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Robert Johnson

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85

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2016-04-22

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2016-04-22

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1

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1. “It's funny because over the course of my career, my holding periods have gone from minutes to months to years to decade. I started out as a trader, and if you had to hold something for 20 minutes, it was a long time. And then it slowly moved to long term being defined as six months to a year and now long-term as decades. So I kind of did a full 180 from my early days, but I see everybody else going the opposite direction. The holding periods are getting shorter. Not talking about HFTs or the guys who are holding things for a nanosecond. I mean actual investors and traders. Is that your perception of this as well?”

   2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

2. “Really, that person, what that person wants, or what that person needs should be paramount. Sure. So that's the question, and I didn't mean to go on a massive digression. In the last minute we have in this section, let me ask one short question. What is it that the industry is doing right and what's its biggest flaw?”

   2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

3. “No matter what, you just wasted a quarter, 250 million dollars, and heaven forbid you give money to the guy who did the best, and it has nothing to do with how he should manage your $10 million. The question you should be asking is, what do I want to use this money for? Money is a tool. How best can I do that with the least amount of risk to myself and my family, and what is this going to do for me over the next 20, 40, 60 years and beyond? Not who's going to shoot the lights out. So I have bragging rights at a cocktail party. But nobody, you know, so I never heard from that guy again. And I swear that was the email. I don't remember if it was a million a person or half a million, whatever it was, it was some idiotic thing. When we look at the right way to manage money for clients, is that”

   2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

4. “So I wrote him back and said, thank you, but no thanks. But before you dismiss my dismissing of your offer, let me explain to you what you just did. You just created a game theory agency issue where you've incentivized five managers. They know the odds are only one in five that you're going to win. So you've incentivized them to swing for the fences. And if they lose, well, I got a year fees out of this guy. And if they win, you can't tell the difference between a repeatable process.”

   2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

5. “With the lowest cost, the lowest amount of risk, the lowest turnover, the lowest taxes, blah, blah, blah, blah, blah. So sometimes you have to look at a client who I swear this is true. I tell this to people and nobody believes me. I got an email about five years ago from somebody who says to me I just inherited a big slug of money and I want to give half a million dollars to five advisors and whoever does the best I'm going to give $10 million to. That's the money behind it.”

   2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

6. “And based on what you're describing, we're not sure you're a good fit. But here's what we do global, low cost index, blah, blah, blah. But you are looking for a little more juice. Now, let's figure out what you really want, need, when are you going to retire, when are you going to draw down kids in college? Blah, blah, blah. And when we get to how the money is deployed, if you want to have a slug, if you want to have a sleeve of your money in a really sexy, high-octane, shoot the lights out when the times are good, but get shellacked when the times are bad sort of sleeve. We work with other third-party managers. There's somebody who I know offers that. There's a handful of people who are great at it, but we don't think that's the best thing for you over the long haul. We think over the long haul, hey, the market's going to give you a certain amount.”

   2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

7. “Why did this investor go to this advisor? There are a lot of questions. Look, so let me, I try not to talk about my practice on the air because it's too easy to just digress, but we set stuff up so that there's a three-step process. And step one is, hey, are we a good fit for you? When we have a client content or a prospective client contact us, and the first thing he's doing is what's your sharp ratio? How much drawdown can I expect? How much should I expect to outperform the market? Those are red flags that force us to say, listen, we appreciate your interest. Let us explain what we do.”

   2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

8. “I don't think we could say after the fact that if you went active because the client requested it, and we know 60% of active managers don't hit their benchmark, look, we can look at it over a decade. Once you're taking costs, fees, taxes, Almost nobody outperforms the indexes over a decade.”

   2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

9. “Don't want isn't going to take and is going to move on at a certain point doesn't the behavior of the investor become a question?”

   2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

10. “I can't do that. That would board me out of my mind, and I know in six months I'd be on to the next advisor. Well, me personally, I would say, well, let me save you the six months and go find another advisor now, and we'll just say, hey, this isn't a great fit. But what about the advisor who understands that this guy needs a little excitement in his life? And Sunday night football doesn't get it done for him and understands the risk he's taking. It's weird for me to make this argument because I don't believe any of it, but he understands the risk he's taking in order to try and capture Alpha that he might actually forego beta, but he needs some of his portfolio. Here, we'll take 10%. We'll put you in this high octane slug, and maybe that'll keep you focused on this so we could let the bulk of your portfolio do what it's supposed to do. If a client understands and wants that, is it in his best interest to give him the medicine that he...”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

11. “You could talk till you're blue in the face to that person. I could say, look, all the academic data says overwhelmingly your best bet is low cost, broadly diversified global indices. You rebalance it regularly. See you next year. Investing should be boring. If a person says to me,”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

12. “Listen, that's how I manage money, but that's not what necessarily what everybody wants. Some people, if someone says to me, look, I would be bored with that and I wouldn't be able to stay with that. So I need something. It's on American, right? Just to keep me interested.”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

13. “The question becomes shouldn't it simply be what's in the best interest of the client? Hey, here's our fee structure. We're transparent. We're going to disclose our fees. It's all out in the open. There's no conflicts. Nobody else is paying us under the table. It's all here in front of you. It should be fairly easy to make the interest of the clients. That shouldn't be a challenging standard, best interest or fiduciary. Should it?”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

14. “Well, there are such things as best practices. You can look at average costs, and there's always a gray line. Well, if the average is I'm going to use a fat round number, if the average is 1% and you think you're doing something special and you're charging one and a quarter and one and a half percent, I don't think anyone's going to argue that that is usurious. On the other hand, when we see 9% and 14% and really multiples of an average 1%, that's a pretty bright line variation. So where it gets a little challenging is, okay, 1% is standard, one and a quarter is a little high, but it's not ridiculous. 1.5%, especially for smaller accounts.”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

15. “Argued against people who said we shouldn't do that. I said there's no reason we shouldn't. But let me push back and here's the argument that they said. Well, if we're on the brokerage side, we have our own ethical code that we're obligated to be maintain a certain level of ethical standard. We may not have a fiduciary obligation, but we certainly have to know our clients and only offer them suitable investments. And if we engage in any behavior that transgresses from that, we could be penalized or fired from the industry. What's wrong with that argument?”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

16. “So I'm on the same side of the boat as you. I think we should have a fiduciary standard. I think the best interests of the client should be paramount. But let me, however, briefly take the other side of the argument. This is what we just finished a fairly robust debate about the fiduciary standard on retirement accounts.”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

17. “Recently, 15 years ago. Recently. That's interesting. I don't even know such a thing. I assumed it existed. I never knew what the acronym was. So let's talk a little bit about the details of that. What should clients expect from their relationship with their financial advisor?”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

18. “Oh, really? Yeah. Collegiate schools of business. So anybody who wants to mile them out as Stonybrook, they added a school of business recently. They had to jump through his hoops.”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

19. “I'm Barry Ritholz. You're listening to Masters in Business on Bloomberg Radio. My special guest today is Dr. Robert Johnson. He is the head of the American College of Financial Services. He used to run the entire CFA Institute chartered financial analyst testing program and the curriculum program and is extremely knowledgeable about all things CFA related. Let's talk about a book you wrote way back when called The Tools and Techniques of Investment Planning. What motivated you to pen a book of such a title?”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

20. “So, in the last minute or so, we have left. What does this credentialing do for investors? What does it do for corporate clients? And what does it do for investment banks?”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

21. “Dead of more than half Yeah, that's occasionally walk level three. You don't even have to study Walk right through that. It's only like a 48% fail rate. You could cram in like an hour.”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

22. “That's really never thought about that before. That's quite interesting. So the CFA exam has a reputation for being a killer, especially two of the levels are known as being notoriously hard. The fail rate is fairly high. What is the fail rate on each CFA level?”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

23. “I love that expression, the distance learner, the person who's not just memorizing something temporarily, but learning it for the long haul.”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

24. “Your bio says that you have, quote, extensive experience with the credentialing programs. Now, in English, what exactly does that mean?”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

25. “We're going to get to that in a little while. That's on my list of things to chat about. I'm Barry Ridholtz. You're listening to Masters in Business on Bloomberg Radio. My special guest this week is doctor Robert Johnson. He is the president of the American College of Financial Services. Before that, he was a very senior person at the CFA Institute where he had a lot to do with the chartered financial analyst test, the CFA exam levels one, two, and three, as it's known and hated. Let's talk a little bit about the institute first. What exactly is the CFA Institute?”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

26. “So let's talk about another rising tide in the last minute and a half we have in the segment. You wrote the role of monetary policy in investment management, said differently. I was always taught don't fight the Fed. What is the proper role of monetary policy in investment management?”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

27. “The market goes up, the sector goes up, and your company within that sector is going to participate in both of those, whether you're great or terrible, there's going to be some overlap there.”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

28. “So, not just a story, but actual data that underlines it as long as you brought it up. Let's talk a little bit about executive compensation. My concern about stock options are that you're paying people for based how well the stock market does, as opposed to how much they've improved the underlying company. True or false? True.”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

29. “You know, we use so much academic research in our regular practice, whether it's the behavioral side as to how people misbehave or just classic portfolio management theory. There's a lot of things to be learned from people who are spending lots of time just doing deep thought. You mentioned you were running a relatively small asset management business, but you've also been an outside director on some fairly substantial multi-billion dollar management firms. What does the academic bring to a 20 plus billion dollar fund? And how does that help you? How does being on a huge $20 billion fund board help you as an educator?”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

30. “So that's fascinating. One of the questions I wanted to ask you was you've sort of gone back and forth between being a practitioner and being an academic. How does one make that transition in either direction? How do you go from a practitioner to an academic and vice versa?”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

31. “I'm thrilled to have you. We've met previously on Tom Keane's show, and I found it fascinating what a unique niche in the world of finance that you occupy, sort of one foot in the world of academia and one foot in the world of actually helping people become chartered financial analysts. So let's talk a little bit about your background. When people first meet people and they say, hey, Bob, what do you do for a living? How do you answer that question?”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

32. “My special guest this week is Dr. Robert Johnson. Let me just give you the short version of his curriculum Vitay. He is currently president and CEO at the American College of Financial Services. He has been the recipient of the Alfred C. Morley Distinguished Service Award when he was one of the senior folks at the CFA Institute. He has won the RFK Memorial Student Award for Teaching Achievement serves on the editorial board of the Journal of Portfolio Management. He really helped to develop and refine the chartered financial analyst test. We'll get to that later today. He is the author of numerous books, including Invest with the Fed, Strategic Value Investing, and Tools and Techniques of Investment Planning. Dr. Robert Johnson, welcome to Bloomberg.”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

33. “If you are at all interested in how people become certified to actually be CFAs and what the value of those letters are. To either a company or an investment bank or an analyst I think you'll find this conversation quite interesting. Bob is really an interesting guy to talk to. He's very knowledgeable about a lot of areas. Tells some great stories about Warren Buffett. One of the books he wrote, which is called Strategic Value Investing, is on Buffett's reading list every year at Berkshire Hathaway's annual fest. They have a list of suggested books. His book has been on that list for quite some time. Anyway, I found him to be just a genuine, fascinating, interesting guy, and I think you'll enjoy the conversation. So with no further ado, my conversation with Dr. Robert Johnson.”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

34. “This week on Masters in Business, I have a special guest. His name is Dr. Robert Johnson. He is currently the president of the American College of Finance. In his previous job he was a senior person at the CFA Institute where he pretty much was in charge of the Chartered Financial Analyst Test. You can only take one part per year, past part one, and you have to wait a year to pass part two, and then ultimately take the third part in the third year. It has about a 50% fail rate, and a lot of people look at it as a really the most challenging exam they'll ever encounter in their career in finance. We discuss all sorts of things, everything from the value of value investing to the impact of the Fed on the investment process.”

    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

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    2016-04-22 · Masters in Business · Interview With Robert Johnson: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source