YouSaid · the spoken record

Dan Egan

lines on the record: 97
first: 2017-08-28
most recent: 2017-08-28
sittings or episodes: 1
sources: podcast

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“Sitting in a rocking chair Take more breaks. I love what I do here, but at the end of the day, I need to take more real breaks where I spend time with friends and family completely away from things, where I challenge myself in different domains than what I did now, and where I cultivate those sort of Really deep friendships, which you need the people who you love and are comfortable with and who can call bullshit on you on anything and that you know you can go to and like just blow your heart out. I think looking back from now, you know, like a lot of people, I'm going to be like, learn how to enjoy life while not working. Learn how to do it in all these other ways. What do you think? Does that sound about?”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“I got 10 years on you. So 10 years from now, we'll have that conversation again. So it's your waning days. You are thinking about People who are in their old age and dying and how they protect their investments, sitting in a rocking chair, what advice would you give yourself today?”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I now have an 18 month old kid and on a regular basis I go, what did I do to my parents? Why was I such a little pain in the butt? And not even in like hard stuff, just not understanding how much a parent cares and how valuable it is to get a hug from your kid. That stuff is straight dope.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“computers work with us inside of our heads so that we can learn faster, right? Like imagine if the way that you learned algebra wasn't horrifically boring in a classroom that's hot and you want to do anything else, but simply saying, okay, you're going to get this upload into your head and then you're going to have to practice it for half an hour and then you're going to actually know algebra. The ability for that to kind of like accelerate the rate at which we as an entire society learn the way learning kind of spreads. I think there's a lot of potential there. And I always think of like things that I would want to do. I don't even know what I would do there, but it is exciting enough sort of in like the history of civilization that I would do it. I would try and figure it out.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think these are a little bit related, but I'll say them anyway. One is a venture capitalist. There's an old quote by Abraham Lincoln, the best way to predict the future is to create it. And I think we sometimes lose track of that, like you can put your money where your mouth is literally in terms of I want to fund this thing that I want to see in the world. Kickstarter and various things. I love the collaborative fund because they have that element of if you think it should exist, make it. And that's from a finance perspective. Even closer to home, I actually, Elon Musk has a company that he's just started up called Neuralink. That basically is trying to help figure out how you can allow computer or machine brain interfaces. So for people who have lost limbs or disabled in other ways or can't talk, but they're literally inside their head. The long-term potential for that for us as a species of figuring out how do we help”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'll take a pay cut. I'll work longer hours. I will be perfectly happy doing something that otherwise looks silly because I can go home to my wife and I can say Guess what happened today? Coolest thing happened today.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“This is going to sound overly sentimental, but it's really, really true every once in a while. We get messages from our customers that Let me know we are doing the right thing for the right people. So we had one a few weeks ago where a guy rode in and said, I'm a truck driver. I've been investing like fifty bucks a month with you guys for a while. I would have been spending this on like booze if you didn't make it this easy and straightforward. And today I needed the money and I had like what I needed in this account. And so we get really focused on like what are wealthy people doing? How do we need to minimize taxes and all this other stuff? Every once in a while we get some unvarnished thing through that says you have helped somebody who otherwise would have been in a bad position and up in a good position. And that's the sort of moment where I go.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, like it was scary, it was super intimidating, and there's this one point where you end up in order to climb up, you have to climb up inside a chimney, right? So like you're encapsulated by rock, there's no handholds, and you're effectively using tension, you're pushing against the opposite wall and sort of shifting up it slowly for a good sort of 10 or 12 feet. And I started to get tired. And, you know, like the walls are slick. Probably my hands are incredibly sweaty. And I say, like, hold me, hold me, hold me. I'm about to fall. And then I make a last jump and I manage to just grab the edge of it and then pull up. That was like, you know, number one, I didn't die. And number two, I made it.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I actually don't really do much competitive sport. I do a lot of my own stuff, so I swim a lot and I got into rock climbing a little while ago. Actually, yeah, so the first time I went seriously outdoor rock climbing was incredible. So usually you train in a gym and you have to learn a lot of stuff. You have to learn how to tie knots and use protection, setting bolts into the rocks and everything. And you have to also learn physically how to climb. It's like it's not like doing a bunch of pull-ups. There's a lot of balance in it. Women are often better at it because they have a better distribution of weight. So I've been climbing in the gym for a while and a good friend of mine was like, let's go climbing outside. I know this great place I used to climb there when I was younger, the Colunks in the south of France. And what he didn't tell me was that this was like a six rope climb to the top where you're going to end up like 2,000 feet above the sea. And if you fall, you're dead. There's like zero chance that you're not going to die.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“A couple of things. So, number one, Michael Jordan, you know, like hit tapes are just amazing. It's really easy to forget how ridiculously talented and hardworking he was. And sometimes I see past, not even his dunks, but passes he made to other people where you have no idea. He wasn't looking there. You have no idea how he knew that person was there, and they're just beautiful. Hussein Bolt, that first 100-yard dash where he was like 20 feet ahead of him. The small American gymnast who twisted her ankle. Yeah, and then she landed like the last jump and landed it, you could see the pain, she had it, and then she collapsed. That was, I mean, that was one of the small feats of sort of like human dedication that really stick to me. You know, like she trained for everything. At the end of the day, it was just about sticking through.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“I would love for us to be able to allow betterman customers to own all of the underlying stocks and vote them. So scaled proxy voting that says what do you believe about X, Y, and Z? Okay, we're going to vote for you specifically that way. We're going to vote for you on this way on environmental matters and about guns. And you, we're going to vote this way about, I don't know, you're fine with corporate greed or something. So that is an interesting idea that allows sort of activists investing to get back into the fold because you're disintermediating the funds who are kind of playing that role and allowing individuals to express their views on it. That's an interesting idea that nobody's going to get near for five or six years. And I could end up spending a lot of time researching and thinking about it, but until five or six years from now, it's going to be a waste of time.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“I can think of a few things that are genuinely a waste of time. I get excited about new ideas and I start running with them and I don't stop and say this is a good idea. You need to just write it down and then you need to put it aside because this isn't getting done in the next year or the next two years. You're going to have to bring us back to active and passive. Does passive index tracking reduce competitiveness? Does it increase corporate ability to do malfeasance because of the fact that there's common ownership”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think less is usually not do nothing do less. The more that we can build systems around people that push their focus out to the future and further and further into the future, that reduce the emotional impact of recent history, that kind of like work with their brains and don't say like just get frustrated. I'm going to not tell you. But here's this thing that you can do. Here's something that's going to give you a bit of catharsis. A brilliant thing that I would love to do is something along the lines of if somebody's worried, don't let them trade their portfolio. Let them just like put on a two-week downside hedge. It costs them a little bit of money. And like after they've done that five or six times, let them know just so you know. So work with them.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“Unless you're in a professional shop, you have a very low quality feedback loop about how well you're doing. The only people who have really high quality feedback loops are professional PMs, sometimes analysts, who'd get like, you made this call, you said it was this date, this amount, this price target, you were right or you were wrong, why? And that tight feedback loop is what allows you to learn. Most investors have a very noisy bad feedback loop about their decision making. So setting up a system by which, and we have a little bit of this today. So like when a customer makes some decisions, we ask them, why are you doing this? What are your thoughts on it? And we can play that back to them later. So setting up that kind of a high fidelity personalized feedback loop so that you learn as efficiently as possible. I think that's a very exciting thing. It's something that we're doing because, or we would do because it means that our customers make better decisions and hopefully their wealth grows faster. I don't think it's, you know, generally it leads to like trading less and more diversification.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“The biggest one is that I want our interfaces and our interactions with people to become more personalized but in an automated fashion. So very, very simple thing. Our sophisticated and our normal investors, they should have different interfaces. At some point, we should just automatically figure out, you like detail. You like seeing like performance reports and betas and alphas and all this other stuff. And the interface should just change. And it should just be a fundamentally different experience for you than my little brother, who is like, I don't want to understand any of this. I trust you just make it super easy so I can do what I need to do. That level of personalization, it takes a lot of, this is something that sort of machine learning and AI need to get involved in, but it also takes a lot of insight about when we say sophisticated want to see this. We don't mean just shoving numbers in front of them. We mean show them the information or analysis that will lead them to make better decisions. Another component of it is feedback loops about people. So the vast, vast majority of investors”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, got it. So what's the next frontier for your research? If you could wave a magic wand and say, there are two or three things that you would love to have available for your clients that aren't today, either because of technology or because they're just a little tricky to solve. What would they be?”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“So that you don't end up with an echo chamber. Like diversity of perspectives is not comfortable. It is not fun. You are going to be disagreeing with people who you work closely with on a regular basis. They need to feel respected. They need to feel that they're being heard. And it can make for, it's very tough because it can make for a tense workplace, but also that's the crucible that the really strong stuff comes out of. I get if we have five of us all agreeing on something, I am 100% sure that it's the right thing to do. We're going to disagree on 90% of things. The other 10% must be right. Yeah.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“Very embarrassingly. The key thing is trying to build a system by which those discussions and arguments take place where number one, you get in the maximum breadth of ideas possible such that you're kind of pulling from maybe this person has an idea that nobody's ever heard of before, but it's been hard to deliver using technology, using automation, we can write the algorithms and we can do it. That's one of the real core binding things is nobody wants to deliver something that requires idiosyncratic subjective expertise. Like our trading is done completely automated. We have a guy who writes trading algorithms to figure out how to do it well. So having hired all these very different people, even I very much underestimated how difficult it was going to be to set up systems and processes such that people who have very different perspectives feel enfranchised, feel like they're being heard, and making sure that that continues.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, this is one area where I'm going to say this is not my strength, and I would say that it's something we are actively figuring out on the fly. So it's kind of neat because you're seeing the culture, I was with Betterment from about 20 employees, and we're now at 250. And while the culture...”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“Talk a little bit about the management of teams, something that comes up in a lot of my conversations that the asset management industry is not known for being great people managers. I don't know so much about technology. You do hear in corporate America there's a lot more experience in sort of managing people and being a little more holistic about their life and their experience within a company. How does it work here?”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“Or mutual fund company. And as strange as it sounds, tech is an enabler of that. It is how we are going to do it. But the mission is not build cool tech. It's solve people's financial problems.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I've never worked at a non fintech tech company, but I can tell you that this is definitely more like a tech company than any financial services company I've been in. There are maybe eight people here who come from a finance background out of 250 employees, whereas there are probably at least 120 software engineers. So the culture, the thought process, the sort of ethos that pervades is much more tech than it is financial services. I don't want to discount it. Myself, a number of the other key people come from wealth management or financial services and they, you know, as much as anything, came here because they wanted to do business a different way from how they saw it traditionally being done. So I think that it is a good blend of it. We're very committed to the idea of fiduciary advice. I think that's in the long run what we see ourselves as being is the first company that goes public off the back of being a fiduciary advisor rather than a broker.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“So over time, you're starting to see an asset management, this blend of quantitative and qualitative and fundamental investing, where can people use either data analysis or computers to optimize portfolio construction? And the more you're talking about it, the more I'm feeling this, is there a tension here between you are delivering asset management services? Almost everything you talk about is really a technology company. What's the culture like here? Is it a technology company? Is it an asset management company?”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“The outcome of it, so I wouldn't entice them to change because I think if you enjoy doing this, if this is kind of like your hobby and like people go to Vegas and they don't go to Vegas because they think they're going to win a lot of money, they want to be entertained. And this is a little bit the same thing. The issue is more how do we get it so that we push you into new domains or make you try new things so that at least you're diversified in your hobbies and you're less likely to kind of like end up in a super narrow but highly leveraged position on one specific thing. And how do we make sure that you're getting the feedback such that maybe the thing that you're really good at and you should enjoy more, you've never tried yet and we need to push you towards it by telling you you're not great at this thing that you do a lot of. But you're surprisingly good at this thing that maybe you haven't valued yet.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a great question. I think that I have noticed it a bit. And there are two elements too. So number one is just a straight giving advice and being responsible for somebody else's money is different than what you do with your own. So I know people who have made bets on Bitcoin or various other things that lost tons of money. And if they were an advisor, they would be fired. But you can't fire yourself. Like that's the kind of nice thing about being your own money manager is that no matter what you got to live with you, you can't fire you. The other element of it is that I think people figuring out how to give negative feedback in that context, learning from your mistakes, that's really hard. People love paying attention to and doubling down on things that have gone well when really most of us should spend more time trying to strengthen up our weaknesses. And I think that's where a lot of professional investors, they enjoy the doing more than they care about.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“I've noticed in conversations with professional investors that a lot of them don't come close to maintaining the same type of rigor and discipline with their professional portfolios as they do with their personal portfolios. And I'm wondering if you've, in your runnings around about doing this, if you've had exposure to professional money managers and had conversations with them about what they do on the personal side and if you've noticed any of the either similar or maybe somewhat different reasons because of their knowledge base of how they might be able to benefit from that type of systematic program that betterment provides.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“Or using a digital system versus these same advisors continuing to build systems, them sort of being the beta testers of their automating themselves. We're going to see more and more of that.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“We are going to keep automating a large part of that. So it is not simply a matter of, oh, we hit some brick wall and we ended up having to use advisors. Every single financial planner or licensed expert on our platform is doing this so that they can figure out how to automate more of their own job. Everybody here to some degree is figuring out how to put themselves out of a job, as strange as that sounds, because these are the sort of the non-scalable problems where if you're talking to one person, you can't be talking to 10 other people. So let's work. Let's see what questions people ask. Let's see how we could get the right information from their bank accounts or from wherever else. Do that automatically and give them the questions easier. Triage them, figure out what's urgent and needs to be addressed immediately versus what could wait for a little while later. Looking ahead sort of five to ten years, I wouldn't be surprised that the balance of labor of what questions are being answered sort of automatically.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. So I'll give you a two part answer. One is the short term and the other one is the long term. So one of the components of it, we've had the employee who I work with the most is a CFP who's been here about a month longer than me. And so from the beginning, we've had planners involved in the process. It was mostly a matter of talking to them and pulling out whatever algorithm was in their brain and then putting it into software. Now one of the things that we've been doing that pretty well, but one of the things that we hit is that we want a better understanding of what are the next things that our customers need from us and what are the questions that they have that mean that they can't get over the hill to committing to us. They can't really completely pull the trigger. So I would say five times out of ten, the questions that customers ask us are like, here's my situation. Am I okay? That's not something that's easy for an algorithm to answer, but an advisor can go through it pretty quickly and get them to a comfortable point. In the longer term, to be clear,”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“I noticed that recently you've added financial planners like live advisors to the platform from what was traditionally just an automated. What was the sort of, is there a behavioral thought process as part of that or is it just adding on another piece of the broad financial picture that your clients were interested in?”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's almost like a perversity. If you're excited about what you're investing in, you should worry, right? If you're kind of like, oh, I'm doing this thing. It's pretty standard. It's not very exciting. You're going to stick with it. You're not motivated to monitor it all the time and to run away when it's not doing exactly what you thought. I think a lot of things where people do get into trouble is because they either they are looking at something where it's done well lately or it's exciting or their friends are telling them about it or it has some allure of sort of exclusivity to it. They want to be part of that club. They want a social experience. Then when the actual returns don't pan out to be that well, because there wasn't an underlying philosophy or like an adherence to this just works, I know that I can get through this. It's really easy to cut and run.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“And that ends up being the same. It doesn't matter if it's an individual on the betterment platform or a board member at the most sophisticated endowment. That level of understanding about the investment ends up being the threshold by which people cut bait at the period of maximum pain, whatever that is. And it's usually slightly different from what people go into an investment, whether it's they're just wiring money to betterment or they're picking a manager, a hedge fund manager. They go into it, assuming it's going to work out according to their expectations, right? But there's always a point.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“Investment strategy is whatever ends up with the investor taking home the most growth. I don't care if something returns 9% a year, but it's a deep value strategy that has huge drawdowns or something, nobody's going to stick with it that such that they benefit from it. So whatever the investment strategy is, it's return profile and its understandability people's ability to have faith in it. That is actually a huge part of what determines if it's going to get in front of our customers because it's got to generate take-home returns. Not top line returns, not mutual fund prospectus returns, actual investor take-home returns.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that last bit is really the important one. We have a number of extremely bright, sophisticated investing individuals, but we have to remember that at the end we have mom and pops who are investing for. So that is a, it is a limiting factor in that we're not going to do anything too complex or like esoteric because it needs to be communicated and understood in such a way that they're going to be comfortable with it. So that filter right now we predominantly trade ETFs. We can trade single line stocks if we need to. approach has said we're going to stick to things that can be well understood by the end investor and it would take a very very very high degree of conviction that the investment strategy was going to pay off for us to do anything that i couldn't explain to my mom because they're the kind of like the biggest risk factor in a lot of this is them understanding and and dealing with it and a lot of people say this but this is absolutely one of our core principles the best”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah. But that's a little bit different from your individual client perspective and then your perspective and the product offering that you may have because you can go and vet the manager. If you have someone on your team, well, there's a smart beta, whatever the play is that has scale. And if you think, hey, this is going to be better than the index, you'd put it in. So how do you go about making those decisions effectively on behalf of the large group of your clients?”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“Smart beta is fine, all of these other things are fine. They are not going to make or break anybody's retirement. On the other hand, I don't care how much alpha you have. Zero multiplied by a million is still zero. We got to get people saving and getting that base number up faster. Yeah.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, one of our analysts, Michael Campos, did a great research piece where he said, let's think about an ordinary person who's confronted with two different things. They can either figure out how to save more, or they can put that money and their time and effort into finding a manager with alpha. And he specifically said, I'm going to pick a manager that has 1% alpha every single year. That's my target. If we could find that person, that would be amazing, right? So we've not set the bar low here. And he basically found that for that person, in order to, if that person went with finding out how to save more or invest more rather than pick the better manager, they would need to say something like $33 more dollars per month. So that's the trade-off is like if you know that you can save a little bit more, that's effectively more powerful than getting a manager who delivers 1% alpha. So as long as they're diverse.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I think the best way of describing it is that it's a distraction for the vast majority of people. I think that the amount of thought and ink that has been spilled on it has just been deadweight losses to the vast majority of investors. And if you're in a low-cost fund that is systematic, you don't have a lot of random tail risk. You don't have a lot of MATOF risk in it in whatever way. I think you're probably going to be fine. I think that most people, the issue that comes up with it is however many hours you spend trying to find the right manager or trying to find the right strategy and understand what this stuff is doing is not well spent unless you already have a very, very large asset base. I'm talking in the millions at least. Most people are looking to get to the point where they have $2 million so that they can retire. And in that case, the best use of your labor is figuring out how to make more money or save a bit more money.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, you know, you mentioned earlier about sort of beliefs and implementation of small cap and value bias. Talk a little bit about your perception, which may be the same as betterments or maybe slightly different, of active versus passive.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“Business learns things that previously because of the level of number of intermediaries or how the assets or the liabilities were transferred was really inefficient. Maybe those are things that can scale well and effectively. But when we look ahead, we are more than twice as big as we were last year. And that growth pattern is just going to keep continuing and continuing. So whichever asset classes we go into have to be sufficiently liquid, the transaction costs have to be low, the sort of like carrying costs have to be low enough that we know we could deliver that to a million people, two million people, 10 million people, and not worry about the underlying asset base.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't foresee us making that a core part of our value prop, if only because our mission is to democratize a lot of the higher-end wealth management things. And those are almost always capacity-constrained or exclusivity plays, right? Everybody can't have the best hedge fund. Everybody can't be the richest. So our value prop, I definitely think we're going to push more into personalization. So recently we announced that you can have an SRI portfolio here, that we're going to actually look at a major and make sure that the scores are doing well, etc. There's a lot of play there, again, looking at things that aren't zero-sum games or that there's not a strategic actor on the other side of the table. And that means that we can exploit that, especially if it involves technology. There are kind of asset classes that I view as previously inaccessible asset classes that technology or other structure changes are allowing to be viable. Things like peer-to-peer consumer loans,”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“In an environment like this, a lot of the broad asset allocation models of institutions are almost set up to diversify away from traditional equity and bond risk as your assets have grown as a firm, you must start thinking about huh, are there a diversifying return stream? Is it a hedge fund strategy or some type of credit instrument that would be suitable for a lot of your clients? Where are your thoughts on that and how is that evolving?”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“Looking at actually preparing people for this, so they're more desensitized. So right now there's a ton of content going around that's about like the market's never been higher. The last time”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think there are two that things aren't completely in place for. One which is looking at things called commitment mechanisms. So effectively saying, what do you think that you should do? Or what would you recommend that an average investor does if the market drops 30%? And most people will say, I would recommend that they stay put and they don't change everything. You say, all right, cool. Will you adhere to your own advice? Say, yes, obviously this was good advice, so I'm going to adhere to it. And if something like that happens, you bring that back up. You say, like, your advice to you was to stay the course. Here's your signature. Maybe even Lincoln something that involves a second party. Like you have to kind of call it phone a friend and say, like, just so you know, I am hitting the glass box. I'm freaking out right now. I'm breaking my own advice. So that's one element. The other one is...”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“Afterwards, and we said there are some bad behaviors like people changing their allocation or defunding their accounts. And there are good behaviors like depositing that lets us rebound. And we found that that simple, easy thing to do, just a pop-up notification, reduced the bad behaviors by about 15% and increased deposits by about 10 or 12%. So it didn't solve the problem, but it's very easy to do and it does have enough effect that you can kind of tip your hat on it. When a big one comes, I think we're going to be in new territory. And I think that It's going to hurt like, you know, there is no, regardless of any sort of asset flows or anything, if the market's down 40%, I'm down 40%. You're down 40%. Like, it's going to hurt. I think that's going to be, there is going to be a separating the wheat from the chafe at that point in time. I think there are a lot of companies that are going to fail, like at that point in time because it's going to be really hard. And it's going to be a question of how much you can not simply protect your existing customers and help them, but also can”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“So starting way back, starting with the Greek crisis, the first thing that we did was outbound emails to try and calm customers down. Did a randomized controlled trial. There were like three or four different arms to it, and there was a control. And what we learned is that most people are not worried about the market. You know, most people aren't following it, even if it's the front page of the news. They're worried about the presentation they're going to give to their boss or their kids' grades. And by notifying those people who are not following it that something was going on, we were actually causing a bit of stress. So what we want to do is we want to target the people who are following it and who are going to be stressed without hitting everybody else. So in the following one, we didn't send any emails, but if you came in and you logged in either on the web or on our smartphone app, we would show you this sort of like little takeover message that said, if you're worried about markets and what's going on right now, here's our thoughts on it. Here's what we think you should do. And that, we looked at the behaviors right.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“Again, the experimental thing, people forget that we've had about, we've had five corrections over the five years that I've been here, and we had one 20% drawdown. I think in January and February of last year, everybody hates drawdowns except for perma bears, people who are short the market, and behavioral scientists, because this is the point where I finally get to test whether or not stuff works. So every time there's a market drawdown, like a third of our plan that we execute is running experiments to see, do emails work, to push notifications work? Does changing the screen like this work? Like, what do we do that we actually can scale?”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“This is a great question. I think there were tremendous trades. I think if you just look at profit numbers for people like e-trade, et cetera, during those periods, we are not where you're going to go to trade. We are not that fun. There are now apps out there that make it really fun and interesting and free to trade single-line stocks into market time. We are wonderfully boring when it comes to it. So I think that we are selecting for investors. When it hits, we're going to try and guide them towards doing less extreme things. So the worst thing you can ever do if somebody's freaking out to say, stop, don't do anything, sit still, et cetera. You have to take that anxiety and that energy and redirect it towards more positive things. So it's going to be, okay, take your 80% stock portfolio and let's shift it down to 60% and wait for a little while longer. Let's reduce the extremity of the action. Let's focus on the plan and see whether or not you're on or off track from your plan. There's a lot of little things we can do that are about refocusing the investor at that point in time that do work.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is from people who are sitting on cash until the news and the markets make them notice that they can be putting it in cheap now. I also think that our business over time, it started out with direct retail predominantly taxable and IRA accounts, but also now we have 401ks and advisors. And that sort of shift towards longer-term accounts in IRAs and 401ks are much more stable during crises. It was a great study by Vanguard of their IRA and four hundred one K investors that found through the 2008 2009 financial crisis something like 80% of them didn't touch their accounts.”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source
“Definitely. So I have the unlucky luck to have worked and lived through the 2008-9 financial crisis. I was at Barclays during it. And this was one of the big questions is who stays put, how do things change? And I was working with Berkeley's stockbrokers at that point in time, who is a direct to retail brokerage platform. So a lot like E-Trade here. And one of the most surprising things, one of the things that actually crashed their website during some of the worst days was young people signing up. There is effectively, we don't think about it as much, but there are a lot of people out there with dry powder. They're sitting on a lot of cash. We don't see it. It's not on our platform. Waiting for a sufficiently convincing dip to put money in. So the first thing, this isn't going to solve it. Like if the market goes down 40%, our portfolio is going to go down 40%. You know, we don't have any magic there. But I think that we underestimate a number of factors. Number one, how much dry powder?”
2017-08-28 · Capital Allocators · Dan Egan – Better Investment Outcomes (Capital Allocators, EP.23) · IDENTIFIED FROM THE TRANSCRIPT · source