Summering At The Cambridge Conference
Ever wonder what happens when a whole bunch of financial advisors get together for a 3 day conference? If you said, “Yes”, then you need to critically analyze your “Things To Wonder About” list. Having said that, Steve, Dave, and Amy* learned a lot at their Broker Dealer’s annual meeting at the Gaylord in National Harbor. We share all the information, stories, and helpful takeaways on Episode 122 of Plan For Life Now!
*It only took Amy 122 episodes to be mentioned in the Pod summary. Now I have to figure out how to work her into episode 244.
Steve:
Welcome to Plan for Life now, episode 1 22. Dave, I think one of the things we’re going to consider doing going forward, not doing it now, not going to spring this, but we’re considering actually having a YouTube version of this podcast,
Dave:
Really
Steve:
Recording video.
Dave:
Cool. There’s only going to be one thing that’s going to happen with the YouTube version of this show. What do you think that is? I just want you to guess. Let’s see how well you know me,
Steve:
What happened with you, or
Dave:
It’s going to evolve me.
Steve:
You’re going to wear a collared shirt. I don’t
Dave:
Know. No, that’s exactly it. I’m not, you’re not going to wear, I’m not getting dressed for the podcast. I know Why doing a YouTube, I’ll wear a shirt. I’m not going to do it shirtless because we want a viewer, but
Steve:
Well, we will get into it what we want. Welcome everyone listening. What we wanted to talk about and focus on today, here we are, September the 10th as most of have been following along with what’s going on in the markets this year. It’s been a pretty good year to be an investor stock market, depending on when you’re listening to this US markets up about 10% on the year. Bond market is doing well. International stocks up even more, so we’re not going to spend much if any time talking about the markets. What we wanted to spend our time talking about was the national conference for our broker dealer firm, Cambridge. Now, some of this is going to be a little bit of inside baseball and it might be stuff that some of it you might not really care about, but I will get to why I think that you should care about some of it. So just back up for a second. Most of you know us as Capital Retirement Strategies. That is the firm that Dave and I founded in, how do I say, 2010?
In 2010, and that’s the firm that Dave and I run. But those of you who are clients know that our back office, the broker dealer firm and the corporate registered investment advisor firm that we work through is called Cambridge Investment Research. And those clients, you’re nodding your head. Yeah, yeah. We’ve gotten plenty of mailings and disclosures and all that fun stuff from Cambridge, but a lot of people don’t really know a lot of cases really care. What is your back office? Well, why do we really care about that? What’s the big deal? Dave and I went along with Amy. We went to the Cambridge National Conference, which was conveniently located at the National Harbor at the Gaylord down there. If those of you in the area, if you’ve ever been down there, beautiful hotel, really nice venue. Whole thing was very nice,
Dave:
Right? It’s like playing a home game though. They’re usually, these conferences are somewhere else, but it was home game and it’s kind of like when the commanders have to stay in a hotel near what was formally FedEx Field now, Northwest Stadium. But they live, why do I have to stay at the hotel? Because we want everyone. So it was very similar to that and I actually liked that. It was kind of nice and I think it was important to stay at the hotel and just to be there not to commute.
Steve:
Oh my God. I mean for us, we were talking with a lot of people at the conference and they’re saying, oh, you live in Maryland, so you’re just staying at home? And I said, well, you don’t understand the traffic around here. For me to get up and be at these 8:00 AM meetings, I’d have to leave the house by six 30 to account for all the traffic there. So we went to the Cambridge National Conference, and one of the big themes in our industry, and this was certainly a big theme in the conference, is talking about who owns the broker dealer firms or the registered investment advisory firms. And this is not something that a lot of people as a client spend much time thinking about, but I do think that it’s important for people to understand what’s going on behind the scenes. So let’s take just a real generic, well, not generic, it’s a specific example, but a big firm that’s out there, Morgan Stanley, if you work with an advisor who works for Morgan Stanley, they are an employee of Morgan Stanley.
And Morgan Stanley is a big publicly traded company. And as an employee of Morgan Stanley, and I’m not just picking on them, this could be Merrill Lynch or this could be UBS or those are what you call the wirehouse firms. But when you work for one of those, you are an employee and all of you out there who’ve been an employee, which most people you know that you have to do what your employer tells you to do. And you could be a really good advisor. And I always tell people, look, I’ve got friends, I know people who are really good advisors at these types of firms, but at the end of the day, you can only do what your employer tells you what to do. You are restricted in how you manage assets, how you service clients, what kind of software you use, all that kind of stuff. And in some cases it doesn’t matter. Some cases, I think it matters a lot. So the trend in our industry has been people going, this has been the last 20 some years, is people going to more independent firms saying, you know what? I don’t like that control. I don’t like the corporate overlords of Morgan Stanley or Merrill Lynch or whoever.
Dave:
I’m just going to interrupt you for one second. The trend of advisors who have some experience who’ve been in the business a while, I think would be a good way to preface that.
Steve:
Yeah, because what are the positives of a firm like that? Well, they’re huge. They’ve got tons of resources. The training programs there are really good because they’re these big corporate entities, so they can do a good job with that. So the trend has definitely been for experienced advisors, moving independent, going to an independent broker dealer and with an independent broker dealer like Cambridge. But Cambridge is not the only one out there. You’ve got much more control over how you manage client assets, what software you use, how you structure your business, who you work with, all that kind of stuff. Within the independent space, there has been a newer trend, and I’ll say newer within the last couple of years of private equity firms buying independent broker dealers. So what does that mean a private equity firm? Well, these independent broker dealers usually smaller, but they don’t have to be.
Some of ’em are publicly traded companies and these private equity firms come in and they say, Hey, this asset management, this wealth management stuff, this is a really good business. We like where this is headed, and so we’re going to buy this company. And what do they do? They want to squeeze profits out of it. And I’m not saying this as if it’s a terrible thing or this is not a Bernie Sanders rant. I’m not saying we got to get rid of companies and break ’em up and flush ’em down the toilet and all that. No, I’m just saying that’s what private equity firms do is they buy businesses, they find inefficiencies in the business, they cut costs, they squeeze out profits. And that has been the trend in the independent advisory business. Now, why am I talking about all this? Why have you sat through, if you’re listening to this 10 minutes of me talking about this inside baseball, Steve, I don’t really care about wirehouses or independent broker dealers, blah, blah, blah. It’s because Cambridge is not owned by a private equity firm. And one of the big things that they talked about at the national conference, and this was the ownership, the management, everyone from Cambridge was about how they do not have plans to sell and in fact have active plans to make sure that they never have to sell to private equity.
Dave:
They’ve put together a very complicated, it’s like an estate plan would be the best way to describe it, that no matter what happens, I feel bad. I forgot the head of our firm, Cambridge, his name off the top, Eric Schwartz, right? If Eric Schwartz, who’s the founder of this, and I guess he’s the chairman of the whatever he is. I remember when we went to Iowa, I’ll never forget driving through those cornfields at night. I didn’t drive, but somebody drove. But anyway,
Steve:
December and Iowa was
Dave:
December and Iowa. Pretty romantic. But anyway, so we got there, and I remember this guy, we talked to Eric Schwartz and some other people there, and he gave us the same speech we heard 15 years later about the succession plan. They have to make sure that’s an independent and not owned by private equity and all that. And I remember at the time, honestly, glossing over that. I just remember it. They talked about it. But now it’s 15 years later and many, many of these independent broker dealers have been bought up by private equity firms. And it’s the same story. It’s very, very important to their legacy. I think the founders of Cambridge, no matter how big they are, and they’re awfully big to keep this independence, which ultimately gives us our ability to be the independence that we need, that we’re basically serving us. They’re just like we are to you who’s listening, who’s our client? We’re their clients and they want to make sure we have the tools we need to be independent and to do the best job that we can. And to be very honest with you, Steve and I aren’t shopping around. We’re both obviously big fans of our broker dealer, Cambridge. We’re not shopping around to get another broker dealer, but I’ll bet you if we did, they would offer us a little more in the way of incentive or something.
And I would always look at that as, yeah, I’d rather have less incentive and keep my independence than any kind of extra little incentive. That’s my takeaway from it.
Steve:
Absolutely. And I had a reaction before when you said, oh, should we ever shop around and look at other firms? I said, are you kidding me? We’ve been with Cambridge for 15 years and I’ve never had any major complaints. Anytime anything has not gone perfectly smoothly, they have been there to help and to do things. And no, I wouldn’t consider it. It’d, it’d have to be just some life-changing money and no, not going to do it.
Dave:
So within that, I think we could leave that part. So within that, one of the things I thought about before we did this podcast is what you would be thinking, you, the listener would be thinking, A bunch of financial advisors are all together for these days. And a lot of these, in fact, these days were all weekdays. And if I were you listening, I would take, oh my God, every second people must have been looking at the phone, all the tickers, NASDAQ s and p 500, what’s going on? I did not see one person looking at their phone at that stuff, the entire conference, which tells me that, and I’m not selling other people. You should work with Dave and Steve is what I’m saying. But there’s a similarity in advisors in Cambridge, and that is, it’s a long-term group. I talked to a bunch of ’em, and we’re all on the same page, which is the reason we’re not sitting here looking at the day to day in the late August is basically because that’s not the focus for the work we do and the work a lot. Most financial advisors, I think do with Cambridge anyway, with that should not be our focus. If that is our focus, maybe you all have a problem with who you hired.
Steve:
And I think that is a common theme that it’s much more of a planning focus a long-term, not a, Hey, we’re going to day trade this. We’re going to get short-term performance. That’s not the focus. It’s definitely, I’ve seen
Dave:
More people checking their phone to see how the s and p 500 was doing, waiting for my car at Toyota than the three days.
Steve:
That’s funny. Well, okay, so the number one thing I had written down to talk about from the conference was definitely Cambridge talking about their independence, their plan to maintain the independence, all of that. But that’s a little more specific to their situation. And the advisors, the number two thing that I think they talked about. Do you want to take a guess, Dave, as to what I thought the number two thing
Dave:
That who talked about
Steve:
The Cambridge at the conference, and I’m sorry to put you on the spot, this is,
Dave:
I know I’m going to take a guess AI and how
Steve:
Ai, you nailed it. I thought you’d nail it. Yeah, so they did definitely talk a lot about ai and if we’ve talked with you in the last two or three years, you’ve certainly heard us talk about how the market has definitely been driven higher by the excitement, the enthusiasm around AI and about how all of the big technology companies, the Googles, the Facebooks, the Amazons, the Microsoft, all of those are investing just insane amounts of money into ai, into Nvidia chips and all of that. So when they’re talking about it, obviously it’s a little bit of a different conversation, but it’s definitely around helping Dave and I as advisors and therefore our clients to manage our practices more efficiently to service clients more efficiently. And I think it also dovetails in with another theme that I’ve heard talked about in our industry. I’ve been in this industry now for 23 years, just celebrated my 23 year anniversary, Dave in the industry a week or two ago. And something I’ve been hearing about for that entire time is about how there is going to be this big wealth transfer that baby boomers will be dying off and there will be a big wealth transfer, meaning they’re passing away, leaving money to the next generation. And also about how the advice industry, the financial advice industry is not getting any younger.
We’re
Not doing a good job of recruiting and attracting younger talent. So they talk about these things in conjunction, big wealth transfer, older advisory population and ai. And they really talked about it in the context of using AI to help advisors serve and service existing clients and more clients more effectively. And I believe me, I certainly hope that that’s accurate, that that will help us. Because you do see that limit of where you say, okay, we can only effectively service X number of clients, but maybe AI will help us do that more effectively.
Dave:
But the attracting younger talent thing has been, this has been going on for when we started with Cambridge, they were so excited about you because at the time, I’m guessing you were in your twenties, is that right?
Around my
Thirties, but still super young. And they were super excited about you, me. They’re like, okay, yeah, you’re all right too, Dave
Steve:
- That was probably good.
Dave:
It probably was good. That was under, yeah. But anyway, but yeah, that is still an issue. That’s always an issue. I actually went to a session, a breakout session about getting younger advisors and how to hire and who you should get and all that stuff. And I thought that was very interesting on what we have to do because we are going to bring in somebody younger sooner rather than later. And how we go about doing that, and that was important. That’s important to us and it’s important to the industry. So that was interesting. It’s important.
Steve:
I mean, my big takeaway from the whole conference that I do think there’s been talk about, this is another thing, it’s been around for years. The other spin on AI is, oh, AI is going to replace your financial advisor. There won’t need to be any human advisors anymore. You’ll just have this AI thing that you interact with and it’ll replace human advisors. And this is coming from an advisor. So of course I don’t think that’ll take place, but I just have a hard time seeing that, at least in the near future, in the next 10 or 15 years,
Dave:
Yeah, AI cannot get on the phone with me and help me with a minor incident with my home alarm system, let alone B, and that I don’t see happening for a long time, let alone giving financial advice with markets that are volatile and unpredictable and always will be.
Speaker 1:
So
Dave:
You know me, I was never a believer from the moment I heard the letters AI that was going to replace us. And I think as long as markets are unpredictable and markets will always be unpredictable or they won’t be, markets changing.
Steve:
Yeah. Alright. I mean that was everything that I had written down to talk about from the conference. I mean the other stuff, we each went to a handful of those breakout sessions. My big takeaway on some of that is Medicare is really complicated. That was literally one of the takeaways that I had written down there. These are some things that we’ve hit on many times. People need to have a withdrawal strategy. We talk about that all the time, but one of the breakout sessions that I went to talked about having a withdrawal strategy, putting that in place, all of that, something that we’ve talked about with people a lot, tax diversification. This is when I talk to people about doing Roth conversions and we say, okay, we want to do some Roth conversions, and if we can save some in taxes there, that’s great, but having some tax diversification is also really powerful so that you don’t have all of your money just invested in taxable accounts there.
Dave:
Yeah. Oh, I have something to add. That was actually interesting. Speaker Jeff Bush,
Who
He’s basically, I think he speaks in a lot of these conferences, but I’ve only seen him and he sort of combines financial with the political scene. And since we were in Washington DC it’s his home base, they figured this would be a great speaker. He has a lot of experience in how the political narrative will affect markets. I don’t think anything he said was surprising, but it was sort of reiterates what I think you and I, maybe we’ve done this on another podcast, but he’s basically saying pros and cons of the Trump years coming up. One of the pros, he says that the effects of deregulation, deregulation, which helps markets, takes us long to start to show is the regulation that maybe slowed things down. I’m still getting over a cold. So it’s getting crackly. It’s not contagious
Steve:
Through the podcast though.
Dave:
Yeah. And then he said on the flip side, same with tariffs, that we might not see the real effective tariffs on the negative side for a while. So he sort of had a pro and a con of the Trump years as we look at the markets going forward.
Steve:
Yeah, it’s definitely something that I’ve heard many times is with the tariffs, not only is there kind of a delay in when they really take place and are implemented, there was also this pull forward effect where companies knew some of these tariffs were coming, so they bought a bunch of stuff before the tariffs. So you’re actually not seeing that impact of the tariffs yet on prices and there could be a delay. So, alright, thank you for joining us. Hope everybody’s having a good start to the fall. I hope by the time you’re listening to this, commanders are two and oh, big Thursday night game coming up, but by the time you hear this, it’ll already be over. So thanks for listening and we’ll check in again soon.