Video Transcription:
Investing: How to Stay Safe on the Rollercoaster Ride (w/ Ric Edelman)
I'm here with Rick Edelman Rick welcome to the show great to be with you ash thanks it's a pleasure to have you Rick you are currently the largest RIAA in America is that right correct by far Eva you've got something like 200 billion of assets under management correct we have 350 financial advisors in 170 offices well not anymore but normally about 170 offices and we also are the largest workplace provider of advice in the country we serve about 150 of the fortune 500 as well as thousands of small businesses around the country all told about 10 million workers around the US have access to our financial advice and then we serve about a hundred thousand families with full-blown personal financial planning yeah I'm so curious to get into this so I can hear about the conversations that you're having with your clients and what you're hearing from them but first just a little bit of background I'm I imagine most of our subscribers have are already familiar with your work but you're also a former academic you talk personal finance at Georgetown you're a New York Times bestselling author you've written something like ten books about personal finance and of course you've had a nationally syndicated radio show for 30 years yeah it keeps us pretty busy the the foundation of our practice when my wife Jeanne and I created it back 35 years ago was financial education we started our business because we got ripped off by a financial advisor we were young newly married and like every newlywed you know wanted to buy a house and realize we didn't know anything about it how to go about it and so on the referral of a friend we went to a financial planner a CFP he said and he proceeded to rip us off he he told us to lie on our mortgage application told us to commit a felony it infuriated us to such a degree and by the way he charged us 1,500 bucks for this plan that was back in 1984 that was a lot of money back then especially for newlyweds like us who didn't have a lot and it just made us so angry we said you know what we're gonna learn how to figure this out ourselves and then we're gonna teach others what we and so financial education was the basis of our practice and so we began our practice by doing seminars PTA Elementary School PTA groups we would go in and do college planning seminars for those young parents and then word spread I got invited onto the radio that ended up becoming what is now I think the longest-running national personal finance show um and talkers 101 the top 100 most important talk show hosts in the country and that led to television I've been hosting TV shows for the last 25 years I have a new PBS television special debuting June 1 and a a long way of written books ten of them as you've said and I think I'm the best-selling personal finance writer among financial advisors about a million copies of my books are in print in a whole bunch of languages around the world and so our advice has always been consumer focused common sense plain English fun as entertaining as you can make it because let's face it it's an incredibly boring subject that is actionable that isn't filled with Wall Street isms but really focused on ordinary folks working hard trying to get their kids into college care for aging parents while preparing for their own retirement and so yeah we engage in all forms of media activities every channel available because people learn in different ways some people like audio some videos some like to read some like to go to live events so we provide our content every which way to enable people to get the information they need that's applicable by them in the format that they like to digest it so Rick precisely to that point obviously in terms of this information incredibly anxious uncertain time right now what are you telling your clients what we've been telling them for the past 35 years you know I've gone through every crisis since the crash of 87 and we went through the recession of 92 the dot-com bubble 9/11 of course most recently the o8 credit crisis and lots of history before that you know our nation has been going through crises we were founded on a crisis and we've seen economic devastation even before the US was created you know of course we saw the tulip bulb craze of 1636 and the South Seas bubble and you know we have a lot of history showing us how bubbles get started how pandemics exist crises and manias and panics and crashes and we have a lot of history collectively we also have a massive amount of history as to government responses to those crises and an equal amount of history regarding personal behavior the emerging field of behavioral finance which is a relatively new field only about 20 years 25 years old now and we're huge students of behavioral finance have written a lot about that in my books and done a lot of live events on that subject to help people understand not only what happens in a crisis and after a crisis what you can expect to occur on a macro level from government perspectives but also what you are likely to experience emotionally psychologically and how you need to use that information to help you avoid making big mistakes so the advice we've been giving our clients is the same advice we've been giving for 35 years and it falls in this case into really two major camps because what we're discovering is that this crisis is on the one hand the same as every other crisis we've ever seen but on the other hand it's vastly different and it's different in one way we all know what that is this is a healthcare crisis in addition to being a financial crisis pretty much every other crisis we've experienced has been isolated to money the causes are varied sometimes Wars and sometimes other things but this one has the added layer of health and that is what's making this so much more dicey and horrific for so many of our friends family and many of us personally we've lost 11 clients so far to covet 19 we've had several staff members and financial planners lose family members so we're feeling this pain in ways that you that no one ever did in the crash of 87 or the Oh a credit crisis it's just our hearts are just torn from all of us so the advice we're giving our clients is a two-step piece of advice and it really comes in two very different pieces the first step says what you should do and the second step says what you must do if you can't do the first part mmm here's the first part you should do you need to ignore the fact that we are experiencing massive volatility you need to ignore the fact that we are very likely going to experience significantly more declines than we have already we know how tumultuous this environment is bid we know how difficult it is the 35 million jobs lost so far many are predicting that it will exceed 50 million before this is over to put that into context the worst we've ever had in this country was 1933 the depths of the purr of the depression at 25 percent we're now facing a situation of as high as 35% in this crisis so we're seeing the impact on American business both big corporations and small business owners of absence of sales businesses shutting down massive layoffs people unable to pay their rent all kinds of financial devastation resulting in the stock market having a really difficult time horrific aliy difficult like we saw no 708 when the market fell almost 60% you need to ignore that which is seems kind of crazy how can you ignore it well if you're a long-term investor meaning you the money you've got invested you weren't planning to use for ten years twenty years you know for your kids college or your own retirement well by the time you get to those dates this crisis will be long gone just like oh eight was twelve years ago the dot-com bubble was twenty years ago this too will be ancient history and won't adversely impact you 10 or 20 years from now so if you can hang in there with your long term goals meaning you've got enough cash reserves you've got enough external resources to be able to allow you to pay your bills get through the crisis financially you can have a long term perspective recognizing that the lower the prices go the more the buying opportunity becomes it becomes a bargain Wall Street's on sale people who invested through o8 got fabulously wealthy because the market tripled over the past ten years so this is a great opportunity for securing your wealth over the long term but there's a big but they're not everybody has the ability to do that the massive job loss the interruption of income the inability to have enough cash reserves the need for you to help out family members even if you're okay they may not be and I don't just mean parents and children but also siblings maybe needing your help you may not have enough cash to allow you to avoid dipping into your finances and then there's the emotional side of it you might freak out you might panic as things get worse and you might not have the stomach for the volatility the market loss is seeing your account values fall month after month like we saw over 16 months no.8 that could mean you need to sell and sell now if you don't have the stomach for this rollercoaster get off it and get on a little merry-go-round rollercoasters America grounds both end up at the same place but only one of them makes you throw up so you need to understand your psychology your emotional state to understand if you're able to handle what our nation is going through and is likely to continue going through for some time to come so let's talk you touched on a lot of incredibly important points there let's talk on what you're a bit about what your outlook is for for example US equity markets at the time we're taping this the US equity markets are down roughly 14% from the all-time high of February of 2020 and you know this does not seem like it reflects the full magnitude of all of the points that you just made the incredible damage this is done to the real economy the damage that this is done to savings the damage that's done to families it just it's hard to understand how that number that minus 14% is reflective of the kind of absolute devastation that we've witnessed what are your thoughts about that well I'm not a market timer I am a believer in America I'm a believer in the American capitalist system I believe that you view bet against America you're gonna lose and I believe very strongly that our nation which has faced every imaginable crisis in its history and has succeeded and every one of them will succeed in this one as well and in the long run this will pass just like all the others before it have passed and by the way when we get through this crisis don't get cocky we're gonna be facing the next crisis I don't know what it is I don't know what it will occur but we bounce from crisis to crisis in our country and that's the way it is its way it has always been and always will be so we need to wreck nice that there are no good times versus bad times there's bad times and preparing for bad times and what we need to recognize that if you are a long term investor you do well financially despite going through those crises so yeah I'm I'm ok with what's coming but having said that to your point if I were a market timer I would say that investors today are in la-la land how can you justify given everything going on the stock market is only down 14% in fact it's not that the market is down 14 that is really shocking to me is that the market has risen 20 percentage points from its 35 percent decline at the beginning of this crisis how our investors justifying this major increase in stock prices considering all the information that we have available to us about how long this crisis will last and how deep it's going to get economically makes no sense to me when we look at the p/e ratio the forward p/e is trading around 21 typically it's around 15 the last time it was 21 was in the dot-com bubble what does that tell you so to see that stock prices are as high as they are says to me that many investors are either in denial about what's happening or they're acting with Pollyanna and I just find it hard to believe that stock prices aren't eventually going to catch up to the economic realities that our corporations are experiencing right that was exactly what I was curious to hear and when you think about that what's your outlook going forward what do you think the timing of that is going to be what do you think the magnitude of that retrenchment is going to look like what are your overall thoughts about what that correction might be I have no idea I and nobody knows and I'm not a market timer so I wouldn't even begin to put a clock on this I don't know how long this is gonna last I don't know how deep it's gonna get I don't know how quickly the recovery is going to be all of it could be shocking and surprising in both directions the V down and the V up some are talking about a you some are talking about a w I've heard recently they're talking about a Nike swoosh I mean everybody's coming up with these graphic images of what this is going to look like nobody knows the only thing we do know is the following it's going to get worse before it gets better and then it's going to get better and when it gets better it's gonna get really good because we know the crisis that this is the economy was in fabulous condition the best ever in American history our economy was sailing brilliantly until kovat came along well as soon as Kovac goes away the economy will go back to her it was so we will resume the fabulous environment so it's going to be great but in between here and there is going to be ugly I don't know how ugly and I don't know for how long but I can tell you what it was like in Prior crises go back to the 2008 credit crisis back then the sp500 fell SIF 57% over 16 months if that were to happen today in other words just ask yourself is this crisis equally as bad as that one if you agree that it is as bad and therefore the market will have the same reaction as it did then last time a 57% decline if that happens now the Dow which at its high was 29,500 would fall to 12 7 that's about half of where the market is right now I'm not predicting that that's going to happen I'm just saying if it was the same as what happened in the past yeah much will it fall less will it fall more how long will that last I don't know you know it's so it's so interesting you raise so many interesting points I guess one of the questions that I have is that when you think about this I wonder even worse and better is that is an arrow is too narrow a framework to even think about this within you know for example obviously that was a banking crisis it was a different type of problem we had problems with credit creation but this is something that seems different you know when I walk down the street here in New York City and I see stores that I shopped at cafes that I've had coffee at physically boarded up I wonder is it possible that this recovery can be extended or decelerated because of the amount of damage done to the real economy as opposed to the financial economy that we saw last time I don't know and I don't care and and here's why because you may be right ash I mean who knows everybody has an opinion and a conjecture a lot of smart people are studying this data I talk with a lot of them frequently everybody's brilliant and nobody knows for sure what's going to happen so you may well be right but here's the point it doesn't matter if you are a long-term investor I'm sure you'll agree with me no matter how bad it gets it'll eventually get better we'll get through this now that existing small business owner may not individually recover their business may close never to reopen but they'll be replaced by their successor someone who worked for them will then open the business in the same spot they used to operate in instead of working in the place they'll own the place that business owner may lose the restaurant they'll just open another restaurant somewhere else with the new loans who are equity to get that going so we will emerge from this crisis how long will it be before that happens what will that reimagines look like I don't know but I don't care as long as it happens and it happens within my timetable meaning I'm a long-term investor with a 10 or 20 year horizon it'll work out just fine the problem is do I have that time horizon right and do I have the emotional capacity to sustain the tumultuous environment between now and then not everybody has that long-term time horizon you've got retirees people who are living right now on their investment income dependent on their asset values to be able to generate the income they need dependent on the bonds to pay the interest necessary for them to pay their bills they don't have the luxury of looking 10 or 20 or 30 years out and then you've got folks who are dealing with financial issues within their families people who are suddenly out of work and have lost their income family members who need financial help we had a hundred and ten million Americans enter this crisis in credit card debt that was before the crisis even began two years ago the Federal Reserve said 40% of US households didn't even have 400 bucks that they could put together to pay an unexpected bill and that was before all these people lost their jobs the Fed now says 40% of all the job losses are occurring in households that were earning under 40 grand a year these are people who are living precariously in the first place and it didn't take much to toss them into financial jeopardy so some folks don't have the luxury of saying I'll wait this out others don't have the financial or the emotional wherewithal to be able to say that and those are the folks who need to re-evaluate their investment strategy because they might be engaging in a strategy they can tolerate and will therefore fail them I'm not worried about the markets I'm worried about you right you know I'm one of the questions that I'm so eager to ask you you have over a million clients and I'm curious to hear what you're hearing from them well as you can imagine a lot of concern and anxiety on the one hand I Sarah clients fall into two camps a great many are very concerned because they're looking at their account statements they're seeing their asset values fall they are looking at interest rates decline to dramatically low levels like we've never seen in our lives and that means the income they're earning on their fixed income is lower than ever before they're fearful of inflation rates and so there's a lot of concern Oh am I going to be okay that's that's the bottom line question that people are asking am I going to be okay on the other hand we have a lot of clients because we've been doing this for 35 years and we've got clients who've been with us 10 20 30 years they've been through this many times and they're being much more Cavalier in a healthy way they're saying I've been there done that I mean I panicked in ou7 I got really upset in 92 I freaked out in 2001 and it all worked out just fine so will this I've learned through my personal experience that if I just hang in there I turn off the news I stop looking at my account values in the end it'll be fine and so a lot of our clients are literally taking this in stride and good for them they're able to do it but some folks who have let less experience either because they haven't been our clients for as long or they they're not old enough to remember those past crises they weren't invested back then where they had bad investment advice from where they were before they joined us they're a little less comfortable less certain of themselves because they have less of financial experience and less financial education those are the ones were spending most of our time with yeah and what are you telling them everything I've just said to you that we are evaluating very carefully their personal circumstances how secure is their job how likely is it that they're going to be able to keep their job might they experience a furlough might they be experience a pay cut might they experience a complete layoff and if that were to happen what would that do to their personal finances their ability to pay their bills how much do they having cash reserves let's go beyond them and look at their parents their children and their siblings because nobody is turning family away in this environment and if your family needs help and you've got money you're gonna help them so to what degree can you help and what impact might that have on your financial stability and security and with all of that taken into consideration now we can evaluate the investment strategy to see and confirm if the advice we gave you preak ovid remains valid now during kovat and for some clients we're changing the advice quite frankly and we're setting their portfolios far more conservative than before other clients we're leaving them exactly as is and for some actually getting more aggressive as they recognize that they've got their plenty flush with cash they're in great financial shape and they regard this as a buying opportunity and their attitude is damn the torpedoes full speed ahead so it is always down to the individual client and their individual circumstances and attitudes as well yeah especially if they have longer time horizons right they have the opportunity to get more aggressive only if you have a set of circumstances that will get you through that we're also devoting an equal amount of energy and attention to non investment items I mean sure people tend to turn to us and all their financial advisors for investment advice that's what you typically think of when you think of a financial adviser but we do so much more than just investments for our clients we're giving our clients a very extensive examination over their mortgage their insurance their our automobiles we're looking at their College for their high school students and their students who are returning to college should they be doing that if the college is going to be online in the fall well we're looking at their estate plan to make sure that their wills and trusts are up to date they have current powers of attorney and medical directives and that their beneficiary designations are correct in other words we can't control what happens in the stock market but we certainly can't control the investment behaviors you engage in and the personal finance strategies you operate to help you minimize the damage and take advantage of opportunities that exist like refinancing at today's low interest rates getting rid of auto insurance for a car that's sitting in the garage you're not driving during the Kovan whenever sheltering in place why are you paying for auto insurance on a car you're not driving so there are unique ways that we can help our clients save money and make money that we never would have thought of just three months ago so now that we've covered a bit about what the crisis is like in individual responses when you look out at the response from the federal government from the Fed from congressional fiscal stimulus what are your thoughts there the government's not doing nearly enough and not acting nearly fast enough they've already come up with three trillion dollars there is a bill in Congress for an another three trillion dollars that the Republicans hate and if they're not gonna have a choice they're going to have to provide much more stimulus my calculations are between six and eight trillion will ultimately be needed but I've been talking with someone else in New York who say that the figure is closer to ten to fifteen trillion I don't know where the numbers are going to lay out but the three trillion so far clearly not enough and it's obvious why I mean the government sent to everybody 1,200 bucks plus 500 per child under 16 under 17 well the average u.s. income in this country is $44,000 net of tax about three grand a month a one-time check at twelve hundred bucks what is that supposed to accomplish for a crisis that's lasting at least through the rest of this year and probably throughout 2021 a one-time check at twelve hundred bucks isn't going to accomplish anything the government's not going to have any choice but to provide substantially more stimulus especially the fact that they so far have been provided stimulus to the higher education system which is under massive financial attack right now to states and municipalities and the national pensions that are occurring around the country between unions municipal state and private corporate pension programs that are four trillion underfunded going into the crisis Social Security where the trust fund is going to be depleted by 2029 creating a twenty five percent cut in pension and retirement benefits for America's retirees over the next nine years we've got massive crises on our hands for big companies small business owners who employ three-fourths of all Americans the vast majority of Americans who don't own a home or have no home equity if they do have no savings no investments no money set aside who have now just lost their jobs the government is going to have no choice but to deal with this by providing far more stimulus than they have so far and the dilly dallying that's going on in Capitol Hill is simply making it worse so they're going to have no choice but to act in the sooner they do the better now I'm not liking any of what I just said mmm and then I'm a financial guy I don't like the government going into debt I don't like the fact that we're going to be providing handouts to Americans I don't like the fact that we're gonna be dramatically increasing as a result taxes and inflation rates to deal with all of this but we've got a burning house right now and when you've got a burning house there are only two things that matter get everybody out safely and extinguish the flames yeah that's it everything else has to wait now we can argue over what caused this fire you know and blame the slob who was smoking in bed well we'll get to that later and we can worry about the water damage from the fire hoses or we'll worry about that later we don't have the luxury of dealing with those subjects today we've got to deal with this burning house there are tens of millions of American households who don't have any money and therefore can't buy food we've got to deal with this and Congress is the backstop for this issue they need to act they need to act now you know it's interesting for those of us who've been following markets for some time this reminds me of that period where we had the I think it was called the emergency economic stabilization Act of 2008 obviously this proposed by the Bush administration and the first time it was voted on it was voted down and you know those of us who remember watching watching a financial television that day the stock market promptly sold off and they came back a couple days later network and the interesting thing in the sir you were suggesting about the political component to this is you know we had a Republican in the White House and we had Democrats voting for the bill in the house and Republicans who withheld support were the reason that the bill didn't pass so it is this very unusual sort of politics making strange bedfellows you have an administration who is focusing you know presumably on putting out the fire as you suggest and then you have a Congress maybe Republican Congress people who are voting against the bill more for ideological reasons well it's compounded the fact it's an election year so everybody is recognizing they're going to be held accountable in November for their behavior today so the vote they take today is going to be it's gonna hit them at home on Election Day so that's all part of it as well and some let's face it they love to excuse it don't let a good crisis go to waste so there are some who are who are exploiting this crisis to engage in their political agenda so hey since the government's gonna be spending trillions of dollars anyway let's throw a couple hundred billion over here because I that's one of my philosophical beliefs even though that isn't necessarily related to the crisis you also have others who are going to engage in fraud and abuse people who are going to be getting money from the government who frankly don't need it don't deserve it and who are going aren't gonna use it that in a manner that helps really helps the country the way that it's intended those are inevitable pork and fraud are inevitable byproducts distasteful as they are to a massive scenario like this you can't withhold the support and the funds merely because that stuff makes you hold your nose you got to hold your nose while you write the check there's just that's just all there is to it yeah and are you taking into account what you think in terms of the trajectory of a recovery yeah taking into account this massive stimulus on both on the monetary side as well as on the fiscal side not at all I couldn't care less I got a burning house and yes those are those are really big concerns what is it gonna mean for the federal deficit what will it mean for the national debt what will it therefore mean for interest rates and inflation rates these are all scary questions our heads will explode if we try to deal with those first it knows we're in a leaky rowboat right we're sinking and you're worried about the rust we'll get to the rust later we got to plug the hole in the boat otherwise the rust won't matter we'll all drown so one crisis at a time please no that's not it let's not try to resolve more than we can handle it at any given moment what else are you thinking about right now isn't this enough we have plenty on our hands and oh by the way haven't said a thing about health I haven't said a thing about the need for us all to remain healthy not get sick if we do get sick minimise our symptoms if our symptoms get severe our ability to get the health care that we need from hospitals and avoiding the ultimate crisis death and what that means not just for the deceased but therefore their surviving family members we haven't even talked about any of that and we have to recognize that as we're busy fighting the financial and personal finance elements of this we've got a healthcare crisis on our hands of unprecedented magnitude something we haven't seen since the Spanish flu a hundred years ago and so we have an awful lot on our plates and I am loathe to try to add any more to it another thing that you and I share an interest in and frankly a potential bright spot in all of this has been cryptocurrency what are your thoughts right now about Bitcoin and how that plays into the current crisis well Bitcoin is a huge beneficiary I'm a big fan of digital assets I created the Raa digital assets council which is an organization focused on teaching financial advisers about digital assets particularly Bitcoin ethereum all the other crypto coins as well as the blockchain because it's the blockchain technology that really is what matters here not you know merely digital assets Bitcoin was the number one performing asset class of 2019 it was up over a hundred percent it is the best performing as a class of 2020 it has grown more than any other asset and I am a very big believer that Bitcoin should be considered by consumers and investors as something to add to their portfolios not much you know 1% is plenty of an asset allocation bitcoin is extraordinarily volatile there is no certainty it will survive it could easily be eliminated either by governments who don't like it or competitors who come up with a better mousetrap and render Bitcoin obsolete you know everybody loved Atari but I don't think anybody's playing Atari anymore we all had our Betamax but what happened to that so and does anybody remember Lotus 1-2-3 it's all about Microsoft Excel these days so just because Bitcoin is the market leader and looking really fabulous anybody who invests in Bitcoin needs to recognize they could lose it all so what I've been consistently telling folks is that before you invest in Bitcoin number one learn the technology understand where it is you're talking about number two if you're going to invest no more than 1% of the portfolio you don't need to do a lot 3 recognize that it's an extraordinarily volatile asset and number 4 you are going to continue to see this volatility for years even decades and number 5 be prepared to lose a hundred percent of what you invest because that very well may happen so for a lot of folks that it may be premature for them to invest in Bitcoin many financial advisors including our own firm here at Edelman financial engines we're not recommending Bitcoin to our clients for all the reasons I just cited we're waiting for an ETF to be made available by the SEC that will allow investors to invest in Bitcoin via a security similarly to the way many consumers never invested in gold until there was a gold ETF yeah so we're waiting and watching from a firm based perspective which i think is appropriate but ordinary consumers should recognize bitcoin is I don't believe is going away and digital assets are here to stay and it's going to be accelerated by this crisis and there's one fundamental reason why digital currency and digital assets are going to be the norm sooner then before the crisis came about there's one simple reason for it one of the filthiest things we ever touch isn't money the dollar bills in your pocket are filled with bacteria just imagine all the hands that your money goes on counters why on earth are you touching that money when we are afraid to go anywhere near another person so instead of using printed currency let's use digital currency and I think that this crisis is going to accelerate the use of digital currencies that governments will will provide or make available or allow to help deal with it from a healthcare perspective yeah absolutely you know my mother used to always mock me for using Apple when I would go in the store sits five bucks give the cashier the fine now she's asking me how to set it up so I think you're right I think there is going to be that great demand for it's interesting to me also that due to some of the challenges with custody digital assets the risk of losing for example a key that would effectively result in forfeiting the entire investment that you guys are thinking about investing through vehicles like ETFs as they become available yeah but even there you know that just takes one step further the issue of custody and let me make sure everybody knows what we're talking about when you have a dollar in your pocket you're the custodian you have custody of your money we also know that if you drop your dollar out of your pocket onto the street someone else comes along and picks it up they now have custody of your dollar so that's the issue of physically losing your money and when you're dealing with it digitally you have an online service that is serving as your custodian they have your digital wallet they have your Bitcoin or other digital assets and you have to hope that they don't lose the digital wallet that their system doesn't go down their servers don't crash that they don't get hacked and somebody steals the digital coins this issue of custody is one of the SCC's biggest concerns about Bitcoin is the risk that a custodian might end up going broke or getting hacked now this is an issue the SEC has been dealing with for for as long as the SEC has been in existence over a hundred years when you own a stock or a bond you own it at Merrill Lynch or TD Ameritrade or Charles Schwab or etrade or who knows where but you're buying stocks and bonds with a custodian and they have your physical certificates you don't have shares of IBM sitting in your drawer at home you're doing it online so this custody issue is extraordinarily important it's the foundation we all have fundamental confidence that our custodian is doing a good job that our assets placed in that custodian are legit available to us at any time won't get stolen won't get hacked won't get lost and the SEC wants to make sure that that very same solid structure is equally applicable to digital coins like Bitcoin the sec is not yet convinced I am in my research and work with these organizations I I think that that concern used to be legitimate but I think we've overcome it technologically there are other issues that remain such as volatility and legitimacy of pricing to touch on the point that you just made about custody paradoxically that's one of the selling points for the advocates that people who are most passionate about it is the idea that you can truly self custody of your own assets by maintaining control of the private key now the flip side of that of course is the risk right so if you have the private key and it gets lost you have literally nothing right you have no claim on that asset at all because I can't make money in a safe and you lose the combination right which is also appealing to some people right the idea of being able to physically have money in your own safe it's the same thing when you buy shares of Microsoft you know are you going to let your broker hold on to your shares or are you going to demand that they send you the certificate so you can put the certificate in your safe in your safe deposit box well there's pro and con you know what happens if the brokerage firm collapses well what happens if your house burns down and the document burns up with it so there's no safe place to hide we are all operating under one fundamental word in our economy the entire economy is based on a single word confidence we have confidence that the system works and that's the SCC's fundamental job is maintaining investor confidence because without confidence nobody's going to be willing to do anything so we were willing to put money in the bank because we have confidence that the money will be there back you know in the 1800's when you had bank robbers out west and they ran in stole the money out of the bank there was no FDIC your money was gone it was stolen by a robber you were broke well the government to respond to that created FDIC don't worry if your bank gets robbed FDIC will backstop you up to a quarter of a million dollars so we have systems in place to help create confidence for consumers and the question we have now in this economic crisis how confident will consumers remain about their and therefore what is their willingness to continue investing in and owning stocks bonds and even currency yeah one quick question to get back to the digital assets you've been thinking about Bitcoin and blockchain and aetherium when you think about those technologies what do you think the greatest potential is isn't it is it a form of digital goal to store a value that can be off grid that is less correlated with other assets or is it something that potentially has other uses payment protocol for example or other some of the more abstract uses of the technology when you think about that asset what are you looking at and what are you most enthusiastic about all the above it is all incredibly exciting you know one of the most profound comments that were made to me by a technologist that I spoke to he said let me put it to you this way Rick he said we are the four most impactful technological innovations in human history he said here they are fire the wheel the Internet and the blockchain hmm that was like mind blowing when you put it in that context the blockchain is going to have the most fundamental impact on Commerce ever in human history and it means everything you've just said is true yes there will be digital assets that operate like gold that have a store of value you will have digital assets that operate like a currency like the US dollar does that allows you to transmit money from one place and one person to another you're going to have the ability to transmit and to transact assets we're going to be able to digitize everything we all buy shares of Amazon but you can't afford to buy the whole company but you can buy one sliver of it called one share well why can't we do that with the GM building in New York why can't I do that to the Empire State Building why can't I buy a tiny piece of real estate and we're already doing that digitally we're doing it with rare art we're doing it with rare cars with rare wines we're doing it with stamps and coins we can digitize everything we have professional athletes that have digitized their incomes and their contracts you can actually invest in your favorite recording artist or athlete and enjoy a equity ownership of their career we can digitize everything it is all getting extraordinarily exciting you know in different opportunities that never before existed yeah and we can do cheaper faster and easier than we ever could before I mean man is safer with greater transparency and greater safety as well Rick we've covered a lot of ground here today a lot of interesting conversation what are your final thoughts as you look back I guess my final message is really aimed at financial advisors rather than their clients and investors directly financial advisors pride themselves on being really good at what they do and knowing thousands of them yeah most advisors are really good at what they do we need to be cautious as advisors not to engage in a financial behavioral finance mistake of our own called anchoring meaning I've given my client such advice for such a period of time I need to be willing to acknowledge that perhaps the advice I gave my client is no longer valid in a kovat world and before my client can reevaluate their circumstances I have to be willing to re-evaluate the advice I gave my client I cannot continue to give my client the advice I gave them in the past merely because it's the advice I gave them in the past and even though I might need to say to my clients something new and different I need to be willing to say something new and different if that is what is in my clients best interests so we need to teach ourselves of the ball and chain that is anchoring many of us and acknowledge that this situation is unprecedented and requires for some clients an unprecedented change of advice so Rick if you have a few more minutes to I join us I'd like to ask you a series of questions that we call the intersection which is where we ask some more personal questions just get a broader sense of your view of the world happy - great so first question is there one person living or dead that you'd like to interview more than anyone else so without question that's Moses the Bible is filled with a large number of characters who dealt with their messages from the Lord but it is only Moses who not only actually had an active dialogue with God he challenged God he disagreed with God ultimately had you know the ultimate punishment for it wasn't allowed into the promise but someone who's willing to have an argument with God that's a guy I've got to meet very well said what are the books or book that's changed your life or the change the way you see the world most and why well there's a lot of course I mean there's the you know the the standard of course everything written by Ayn Rand there's I've read growing up a lot of dystopian books Sinclair Lewis and Aldous Huxley and the list goes on and on and on I guess you could probably cook put Rand in that category too and and the title that comes to mind these days is the title it can't happen here well hello looks like it is so a lot of those and I I've read thousands of books on personal finance and and the entire category two in particular of manias and crashes looking at history medicine we repeat history because we fail to learn from it so learning about prior crashes and panics and manias is extremely helpful as is the study of behavioral finance why do we make the decisions we make we like to brag that we're smarter than every other animal on the planet I'm not convinced that we necessarily are because we don't act intellectually we act emotionally and understanding behavioral finance is extraordinarily insightful so all of those I find have been very very helpful isn't it incredible that the field of behavioral finance barely existed when we first got into this business yeah you know it's really interesting I I've talked with Harry Markowitz a lot and Harry likes to he's the Nobel prize-winning economist who created the the field of Modern Portfolio theory and he says that he is actually the grandfather of behavioral finance back in 1953 he showed me his paper on this he actually wrote the very first paper back in 53 that asked the question about investor decision-making and laid the foundation for behavioral finance it wasn't another 20 before Tversky and Kahneman really launched it into a full-blown science where they went about winning Nobel Prize for that work and so yeah you're right it's fascinating how economists for centuries never took into consideration human attitude and behavior when today it seems so unbelievably common and common sense that we behaved emotionally and so it's really funny that's even today many people do not realize that their decision-making is emotional not intellectual yeah economics is not physics and that's where the models were based it's really fascinating so as a leader in your field I'm curious how do you stay engaged how do you stay up to date and what do you look to to find sources that challenge your current opinions I read everything I can in our in the field the investment advisory community lots of conferences I talk with lots of folks in the industry both the individual advisors throughout the country as well as corporate executives and the private equity firms that are providing funding to these corporations the consultants and consulting firms that serve this industry so I've got my pulse on a lot of that stuff plus the macroeconomic folks a lot of policymakers in Washington DC and a lot of experts in other related fields I'm constantly trying to get around all these folks one of the big areas I'm dealing with is the subject of aging so I'm on the advisory board at Stanford's center on longevity and the Milken Institute's Institute on Aging and I've done work with MIT age lab as well to get around these experts who are looking very forward as to where our nation is headed from a demographic perspective with people living longer than ever and the boomers growing in size the population pyramid shifting from a pyramid to a box you know historically the bulk of the population was at the base the younger you are the more of you there were older people tended to die that's not literally true anymore older people instead of dying are living longer my mom's 92 so we have as many people at the top of the pyramid is at the bottom now huge public policy implications of that doing everything from pensions and Social Security to housing and products and services everything affecting Hollywood and entertainment it goes on on and on so I spent a lot of time dealing with a lot of this and unfortunately my perch at Edelman financial engines allows me to do that I'm not involved in the day-to-day activities of the business anymore we have a fabulous CEO and Larry roof own and a great executive team and so they're able to run the company on a daily basis allows me to step back stare out the window a lot and just try to figure out where are we where are we going not only for our firm and for our clients but for the industry and the nation as a whole and that's what allow has allowed me to do some thought leadership in our industry my most recent book the truth about your future is all about thought leadership of where we are headed regarding exponential technologies we talked about one of them Bitcoin and the blockchain but there are so many others 3d printing nanotechnology biotech big data thin tech the list goes on and on and these are going to have tremendous unprecedented impacts on every aspect of life on our planet and what does that mean for your personal finances and your investment strategy so I spend as much time as I can talking with a whole lot of others and doing one thing you said that's really important talking with people whose views I don't agree with too often I'm discovering in society these days we engage in what we know now call confirmation bias we only talk to people who agree with us and we dismiss anything anyone else has to say that's just not an effective approach for knowledge and learning you've got to learn from people who have a point of view that is completely different from your own it's the only way for you to learn and develop and to consider if your own thought process is effective one of my favorite quotes is from Abraham Lincoln who said I don't like that man I must get to know him better yeah yeah yeah the importance of diverse sources simply can't be overstated and and very and very well said some of our guests have a specific breakthrough or tipping point in their life they can trace some of their success to do you have a moment that you think back - in your life that would fulfill that criteria well you know it's it's hard to specifically pinpoint one I remember that a line from one of the Beatles biographers said that they spent five years becoming an overnight success and it's very similar for Gina and me we you know just had our heads down focused on our business trying to grow trying to serve clients trying to find clients and suddenly one day due to the hard work we were engaged in I was invited onto the radio and that initial radio interview led a couple of years later to being offered to host my own show so I guess it would be that but there was no you know wasn't one day you wake up and you know there's a light bulb it really just represents years and even decades day-in day-out of extraordinary levels of hard work and focus and then you turn around one day and you're like oh wow look what I've built I you know didn't even realize it as it was happening and all of a sudden here we are I remember the biggest shock one day was when we'd read ink magazine they published the Inc 500 every year these are the 500 fastest growing privately owned companies in America the opposite of the S&P 500 which is the 500 biggest public companies right Inc 500 or private companies and they ranked us number 69 on the Inc 500 and we had no idea that what we were doing was that we were growing so fast and that we were growing to the point where we were among the fastest growing companies in America it was shocking that was absolutely shocking for us to see that and that's when it realized we're doing something here that is that is special that is different finally what view do you hold that would be most controversial among your peers in the business well I think these days I'm well known within the advisory community that there isn't too much that I could say that would shock many folks but I think I'm best known for the fact that I don't particularly like the financial services industry I don't like Wall Street we love to hate banks and insurance companies credit card companies and brokerage firms the reputation that our industry has is extraordinarily bad and rightfully so we are consistently ranked among the least trusted industries in America only slightly ahead of car mechanics and Congress and and unfortunately it's a well-deserved reputation our industry is well known for its abusive sales practices on deceptive and misleading sales pitches on fees and expenses that are either not disclosed not prominently disclosed or assessed in a subversive inappropriate way that serves the company that is selling that product or service and not the consumer who's the purchaser of that service and that is the basis on which Jean and I built our business as an oasis to help consumers escape that environment rather than be subjected to it I remember talking with a really good friend of mine who had amassed a huge amount of frequent flyer miles on an airline he lives in a small community that only has a small airport and only one airline flies regularly from it so that's the airline he uses all the time and and I said you must love that airline you use it all the time and he said I'm not their customer I'm their hostage he recognized that he didn't have a choice but to do business with them and likewise Americans have no choice but to do business with the financial services industry we have to use banks and credit cards and we have to buy insurance and we need to buy stocks and bonds and mutual funds from brokerage firms where they're available that doesn't mean we like these organizations that doesn't mean we trust them and it doesn't mean that we want to use them we don't have a choice too many Americans are hostage to the financial services industry and my goal my mission has been to provide an opportunity for consumers to find a way that they can actually enjoy the organization that they're working with in the financial field as opposed to funding themselves forced into doing so and my challenge to our industry is to alter their sales practices their corporate policies and their behaviors so that they too can be the kind of an organization that consume would choose to flock to we should be more like Amazon Disney Starbucks and ritz-carlton and much less like those that we are seeing in headlines all today because of the latest government investigation and scandal rare thank you so much for joining us if you're ready to go beyond the interview make sure you visit real vision comm where you can try a real Vision Plus for 30 days for just $1 we'll see you next time right here unreal vision.