The Long View

Our guest on this week's installment of The Long View is noted portfolio manager Bill Nygren. Nygren joined Chicago-based Harris Associates as an analyst in 1983 and later served as the firm's director of research. He has managed Oakmark Select OAKLX since 1996 and Oakmark Fund OAKMX since 2000 and has comanaged Oakmark Global Select OAKWX since 2006. In addition to these duties, Nygren serves as Harris' chief investment officer for U.S. equities. For his investing achievements, Morningstar recognized Nygren as its Domestic-Stock Manager of the Year in 2001, and his funds remain highly rated by Morningstar's manager research analysts. A frequent and insightful commentator on investing and markets, Nygren's shareholder letters are a must-read on the Street and beyond. In this far-ranging conversation, he discusses how his team's competitive edge has evolved, how traditional value metrics won't cut it in today's evolving economy, and the lasting lessons of the financial crisis. Background Information Bill Nygren bio Bill Nygren's Commentary and Shareholder Letters  Oakmark's Philosophy and Process  Morningstar Analyst Report for Oakmark Fund Morningstar Analyst Report for Oakmark Select  Morningstar Analyst Report for Oakmark Global Select "Morningstar Fund Managers of the Year 2001," by Russ Kinnel (Jan. 4, 2002, Morningstar.com) Related Links How Stock-Picking Has Changed and What Defines Value "Value Investors Are Vexed," by Ben Johnson (April 10, 2019, Morningstar.com) "Value Stocks Haven't Traded This Low Since the Dot-Com Bubble," by Justina Lee (July 23, 2019, Bloomberg) Generally Accepted Accounting Principles (GAAP)  Shiller P/E Ratio  Portfolio/Risk Management "Do Concentrated Funds Outperform?" Alex Bryan and Christine Benz (May 8, 2019, Morningstar.com) "The World Cup and Investing," by Win Murray (July 16, 2018, Oakmark.com)  Portfolio and Holdings  Oakmark Fund portfolio, June 30, 2019 Oakmark Select portfolio, June 30, 2019 Oakmark Global Select portfolio, June 30, 2019 "Bank of America Plans to Boost Dividend 20%, Increase Pace of Stock Buybacks" (July 17, 2019, Marketwatch) "Famed Value Investor Bill Nygren on His New Stock Picks" (April 25, 2019, CNBC) "Value Investor Bill Nygren Gets Bullish on Tech" (Feb. 25, 2019, CNBC) "Value Investor Bill Nygren Likes Netflix, Saying It Won't Lose Subscribers on Price Hike" (Jan. 15, 2019, CNBC) "Nygren: A Lot of Value Still Out There" (May 28, 2009, Morningstar) About the Podcast: The Long View is a podcast from Morningstar. Each week, hosts Christine Benz and Jeff Ptak conduct an in-depth discussion with a thought leader from the world of investing or personal finance. The podcast is produced by George Castady and Scott Halver. About the Hosts: Christine Benz and Jeff Ptak have been analysts and commentators on investments and the investment industry for many years. Christine is Morningstar's director of personal finance and senior columnist for Morningstar.com. Jeff is head of global manager research for Morningstar Research Services, overseeing Morningstar's team of 120 manager research analysts in the U.S. and overseas. To Share Feedback or a Guest Idea: Write us at TheLongView@morningstar.com

Our guest on today's podcast is Jonathan Clements, the founder and editor of the website HumbleDollar. Clements has been a prolific and influential writer over his several-decade career. Prior to starting HumbleDollar, he was the longtime money and investing columnist for The Wall Street Journal, where he wrote more than 1,000 columns. After he left The Journal, Clements spent six years heading up investor education at Citi Personal Wealth Management. He has also authored seven investment books and a novel, including the Jonathan Clements Money Guide, How to Think about Money, and From Here to Financial Happiness. Background Information Jonathan Clements bio HumbleDollar Books by Jonathan Clements Related Links Frugality and Setting Financial Goals FIRE Movement Wikipedia entry HumbleDollar's Spending Guide HumbleDollar's Saving Guide "Can Money Buy Happiness?" by Andrew Blackman (Nov. 10, 2014, The Wall Street Journal) The Role of Advisors in Improving Outcomes Michael Kitces on "The Long View" podcast Great Debates on HumbleDollar's site "Hire an Advisor?" by Jonathan Clements (HumbleDollar) Bogleheads.org Whether Investors Undermine Their Results With Bad Behavior DALBAR's Quantitative Analysis of Investor Behavior "Taking Us for Fools," by Jonathan Clements (Dec. 1, 2018, HumbleDollar) "Maybe Investors Aren't Stupid After All," by Jonathan Clements (March 31, 2004, The Wall Street Journal) "Just How Dumb Are Investors?" by Jason Zweig (May 9, 2014, The Wall Street Journal) "A Warning to the Advisory Profession: DALBAR's Math is Wrong" by Wade D. Pfau (May 6, 2017, Advisor Perspectives) "Mind the Gap 2018" by Russel Kinnel (Aug. 21, 2018, Morningstar.com) Retirement Decumulation "Reducing Retirement Risk with a Rising Equity Glide Path" by Wade D. Pfau and Michael Kitces (Journal of Financial Planning) "Initial Conditions and Optimal Retirement Glide Paths" by David M. Blanchett (Journal of Financial Planning) "Cut Stocks or Add to Them? A Key Decision for Your Retirement Plan" by Christine Benz (July 25, 2019, Morningstar.com) HumbleDollar's Retirement Guide "Immediate Fixed" (HumbleDollar blog post) Asset Allocation and Investing HumbleDollar's Investing Guide  "Our Humble Opinion: Asset Allocation" (HumbleDollar blog post) "Market Portfolio" (HumbleDollar blog post) "Investors Have Fewer Reasons Than Ever for Home Bias" by Ben Johnson (June 7, 2019, Morningstar.com)

Our guests for the latest installment of "The Long View," Maria Bruno and Joel Dickson, are both veterans of investment behemoth Vanguard.  Bruno is the head of U.S. wealth planning research at Vanguard, leading a team responsible for conducting research and analysis on a wide range of retirement, wealth planning, and portfolio construction topics. She also contributes to the oversight of the investment philosophy, methodology, and wealth management strategies supporting Vanguard's advisory products and services. Bruno is a Certified Financial Planner, and she's a fount of wisdom on many subjects, but especially retirement planning.  Dickson has worn many hats at Vanguard during his long career there. In his current position as Vanguard's global head of advice methodology, he oversees all investment methodology development for Vanguard's advice programs whose end consumers are individual investors.  The transcript for this podcast can be found here. Background Information Maria Bruno bio Joel Dickson bio  "The Planner and the Geek" podcast series Vanguard Research and Commentary Archive How Retirement Savers Can Play Catch-Up "It's the 'how much?' But then also how do you actually direct those savings?" (1:30-2:56) "It's such an idiosyncratic or individual sort of consideration from a planning standpoint; there are plenty of people that have little wealth but high income." Whether traditional tax-deferred accounts are automatically better than Roth for people playing catch-up on retirement savings. (2:57-5:53) "It's a little bit simpler when you're younger and accumulating." How basic savings and investing habits, combined with plan defaults, make the accumulation period much simpler than decumulation. (5:54-8:24) 'Off-Label Uses': Ways Supersavers Can Maximize Their Investments Aftertax 401(k): What it is and how heavy savers can take advantage of it. (10:41-12:55) After-Tax 401(k), Bogleheads Wiki entry "Should You Make Aftertax Contributions to Your 401(k)?" Morningstar.com article "Aftertax 401(k) vs. Taxable Account? Evaluating Options for High-Income Savers," Morningstar.com article "Heavy Savers, Meet the Mega-Backdoor Roth," Morningstar.com article Backdoor Roth IRA: How it works, who should consider, and potential pitfalls to be aware of. (12:56-16:34) "IRA Insights: The Benefits of a Backdoor Roth," Vanguard research "Backdoor IRAs: What You Need to Know," Morningstar.com article "There's more and more focus on minimizing income taxes during one's life than there is about avoiding estate taxes." Using a 529 as an additional tax-advantaged savings vehicle. (16:35-21:26) Navigating College Savings episode from The Planner and The Geek podcast Decumulation "How do I meet my goals today but then also make sure that I'm protecting myself down the road?" Why setting spending rates can be so tricky. (21:27-24:26) "Determining Withdrawal Rates Using Historical Data," research paper by William Bengen  William Bengen bio "How to Put a Dynamic Retirement Spending Strategy in Place," Vanguard research "Spending Trends Boost Safe Withdrawal Rate for Retirees," Morningstar.com video "The 4 Percent Rule Is Not Safe in a Low-Yield World," research paper by Michael Finke, David Blanchett, and Wade Pfau "We're telling people to, on average, oversave and underspend." Balancing longevity, sequence risk with spending and quality of life. (24:27-28:35) "Is There an Upside to Sequence of Return Risk?" Morningstar.com video  Exploring the Retirement Consumption Puzzle, research paper by David Blanchett  "At the end of the day you still kind of get to the same end result." How bucket portfolios may not look very different from traditionally allocated retirement portfolios. (28:36-31:30) "The Bucket Approach to Retirement Portfolio Allocation," Morningstar.com article "Retirees could be overexposed to equity risk." Whether retirees aren't derisking their portfolios. (31:31-32:41) "Best Practices for Portfolio Rebalancing," Vanguard research paper "Generations: Key Drivers of Investor Behavior," Vanguard research paper "The rules of thumb just don't work as well." Why managing taxes during retirement is necessarily an individualized process. (32:42-36:24) "Spending from a Portfolio: Implications of Withdrawal Order for Taxable Investors," Vanguard research paper "Here you're actually looking at strategies that could accelerate income taxes." How the post-retirement/pre-RMD years are a prime time to control future tax bills. (36:25-39:41) • "An IRA Conversion Sweet Spot," Morningstar.com video  • "Age Is Just a Number: Start Thinking About RMDs Now," Vanguard blog post • "Strategies for Annual Roth Conversions," Vanguard research • "But What If I Don't Want My RMD?," Vanguard research • "What to Do With RMDs You Don't Need," Morningstar.com article  Building Portfolios "You have human capital risk at the same time you have investment risk." How investors should think holistically about risk when building their portfolios. (39:42-44:37) "Vanguard ETF Strategic Model Portfolios," Vanguard research paper "Global Equity Investing: The Benefits of Diversification and Sizing Your Allocation," Vanguard research paper "Focus on the things that you can control." What to do if investment returns are muted in the future. (44:38-46:23) "What Fed Projections May Mean for Longer-Term Stock Returns," Vanguard research "Vanguard Economic and Market Outlook for 2019: Down but not Out," Vanguard research "Experts Forecast Long-Term Stock and Bond Returns: 2019 Edition," Morningstar.com article ETF Landscape "Investors that were more likely to trade chose the ETF." Are ETFs being used for long-term investing or trading? (46:24-49:28) "ETFs: For the Better or Bettor?," Vanguard research paper "Morningstar's 2018 Fee Study Finds That Prices Continue to Decline," Morningstar.com article "98% of the DNA is the same." Whether the benefits of ETFs relative to traditional index funds been overstated. (49:29-51:27) "ETFs Versus Mutual Funds: A Comparison," Vanguard research "Traditional Index Fund vs. ETF Cage Match," Morningstar.com article Vanguard's Personal Advisor Service "The most important part of the financial planning process is the goal discovery." Why Vanguard's service offers a combination of human and automated advice. (51:28-56:17) "Helping Vanguard Personal Advisor Service Clients Understand the Anatomy of Our Methodology," Vanguard research The Robo-Advice Market Is Growing, but Changing, InvestmentNews article    About the Podcast: The Long View is a podcast from Morningstar. Each week, hosts Christine Benz and Jeff Ptak conduct an in-depth discussion with a thought leader from the world of investing or personal finance. The podcast is produced by George Castady and Scott Halver. About the Hosts: Christine Benz and Jeff Ptak have been analysts and commentators on investments and the investment industry for many years. Christine is Morningstar's director of personal finance and senior columnist for Morningstar.com. Jeff is head of global manager research for Morningstar Research Services, overseeing Morningstar's team of 120 manager research analysts in the U.S. and overseas. To Share Feedback or a Guest Idea: Write us at TheLongView@morningstar.com

Our guest this week on "The Long View" is Sheryl Garrett. Garrett is a legendary figure in financial-planning circles, having pioneered the concept of offering hourly financial-planning guidance. She's founder of the Garrett Planning Network, a national network of hourly, fee-only financial planners that she started in 2000. Garrett has authored, co-authored, or served as technical editor on many books, including Garrett's Guide to Financial Planning, Just Give Me the Answer$, and the Personal Finance Workbook for Dummies. She has worked with the U.S. House Committee on Financial Services regarding predatory lending regulation, financial literacy, and Social Security reform. She has also received numerous awards in the realm of financial planning during her career. Most recently, InvestmentNews named Garrett as its 2019 Icon. Background Information Sheryl Garrett bio  Garrett Planning Network  Books by Sheryl Garrett  Garrett's Guide to Financial Planning: How to Capture the Middle Market and Increase Your Profits by Sheryl Garrett  Just Give Me the Answer$: Expert Advisors Address Your Most Pressing Financial Questions by Sheryl Garrett and Marie Swift  Personal Finance Workbook for Dummies by Sheryl Garrett  U.S. House of Representatives Committee on Financial Services; hearing dated Wednesday, April 20, 2005; testimony of Sheryl Garrett, CFP  InvestmentNews Icons and Innovators: Sheryl Garrett  Advice Best Practices "How would I want to receive advice?" How Garrett came to build an hourly, fee-only planning practice that eventually spawned a network of advisors. (1:03-3:58) "The industry thought I was nuts." Why Garrett opted for an hourly fee-for-advice model. (3:59-7:53) Advice Models "The issue is bigger between the financial advisor's ears than it is between the client's ears." How to get clients over paying for advice out of pocket. (7:54-14:16) "I see financial planning as a job and I see ongoing investment advice as a different job." How the advice model--and manner of charging fees--should adapt to clients' evolving needs over time. (14:17-22:30) Rick Ferri bio  First Ascent Asset Management Subscription-based vs. hourly advice: What's the better model? (22:31-25:51) XY Planning Network Working With Clients Hourly advice is most successful (and cost-effective) when the client participates. (25:52-32:54) Temperament matters: What people should look for in a financial planner or advisor. (32:55-43:12) Garrett Planning Network's "Financial Advisor Interview Questionnaire"  The National Association of Personal Financial Advisors (NAPFA) Planning Business "They look at me as their financial advisor." Are hourly financial planners constantly in customer-acquisition mode and might that attract those who are better at sales than planning? (43:13-46:06) Commoditization: Given the popularity of planning and advice, could financial planning go the way of the Chartered Financial Analyst designation? (46:07-48:46) Chartered Financial Analyst designation  Certified Financial Planner designation 

Our guest on this week's installment of "The Long View" podcast is James Montier. Montier is a member of the asset-allocation team at Grantham, Mayo, Van Otterloo & Co. Before joining GMO in 2009, he was co-head of global strategy at Societe Generale. A prolific and incisive writer, Montier has authored several books, including Behavioural Investing: A Practitioner's Guide to Applying Behavioural Finance; Value Investing: Tools and Techniques for Intelligent Investment; and The Little Book of Behavioral Investing. He's also a regular contributor to GMO's library of white papers and research studies on topics ranging from productivity, strategic asset allocation, contrarianism, and more. In addition to his duties at GMO, Montier is also a visiting fellow at the University of Durham and a fellow of the Royal Society of Arts. Background  Grantham, Mayo, Van Otterloo & Co. Behavioural Investing: A Practitioner's Guide to Applying Behavioural Finance by James Montier  Value Investing: Tools and Techniques for Intelligent Investment by James Montier  The Little Book of Behavioral Investing: How Not to Be Your Own Worst Enemy by James Montier  GMO's research library   Montier's articles in GMO's research library  Montier's Role at GMO "My role is essentially to be difficult, and it turns out I'm quite good at that." Montier describes his role at GMO and how his contributions to the firm are measured. (1:10-3:11) Ben Inker bio  Fostering Debate at GMO "We have never had a house view." Why debate and constructive devil's advocacy is welcome at GMO. (3:12-4:31) "Investing is one of those fields where there is almost constant evidence that we are all wrong." How to foster humility and a diversity of views. (4:32-7:38) Debating Jeremy Grantham on mean reversion: Montier gives an example of an issue the team has debated recently--how long it takes for markets to revert to their long-term averages. (7:39-9:36) Jeremy Grantham bio  "This Time Seems Very, Very Different" by Jeremy Grantham (GMO Quarterly Letter, 1Q 2017)   "The S&P 500: Just Say No" by Matt Kadnar and James Montier (Aug. 15, 2017)  Forecasting and Portfolio Construction How the debate over mean reversion informs GMO's asset-class forecasts. (9:37-10:09) GMO 7-Year Asset Class Forecast (May 2019)  Corporate concentration and low interest rates: How GMO is reconsidering these variables and their impact on the asset-class forecasts it makes. (10:10-11:38) "The Idolatry of Interest Rates, Part II: Financial Heresy and Potential Utility in an ERP Framework" by James Montier and Ben Inker (Aug. 11, 2015) How GMO incorporates its asset-class forecasts into the multi-asset strategies it manages. (11:39-12:37) GMO Benchmark-Free Allocation III GBMFX   The appeal of a "robust" forecast that's meant to help portfolios withstand various potential outcomes. (12:38-14:15) "Our portfolios look a little freakish." Montier explains why GMO is U.S.-stock-phobic and, conversely, why the firm is finding value in alternatives. (14:16-18:04) GMO Benchmark-Free Allocation II Fund's asset allocation  Sir John Templeton: "If you want to have a better performance than the crowd, you must do things differently from the crowd." Career risk: Where individual investors hold an edge over institutions. (18:05-18:55) "Career Risk Is Likely to Always Dominate Investing" by Jeremy Grantham (Dec. 24, 2014, Finanz and Wirtschaft)  Alternatives Montier defines "alternatives." Different ways of owning standard risks--depression risk, inflation risk, and liquidity. (18:56-21:49) "The General Theory of Employment, Interest, and Money" by John Maynard Keynes  Montier presents two examples of alternative strategies that GMO employs--merger arbitrage and put-selling--to own standard risks in different ways. (21:50-25:49)  Merger-arbitrage definition   Put-selling definition  "Is This Purgatory, or Is It Hell?" by Ben Inker (GMO Quarterly Letter, 3Q 2014)  "We should size them such that they cannot hurt the overall fund should we get something wrong." How GMO sizes its positions in alternative strategies. (25:50-27:33)  GMO Systematic Global Macro Trust  Alpha, beta, and decay: How GMO assesses an alternative strategy's vulnerability to being arbitraged away. (27:34-29:57) GMO's Bearish U.S. Equity Forecast "How do I get paid for owning this asset?" Key inputs to GMO's U.S. equity forecast--multiple, margin, yield, and growth. (29:58-32:08) "Back to Basics: Six Questions to Consider Before Investing" by Ben Inker (Nov. 8, 2010)  "A behavioral self-defense mechanism." How GMO's approach to forecasting helps to structure its thinking and anchors decision-making. (32:09-34:54) "It's really valuation where we've been most wrong." Where GMO's U.S. equity forecast erred in recent years. (34:55-36:01) "We have to wear that. We have to own it." Montier on steps that GMO has taken to introspect on its forecasting error and how that expresses itself in the way it makes decisions and manages money. (36:02-39:45) Planning Amid a Dearth of Value "A reach for yield in any way, shape, or form." Explaining the dearth of value. (39:46-41:43) "The Deep Causes of Secular Stagnation and the Rise of Populism" by James Montier and Philip Pilkington (March 22, 2017)  "We have always been pretty bad at (forecasting), and it's unlikely we're going to get a lot better." (41:44-44:37) How should investors and advisors forecast asset-class returns and plan for the future? (44:38-47:25) "Investing for Retirement: The Defined Contribution Challenge" by Ben Inker and Martin Tarlie (April 5, 2014) Capital Allocation Montier on the folly of firms borrowing to repurchase shares: "The more stable the environment, the easier it is to take on leverage, but the greater the danger that taking leverage creates further down the line when you get some random shock." (47:26-50:49) "The Late Cycle Lament: The Dual Economy, Minsky Moments, and Other Concerns" by James Montier (Dec. 17, 2018)   "The Financial Instability Hypothesis" by Hyman P. Minsky (May 1992; The Jerome Levy Economics Institute of Bard College) 

Our guest today on The Long View podcast is Rick Ferri. Ferri is an hourly fee-only investment consultant at Ferri Investment Solutions; he's also a CFA charterholder. Prior to starting his new firm in April 2019, he was the founder and head of investing at a $1.5 billion advisory firm that specialized in low-fee asset management using index funds and exchange-traded funds. Prior to that, he worked for a brokerage firm, where he was an early adopter of inexpensive index products for client portfolios. Ferri is a Marine Corps officer and retired fighter pilot. Ferri has written several books on low-fee investing, including All About Asset Allocation, The ETF Book, All About Index Funds, and The Power of Passive Investing. He has also authored numerous investment-related articles and research papers, including a research paper on index investing that won S&P Dow Jones Indices' third-annual SPIVA Award. Introduction and Background Rick Ferri's bio  Ferri's philosophy  Ferri Investment Solutions  Ferri's books Ferri's Forbes column "Bogleheads on Investing" podcast hosted by Rick Ferri "Ferri: 3 Keys to a Successful Investment Strategy," Morningstar.com video "The conversation about asset allocation comes later, and the conversation about investments comes after that." Ferri discusses how his definition of value-add has changed over the past 10-15 years. (0:55-3:24) "I've been through the whole gantlet." Transitioning from broker to Registered Investment Advisor. (3:25-5:14) On clients who have needs that go beyond investment management. (5:15-5:56) "You get the work done, you pay for the work." Why Ferri's new advisory practice charges clients by the hour, not by their assets under management. (5:57-9:44) "Rick Ferri, Back in Business, Drops Bomb on AUM Model," ThinkAdvisor article "Move Over 1% Advisor Fee: Change Is Here," Ferri's blog post on Forbes  "Advisors talk about how they add value behaviorally; I think a lot of that is created by the advisor and not so much by the client." The role of advisors in managing client behavior. (9:45-11:12) Asset Allocation "Ferri: 3-Fund Portfolio the Simplest Way to Best Return," Morningstar.com video Ferri's Core-4 Portfolios "There are no average investors." How investors of the same age can vary widely in their appetite for equity risk. (11:13-15:03) "Those are the things that are going to add value to a client's portfolio." Focusing on keeping taxes and investment costs down, not trying to play factors. (15:03-18:21)  "There seem to be a lot of factor renters, rather than factor owners." Ferri is skeptical that factor investing will outperform in the future. (18:23-20:44) Factor investing defined Dr. Wesley Gray interview on factor investing, "Bogleheads on Investing" podcast   "I don't use anything that doesn't have an expected real return." Why Ferri sticks with plain-vanilla asset classes. (20:45-21:56) How to go about making return assumptions for the major asset classes. (21:57-24:14) "It depends on how much money the client has." A total bond market index as a one-stop option for fixed-income exposure. (24:15-27:20) International bonds as a core asset class. (27:21-28:46)  "Global Fixed Income: Considerations for U.S. Investors," Vanguard research paper "Six Advisors on Investing in International Bonds," OregonLive article "I don't think they're pivotal." REITs as a direct allocation.  (28:47-31:45) "REITs and Your Portfolio," Ferri's Forbes blog post Decumulation   "The software doesn't seem to be very good at this." Decumulation is inherently more complicated and customized than accumulation. (31:46-34:19) "There seem to be better ways of doing it than the classic way in which we've been taught." On whether the traditional declining equity glide path makes sense. (34:20-39:28) Indexing and the Legacy of Jack Bogle "It's been around forever." Direct indexing: the wave of the future? (39:29-42:09) "Could Direct Indexing Help Your Portfolio?" Forbes blog post by Simon Moore "I don't see it as big of a threat as other people do." Should investors be worried about concentration in very few ETFs, and do index funds and ETFs own too much of the market? (42:10-44:07) "I was having a real moral dilemma." How influential Jack Bogle was in shaping Ferri's career path. (44:08-46:08) "The Worth of a Man: A Tribute to John C. Bogle," Forbes blog post Ferri's interview with Bogle, "Bogleheads on Investing" podcast "Vanguard Founder Jack Bogle Passes Away," Morningstar.com article

Our guest on this week's episode of the Long View is none other than Josh Brown, CEO of Ritholtz Wealth Management. Brown's story is unique and inspiring. He began his career as a broker but grew disillusioned with the industry's skewed incentives and practices, eventually pursuing a career as an independent Registered Investment Advisor. Along the way, Brown managed to author an acclaimed book, Backstage Wall Street, and build an enormous following around his blog, "The Reformed Broker," as well as his twitter handle, @reformedbroker. Now he oversees Ritholtz's day-to-day operations in addition to his other duties, which include serving as a regular contributor on CNBC, as a member of fintech firm BrightScope's advisory board, and most recently as a technical advisor on the Showtime hedge fund drama Billions. Introduction and Background  Ritholtz Wealth Management   Josh Brown bio   The Reformed Broker   Josh Brown @reformedbroker  Backstage Wall Street: An Insider’s Guide to Knowing Who to Trust, Who to Run From, and How to Maximize Your Investments by Josh Brown  BrightScope Brown's appearance on Showtime's Billions  Origin Story "A personal crisis." Josh describes the epiphany he had in leaving the brokerage industry for the advice business after 10 years (1:20-3:41). "It worked immediately." How the Reformed Broker blog was born and led to a chance meeting with Barry Ritholtz, which gave rise to an RIA (3:42-5:21).  Barry Ritholtz bio Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy by Barry Ritholtz  "How I Met Barry" by Josh Brown, The Reformed Broker blog  The Advice Business "If they haven’t figured it out by now, they probably don’t want to." Observations on how the advice business has changed (5:22-7:29). "Understanding Mutual Fund Classes" by Finra   SEC Regulation Best Interest   Definition of a nontraded REIT  "Brokerages in name only." Why wirehouse clients aren't necessarily being ill-served by the system (7:30-8:09).  Morgan Stanley First Quarter 2019 Earnings Results  James P. Gorman, chairman and CEO of Morgan Stanley  Lending: The key difference between a fee-based account at a Wall Street wirehouse and a fee-based account at a traditional RIA (8:10-10:34). "The Rise of Rich Man's Subprime" by Josh Brown, Fortune magazine  Securities-based lending, explained  How to Provide Financial Advice Telling the client "no." The difference between pushing product and offering advice (10:35-12:16). "When Fund Companies Pay to Play, So Do You" by Leslie Norton, Barron's  "It's recreation; it's not a necessity." Helping clients to scratch an itch without putting their financial plans at risk (12:17-14:53). "Financial planning is the highest calling within our profession." Ensuring clients get past the firm's public persona and truly buy into its plan and approach (14:54-16:46). An ensemble approach to delivering advice to clients: The anti "eat what you kill." (16:47-18:58). Michael Batnick bio   Michael Batnick's "The Irrelevant Investor" blog  Ben Carlson bio  Ben Carlson's "A Wealth of Common Sense" blog  Blair duQuesnay bio   Blair duQuesnay's "The Belle Curve" blog "Consider Firing Your Male Broker" by Blair duQuesnay, The New York Times op-ed  How to Build an Advice Firm "Barry and I don't spread out a map like Napoleon and start sticking thumb-tacks in it." How Brown thinks about strategically expanding the firm (19:04-20:45). "If somebody comes to us in a rush, it's probably a bad situation, and we don't want anything to do with it." The advisor recruitment and weeding-out process (20:46-24:23). Kris Venne bio   Bill Sweet bio  Portfolio Construction and Asset Allocation "You're going to lose money. It's gonna happen. There's no way around it." The firm's approach to allocating assets and setting client expectations (24:24-27:33). Tactical asset allocation's role in their process: "We don't believe in investment alpha using tactical." (27:34-29:33)  Sequence-of-return risk  "What if you had a tactical model that almost never did anything?" How they built their tactical-asset-allocation overlay to help manage client behavior (29:34-33:13). "I hope it underperforms, because most of our clients' money is not invested in tactical." (33:14-35:03) "Every client is different, but their needs are not." Implementing a scalable asset allocation (35:04-37:08). "You want to be wrong in such a way that it's not going to be catastrophic for the end client." How Ritholtz sets capital-markets expectations (37:09-38:41). Managing Client Assets How Ritholtz approaches assets that clients bring in with them: "You've got a human being with their own issues." (38:42-40:58)  Mark Tibergien bio  "The longer I'm doing this, the more stuff I want to take out, not add." Brown explains why they err on the side of excluding various types of investments from client portfolios (40:59-42:33). "Our clients are here because they want us." Brown says fee pressure hasn't been an issue for the firm (42:34-44:22).  Wealth/Stack Conference  Nerd's Eye View blog (Michael Kitces)  The Future of Advice "You're being judged on the portfolio, you should get paid on the portfolio you recommend." Brown is dubious of clients who aren't willing to pay for advice as a percentage of assets under advisement (44:23-46:50). "What People Will Pay For" by Josh Brown, Reformed Broker blog  How a chocolatier's success reinforced the importance of consistency in client interactions: "Standardize the process, personalize the advice." (46:51-50:25)  Hershey Park   Hershey Museum 

This week's guest on The Long View is financial advisor Harold Evensky, who Morningstar managing director Don Phillips has often called the "dean of financial planning." Evensky is chairman of Evensky & Katz/Foldes Financial, and he's a retired professor of personal financial planning at Texas Tech University. Evensky has been extremely active in the planning community during his career. He's the past chairman of the International CFP Council, the CFP Board of Directors, the CFP Council on Examinations, and the Board of Appeals. Evensky is a frequent public speaker and has authored several books, including The New Wealth Management. During the course of this conversation, he weighed in on the SEC's newly approved Regulation Best Interest, calling it an "unmitigated disaster." He also discussed asset allocation leading up to and in retirement, his firm's application of a core/satellite approach, and different business models for financial advice.  Show Notes and References Background (0:18-0:57) • Harold Evensky bio  • Evensky & Katz/Foldes Financial  • Personal Financial Planning Department, Texas Tech University  • Financial Planning Standards Board Council (formerly known as "International CFP Council")  • CFP Board of Directors (formerly "Board of Governors")  • CFP Council on Examinations (formerly "Board of Examiners")  • The New Wealth Management: The Financial Advisor's Guide to Managing and Investing Client Assets (CFA Institute Investment Series Book 28) by Harold Evensky  • Books by Harold Evensky  Evensky explains why his practice opted to charge clients a percentage of assets under advisement instead of an annual retainer: "An unmitigated disaster." (0:58-2:51) How Evensky and his fellow practitioners spend their time: "It's all built around the planning." (2:52-4:02) On the firm's receptiveness to younger clients with less assets to advise: "Absolutely yes." (4:03-4:40) The future: Comprehensive, modular financial planning. (4:41-6:49) On the commodification of financial advice: "To the general public … it pretty much looks like the same service." (6:50-7:37) On robo-advice: "Our conclusion was ... it's dangerous." (7:38-11:15) • "The Efficacy of Publicly Available Retirement Planning Tools" by Taft Dorman, Barry S. Mulholland, Qianwen Bi, and Harold Evensky (Oct. 9, 2018).  Helping clients navigate turbulence: "Our goal is to call the client before they call us." (11:16-12:15) The critical importance of communicating with clients: "Brokers and, much to my surprise, trust officers … hide under their desks." (12:16-13:02) Where risk tolerance and client-specific circumstances come to the fore and human capital and age take a back seat: "Everything calls for a customized mix." (13:03-15:25) • Human Capital  "That's horribly inefficient." How Evensky came to embrace the simplicity of the core-and-satellite approach to portfolio construction. (15:26-19:27) Evensky's construct for "explore" positions: "It can be most anything." (19:28-20:37) Value's dry spell: "The basic concept of the value premium remains viable." (20:38-22:19) • Dimensional Fund Advisors  Permanent impermanence: How Evensky and his colleagues grapple with investing ephemera. (22:20-23:58) Global diversification: "We've always believed in an international exposure." (23:59-25:45) • Home-bias definition  • Market capitalization of listed companies in current prices  Risk tolerance and return needs drive strategic asset-allocation decisions: "Our maximum equity allocation is 80%." (25:46-27:53) "Rebalancing is an immensely powerful tool, painful though it is in the short-term." (27:54-30:44) Human capital's influence on the planning process: Car salesman versus tenured professor. (30:45-32:42) Ramping up equity exposure through retirement: "Intellectually I think it's very sound research; but from a behavioral standpoint I don’t think it's realistic." (32:43-34:24) • "Reducing Retirement Risk With a Rising Equity Glide Path" by Wade D. Pfau and Michael Kitces (Sept. 12, 2013) . The simple two-bucket approach: "My experience is the relatively small opportunity costs (associated with the bucketing approach) are way outweighed by the behavioral benefits." (34:25-38:24) • Testimony of Deena Katz, CFP, on "Boomer Bust? Securing Retirement in a Volatile Economy" before the Senate Special Subcommittee on Aging, Feb. 25, 2009 (see Page 7 for "paycheck syndrome").  Time- and goals-based bucketing: "A great deal of appeal but they don't make any sense." (38:25-39:19) How the complexion of retirement has changed: People will have to work longer. (39:20-41:32) "Where's the protection of the investor?" Evensky takes a dim view of the SEC's just-finalized Regulation Best Interest measure. (41:33-43:34) • "A New Rule Won’t Make Your Broker an Angel" by Jason Zweig, The Wall Street Journal, May 31, 2019.  Competency standards: Professionalism subsumes competency. (43:35-46:57) About the Podcast: The Long View is a podcast from Morningstar. Each week, hosts Christine Benz and Jeff Ptak conduct an in-depth discussion with a thought leader from the world of investing or personal finance. The podcast is produced by George Castady and Scott Halver. About the Hosts: Christine Benz and Jeff Ptak have been analysts and commentators on investments and the investment industry for many years. Christine is Morningstar's director of personal finance and senior columnist for Morningstar.com. Jeff is head of global manager research for Morningstar Research Services, overseeing Morningstar's team of 120 manager research analysts in the U.S. and overseas. To Share Feedback or a Guest Idea: Write us at TheLongView@morningstar.com

Is there a retirement crisis in the United States, and what role does the government have in improving the system? What's the current status of a fiduciary standard for financial advice?  Aron Szapiro, Morningstar's director of policy research and our guest for The Long View podcast, obsesses over these topics. In his role, he and his team conduct research on various matters of public policy and formulate views on policy proposals under consideration by Congress and regulatory bodies. Szapiro has testified before Congress, and he has an inside view of how Washington works: Before venturing into the private sector, he was a senior analyst in the U.S. Government Accountability Office, and he also worked for the New Jersey state legislature.  In this wide-ranging interview, Szapiro defines Morningstar's approach to policy research and homes in on some of the policy matters dominating our discourse today: whether financial advisors should be held to a fiduciary standard, how the U.S. retirement system might be improved, and whether meaningful retirement legislation can make it through partisan gridlock in Washington.  This conversation was recorded on April 30, 2019. Since then, the House passed the SECURE Act (on May 23); that legislation has provisions related to annuities in 401(k) plans, multiple employer plans, and required minimum distributions. As of June 11, 2019, the provisions have not passed the Senate. And the Securities and Exchange Commission approved a final version of Regulation Best Interest, which aims to hold broker/dealers to a higher standard of care than was previously required. Show Notes and References Background and Professional Development Szapiro's trajectory into policy research: "It was this arcane language that I wanted to understand." (1:15-2:39) • 10 Millennials Making Their Mark on Washington and Beyond  Policy Research What policy means at Morningstar and for investors: "Policy really drives and dictates a lot of what ends up happening to investors." (2:40-4:55) How his team avoids conflicts with Morningstar's business interests: "What would be best for investors and what evidence do we have to support that position?" (4:56-6:25) How his team works to ground policy recommendations in the data: "What we don't do is we don't try to make values-based arguments." (6:26-8:25) On whether investors are shaping the investment landscape more than policymakers are: "It's in government's long-term interest to make sure we have a system that protects and empowers people to save and make some decisions." (8:26-10:35) Policy Matters Today The state of fiduciary regulation for financial advisors: "It's sort of a mess." (10:36-14:53) Morningstar's Take on the SEC's Proposed Conflict of Interest Rules The SEC's Best-Interest Proposal: What Morningstar Told Regulators DOL Sets Date to Propose New Fiduciary Rule    States' role in creating policies that affect investors: "I hope these things build toward a federal solution." (14:54-16:58) New Jersey Proceeds With Adoption of a Uniform Fiduciary Standard  Nevada's Draft Regulations for a Uniform Fiduciary Standard    What will drive substantive change in Washington with respect to the investment and retirement landscape: "It's a very slow-moving ship." (16:59-19:51) The State of the U.S. Retirement System Retirement preparedness in the U.S.: "There are a lot of people who have been left behind by the fragmented system that we have." (19:52-22:48) How to measure retirement adequacy: "People should be able to sustain their standard of living that they had during their working lives in retirement." (22:49-24:13) Whether today's retirees are running out of money, and how we would know. "You don't want to do policy by anecdote." (24:14-26:38) Rand Corporation Retirement and Retirement Benefits Research 2019 Retirement Confidence Survey (EBRI)   On the bifurcation in retirement-plan quality between big and small employers. "Small employers are busy keeping the lights on." (26:39-29:22) SECURE Act (passed by the U.S. House of Representatives on May 23, 2019)  Retirement Enhancement and Savings Act of 2018  Solutions for Small-Company Retirement Plans  Legislation That Aims to Help Workers Save    On whether the Thrift Savings Plan for federal workers should be available to more workers. "It's great as a model that others can aspire to." (29:23-31:50) About the Podcast: The Long View is a podcast from Morningstar. Each week, hosts Christine Benz and Jeff Ptak conduct an in-depth discussion with a thought leader from the world of investing or personal finance. The podcast is produced by George Castady and Scott Halver. About the Hosts: Christine Benz and Jeff Ptak have been analysts and commentators on investments and the investment industry for many years. Christine is Morningstar's director of personal finance and senior columnist for Morningstar.com. Jeff is head of global manager research for Morningstar Research Services, overseeing Morningstar's team of 120 manager research analysts in the U.S. and overseas. To Share Feedback or a Guest Idea: Write us at TheLongView@morningstar.com

Our guest on this week's podcast is Michael Kitces. Michael is a partner and the director of wealth management for Pinnacle Advisory Group, a Columbia, Maryland-based wealth management firm that advises on about $1.8 billion of assets. In addition, he is a co-founder of the XY Planning Network. As the host of the Financial Advisor Success podcast and the publisher of the popular financial planning industry blog Nerd's Eye View, Michael has established himself as one of the most prolific and insightful commentators on the financial advice business. A fixture on the speaking circuit and in the media, Michael often addresses key trends and innovations in the way advisors serve their clients; our interview with him focused on the future of the financial advice business.  Show Notes and References Background and Professional Development Michael’s formative years: “The only thing I really think I figured out by the end of college was … that I didn’t want to do psychology, theater, or medicine” (0:59-2:51)  Michael’s bio Pinnacle Advisory Group XY Planning Network  Financial Advisor Success podcast  Nerd’s Eye View blog Dad’s old life insurance policy: How a wedding gift led Michael down a path to a career in the financial services industry (2:52-4:21)  Michael’s background and entry-path into finance  “He was just a really different guy than everybody else”: Michael’s recounts his breakthrough realization that he wanted to be a financial planner (4:22-6:07) ·  Certified financial planner designation  How Michael used his pre-med training to overcome a crisis of confidence that he didn’t know what he was doing: “I probably shouldn’t be giving them advice; I’m going to hurt someone” (6:08-7:31)  Hippocratic oath  Going deep to differentiate: “I’m going to get really good at these annuity benefit riders” (7:32-8:45) Leveraging a Mini-Specialization to Gain Experience and Get More Client Referrals” by Michael Kitces (Aug. 16, 2018; Nerd’s Eye View blog)  Variable universal life insurance—a short explainer   The Advisor’s Guide to Annuities (5th Edition) by Michael E. Kitces and John L. Olsen  Behavioral Finance in Practice Where behavioral finance falls short: Practicality (8:46-11:40)  Recency bias: A brief explainer  Persuasion: Using psychology and coaching to help clients overcome their biases (11:41-13:01) “Why Evolutionary Psychology May Be Better Than Behavioral Finance Research to Understand Financial Behaviors” by Dr. Derek Tharp, lead researcher for Kitces.com (Jan. 16, 2019; Nerd’s Eye View blog)  Influence: Science and Practice (5th Edition) by Robert Cialdini   Advice that Sticks by Dr. Moira Somers  “Most of us just don’t want to say that about ourselves”: Clients don’t hire us to save them from themselves, but to get on a better path and save time (13:02-16:37) “Do Clients Really Value Getting Help Managing Their Behavior Gap?”; transcript of episode 5 of “Kitces and Carl” video series  “Zoom the camera out a little bit”: The key to helping clients through difficult times is being available, clearly communicating, and setting context (16:38-18:18) “There’s very little research at all about what you’re actually supposed to do about this stuff” (18:19-19:56) Financial Advice: Evolution and Great Leaps “Disturbingly like clockwork”: Technology’s role in propelling financial-advice from stock-brokering to the mutual-fund era to asset-allocation models (19:57-22:14) “How May Day Remade Wall Street” by Jason Zweig (May 1, 2015; Wall Street Journal; Total Return Blog)  “So Easy a Baby Could Do It” E-trade commercial  Computers disrupted the stock-broker model and the internet disrupted the mutual-fund model. Michael on why he thinks software will disrupt the fee-based asset-allocation model (22:15-24:06) An S&P 500 index fund just for you: “Technology is going to allow us to completely disintermediate not just mutual funds but most of the ETF complex as well” (24:07-25:36) “Indexing 2.0: How Declining Transaction Costs and Robo-Indexing Could Disintermediate Index Mutual Funds and ETFs” by Michael Kitces (May 28, 2014; Nerd’s Eye View blog)  “Global Fund Flows Report” by Morningstar  The Future of Advice “If we can do that with medicine and we can do this with clothing, we can do this with at least large portion of financial advice as well”: Michael on delivering advice virtually (25:37-30:25) “How Video Conferencing Can Put the Face-to-Face (Back) into Distance Financial Planning Client Relationships” by Michael Kitces (July 27, 2015; Nerd’s Eye View blog) “(Saying) ‘Oh no one’s ever going to want to work with an advisor virtually; it’s all in person’ … is like clothing stores insisting that Amazon was no threat to them 20 years ago” (30:26-32:56) “The Future of Financial Planning in the Digital Age,” a presentation by Michael Kitces to FPA Georgia (May 24, 2017)  “Is Digital Search About to Replace Referrals for Finding a Good Financial Advisor” by Michael Kitces (June 3, 2013; Nerd’s Eye View blog)  Technology leaps like robo-advice are less of a threat to the financial advisor than to the the back- and middle-office that supports them (32:57-33:54) “The Advisory Firm Jobs That Robots Really Do Threaten” by Michael Kitces (May 10, 2018; Nerd’s Eye View blog)  The great inversion: In the future, advisors will charge for financial-planning services and give away investment management for free (vs. today where the opposite often holds true) (33:55-35:36) “Pricing Models for Financial Adviosrs and the Power of 'Free' Financial Planning” by Michael Kitces (Aug. 10, 2015; Nerd’s Eye View blog)  Best Practices for Delivering and Paying for Advice “We still have a huge industry gap”: Not even 30% of financial advisors have achieved a baseline financial-planning designation—the CFP mark (35:37-39:20) “3 Reasons Why the Financial Advisor Market Size Isn’t Actually Shrinking” by Michael Kitces (Nov. 15, 2018; Nerd’s Eye View blog)  “The Long Tail, the Big Head, and the Dangerous Middle of Financial Advisory Firms” by Michael Kitces (Aug. 27, 2018; Nerd’s Eye View blog)  FINRA Series 6 exam  FINRA Series 63 exam  FINRA Series 7 exam   FINRA Series 65 exam  A question of when, not if, more exacting financial-advice standards will arrive: “The U.S. has become a laggard on fiduciary and competency standards” (39:21-43:21) Australia’s Financial Adviser Standards and Ethics Authority (FASEA)  The Fiduciary Standard  “Is Financial Planning an Industry or a Profession?” by Michael Kitces (Dec. 15, 2016; Nerd’s Eye View blog)  We can’t do financial advice for young people? Michael on why that’s ridiculous and how flat-fee or subscription-based advice will come to fill that void (43:22-46:51) “How the Financial Planning Process Differs for Young Clients: Not Simpler, but Different Complexities” by Michael Kitces (Apr. 17, 2019; Nerd’s Eye View blog)  “Introducing AdvicePay and the Automation of Billing Financial Planning Fees (without Custody)” by Michael Kitces (Jan. 22, 2018; Nerd’s Eye View blog)  “The New 1% Advisory Fee: 1% of Income, Instead of 1% of Assets” by Michael Kitces (Feb. 11, 2019; Nerd’s Eye View blog)  “I don’t … see anything wrong with the AUM model”: Why charging a percentage of assets-under-advisement makes sense for some clients, but will become less common in the future (46:52-48:56) “How to Profitably Price Fee-for-Service Financial Planning” by Alan Moore, co-founder XY Planning Network (May 21, 2018; Nerd’s Eye View blog)  When it does and doesn’t makes sense to pay for financial advice by the hour (48:57:51:47) “The Opportunities in Providing Hourly As-Needed Financial Advice for the Middle Market with Sheryl Garrett” by Michael Kitces (Jan. 23, 2018; Financial Advisor Success podcast)  About the Podcast: The Long View is a podcast from Morningstar. Each week, hosts Christine Benz and Jeff Ptak conduct an in-depth discussion with a thought leader from the world of investing or personal finance. The podcast is produced by George Castady and Scott Halver. About the Hosts: Christine Benz and Jeff Ptak have been analysts and commentators on investments and the investment industry for many years. Christine is Morningstar's director of personal finance and senior columnist for Morningstar.com. Jeff is head of global manager research in Morningstar Research Services, overseeing Morningstar's team of 120 manager research analysts in the U.S. and overseas. To Share Feedback or a Guest Idea: Write us at TheLongView@morningstar.com