YouSaid · the spoken record

Rick Ferri

lines on the record: 102
first: 2015-04-12
most recent: 2015-04-12
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Going to have to make a decision at some point whether you just want to work out of your living room and just take on the 25 clients and be happy or whether you want to build this colossal thing And I don't know if I guess What I learned in the last 25 years is he's absolutely right. I mean, there's nothing wrong. Just working out of your living room with 25 clients and helping those 25 clients. There's nothing wrong with going on and building a multi-billion dollar business. But I always thought that it was the right thing to do back when I was 40 years old to go out and build a multibillion dollar business. But in fact, now that I'm 57, I think that working out of my living room with 25 clients seems. Not a bad idea. Not such a terrible idea. A lot less headaches than running a big fence. Well, Rick, thank you so much for being here.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“One of my clients who is now a deceased said to me, I started my company Rick, you're going to be enormously successful. I didn't think this. I said, well, I'm just working out of my living room out of this old wooden desk I pulled out of the trash can. He goes, you're going to be enormously successful. You have to make a decision. Either going to just going to continue to work out of your living room and have maybe 60 clients and you're going to earn a good living with you and your wife and maybe one assistant or you're going to go out and you're going to build a big multi-billion dollar money management company and you're going to hire all kinds of people and you're going to have all kinds of HR issues and you're going to have a business that you're going to have to run. And he said”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I always tell people as I get older, I know less difficult questions. It's not that you know less, it's that your head is filled with so much stuff. It's harder to access things.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“ETFs while they've been great to promote the idea of John Bogo's philosophy, they have also polluted the pure concept of what indexing is.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“For the better is certainly the technology. It's made it so much more efficient and really has tightened up our ability to Analyze portfolios, analyze products. I think that the transparency also is better than it used to be as well. So it's made me made our company and made the whole industry more productive. So that's good. What's bad Nothing's changed on Wall Street, really. You take a good product like indexing and you got to smear it all up by calling it something else and active management takes something as pure and beautiful, if you will, as a straight market index fund. And now everything is an index. Every active management strategy that you can think of is now an index. And you have to add these new indexes to your portfolio to give you diversification. It's kind of complete nonsense.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“With US equities because they're doing business overseas, therefore, the earnings of U.S. companies are being affected by currencies. This is a direct currency play. And doing rebalancing between U.S. and international gives you a little bit of a rebalancing benefit between the currencies. Mathematically, John's idea hasn't, it makes, it sounds good, you know, it's... Populist, if you will, but from an academic standpoint, you really want to have about 30% international.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I've never believed that in his approach to the fact that while U.S. companies are doing, at least in the S&P 500, are doing 40% of their business overseas, therefore you're getting overseas exposure. That's true. But overseas companies are doing business with the U.S. as well. So I like the idea of getting more diversification in a portfolio. Remember, we talked about the U.S. equity market is shrinking. The number of names are shrinking. And getting more... Names in the portfolio via international where things are expanding and more names are coming on board, especially in the emerging markets, is it helps offset the fact that the US equity market number of issuers are shrinking. But in addition to that, I like the idea of getting some currency diversification in my portfolio, even though you're getting it sort of”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Here's the irony of the situation. ETFs have done more to promote John Bogle's philosophy than anything in the last 25 years. So All of the robo advisors, all of the other advisors out there that are doing ETFs, mainly using beta-type products to put together an asset allocation. That is promoting John Bogel's strategy. So the irony is, even though John doesn't like exchange-traded funds or is said publicly he doesn't like them. That product or that structure has done more to promote his philosophy than anything in a very long time. So he should love ETFs for that reason.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Something, yeah. Yet, if you get with him privately, he will say that there's a handful of ETFs that actually make sense.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's not really styled if it's just this is that they do more of a equal weighting approach rather than the market just cap weighting. Okay, now you get the small cap side and small cap underperforms, but since the small cap managers are not all small cap, they're bleed off into some mid-cap. Maybe even a large cap or something, they're going to pick that up, that style difference up, and they're going to outperform. In the asset class or the style that underperforms, you will find more managers that outperform. And in the style that outperforms, you're going to find more managers that underperform.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I watched that story. I'm going to tell you otherwise, depending what part of the market you're looking at, there's always that part of the market that outperforms. So if large cap stocks outperform last year, you're going to find that Few large cap active managers outperform. And if small cap underperformed, you're going to find that More small cap active managers outperformed than large cap managers. Now, why is that? Because the index is a pure and the managers are messy. So, if small cap underperformed and large cap outperformed and the managers are messy and they kind of bleed off into mid-cap and even some small cap, even though they're still in the Morningstar large cap box. Going to underperform because they're bleeding, and the index itself is pure”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“To be in the CRISP indexes. That is now down to something like 3600. So companies are no longer capitalizing themselves using private equity. There's less companies trading on the U.S. exchanges. So you've got more advisors and more hedge funds chasing fewer opportunities just because there were just fewer companies too as well.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'll add something to that too, which is that not only are there a lot of alpha chafers now, but there's also less stocks on the stock exchange. So the number of stocks on the US exchange is that trade with any amount of volume has been cut in half since 1997. So over the last 20 years, cut in half. Yeah, there used to be over 7,000 stocks that trade on the U.S. stock exchanges that had enough volume.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's the theory only. Remember, we just said that $2 trillion is already benchmarked to the SP 500, yet last year only 15% of large cap U.S. managers outperformed the S&P 500. So where's the data?”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Another guest for you if you're Looking for someone, he would be great to have on the show, I think $2 trillion are directly benchmarked to the SP 500. Yet there's still volatility between the SP 500 stocks. In other words, it really hasn't. Change the market. Know a little bit perhaps, but if you're buying a total market as opposed to the S&P, it's a wash. There's no effect on you at all. So I don't think that how... How much Indexing is too much indexing? 98% of the market being indexed, maybe that becomes too much. I mean, I don't know what the answer is”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I don't know if we are at a point where so much money is going into these strategies that we're going to have a very poor period of performance for a while. Or not”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“10 years prior to that, I mean, it's not so rosy. It looks really bad. So I don't know if it's going to work for 10 years going forward. There's a thing called factor crowding. Have you heard that term before? Okay, so you've got all this money coming into these smart beta strategies. A lot of it potentially for the wrong reason they're chasing performance, they're chasing the hot dot, if you will. The chasing smart beta rather than factor investing”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And what's going to happen to your business if you hang your hat on this stuff and it doesn't work, what do your clients going to think of it and how long are they going to stick with you when the guy down the road is just doing what the market's doing and you're not? And so there's a certain business risk to advisors to going down this road. And if you do, how much are you going to expose the portfolio to it? And we made the decision that no more than 25% of the equity portfolio will be exposed to these various factors and the rest of it's just going to be beta. Because I don't know if it's going to work. I know it worked in the last 15 years. It was fabulous coming off the tech. But if you look back,”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“The new paradigm, you remember that, exactly. That was the word. The new paradigm. And here's the thing. If our clients or advisors don't understand what they're really doing with this smart beta stuff and doesn't really understand where they're Potential returns are supposed to be coming from, then how long are they going to stick with this strategy when it doesn't work for 10 years? And there have been 10-year periods of time where it didn't work.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Cost per unit of risk from our perspective as an advisor, looking at all these different products out there, determining how much tilt is there or how much load is there to these various factors, risk factors, and how much am I paying over beta to get those loads. And it's a cost per unit of risk to come up with what funds you should invest in. If you decide to even do this. Now, it's a big question whether you should even do it. You have to really understand it to do it because if you don't understand it, then the next time these things don't work, like in the 1990s when large cap growth was doing very well.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Have those tilts, if you will, towards value stocks specifically. Sure. I mean, it's a methodology or a strategy that you can use to get those tilts of DFA is another strategy you can use to get those tilts. So there's a lot of different strategies out there that you can use to get these various tilts. And it's a question of”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. Now, in fact, I had this conversation with Rob or not. I said fundamental indexing has legs because it actually describes what you're doing.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“But it's all the same thing. Again, smart pay is just a marketing term. And Rob picked up on it. Rob or not. I mean, he picked up on the word smart, but he loved it because all of a sudden it was a very easy way to talk about fundamental indexing. And it made it sound so chic.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“However, this idea that it is something wrong about a capweighted index is just wrong. Capweighted index are a measurement of the value of the equity market, and that's what they were designed to do. And only out of sheer poor performance by the active managers have indexing using cap weighting become so popular. In other words, you're trying to say that this isn't a good way to invest, yet it outperforms most everything else. It's like our form of government, right? What a terrible government. Democracy is terrible.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I know Rob very well. I speak with Rob all the time. And I'm a big proponent of what he's doing. I follow all his research and they do a great job. That said, but however, I can tell you.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Great portion of the variability of a diversified stock portfolio. So you can now design your equity portfolios to have tilts or overweightings to these various risks with the hope of getting a higher return than the market. Although, you know, in the former French world, it's only because you're taking more risk.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“The Farmer French three factor model, which codified, if you will, the The idea that portfolios have three distinct risks. And you can measure the risk, and the risks are the return, the sensitivity to the market, the sensitivity of small caps to large caps, and the sensitivity of basically values, stocks to growth stocks. And that covers 95% of the variability of a diversified portfolio of stocks. So kind of captures most of it. There's a few others in there like momentum and quality now. So it's really a five-factor model that captures”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“First of all, smart beta is just a marketing term. I mean, there's nothing smart about There's nothing smart, inherently smart about taking more risk. I mean, if you decide to take more risk, they get a higher return, fine. And if you decide that the risk isn't going to be beta, but it's going to be small cap risk or it's going to be value risk or momentum risk or it's going to be quality risk or something. I mean, if you believe in pharma French. Methodology, you're going to say these are risks.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because even though they're not inexpensive relative to Vanguard, I mean, they are more expensive, you're getting more bang for the buck. You're getting more risk exposure to the risks that you want. So you would look at them, you would look at research affiliates, RAFI, you would look at other types of products that are in that space.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“For just meaningful. Stock market, bond market, that's correct. Now, if you're talking about smart beta, if you will, or factor investing. Strategic beta or alternative beta additional beta, exotic beta, whatever you want to call it. I mean, the fact is, you're not actually going after the market. You're going after a strategy that's used in the market Then you have to try to figure out what risks, by the way, are that strategy giving you and therefore what risk premiums you might be able to draw from it. Now you have to look at what is my best bang for the buck? I mean, what funds produce gives me the highest exposures to those risks, therefore potentially highest exposures to those risk premiums, for the amount of fee that I'm paying. And here is where you end up with somebody like DFA.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, is your 5,000? Okay, so now you have all the indexes out there that have been created that capture this. And then you have to go to the marketplace and see what products are tracking these indexes. And you end up running into Vanguard and you run into iShares and you run into State Street and you also are now running into Schwab. And so you have to do an analysis of fees and turnover, taxes. To come up with what is the best product that I can select that best captures the risk that I'm trying to capture. And a lot of times it ends up with Vanguard.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's mostly Vanguard and DFA. That's a majority of our assets There might be an eyeshare or two out there. But, you know, we're trying to capture the return of risk in the marketplace. I don't even want to call it an asset class because asset classes may not have returns. We're looking at a risk in the marketplace, call it market beta at US equity beta, if you will. So we're going to try to capture that. Well, now, what's the best way to capture that? Well, first, you have to look at all the different products that are available. There's different indexes out there. There's a Russell 3000, there's the Dow Jones Total Market, there's the CRISP total market index.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And advice perhaps if you're an advisor on how to structure the portfolio, I mean, you really want to have the S&P 500 or should you have a total market? Do you need a QQQ Nasdaq? I mean, really, what is that? God, you're genuinely.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Advisory side. That's correct. That's correct. But, of course, all the advisors who go with us have to have the same philosophy. So it's not like we're going to do tactical asset allocation because an advisor believes in that. So just like a DFA and just like a BAM client, you have the philosophy and then you're coming to us for implementation.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, exactly. And what happened there, and I can't speak for Buckingham, but what they did was they created an asset management company called Buckingham Asset Management. And they realized that they can run money not just for their own clients and advise their own clients, but since they had built out the back office, they can run money for other advisors using their strategies as well. But it's the other advisor who gets paid the advisory fee. They get paid the portfolio management fee. And it's the same thing with portfolio solutions.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“No, because the way I looked at the pricing of this is that we get paid 25 basis points for portfolio management, whether it's through the RoboAdvisor, which we're creating, whether it's through our own channel, or whether it's through a sub-advising, we're getting paid 25 basis points for the intellectual property and the running of the portfolio and creating the portfolio. The extra fees are for advice. Either you're going to get the advice from my CFPs or you're going to get the advice from.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the portfolio management fee to their clients is 25 basis points. But then if we do some administrative work for the advisor themselves, like collect their fees for them, it's a little bit more than that.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it's also now I don't have to hire two people in portfolio management. So it's those two CPAs that you were saying in the back crunching the numbers. Okay, so those people, I don't have to hire because I've been able to use technology and put it up in the cloud and outsource it to a black diamond. And then also do a sub-advisor role or a tamp role using that same technology, which allows me now to expand my intellectual property, which again, that's what I'm selling, to other advisors who don't want to manage money, and they can put their clients with us and we can manage their clients' money in a customized fashion at a very low fee using the same technology.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Right. And reporting functions and portal and all of that for the clients. So although it's expensive for us, we're paying about $100,000 a year for this.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so this just occurred. So we're coming off of APX, which is Advent on server software. And we've gone to the cloud, Black Diamond. And we are. And they are actually doing a lot of our reconciliation”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“For example, there came a point when I personally couldn't speak with all the clients anymore. So we began to hire certified financial planners who came in. And now we have three full-time certified financial planners. They're speaking with the clients on a day-to-day basis. And I'm just they're saying, hey, thank you for being with us. And if you have any questions for me, just give me a call. But it's these CFPs who are speaking with the clients one-on-one now on a daily basis.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And again, technology does drive a lot of this. So as technology gets better, we are able to do it scale it more so it can go further”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“What you've put together can take you to a certain point. And then you've got to recreate it. And that'll take you to another point. So it scales and then a sort of a sort of a s”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think so. I mean, there are different levels as you grow your advisory firm where you realize you have to do creative reconstruction. What's the word? Creative destruction. Destructive destruction, right? I'm sorry. So you realize that”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“My formula has always been one new employee for every hundred million of assets. Try to keep to that as much as I can. But as you get larger over a billion dollars, you need to add. Different levels like I had to add a compliance manager full time, you have to add an operations manager full time. That was over.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I can't do that. But I can do it in mass by writing books and then they come to me because they read a book or they read a blog or they read a lot of stuff and they ended up coming to me and saying, I get it. And now I'm interested in having you manage my assets. Well, that's a good conversation.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure, so most of my education is done through the books and my blog and articles as opposed to one-on-one conversations. Again, because I structured this company to be low fee, including our fee, I can't go out and try to convert people. Person one on one. I don't have the time for it. I don't have the resources for it.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, we can try to convert people on radio shows and such, but by the time we're speaking with them one-on-one as an advisor, they have to already see eye to eye because if not, I can't convert you.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Not Not in our business. I mean, the philosophy we have, again, in Low cost to try to create the correct allocation for you in the long term, educating the clients and reminding them. Vast majority of our clients didn't do anything. No penalty.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. So, of course, we got a lot of phone calls just like everyone else, and 90% of those people after talking with them didn't do anything, which was good. We didn't have to do anything with their portfolios. The other 10%, a portion of them terminated, they capitulated before we even had a chance to talk with them.”
2015-04-12 · Masters in Business · Founder and CIO Rick Ferri: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source