and they’re the ones doing the diligence on your managers that are available. And whatever other stuff they might do.

And I felt like an open architecture solution was better. That way advisers could build whatever was best for them and their clients. So, I made the tough decision, you know, I had a company that I built, it was very successful and doing very well, I guess, from it. And I had to step down because it just didn’t make sense to do it as part of FormulaFolios. So, I resigned in 2018…I think July of 2018. Fortunately, this is just the nature of start-ups. I can say that, if you’ve already done something well once, it’s a hell of a lot easier to get money from other people to go do something again.

Now, I had a lot of people always trying to buy, you know, private-equity firms, venture firms. I bootstrapped and fully owned FormulaFolios, I didn’t ever take any outside capital. But I had lots of friends I’d made that always wanted to give me something. So, when I started a new company, I thought, “Hey, who’s the best person? Like the single best person I can think of that I’d want to partner with to launch this new sort of endeavor and see if they’d be along for the ride…” So, I called up Nick Byrne, who’s a partner at Venrock. Venrock is the Rockefeller family’s venture arm. But they’re a lot more than that now, they take outside LPs, a really, really cool group of people. And Nick is really exceptional.

So, I reached out to Nick, made a phone call, and, obviously, there’s still an investment committee there, so, I don’t want to like oversell like that Nick holds like all wielding power there. He certainly does and he has a team that he works with. But he was incredibly excited about the idea. There was no pitch deck, there was no co-founders, it was just like me had this idea. I pitched Nick and Venrock, they were very supportive. Within weeks, we raised 8.5 million dollars based on just an idea in my head.

Of course, eventually, I built a pitch deck and formulated the plan. First person I hired was my former head of design at FormulaFolios because I wanted to kind of like take all these ideas in my head and turn them into like some type of visualization and brand. And, so, employee number one was John Scianna, who’s an absolutely brilliant brand-design thinker, and we got to work on what was Altruist was going to be. It didn’t really start taking shape until early 2019, that’s when we like kind of had the founding team in place. So, those first few months, it was just recruiting like incredibly talented people in product engineering, compliance to kind of partner with John and I. And we started writing the first lines of code in late January, 2019.

Meb: Kudos to your design guy, he’s clearly talented because all the flow and design of it is pretty great. Not to diminish your idea.

Jason: Yeah. No, listen, really stupid ideas with really great design look a lot less stupid. We happen to have a pretty good idea and then exceptional design thinkers. And, you know, today I think we have almost a dozen designers across, product design, brand design, and they do UX research. I mean it’s a really well…but we’re very much a design-led company, we have been from day one, obviously, hired my first person there. But I think that’s important. You know, our space, I mean beyond all the technology, that’s just brutal. Our industry is fugly, man, it’s so bad. It’s just painful to see logos of compasses and sail boats and like castles and whatever. Like there are all these things, it’s super cliché. And then the products that advisers have to use, like it’s almost like you don’t realize…I mean maybe a forward question here, Meb, but what kind of car do you drive, let me ask?

Meb: I was going to make a joke about having all three on our website, but it’s just Manhattan Beach here, sadly. I was like, “Maybe…I wonder if like the sail boats, like there’s some like a 1960s focus group where they’re like, ‘you know, the three images that work best is sail boats, a couple like reading a book with their kid, and…what’s the third one?'” But the one you see a lot on the advertising ads all the time are like people rock climbing. A sail boat, like there’s people rock climbing, and then it’s like some quote about risk or something.

Jason: Yeah. I think the fisher ads these days, you’ll find somebody who’s 50 and like holding a surfboard like looking out on the horizon, you know, when there’s no break at all. And you’re like, “Yeah, that’s so fabricated and not realistic.” But, you know, “Hey, look, that’s what you’re trying to personify.”

Meb: What car do I drive? This is kind of a touchy question for me, Jason, so, thanks for bringing up a wound. But when I had a child, I had to give up my car because it didn’t have kid seats. This was an old 1960s Land Cruiser. So, my first car, when I was 18, was an old brown boxy Land Cruiser. It was like 1983, it looked like the Jeep Cherokee body style. And, so, I got a 1960s one but that’s more like the small Jeep CJ40 body style, so, it’s FJ40. But the seats in the back went this way, which babies can’t go in, obviously. I mean they could in lots of places. They could in Western Michigan and probably North Carolina, where I grew up partially, not in LA. So, I went electric. I got a Tesla, which I love…

Jason: I’m so glad, I didn’t know this story. By the way, like I love the vintage cars myself, so, I’m partial…I can do both, so, I have an old Jeep and then I have a Tesla. Right? So, until you’ve driven a Tesla, it’s easy to dog on them. But like, once you drive one, especially if you drive in LA…like, yesterday, I had to drive up to Van Nuys at 6 00 p.m. from Venice, which is basically like an extra warm day in hell basically. But it’s a lot more bearable when you just like double tap your gear shifter and you let the car drive you. But with our industry, like one of the things that’s happened is that people don’t even know. It’s like everyone’s still driving around in like, you know, a car that’s like not fuel-injected or something with no power steering. It’s like they’re like, “What’s the big problem? I don’t see what the deal is,” like, “there’s nothing’s wrong.” You know, it’s like, “No, dude,” like, “it shouldn’t be that way.”

And until they experience actual modern user experience, beautiful design that customers actually appreciate, it’s hard for someone to take my word for it. But, once they experience it, it’s kind of like an aha moment. We’re trying to at least give advisers this option for this modern experience, design’s a big part of that. Beyond, obviously, like the technical innovation.

Meb: It’s such a great analogy. I mean, look, there’s so many experiences in life once you try something and you’re just like, “Oh my god, wait, this is what’s this like? Why would I ever go back?” But it’s getting people to that doorway, I mean so many people never get to it. I had a bad flashback though, you just reminded me that, in high school, when I had my Land Cruiser, the power steering went out and I was being a cheap bastard and wouldn’t fix it. And it was like the most miserable experience driving for like 6 months. And then I fixed it and I was like, “Well, if you’re going to fix it, you should just fix it ahead of time because now I just drove for 6 months…”

Jason: Pain’s a good motivator but I prefer that our industry not be stuck in that no power steering age for the next 20 years.

Meb: So, you’ve obviously been on the Vanguard, that’s not a pun, given your Vanguard involvement we can talk about later, but you’ve been on the forefront of the tech and adviser community. And, so, when you sat down, you’re obviously mission-driven, financial adviser is something that’s close to your heart and, as an extension, the relationship with the end client and actually doing work that has a measurable impact, what were sort of the guiding principles? Obviously, like, “Look, we’re just going to clean this up and deliver a better experience,” but what else was like, “this is what we’re going to build into the product.”? Because I imagine, as everyone listening who’s ever built anything experiences that it definitely changes after you start building it in a million different ways, from feedback and everything else. But what are like the guiding principles? And it’s only 2 years ago, by the way, when you guys started rolling the sucker out.

Jason: Yeah, anyone that’s founding something, they should start with…and there’s like all these cliché things, “Start with your why,” right, but look, the most simple form, “have a mission, like something you stand for.” So, for us actually, before we ever hired an employee, we created a mission, and the mission was, “How can we make financial advice better, more affordable, and accessible to everybody?” And…like advice is different than access to products and trading. Right? Like there’s already lots of access to products and trading out there. We wanted advice, human financial advice, make it better, more affordable, accessible to everybody.

So, when we think about like building the products…so, I’ll just take a couple seconds for each one, right. So, make advice better. Unfortunately, not all financial advisers are great at what they do. There are some planners who are really exceptional. I actually think the majority are quite excellent but there’s some bad actors, it gives the industry a little bit of a bad reputation. But what are the empirical things we could do, like build and sort of codify into the product that would help deliver better outcomes for everybody regardless of if they had a lot of money or a little money?

So, examples of that would be, “Let’s do fractional orders for the entire platform,” which no other custodian for financial advisers is doing today. There used to be one that did but they got bought by Goldman Sachs and they’re being sunset, and, so, that’s no longer…and the other was bought by E*TRADE, and that’s now being sunset. Right? So…

Meb: Why are they sunsetting them do you think?

Jason: I mean I could tell you exactly why, you know, then I’d have to like, you know, delete this podcast and come to your house… The short public I think version is that Morgan Stanley bought E-Trade not for their advisory business, they didn’t care about it, so, just it’s a distraction to them, they’re going to sunset and get rid of those adviser relationships. And it’s done…that was the former Trust Company of America, which was bought by E*TRADE which had fractional share trading. Now it’s gone.

Goldman bought Folio Institutional, another fractional share-trading small custodian. I think the analogy I would give is that they bought the entire house because they liked the toaster, the kitchen. And now that they have the toaster, they’re scrapping the house. So, there was a little bit of tech that they had that they wanted that they could deploy across their wealth-management division. And that was what they really were looking for, not RIA custody and the way that it was being delivered.

So, that’s a great example of a very useful tool that will help make advice better because you have a lot less money in cash. For those who don’t know, like the average account I think that Schwab has like 16% or something in cash, basically earning no money, and probably getting charged an advisory fee. These are not good things for people, they make your outcomes worse, not better. So, how do we make them better? We want to make it easier for people to have ETF portfolios, fractional shares does that.

It used to be, by the way…one of the reasons the big custodians didn’t want you to have fractional shares was because, if you had like a monthly recurring deposit, right, of 100 bucks, 200 bucks and you wanted to invest it all, the easiest thing to do is to buy mutual funds because they could be bought with fractional shares. They loved you buying mutual funds because they made so much money. And I know you know that industry incredibly well, the big custodians love their mutual funds. And people don’t fully appreciate that, mutual funds through the big financial adviser custodians is a huge portion of their business, tons of assets and tons of revenue. They charge a ton of money to the fund companies to even be distributed. So, the acronym they all use is ROCA, revenue on client assets, these custodians want to maximize revenue on client assets, that’s like the total opposite of maximizing the return for the customer.

Meb: Right, right.

Jason: So, fractional shares is one example of that but there’s a bunch more, building automatic tax-loss harvesting tools and tax-location tools. So, again, regardless of what investment strategy you deploy, how you deploy it matters a lot. Like it can generate over 200 basis points of better return just by being tax-efficient. None of the other custodians have those tools built in, they make your adviser go buy some other solution, try to handle integration. Consequently, unless you have a big firm, you probably don’t have those sophisticated trading tools and, therefore, your clients are just losing out on these returns. Right?

So, that’s a great example of making advice better, making it more affordable for us, which is, “How do we codify and systematize everything?” Like a big part of why financial advisers are expensive, right, their fees are high. Like there’s just a report I saw yesterday that said like average advisory fee charged by a financial adviser is still close to 1%, even though everything else has come way down. Right? All the product companies had to drop the cost of their funds and their ETFs, commissions have went away, there’s so many other things. But financial advisers that charge AUM fees are largely the same they were 20 years ago.

And it’s not because they’re greedy, it’s because they’re costs of acquiring clients is pretty high. Somebody’s got to pay for it, right, it’s the customer. So, we built a product that’s incredibly affordable, you know. So, much like a lot of the consumer apps, advisers can use it, it’s free for their first 100 accounts. So, if they’re early-stage, they’re saving tens of…I mean it’s like, again, 90% is no joke, it’s like huge massive drop in their cost of like launching the firm. And the interesting thing is that combination of that high efficiency, the bettering of device and the efficiency gains, which makes for lower cost, delivers on the third part of our mission, make advice accessible.

I think, you know, a lot of advisers, they’d love to serve more customers, it’s just there’s only so much time in a day. So, if you’re kind of maxed out at 100 families you can really properly care for, what if there were ways you could serve 500 families and it actually was easier and you delivered better outcomes because we just made everything 10 times more efficient? Account opening 10 times faster, funding 10 times faster, fully automate trading, rebalancing, fee billing, performance reporting…

So, you know, for anyone of your listeners and non-financial advisers, this stuff is like probably boring…but if you’re a financial adviser, we get it. This is the pain that we all have to deal with. So, if we deliver on that mission, like it helps guide the product roadmap pretty heavy because it ends up resulting in a lot more advisers serving a lot more clients and giving them a lot better outcomes.

Meb: Yeah. Our industry is so littered with just legacy ways of doing business. I mean you reference the mutual-fund platforms, I think Schwab makes over a billion on one source, last I checked. But I remember looking out in the early days and it was like a couple hundred grand to just onboard it, it was like 40 basis points feed or something to like revenue share. And I was like, “Most ETFs don’t even have a 40-basis-point fee, how is this going to exist 10-20 years from now?” probably won’t. But what do you think like were the biggest unlocks? Like, so, all right, so, give us kind of a walk forward a couple years. I assume you got a number of advisers on the platform, how has it sort of changed in the last year or 2, you guys say, “Oh, we got to iterate, people really love this feature. This has been a huge pain point,” what’s kind of where you envisioned it and where it is now, in 2021?

Jason: Yeah. So, we released a beta in May of 2020. So, we let about 30 advisers use the platform for about 6 months just to help us learn how they were using it. So, there wasn’t a whole lot of dollars on the platforms, like maybe 30-40 million dollars, you know, across these sort of test advisers but we learned a ton and then we released the product fully in November. So, it’s been almost exactly a year, you know, November 15th of last year.

At that point, we built a lot of buzz actually, it was pretty kind of, you know, surreal. Like we had a pretty large number, I think, like 500-600 RIA firms that were on the wait list and represented multiple hundreds of billions of dollars in assets. So, at minimum, we knew there was a lot of curiosity. I wouldn’t call that like product-market fit yet, just like a lot of people very interested and intrigued. And when we opened up, then we got to see how much real fit. Like real fit can be measured by the actual account start getting opened and dollars flowed here and people switching the way they do business. And that’s been one of the coolest things to watch throughout 2021 is we’ve seen now firms fully 100% adopt Altruist as the only platform they use, they don’t have to have anything other than maybe CRM and a financial-planning app besides Altruist.

So, things are going great, from that perspective, there are about 1,000 firms now on the platform. And again, I can’t share all the details because, you know, then I’d be giving away too much but I can say that

we’ve grown faster than any fintech company in the history of fintech by like orders of magnitude.

So, if you took every single robo-adviser that’s ever been built, combine them, not including Schwab and Vanguard, right, like…

Meb: I was going to say, “You combined them, then you have Vanguard.”

Jason: Yeah. But if you took like Betterment, Wealthfront, you know, Personal Capital, Acorns, Stash, blah-blah-blah, take them all, combine them, add in Robinhood to the mix, combine that…which, by the way, Robin was like 10x bigger than all of them after their first year, like they grew so much faster than every robo platform. But if we took all of them, Robinhood included, and combined them all, they may be what we did in our first year. So, we’re pretty stoked on that. Obviously, our investors are very excited about that.

And it validates, that was that market-fit moment was like, “Okay, people drove the Tesla, they liked it. Now we’re iterating, we’re creating new features.” But what’s interesting is like all we did actually in the first year is we didn’t really invent anything. I’d say we divided our product into five key categories. So, it was account opening, account funding, trading, reporting, and billing. These are five things that have been being done for a long time, like decades. The problem is they all were so bad that we thought, “Hey, let’s do those five things and we’ll measure our C-set, our customer satisfaction rating on these and kind of like how do we compare.” And we thought, you know, if we could get all of those things to like 8.5 or 9s or better, on a scale of 1 to 10, to where we were basically the industry leader, there was no one who could do it better, account opening, account funding, trading and rebalancing, right, fee billing and reporting all rolled up into, in our case, one platform, you don’t have to go to separate places, just do it all in one spot, and we’re still the best in business with those five core things, that’s a good place to start. So, that’s what we spent a lot of our first year doing. Actually, you know, built for a year and a half and then, even this first year, iterating on those five things.

As we go forward, it gets a lot more about innovation, like real innovation. Like, now that we have like some significant large number of users and data, we can take that data and do some really interesting things with it that help augment the ability for an adviser to just deliver better outcomes for their clients. So, lots of things on the horizon, that’ll be sort of like industry-first. But people forget that like a great recipe for building a really significant company doesn’t mean you have to like invent everything. Trailblazers end up face down with arrows in their backs for a reason, we just found that a lot of the ways that people were doing things nobody liked. So, let’s do it way better.

And then, from here, I think there’s, again, lots of opportunities to apply machine learning to take that data and give advisers almost like an unfair advantage that they’ve never had before so that they can give their clients these outcomes and experiences that they’ve never had before with a financial adviser.

Meb: We’ll get to the previews in a minute, to the extent you’re willing to talk about any of them. But tell us the monetization. You said first 100 are free, which is cool, I wonder how many people just have 99 clients, just kind of chill out at 99. So, how do you guys make money? Is it similar to traditional custodians? Is it different? How are you different?

Jason: Yeah, I mean there are a lot of similarities. So, it’s interesting, you know, no one talked about this stuff until the last couple of years. The funniest part was I remember writing like blog posts like way before things went commission-free and just being like…commissions are the biggest smoke and mirrors from these custodians. Because, you know, it used to be, right, if you bought whatever, an ETF, let’s say, at name-your-broker, right, it was going to be whatever, six, seven, eight bucks a trade. And everybody believed that’s what the cost was.

It’s like, “That wasn’t the cost.” If someone, obviously, read like a quarterly earnings report from one of the public companies, they’d be like, “Yeah, transactions were like,” you know, “15% or less of the revenue.” They made all their money on stuff like credit interest, security interest, rev (revenue) share…fees meaning rev share. Payment for order flow, securities lending, margin. Right? So, there’s all these ways brokers would save money but they didn’t want to kind of have to explain all that, that felt dirty. So, the easier solution was, “Let’s just tell people it’s 40 bucks, you know, to buy a mutual fund and 7 bucks to buy an ETF for stock.”

When that went away and Robinhood really led the charge there, I mean people started asking questions. And now, all of a sudden, like nobody in our industry even knew what PFOF was, you know, until like they started getting talked about. And I’ll be like, “Oh, they’re selling your information. You’re the product, right?” It’s like, look, they’ve always been doing this.

Meb: You’ve done a very good job of being transparent and also being, I think, pretty data-driven on describing a lot of the different ways these companies do it. And there’s a lot of misinformation, one, because, again, it wasn’t a topic people were aware of or cared about, because many weren’t aware of it at all. Some of it sounds nefarious but isn’t, some of it sounds totally not a big deal but is a big deal. And, so, it’s a lot of complexity. So, keep going. You want to walk us through kind of like…

Jason: Yeah. I’ll give you the short version. So, our platform…I think of it as a vertically-integrated solution. Keep in mind, in the past, a financial adviser would go get a custodian and then the custodian really just like held the accounts and handled the transactions. But an adviser could do business out of the box with custodian, they had to then go find a software platform to do things like performance reporting. Like it’s the craziest thing, people would never believe me if I was like, “Do you know that, if you work with your custodian and you call up your adviser and were like, ‘hey, how did I do last year?'” the adviser can’t tell you that. Because a custodian doesn’t tell you your returns, like you have to buy another software package. And it’s weird, right, like you have to get like a data download and these are old flat files.

Meb: Dude, we used to use whatever the advent, of like five advent, not Black Diamond…

Jason: Yeah, PortfolioCenter or something like that.

Meb: It used to be for the GIPS auditing and it used to be like the most mind-numbingly impossible software to work with. And it’s weird that, A, and maybe this is a softball question, I don’t know, but it’s weird that it’s not legislated to where people are like, “You need to give these customers almost like, you know, the labels on the back of…” which, whatever, on the back of foods, like, “Here, standardized. This is what it is. Here’s your report.” And maybe it’s going that way but our world is so full of jargon, it’s like impossible to even create the performance you wanted to. But like you mentioned, like most brokerages, you talk to people, like, “How are you doing?” like, “I don’t know.” Like it beats me.

Jason: Exactly. And it’s funny because like the regulators, they do try to create transparency. And then, by the time it like hits the consumer, like the end client, it becomes the Form CRS or the Form ADV Part 2B. And people are like, “Oh, yeah, this is the simple brochure,” it’s like, “no, man, that things might as well be in fucking Greek. Nobody can understand that. Nobody’s going to read that.” Like, so, this is regulation that creates all this additional workload and expense. It doesn’t actually benefit anybody, it’s a real shame, of course.

So, to simplify our revenue, we have a software element of our business because there’s integrated software. That’s what the dollar per account per month is after 100 free accounts. So, that’s the SAAS feeds paid by the financial adviser.” To answer your question, do people stop at 99? It’s a per account fee, not a per household fee. So, look, if someone had 100 clients, they probably have 250 accounts and they’re probably paying us $150 a month. If they’re doing that exact same thing at like, you know, insert the name of a portfolio accounting system, you know, whatever people call them these days, they’re probably paying 15,000 to 25,000 instead. Right. So, they go from like let’s call it that 20,000-ish range down to 1,800 bucks a year. It’s a pretty big save.

That’s our software side of the business. We’re, obviously, a brokerage firm, so, the custody brokerage part, like people open accounts, do trades. We make money similar to other firms but there are a few things we don’t do. So, like all that nefarious around 12B-1s, we don’t play that game. Like, if people want to buy DFA funds or Vanguard funds or whatever the hell they want to buy, like we’re not going to penalize you, make you pay a commission to buy a fund because that fund company is unwilling to give us a rev-share deal. So, everything’s just you buy what you want to buy, we don’t care actually.

And that gives the adviser the real opportunity to do whatever’s in the best interest of their clients. In the past, you know, advisers…and they still do this with big custodians, they have to be like, “Well, you know, for my small accounts, I’m going to do this because like it kind of makes the most sense when I massage all the numbers. And then, for my medium-sized accounts, I’m going to do like this other strategy. And then my largest accounts, it’s like we need to get rid of that and create systemization.”

Meb: Vanguard has done a great job in breaking down those walls because, in so many instances, these platforms try to reach out to Vanguard and say, “Here’s our toll,” you know, “this is what we charted Vanguard like pound sand, like, “we’re not paying that.” And then it creates all sorts of…I mean it’s a net benefit no matter what but it creates so many issues with these platforms with other companies, I imagine, because the companies that do pay it, all of a sudden, are like, “Well, why are we paying this in Vanguard” you know, “on and on?” Anyway, I love Vanguard but…

Jason: Look, if you can flex like Vanguard can, then god bless you but, obviously, most fund companies can’t, they need that distribution. And the thing that we keep in mind about the Vanguards of the world is that probably half or more of their business they don’t need the custodians for, like it’s direct-to-consumer, they have a very strong consumer brand. But if you’re like American Century or something like that, nobody’s ever heard of you actually. Even though you manage billions and billions of dollars, like you need distribution. And that means you need custodians. Right? You need Pershing through the broker dealers, you need the wire houses, you need the independents. Right?

Like, so, it’s a convoluted kind of set-up. Right? But, in our case, we make money on things like cash balance. But again, we make less than others because we offer fractional shares so people can be fully invested. We built a rebalancing tool automatically into our product, it’s got event-based rebalancing. What that means in layspeak is, if you put 100 bucks into your account, it just gets invested instead of going to cash and then us earning like extra interest. So, we do make money there but we’re, obviously, compressing our own broker so that the customer can get more of it. So, it’s better for the adviser and their clients. Like, if you’re a fiduciary, I don’t understand actually how advisers can with a straight face be like, “Yeah, no, I work with this like major big custodian and it’s best for my clients.” But it’s like it is absolutely 100% totally not in the best interest of your clients and you don’t care. And yet, you’re holding yourself out as this fiduciary, right, who’s like, you know, holier than thou. So, we should start to understand how these companies make money and we should find like, “Are there better solutions?” I mean we might be one of those but, hopefully, there’ll be others too.

And then, lastly, like we do offer model portfolios. So, I’m actually really excited for like the Cambria model portfolio someday, when you’re ready to fire that up with us. But basically, what we’ve learned is that, even though our platform’s open architecture, an adviser can build their own models, they can use individual securities. Like direct indexing is very easy on our platform, like all these kind of things that are now happening. But, at the end of the day, a big chunk of financial planners are financial planners, they’re not asset managers. And they just want to be able to plug into a risk-appropriate tax-appropriate portfolio built by money-management experts. So, we want to make sure we added that to make it really easy if you want to go and, again, either pick your favorite institutional asset manager or a strategist to be multi-manager that’s available. And we charge really low fees, like anywhere from 0 to 12 basis points. So, if someone does want to outsource asset management, make it kind of robo-like, very easy to do that.

So, you can see like three different types of revenue, all of them are way lower than what they would be if they were piecemeal. That’s the power of vertical integration. Look, it’s not the same…I don’t say we’re Amazon but it’s not dissimilar. Like why can Amazon win? It’s because they can afford to make nothing on huge chunks of their business because they make so much on prime. Right? Or something else, like AWS.

So, in our space, if we can instead of like live in a world where everything’s fragmented and every one of those companies wants to have a fair software company and they’re operating on less than 80% gross margins, they’re a really shitty software company. But if you have seven vendors all making 80% margin on you, you’re definitely getting screwed. But the advisers just, you know, they’ve never known anything different and, so, that’s just what we come to accept. And that’s not okay. The software companies need to lean up. It shouldn’t be about integration, it should be about consolidation, vertical integration, I mean like consolidation under one roof. This is how we deliver better lower-cost more seamless experiences, etc.

So, that’s the rev model, if you will, for altruist. It’s nothing that innovative other than the fact that it’s not been done in our industry, it’s being done everywhere else at scale and really effectively. Our industry just needs to have this. I don’t want to say like human advisers are going to be out of business in 20 years, I mean I think that’s totally lip service, but I do think that like it’s going to be a lot different. You know, and if people don’t change, like they’re going to be in for a world of hurt. So, like we might as well embrace some of that change, get out in front of it. And that’s a lot of what is driving our rep model.

Meb: There’s obviously the experience. And when it comes to costs, I think what most people care about, they prefer people to be honest and transparent, what they really care about is that you’re just not totally screwing them. And when I say that, there’s the formulaic or monetary amount that it is but it’s also the intent. And, so, a good example…like there’s plenty of groups out there that do whatever they may do but I remember, when Schwab rolled out their robo-adviser…

Jason: Intelligent Portfolios.

Meb: Intelligent Portfolios. And I thought, you know, actually everything was decently well done, it was kind of nice interface, onboarding was still like in the 90s, but they opted, and not in a transparent way, like the default cash allocations. Which people picked up on immediately. But some of the cash allocations were like half. And there was a minimum of like a quarter. But they didn’t pay you a market clearing rate on that. And I said, “Why would they do this? Why wouldn’t they just not do that but put you in a Schwab ETF, that’s a money market fund, and just be open about it?” Like you didn’t have to do this shady thing but you chose to for no reason. I think they’re going to get fined for it, by the way, is my personal take on this.

Jason: I thought they already did, I thought it was like 200 million or something.

Meb: Well, I didn’t know they set aside some money, I don’t know if it was clear or what it was for, if it was disclosed, maybe it was. I saw the same thing. So, maybe…which is a lot, by the way. But I was like, “I don’t know,” like you can call yourself a fiduciary or like doing the right thing if you like intentionally make this decision. And it’s not even like a huge decision money maker, it was just kind of like…the way I describe it is like everything I’d talk about on Twitter and elsewhere, I’m like, “One of the first rules of life just like don’t be a dick.” Like you don’t have to…anyway. And this sounds self-righteous or whatever but it’s like just kind of be open and clear about it.

And like people, I think, are fine with that. Like, if you tell them kind of what you’re doing and why…and look, you obviously need to be in business and this is what our approach, but it goes back that element of like trust, fiduciary, “Is this person looking out for my best interest?” which I think is the number one consideration. Like is this a fair amount? Sure, but like, “Are they just going to totally hose me when they get the chance to?”

Jason: Yeah, not going to be…but I think there’s a survey out every year, “Why did people fire an adviser?” And it’s rarely because like, “Oh, they charged me an extra, a quarter of a percent,” like that’s like doesn’t even show up on the survey, right, it’s almost always like, “I didn’t feel like they valued me. I didn’t hear from them enough.” Right? Like most people, if they’re hiring an adviser, they just want to know, like, and trust that person.

All that being said, I think a lot of the time, certainly historically, a lot of people haven’t paid a ton of attention to performance as a decision-making factor. These younger generations, I suspect, might. They have a very different abstract on, “What should I be getting from an adviser?” and it’s not just like, “I like this person, they’re cool and chill,” like, “they seem to be fair.” You know, I think there’s like that sort of hyper awareness of details does exist more because they grew up in an era where like everything was at their fingertips.

We’ll see, as time unfolds, but I do think that it’s never a bad idea, one, to not be a dick, but two, like just to do what’s right for people. You know, so, if there’s a way you can give someone an extra half a percent in return and it doesn’t cost you anything to do it, like why would you not do that? Like that makes, you know, all the sense in the world. But there are a lot of people who, “It’s kind of inconvenient. It’s inconvenient to move my account from like one custodian to another. It might take me like,” you know, “30 minutes of my day and, therefore, I’m okay with my client earning a half percent less,” which, you know, rolled up over the next 20 years, might cost them half a million dollars, but, “I’m too busy right now.” That’s not okay.

Meb: When it comes to money, there’s so much inertia too. It’s like people just hang out where they are. And that’s why our old phrase I think we’ve stolen from Josh Brown, maybe someone else, built the concept of mutual fund salad where people own like hundreds of mutual funds across their clients just because they bought them, they’re like, “Well, I’m not going to sell them,” what applies to a lot in life. And same thing with money, like, if it’s sitting somewhere…now, the big difference I think is, once it moves, it doesn’t go back to the S&P 500 index fund that charges 2%, it doesn’t go back to like a shitty experience where someone hosed you over. So, as you’ve seen over the past decade, everyone knows this, they move toward lower-fee funds, tax-efficient funds. That’s been a sort of a one-way trend and going to a better experience and ideally, in my mind, like a fiduciary one.

Let’s talk about the financial-advisory space. As you talk to all these advisers, you’re onboarding with modern problems and modern sort of wants and we look to the horizon for Altruist, what’s out there? You’re a keen observer of the space for many years. As you look to the future, what are some of your thoughts, predictions, ideas, concerns, previews?

Jason: Sure. I’ve never been short of like opinions I guess. But I do think some more like outcome like evidence-based observations…so, we only serve the registered investment adviser channel, and there’s lots of channels, obviously, of advice. And we chose that for a number of reasons. One is I do believe that people want to take their fiduciary’s standard seriously. So, if you’re going to do that, this is a great space to be in. So, we have no intention to change that, like just we always want to be in this RIA channel. It just so happens it’s also a very fast-growing channel, there’s 7.5 trillion or so of assets now just held by the wealth-manager side. That’s not including all the asset-manager, which, of course, like that number ten times that or more, you know, if you include all the asset-manager kind of RIA firms but just the, you know, wealth-management folks that are using the traditional custodians.

It’s a big market and it’s growing pretty fast. You know, so, it’s got a nice mid-teens growth rate, there’s a lot of organic growth. So, it’s not just like new entrants to space, it’s the existing advisers just opening new accounts on a regular basis. So, we’re pretty excited to stay in that lane. And really even the sub segment that we serve really, really, really well are, what we call, emerging and scale-up advisers, you know. So, basically, if you’re in your first 3 years of your RIA, you’re probably an emerging adviser, unless you’re breaking away from Merrill Lynch or something. You have like a lot of stuff on your plate, you’re probably an owner operator, you know, you’re trying to figure out a lot of stuff that you have to do. So, having all in one digitally-driven solution is pretty key to helping make sure you make it.

Once people get to a certain level, they’ve made it, now it’s a matter of how quickly will they scale. And that’s where the scale-up group starts. We don’t really look to serve enterprise customers. I mean I think maybe someday we will but, if whatever creative planning comes calling and says, “Hey, we really want to use you for 100 billion dollars,” we have no interest actually doing that right now. Like I really believe in supporting like the small-business entrepreneur financial adviser, which I actually think is the future of the space. When I look at like the people that are your generation, Meb, and younger, they are, I think, very independent, they’re very entrepreneurial-minded, they don’t really want to go work for like grandpa’s wealth-management firm.

And that’s a beautiful thing because there are so many cool new firms that are being formed that really weren’t. When I started my first RIA, it was 2004 and there’s like 3,700 in the whole country. And probably half of those were asset managers, you know, the RIA divisions that ran funds and things like that. So, there’s very few wealth-manager RIAs. Today that number’s probably 35,000 to 40,000 RIAs, of which I think around 30,000 or so are, again, non-asset manager, they’re a wealth-manager variety, financial-planner variety of RIAs. And maybe a little bit more. So, it’s had a good long run of growth. I think we’ll continue to see that. I think we’ll see people leaving the wire houses and the broker-dealer channels and kind of loving this RIA space.

Alternative-fee schedules are definitely happening, like we see it because we built a fee-billing kind of module like within our platform. So, we’re seeing a lot more people embrace like flat-fees subscription fees. A very alternative view because, serving the next generation of clients, they have a lot of like non-managed assets. And I know like you have your farm, like you do a lot of private investing. I suspect one of the reasons you do that, beyond like the capital-appreciation opportunities, is it’s interesting. Right? Like investing is really boring if all you have is like eight ETFs and you rebalance on an annual basis.

Meb: Which is a good thing.

Jason: Totally. Look, people should have all those things. I mean I personally have them. I invest in start-ups, I invest in private funds, I invest in the regular capital markets. I mean these next generations of investors, like they’re just more interested. That’s why we see things like high-rise and FarmTogether, And like there’s just so many cool things that people can do. But, as a planner, you’ve got to find a different way to serve those clients. I mean, obviously, there’s this whole proliferation of digital assets. And, so, I think we’re going to continue to see that. It’s going to be harder and harder to deliver that kind of advice if you work at a wire house or something. If you work at UBS, like how do you really give someone good advice on like, “Hey, what are you doing with your crypto assets and your seven different farms that you own a fractional portion of on FarmTogether?” and, you know, whatever other things that just might be interesting to you.

I saw the thread yesterday from Brian Chesky at Airbnb, I 100% agree with him. Like this trend of people owning homes that they turn into experiences that they now are floating around living 3 months here and 6 months there, like that’s real. And these younger generations, they love that, they thrive on it.

So, advice has to change and the way we build for it has to change. And, so, I think that’s a trend that’s going to continue. It’ll take time because, look, we still live in a Pareto’s Principle-driven world and 80% of all the liquid assets are still owned by 20% or so if the people. And the bulk of that 20% are over age 60. So, it’s going to take 20-25 years, right, before we see this full cyclical change of like people’s views on money and how it works. But it doesn’t mean it’s not going to happen, people won’t live forever, so, like, you know, it’s going to happen someday. So, I think that’ll happen.

An investor and friend and altruist, and someone who I love and respect a lot, is Ron Carson. But he and I, we have like totally different views on how advice will look. I think he’s in the camp that, maybe 20 years from now, there’s like a half dozen mega RIAs, almost like big regional RIAs and everybody’s affiliated with those. Because it’ll be too hard to be small if you’re like sub-200-million or something in assets, like it’ll just be too hard. The complexities with regulations and infrastructure and also continuity.

And there’s a very good chance like a large chunk of assets does end up that way. It’s actually already happening, obviously, like those mega firms, but I think that there’s also going to be this totally very fiercely independent next generation of owners that are going to have very little interest in rolling up. Maybe when they’re 60, right, and they’re like, “Oh, got to have a continuity plan of some kind,” but like we’ve got 20-25-30 years where I think there’s going to be so much cool innovation happening from young people because they can.

And that’s like one of the cool things about fintech in general is that, when done right, change access significantly. Like and, obviously, like our form of access we’re providing is more people that have an interest in forming their own RIA and running it, growing it can do that, using Altruist, than could have if they didn’t. Because a lot of the big custodians, if you don’t have like a 500 million or 200 million, they don’t even care that you exist. So, there’s got to be tools, right, to help with the innovative next generation of practitioners.

So, those are all things I see kind of happening. I do think that direct indexing is real and it’s going to get really big. And, so, I think people need to be thinking about that if they’re in the asset-management camp. Right? All the fun managers, they got to find their ways to live in that direct-index world. Not entirely, like it’s going to take a long time. It’s kind of like mutual funds aren’t dead, there’s still lots of money in mutual funds. Right? So, as cool as ETFs are, they haven’t totally killed the mutual funds. The mutual funds are still going to be here in 20 or 30 years. So, there’s plenty of money to go around but there’ll be big opportunities created for direct indexing.

And here’s my unpopular take that might…you may have to edit this out if it like creates like so much trolling that, you know, you and I can’t survive anymore, but I think there’ll be a cataclysmic brutal crash in crypto assets that just absolutely wipes out millions of people. I mean just financially destroys them. And that’s really sad, I hate that I think that. It’s not that I don’t think that it will last but, again, I’m old enough to be cynical. And I was around, I got this business in 1999.

Meb: Great vintage, right before the peak.

Jason: Yeah, yeah, vintage, good way of putting it. I just call myself old. But what we have to remember is that I remember all the young people at that point being like, “This time it’s different.” It’s okay to illustrate 25% annualized returns because there’s plenty of funds that had 50%-60%-70%-90% annualized returns at that point. I worked at Morgan Stanley, at the time, and I knew people at Morgan Stanley that were building financial plans and illustrating 20%-plus returns for the retiree clients and then putting them in like heavy allocations to tech-heavy funds, which were plentiful at the time.

And we all know how that played out, but it was bad and it hurt a lot of people. There was a lot of people who were like multi-millionaires in their 50s getting ready to retire and then, all of a sudden, now they had 200,000. And they got so scared, they liquidated at the bottom and then they didn’t get any of the recovery. You know, it’s just a sad thing to see that happen.

So, actually I hope I’m really optimistic for like what Web3 can do. I think the DeFi protocols are incredible. Much like the Dot-Com Revolution, the Web 1.0, there will be massive winners and there will be innovations that last forever. And unfortunately, there will be some big losers. And I don’t know what that’s going to look like exactly but I say that largely because I think human financial advisers are going to be really, really important. It’s been real easy to be a do-it-yourselfer, buy some stuff, and run up 1,000% return. But, as life gets more complicated and you’ve got more to lose and you get burned a couple times, like you’re going to want to have somebody that you can call that helps you make smart choices with your money. Even if you do have a lot of independent views on how it should be done, we don’t want anybody to be silly, right, and get themselves in a bad spot. So, that’s my, whatever, 7-minute rant on the future of advice. I hope I’m at least half right.

Meb: I did a thread last night, I couldn’t help myself, you know, the U.S. stock market, market cap weighted, recently hit a valuation of 40, which is pretty rare, pretty lofty. Only happened once before, which was 99 in 2000. Now the joke was, like the first time it hit that, it proceeded to go up by another like a third or something before going nowhere for a decade. But I said, you know, this has only happened X amount of times in history and the average returns for the next 10 years, real returns are 0 for the next 10 years. The real pain usually comes the next 3 to 5 years. But then I posted this. And like, look, this is just a stat, like it’s not even me saying, “Then conclusion, do X, Y, Z,” I just posted it. And you read all the responses, and it’s a great sentiment indicator because people are either like downright angry or they don’t want the party to be over. Like you can just sense it, like they’re like on and on about it. Anyway, whatever.

Jason: To your point, I read that. I followed a lot of those same, the CAPE…and again, the old man like, you know, yelling at the cloud and me I guess, right, going, “Hey, that seems silly.” But I do think that, look, there’s so much additional money supply today and there’s a better than 0% chance, right, that this bubble extends. If it is a bubble, right. You know, you talked about how it went up another third, this could double again. But people forget that like, if something doubles again and then goes down 90%, like it’s still painful as hell, you almost sold at the top.

Meb: Yeah. I mean my takeaway ends up being on this like, I was like, “Look towards the value stocks, look towards the foreign stuff,” which is way cheaper, so, if this continues on. But to your point, and that’s the beauty to be a historian, the biggest bubble we’ve ever seen was Japan, which hit almost 100. So, theoretically, yes, it could double from here and still be within the realm of what has happened in the past. I think there’s only been two times in history where a country’s P/E ratio got above 60 at year end, which was like Japan, of course, and then like Malaysia. There was a handful of 50s. But we’re in that sort of nosebleed territory. My whole point was there was never an instance of those 50ish observations where you hit average return expectations, not one out of 50. Now, so, the odds just aren’t great. Whatever. Things can always be different, things can always change.

Jason: Totally, yeah. I almost expect them to be. Right? I don’t want to be the last one dancing when the music’s off. So, to me, I think everyone should find their happy place, right, and then they go there. It’ll be interesting, you know, to see how that plays out. And I think that a little bit of human advice won’t be hurtful. And, unfortunately, you know, we tend to learn…again, I got this business so long ago that I did meet a couple people who they were kids during the Great Depression. It’s amazing how like 60 plus years later they were still like, “I don’t trust the banks. I don’t trust the stock market. I’m buying gold bars and cash under the pillow or,” you know, “bury 10k in the backyard.” I mean everyone has some wounds, you know, that like they remember and it kind of shapes how they invest. You know, I happened to get in the business and I got to live through the Dot-Com Bubble bursting and the financial crisis. And, so, I just feel like I got like a little bit too much scar tissue.

There’s a good chunk of investors today, you know, that, you know, the last dozen years or so, don’t have any of that type of scar tissue yet. Right. You know, life is what it is but there are lessons that we only can learn by experience, and a good chunk of people haven’t had those. And then some people have like short attention spans, right, where it’s like they kind of forget like, “Oh, yeah, I lost my ass in 2008 and I lost my ass in 2000 but like I’m cool riding this one out,” like, “it won’t go bad this time around.”

Meb: And, hopefully, as you mentioned, you know, most financial advisers, I think the vast majority are well intentioned and the majority are also well-intentioned and intelligent and thoughtful. So, they want to do the right thing and they do the right thing. Almost all of them want to do the right thing, some may not know what the right thing is, but I put them in the right category. A big challenge, and I would love to hear you talk on this, I think a lot of people struggle on the end investor with the discovery where they say, “All right. Well, I realize I probably need an adviser. How do I find one?” And, historically, like the way you find your local pediatrician, like you have some friends who’s got a good one, “What do you recommend?” There’s been some relaxation of the adviser kind of testimonial and discussions from someone who’s probably a lot more close to this than I am, and maybe this is a business idea, I’d love to fund it, how come there hasn’t been a bigger development of almost like a Zocdoc for advisers or Yelp for advisers? I know there are a couple sites, historically, that kind of did some stuff. What’s the lay of the land there? Like if somebody came up to you and was like, “Jason, I need an adviser. What you got?”

Jason: So, what’s interesting is that, unfortunately, this is like an area where I think the bad actors are going to really jack it up for everyone else. So, I’ve already seen a few marketing organizations that focus on insurance agents that sell a lot of annuities, but they call themselves like “retirement planners” or something, that they’re building entire divisions to help advisers like get incredible Google Reviews and build up a Yelp profile with all these customer reviews and testimonials. But I don’t want to hire those advisers, right, I mean like that’s not what I’m looking for, but maybe for some. So, there’s going to be some tough spots, I think.

The other thing that’s really challenging…I love the Zocdoc, I was going to say and then you did, there’s a lot of value in like an independent source of this information. The testimonials I read on an adviser’s website I kind of take with a grain of salt but like the testimonials I might read on like Zocdoc, which is from thousands of patients, I probably care a little bit more about. I think Yelp is losing its luster a fair bit over the last couple of years. Google Reviews is interesting because of how they can embed it into search, you know, which makes it really hard to compete with.

So, I promise everybody we didn’t see this question of Meb’s but like this is actually part of Altruist’s mission, right, make advice more accessible. When we thought about that, we thought we’re in a really unique position where we can collect real customer testimonials that are verified real customers. So, in our digital account onboarding experience, it’ll happen sometime next year, in 2022, where we will give the client an option to let us know, like, “How was the experience? What was the experience like, this onboarding experience?” We could even embed like a 90-day or a 6-month delay, you know, sort of like an NPS, “Hey like it’s been 90 days since you started. How’s it been going?” just an email, one click, you know, an NPS score. Redirect them to a page, “Hey, based on your feedback, we’d love for you to share your experience by writing the short testimonial.”

So, we think we’re in a unique situation where we’ll be able to collect the largest collection of verified consumer reviews that cannot be challenged, if you will, by the adviser or embedded. Like the only way someone could actually leave that is they would have to have actually opened a real account and have been served up that NPS touch and survey and response.

I think that, in a lot of ways, when we think about the future of Altruist, we think that it won’t be crazy to be similar to Airbnb where people forget that, behind the scenes, the stuff that a home owner, a property owner has, the tools Airbnb has built for them to effectively manage their property and promote it are really great tools. But most of us don’t think of it like that, we think of it as just a marketplace. Right? We go there and we put in our filters what we’re looking for. We find a place and we read the reviews, we check the availability and the price and we find the solution that’s a good fit for us.

So, I think beyond just reviews, there’s a really big opportunity to, again, kind of codify a better way to find a good fit adviser, be able to see their actual historical reviews, like real reviews from real customers. There are a lot of problems with adviser matchmaking today. So, there are people trying to do it. And with no disrespect, although I think from Step Brothers, maybe it was Talladega Nights … I don’t know, one of them right, you know, “I said, with no disrespect!” But I really dislike what’s happening in that space. Like you basically have one incumbent player, I won’t give a name, but their model is a arbitrage model, running a ton of ads, building a ton of content to try to get people to, you know, “Hey, use this survey to find a great adviser.” But the reality is you’re just being sold. Right? Like they’re acquiring you that lead for 200-300 bucks, they’re selling it to 1 to 3 other advisers for like, whatever, 1,000 plus. They’ve got a super quick payback so they can keep the machine just running like crazy, right, like the lead gen like wheels spinning so they can outspend almost everybody because their payback is so fast because they sell these leads off like as fast as they get them, basically.

There’s other players coming in that they’re trying to take the approach of, “Well, we’re going to vet the advisers more, make it easier for consumers to find them. But now we’re going to charge 20 basis points,” you know,” forever, for life or for 5 years or 7 years or something.” That’s an extraordinarily high CAC (customer acquisition cost). If you think about like, “I just acquired a million-dollar account and I’m going to pay $2,000 a year for like, whatever, the next 10 years, including market growth and contributions,” I mean wow is that expensive. And if we’re thinking about like, “How can we get better results for customers?” that is a exact wrong way to get a better result for customers to start off with like a 20-basis-point handicap on that customer relationship.

So, there are a lot of issues with the tools out there today. There’s absolutely a need and demand for like how do you find like one that is trustworthy and makes sense. And, so, yeah, we’ve been hard at work actually behind the scenes. And more info will come about, I’ve teased it a little bit here and there. But I think it’s really important that custodians historically have given referrals but they only give referrals to their biggest customers. So, are you really going to get the best fit? No, like you’re just going to get like referred to some firm that’s got 10 billion dollars with them. And, hopefully, it’s a good fit, maybe it is, maybe it isn’t. And they’re going to charge you 25 basis points for life with an 8x trigger if you ever try to move that client to a different custodian. Meaning like, again, that same million-dollar client, “Oh, I don’t think this custodian’s the best fit for my client anymore.” But the custodian referred you, so, now they’re going to charge you $16,000 for that new client to move them somewhere else that’s in the best interest of the client.

So, like so many things in financial advice, there are lots of problems. There’s lots of embedded ways of doing things, like just the way it’s been done, they’re integrated into whatever the ecosystem is, custodial referral, lead gen, again, arbitrage model. But interestingly, I don’t know that a new start-up…it would be hard, right, to reach that scale. Like I mean, you know, you invest in start-ups, like if you start thinking about like, “What does it make…” you got to have like a big enough TAM (total addressable market) to get like me interested anyway and most other investors interested. And then you’ve got to have, you know, unit economics that aren’t going to like completely break the bank and require hundreds and hundreds of millions of dollars of acquisition.

This is partly what killed even the robo-advisers is like the cost of acquiring the customer directly is disproportionately high relative to the revenue that they’re earning. You can’t have a 5 or 7-year payback, it’s just way too capital-intensive and investors are going to cap out your value. And that’s why you see all these robo-advisers like if they’re going public or, you know, being acquired by a stack, like their valuations are peaking out, billion, 2 billion, 2.5 billion. On the flip side, you have like Robinhood, right, and others. They’re now, you know, whatever they are, depending on the day, but … 40-50 billion dollar company, it’s really just the unit economics. They have a better mousetrap to acquire customers relative to what they earn per customer and they have more ability to cross-sell.

So, a standalone like lead-gen, you know, system or something that connects advisers and clients is tricky. I think it has to actually be bolted onto an integrated solution. Of course, I’m, you know, selling my book here. But I think we’re in a position to be able to do that and we can make it a lot easier for everyone to have access. Right? So, like, in other words, if we have 10,000 users, right, you have a lot more choice than if you have just 500, which is like what a lot of the demand-gen systems are selling to.

Meb: I mean the verified-account check mark is a big one. Like it’s just an actual experience. I mean, look, it’s a hard problem, I’m glad you and others are tackling it because I don’t want to, but I would love to. I would love to invest in someone doing it, and I think someone will figure it out in the right way. Meaning not necessarily just like, “What’s the most money we can make from this?” but like, “what’s the actual right matching thing where the person…” because the sustainable business will be the one that actually matches people with the right fit, as opposed to just burning the lead for the most cost. What do you think about, as we look to the future on the financial advisory model in general, you’ve had the robo advisers, you’ve had the human-assisted robo advisers, you have the traditional fee planners, wire houses, and then a lot of people claiming that the per hour model is, all of a sudden, going to take over the world. Do you have any beliefs about what the future holds for this business in general, is it something where, all of a sudden, it’s going to look like the legal profession in 10 years and no one’s doing a fee model? Like what are Jason’s prognostications for what the future holds?

Jason: Here’s like a non-scientific way of thinking about it but, in our employees at Altruist, like we have, I’d say, a generally younger average age of a team, like let’s just say that it’s 30-years-old or early 30s or something like that. It might be 40 but it’s somewhere in between 30 and 40, I would guess. And most of people are well compensated because they work in the tech industry and, you know, we’re LA-based, it’s like not a low-cost living market.

Meb: Yeah, we’re hiring and you guys keep hovering up all the talent. I need some people that want to move to the beach to come down…

Jason: One of the biggest challenges, the fact that like Google and freaking Amazon…and there’s like been a takeover of LA with all these streaming solutions of bigger tech companies. So, there was a war for talent and talent won. It’s expensive to get great people and they get equity right. So, if you’re a start-up employee, like early-stage employee of Altruist, you’re probably going to make tens of millions of dollars or something, you know, or a good chance of doing it anyway.

So, I say that all to say that these are great potential clients for financial advisers. Almost none of our employees have a financial adviser. In fact, when you think about who they use, just ask them, “Hey, like who do you use?” like, “what’s your experience?” I think the number one response was Wealthfront, that’s the most common source of where do they go to get their planning. Like they use the app so they can kind of connect their accounts, do a light version of like automated self-directed financial planning, plug into a portfolio with some tax harvesting, and just let it run. And many of them are kind of like, “Why would anyone do anything different?” like, “it’s a good value, it’s a good experience.” Like, you know, “I had an advisory once but it was horrible and I heard from them twice a year.”

So, yeah, there are some differences. I think the industry is changing. Now, again, that’s an LA microcosm non-scientific view. Where I’m from, in West Michigan, it’s quite the opposite. I don’t think anyone’s using a robo-adviser, you know, like they’re going to go to the local credit union, they trust that person, they have mostly CDs and fixed annuities and maybe some like mutual funds or something.

So, depending on where we are in the country, it varies. The things I think that are definitely happening is I think virtual advice is here to stay, never let a good crisis go to waste, it accelerates the future in this case. I don’t believe that that many people, in the next couple decades, are going to be going into a mahogany trimmed boardroom to sit down with their adviser wearing a three-piece suit, like that’s just not that important to people anymore. And that’s happening in all industries. Like we’re seeing that with lawyers, CPAs, etc. Like, you know, it’s just not that important to have that face-to-face local adviser, you just go get the best person that’s the best fit, wherever they are. And since everybody’s getting very mobile and portable like in their own lives, like their advisers and lawyers and CPAs will as well.

I think it’s already safe to say that the robo for adviser solutions is probably not going to work. Right? Like I remember when robos came out, like there was a big rush of like, “Oh, let’s build a robo,” and there were advisers like, “yeah, I want to put a link on my website that someone could just click on and just give me their money and have this robot do it all.” And it just didn’t work. Even the firms that had like massive social-media followings and email lists, they still couldn’t make it work. It just doesn’t work. You’re one or the other, and that’s okay. Like I think people just embrace it, you’re either a human financial adviser, you can use tech to augment your skill set, right, and do more for people or you’re building a direct consumer fintech company. Do one or the other, don’t try to do both, it’s too hard.

I do think the robos though, I mean I think they’re going to be an absolute force to be reckoned with. As you mentioned, so, Vanguard is an investor in Altruist, a small investor, so, they don’t have any controlling interest or board vote or anything but they’re extraordinarily helpful. And we’ve learned a ton of things from them, and they just have a wealth of knowledge, I respect that company and the people tremendously.

Meb: Quick interjection, Vanguard is hilarious because like, depending on your perspective in the industry, they’re either like Luke Skywalker, the Death Star, Obi-Wan…I have joked publicly, I said, “Vanguard, part of their user interface, I almost feel like it’s intentionally outdated so that people won’t interact with the platform and trade,” because like some of the old stuff they have. So, I also say, for a lot of the asset-management world, I say, “Name a start-up of the past 20 years that claims to be disrupting the world that’s not just a Vanguard but with higher fees.” And it’s actually really hard to come up with many variants.

Jason: It’s funny. So, we just did our video, our vlog, you know, we call “The Human Advisor,” we just had an interview with Bill McNabb, the former chairman and CEO, and we flew out to Philly for that. When you’re talking to him, and a lot of the people that were there early, I mean, they’re like…I can’t think about, he was like, “What do you say?” I’m like, “to me, that is the most innovative company in financial services in the last 100 years.” Like who’s done more to change the industry? I mean, before them, like people were paying 8.5% commissions to buy 2.5% per year expense ratio mutual funds that underperformed the benchmark by 4% a year. I mean it’s changed everything. And I think that’s a good thing.

And they’ve been surprisingly nimble. They got into the ETF game a lot easier. They could’ve like tried to not, but they didn’t and they became a major player very quickly. They spun up an advice business and it’s now the largest advice business in United States. And they’re expanding that advice business globally. I mean there’s some really interesting things that people can learn, even though they’re a big company, they do a lot of things right, they have a lot of good people.

But I think that, when I look at like what’s happening with their own advice division and knowing like how they’re looking at their own resources, that’s one of the areas that they’re putting more resources into because they have the highest conviction that that is the biggest future of their business is actually the sort of like augmented part where they used to have a really…they still have a big but like their 401k business was really successful. Bill was actually one of the people who built it. But a lot of those people are now needing personal advice and they don’t want to lose those people to someone else. Like, “Let’s keep it all in the family,” so to speak.

I don’t know what Betterment’s at nowadays, they’re probably pretty close to 50 billion or so, I think, in assets. Wealthfront ‘s probably in that ballpark too. It’s hard to know how much there’s cash versus, you know, like managed accounts but they’re now big enough that, if people believe in flywheels and they believe in these, I’d call them almost like exponential factors of growth, I mean they’re going to get real big really fast. Because they’re kind of hitting a point where their customers are getting older, wealthier, they’re depositing more money on a regular basis. And I think that their acquisition, although the cost, raw cost is high on new clients, like they’re getting substantial amount of new business field referral. And there’s a very much this sort of flywheel effect that I think we’ll see at those companies.

So, advisers have to be careful. Again, I don’t think advisers can spin up their own robos, this kind of doesn’t work, it tried and it failed. That’s why I think that it’s like so critical that we deliver the same type of user experience. Like if we go into battle with like a wooden sword and like they’ve got a fucking bazooka, like they’re going to annihilate us. So, like let’s like at least go, you know…and like, while we do different things and serve different customers, like let’s not have our customers be the ones that have the terrible user experience, right, that don’t even have like a mobile app to see the balance of their account or something.

So, there are lots that can be happening there. I mean you said a lot, like, you know, do I think everyone’s going to be hourly fees? No, I just don’t. I think there definitely will be some people, for sure, but it just doesn’t scale. And that’s the problem with it. There’s a handful of people, right…I guess if you’re like Rick Ferri you’re like never, “No, hourly fees is the way to go,” right, but it’s definitely a minority. It might be growing some but the challenge is that I don’t know that we’re ever going to see like a real national powerhouse built on hourly fees because, again, like you run into some serious scale issues. We think about like what hyper growth companies look like that really do become new industry standards, they tend to have a few common elements. And one of those is they have extraordinarily CAC: LTD ratios. Hourly rate just doesn’t work like that, it’s impossible to grow at hyperscale because your LTV is just measured in hours. Right? If you only spend 5 hours, like you cannot possibly generate increasing margins unless you just like hyper increase your hourly rate. You know, which, again, has a limit. So, lots of problems with it.

Meb: Let me introduce you to our lawyers … take the opposite side of that belief.

Jason: Yeah. Yes and no. But think about like law firms. I’ll use my law firm, god bless, you guys are great, Wilson Sonsini. And they’re, you know, $1,100-$1,200 an hour. And yeah, like it’s very, very expensive. But trust me, they’re not trying to make their money off that hourly rate, like they want us to go public and then that’s going to be how they make their money. There’s a substantially large amount of money like on that sort of, you know, whether it’s M&A or IPO front. So, until then, it’s like the hourly rate is just there to provide the service up until you get point of exit.

The other thing I’ll say that’s really interesting, the really big law firms that serve start-ups, they have their own funds internally where they invest in their companies that they actually represent. So, they’re looking at companies like us and other start-ups and they’re going, “We realize that the hourly rate is not the best thing for us either.” Like, “We can raise it only so high, we can try to get the large transactions,” you know, “that creates huge wealth, but where we’re going to make the most possible money is when you have a liquidity event, big liquidity event.” And we were there at the formation of the entity, so, our strike price is like pennies or whatever and they’re turning it into billions.

So, I think advisers, again, if they’re going to try to play the hourly game, it will work, to a certain degree, but I think that will work a lot more like your local plumber than it’s going to work like…you’re not going to become whatever, Cooley or something, you know, by being…you know, think about like how long does it take to become Cooley? These mega law firms around 100 years. So, if you’re an hourly planner, be prepared to be in it for a very, very long time before you build like a 50-partner mega firm that’s serving tens of thousands of customers. I think a much more realistic outcome is that they might become a very successful small business.

And that’s totally okay. Like there’s a Seth Godin quote I love and it’s from his old one-sentence blog post, but it is, “It’s okay to stop when you’re happy.” So, who cares? If you want to do hourly, do hourly and be happy. Like there’s nothing wrong with that. But I don’t think the whole industry is going there. I think a segment will go there, you know, that will be a segment that serves a customer base, that is a segment that wants that. And there’s always going to be like these other segments of customers that want something different. And that’s okay.

Meb: Yeah. You know, you mentioned the Betterment, I’ve been trying to wait for there to be any sort of bear market to pick up shares on the secondary market. And it just hasn’t transpired yet.

Jason: You should’ve done it a year or 2 ago.

Meb: Well, you know, like the second…last year was so quick, the COVID dip, the private markets…it didn’t really feel like I had enough time to really react, it felt like, on the secondary stuff. Because I’m a cheap bastard.

Jason: I did the same with Robinhood, by the way. I was like, “Oh,” I could’ve bought it, but I was like, “7 billion? That’s ridiculous,” you know what I mean…

Meb: That’s crazy.

Jason: We should’ve done that.

Meb: Man, look, this has been a master class on all things, I haven’t even gotten to half my outline, so, we’ll do this again in person in the coming months. If there’s an RIA that wants to sign up, do they mention “The Meb Faber Show?” Get ahead of the queue, jump part of the queue a little bit, Jason…

Jason: Yeah, sure. Why not? So, first of all, we don’t have a wait list anymore but I would say any friend of Meb’s would be a great Altruist user. So, we don’t have a special link or promo code yet for the Meb show but, I would say, there’s always a spot to let us know where you heard about us. Like please let us know…and you just go to altruist.com, like it’s real straightforward.

Meb: Every client that signs up, he’s going to buy me a winter rye cocktail and taste Jelena down the street. What’s been your most memorable investment thus far? You’ve been a founder but also an investor on a lot of different things, good, bad, in between, anything really stick out?

Jason: Yeah, I mean, so, one thing…I mean it’s not an individual investment but I became a venture partner in a fund called MatterScale Ventures. It sort of aligns with my personal values, so, they invest in companies that matter and founders that scale is kind of like where the MatterScale name comes from. And it’s a global fund, so, it’s kind of a cool fund. The investments that they make because they focus a lot on emerging markets, I mean they’re getting into companies that, if those companies were in the U.S., they’d be like a 500-million-dollar company already and they’re getting into one like 5-million-dollar increase.

Meb: Yeah. Well, no, it’s funny because I agree. However, it seems, in the last 6 months, that the attention is starting to gravitate around the world with some of these big successes and funding rounds you’re seeing in some of these emerging markets. But we’ll wrap more on that later. Jay, it’s been a blast, where do people go, best place, to find you, your writings, what’s going on?

Jason: Yeah, man, I mean, look, if they want to like follow my ramblings, I’m just @jasonwenk on pretty much every social channel. Hit up altruist.com to learn about the business and how we’re helping people invest better and lower their costs and make it accessible to everybody. So, thanks a ton for having me on, Meb. You’re one of the best, man, and it’s been a ton of fun.

Meb: Awesome, brother. It’s been fun, let’s do it again.

Jason: Absolutely.

Meb: Podcast listeners, we’ll post show notes to today’s conversation at mebfaber.com/podcast. If you love the show, if you hate it, shoot us feedback at feedback@themebfabershow.com. We love to read the reviews. Please review us on iTunes and subscribe the show anywhere good podcasts are found. Thanks for listening, friends, and good investing.