TRAP: The Real Adviser Podcast

53 - Efficient Market Hype?

• Alan Smith; Andy Hart; Carl Widger; Nick Lincoln • Episode 53

Share episode

Because of scheduling issues, we had to record this episode over a week before its release. An hour after recording, the scrapping of the idiotic "British ISA" was announced. That's why we don't mention it. We may do next episode. Don't bank on it #AbsoluteShambles

In this latest pile of TRAP, the Trap Pack discuss

  • Topical issues, including DFA movie premiere, TRAP saying “No” to Tough Mudder in 2024, private equity to retail investors, protection review, Standard Life retirement survey, Budget what-ifs, Norges Bank
  • Meat and Potatoes: Efficient Market Hype
  • Questions posted by our beloved TRAPist www.twitter.com/pdragoumis
  • Culture Corner

Show links: http://tiny.cc/traplinks

============================
Take part in the conversation! We want YOU to suggest topics and questions you’d like the Trap Pack to answer. The best way to do this is to ask them here.

Help us to help you! The more followers we have, the more we can do stuff going forward. So please:

Unknown:

Music, welcome to the real advisor podcast, T, R, A, P, T, T, follow us and join in the conversation on Twitter at advisor podcast, where you can suggest ideas and themes you'd like the trap team to discuss. Also remember to like and subscribe to our YouTube channel and leave a six out of five star review on iTunes. Doing all this really, really helps us, which means we can do more to help you. Now, let's head over to the studio for the latest pile of trap

Nick Lincoln:

yes, indeed, dear TRAPPIST, welcome back to what many people are calling episode 53, of the real advisor podcast, T, R, A, P, Trapp. My name is lick nincom. Joining me as ever in the digital studio of doom are the three other Horsemen of the Apocalypse, Carl della voce wir in a bunker somewhere in deepest Dublin and the ultra heart and Alan the storyteller. Smith. Now, gentlemen, we have a show packed full of app, absolutely nothing. So let's start unpacking it straight away with one or more high energy review reads, read out by my very good friend the right honorable Mr. Andrew Hart. Thank

Andy Hart:

you very much, boss. First review is from Gunny goo entitled, interesting five stars, interesting podcast, seemingly decent guys that clearly care about client outcomes in a constantly changing environment. The next review is from raging horn fire apps podcast, but his real name will be revealed in the second it's a glowing review, a lifeline for financial planners, five stars in the title, but it starts off with six stars. I missed them for two weeks. I'm honestly a little bit sad after finishing an episode, because of because I know I've got to wait two weeks before I get my top up. Listening to trap podcast every fortnight has been a game changer for me. They just get it and articulate all the thoughts swirling around in my head, the insights make me feel understood and less lonely in this challenging profession, trap is more than a podcast. It's a podcast. It's a companion that keeps me grounded and motivated. Thank you for making a difference, keeping me company on my dog walks or while I drive to client meetings. The links you share are awesome. Never stop being you. Six stars all the way Pete solo advisor, with a bloody awesome support team. So raging horn is also known as Pete solo advisor. Back to you, Nick

Nick Lincoln:

Wow. Pete, the raging horn, that is, what a lovely What a lovely thing to say. And we really do appreciate the reviews. So please do keep them coming in. Leave your reviews on iTunes. You can also now rate on Pocket Cast. I think Pocket Cast takes in iTunes reviews. I'm not sure it gives back. I'd be very much surprised. But anyway, if you can rate wherever you can. It just it gives us a bit more, a bit more energy and a bit more motivation to keep on plodding through 53 Jesus word. How do we get here? Okay, topical tidbits. Let's book a timestamp on this episode, by the way, just to say dear TRAPPIST, if you're listening to us or watching us, and we're sounding a starkly fatigued three of us not, not watch, not the voice, but the other three members of the trap pack. We had lunch yesterday with with, well, I guess we could now say he truly is a close personal friend and a big fan of the show, Rory Sutherland, who is, of course, the advertising stroke sort of branding behavioral guru written some great books, a great speaker, and we had a great lunch with him at the Devonshire in in London, Soho, yeah, Soho, on the cusp of Soho, and sort of a going going further west. A really, really, really good time. But, you know, it was quite hard work. And the whole point was we were then going to go and watch Rory doing a live podcast recording at a club that some of us frequent. All of us actually recruited. We

Andy Hart:

made it. We made it.

Nick Lincoln:

We had Rory for two hours over lunch, and he

Andy Hart:

was regurgitating the same stories that he showed with us at lunch. We had two hours live at lunch, and then we thought, well, we've had it all now, so we're gonna bug her off to the bar. So that's what

Nick Lincoln:

we did, it was, it was, it was good fun, then

Alan Smith:

lightly, slightly tired, shall we say today, it was what you call a long lunch.

Andy Hart:

Long lunch, yeah, yeah, yeah. So if you can get a table at the Devon cheer, we were very lucky, because we booked at 3pm on a Tuesday, basically a quiet time of the week, but it's booked out months and months in advance. So yeah, do check it out. The devil 315

Nick Lincoln:

wasn't it. Was three is that Trappist? You decide 315 is that a late lunch or an early dinner?

Andy Hart:

I'm saying no. I'm saying early dinner. What they famous for recently, the. US pub that's got Guinness zero. Guinness zero,

Nick Lincoln:

yeah, on draft,

Andy Hart:

yeah on draft.

Alan Smith:

Not that we tasted it that

Nick Lincoln:

didn't bother us. But this morning, I was doing, I was a podcast guest on on Gorgeous George Barbas podcast, and I played, I played two hours of doubles tennis, so I am literally just just just fading away to talk. So let's crack on with this. You're

Andy Hart:

a hero. I am a hero.

Nick Lincoln:

I'm a hero to myself and to many people out there. Storyteller, DFA, movie premier,

Alan Smith:

yeah, I don't know if you saw this. A few guys have even seen the film. Dimensional fund advisors have created a film. They've they've hired. Can't remember his name right now, but he's a top kind of Hollywood producer of quite a few famous films and TV shows. I've created a movie called Tune out the noise. First of all. And you guys seen it? You watched it yet? No,

Andy Hart:

no, they've done a couple of sort of premieres of it, haven't they, but I've not been available when they're when they've been on, yeah,

Alan Smith:

they had, there was lots of issues around copyright or something, you know, streaming, right, or whatever, so it's not generally available. But they are. They're having movie nights premieres in the UK, starting in London on the 22nd of October, then going all the way through Bristol, Birmingham, Manchester, Nottingham and up to Edinburgh by the 19th of November. So they're having all that, you know, renting out a private cinema, inviting people along. It's worth seeing. You know, it's not. It's no blockbuster or latest sort of movie, Rom Com Smash, but it's, it's interesting when you, when you the sort of go through the entire story of the company from, as you know, from David boo starting it in his apartment in Brooklyn. It's worth seeing. So if you work with dimensional, reach out to your point of contact and asked to be invited along. And if you don't, you may also wish to reach out and just get a little bit of the backdrop and the story about the organization and company worth seeing.

Nick Lincoln:

Okay, okay, and we'll be coming back to dimensional and Dr Eugene farmer in the meat of potatoes later on. Dear TRAPPIST, okay. This is more of a housekeeping issue that maybe I should have brought up before we hit the record button. I think we're getting a bit late for this tough, Mudder thing, aren't we? We're going to do it, maybe do it next year, and all four of us do or not do it all. Carl, you're never going to do it. I

Andy Hart:

think it'd

Carl Widger:

be the non captain. I told you that before.

Nick Lincoln:

Yeah, you've done a marathon.

Unknown:

I think marathon.

Andy Hart:

20th of September. Is it Surrey area? I don't quite

Alan Smith:

racing up that's quite soon. Maybe, maybe we should really properly. I think we can it,

Nick Lincoln:

and we'll do it properly, if we do it at all, and we'll do it, we'll get some trap swag that we can wear we can give away to people that enter as team trap, perhaps. But so tough mother for 2024 calling it here, not happening, but Vanguard, crack on without us, it won't be the same, I know, but you can do it. You can do it all right, in 2025 for sure. Okay, cool, right? Boys, elkston and shuttle, that sounds like a third rate Channel Four comedy act.

Carl Widger:

Yeah, I just thought I'd bring this up ash. So shuttle have been given their authorization by the Central Bank of Ireland. Shuttle are, it seems, from what I can find out about them, a private equity platform for retail investors, so you can get in for kind of very small money on the back of some private equity deals. And then elkstone would be pretty well known here in Ireland as kind of startup backers, that kind of stuff, amongst other things, and they're out in the news recently saying that they want pension funds to be able to invest in startups. So look, on the one hand, there's a on the one hand, it is good to see innovation and it is good to see choice out there, but on the other hand, just not sure. Should retail investors for kind of small money be jumping in on PE deals that they might not understand. And why would we want to allow pension funds see there's auto enrollment coming into Ireland, supposed to be, I think, the beginning of next year, but it's going to be delayed. But anyway, that's why everyone is jumping on you know. Well, can we let pension funds invest in in this kind of stuff? I don't think it's a good idea, but back to point number one, it is nice to see that there is some kind of innovation in the Irish market, which will only beef up competition. And that can only be a good thing. So I just thought I'd mention them, because, yeah, things are. Getting to happen in this market. Thankfully, competition is good.

Alan Smith:

What what is, though, intrinsically wrong with about 4% above inflation in the public markets, you know, on average, over 100 years, what are we trying to do here by investing in startups? And

Carl Widger:

that's that is the point. Alan, 100% that is the point. And we will be talking about that, I think, in the meat. Think, in the meat and potatoes a little bit later on. But look, there is always, I know that you guys have had the device debate over there, you know, and it's kind of something similar. It's like, you know, the elk stone argument is we should be backing Irish startups, and this is a good idea, and whatever. But look, should retail pension investors be investing in this stuff? My call is absolutely not, you know, but hey, up to elk stone and everybody else to make their point and make it. But please do it, you know, in an evidenced based manner, which we will talk about later on. But yeah, 100% agree. Alan,

Nick Lincoln:

all right. Cool, cool. Okay. Ultra Howard Marks,

Andy Hart:

okay, so Howard Marks is a an American investor, and he produces quite a lot of content. He's famous for writing memos. I don't know if any of you guys have dabbled in these memos over the years, but I find them dull, very dull. Okay, some good. Some of them are bad. Do a search oak tree capital memos from Howard Marks. He's also got a podcast where they read out the memos. Some better than others. Take it with a pinch of soul, but it's free information out there. But he's a very, very experienced investor, stroke, hedge fund manager, so he's coming from a point of authority not mentioned it before. I don't think anyone else has. So, yeah, Oaktree Capital. Oaktreecapital.com, forward slash insights, memos from Howard Marks back to you,

Nick Lincoln:

right? To keep an assignment level bubbling at a feverish pitch. Storyteller, protection review,

Alan Smith:

just noticed this in the press recently. It's but it leads to other other issues, so that our regulator, the FCA, have announced they're going to undertake what I think is the first ever in, certainly in their tenure, complete overhaul review of the protection market in the UK, not it hasn't really been explored exactly what they're going to be reviewing, but it's going to be a detailed, comprehensive review, review, I guess, of how products are created, how they are sold, how they are paid for, all that sort of thing. So detailed review is going to be underway this year. But that just led me to think further about, you know, the protection business and protection market in general, because I don't know, sometimes I get a little concerned, because we as a business do very little, I mean, very little protection. Yeah, and I hear this, most of the advisors that I speak to say the same thing. They when I started 20 years ago, you would often would be recommending insurance policies, protection, critical illness, all that sort of thing, private medical potentially, but it's very rare nowadays. And why is that? Why do we not? I mean, what about you guys? Are you active in the protection market?

Carl Widger:

Yeah, I think, though, Alan, to be fair, that that comes kind of with the maturity of your business. So as the business matures, you know, and your clients become more and more financially secure, the need for some of these products kind of does fall away. And if you're doing your proper job, you'll tell a client, we've done the analysis. You do not need that life cover, you do not need that income protection or whatever, because you are secure now, and that, after all, is kind of the financial engineering piece in, you know, the financial planning process that you're not wasting. You know, it's dead money if, if you, your plan has told you you don't actually need it. So I think I'd be the exact same as you Alan, when I would have started out, there would have been a lot of requirements for these kind of products, but, but less and less so going forward, we would do a good bit of Section 72 which is basically inheritance tax life cover policies to cover tax bills. And we have actually replaced some life policies with these kind of so kind of re diverted the money to save inheritance tax down the line that heretofore was being paid for life insurance. So I do think it comes with maturity. And I think, you know, that's all about the financial planning process. The they're saying about this review, obviously,

Andy Hart:

commission is going to be a key thing that they're going to be focusing on, because at the moment, you can still take commission via protection, even though you need to declare it, and they given an example of what a typical client be happy paying 750 pounds, which they say might be the minimum fee for a financial advisor to charge. So again, it's just going to increase the advice gap if there's a lot of tinkering around the commission side of it. But yeah, we will see. But yeah, similar points to what Carl mentioned about. The types of clients we look after, a lot of them are financially independent in their own right. The average age you look after now is 59 they're slightly older. You know, it's normally mortgage and protection advisors that are obviously heavy in this space dealing with, you know, younger clients and debt and stuff. So yeah,

Carl Widger:

and in that and in that scenario, it is required, what are the commission levels for life insurance products over, over in the UK, like they're

Andy Hart:

very, very simplistically, just whatever the premium is, times it by 20. So if it's 100 pounds a month, times it by 20, that's 2000 pounds, generally around that level.

Alan Smith:

Yeah. So what? One and a half times the one 80% payment? Yeah, 100 880%

Carl Widger:

it's similar here, yeah. So it's, it's, it's large, but, like, there is a requirement for us, yeah, it

Andy Hart:

needs to be sold. Don't wake up and think I'm gonna, you know, I'm gonna shop around for income protection today. They go, No, I'm gonna, I'm gonna book a holiday and buy later, yeah, crappy clothes online. They're not gonna, you know, seek out an advisor and buy income protection.

Alan Smith:

Nicholas,

Nick Lincoln:

totally on that. Much as we all, all of us, agree that RDR was a good thing, and I know Carl, you'd love it to happen in your country, and the stripping out of commissions from investments and so forth and pensions, but I do think commissions in life insurance do play a role. You know, if you're a young couple, you got a mortgage and some now, now you've been now, you understand that you need to pay 3040, quid a month for Life Assurance and maybe critical illness to then be invoiced 750 quid. You'll just see protection sales fall off a cliff. People just will not

Andy Hart:

agree. So I have 750 Nick is the minimum that they're quoting is just Yeah. I know that's Yeah. Give me a couple

Alan Smith:

of 1000, easily. And people just simply aren't very few people are in that

Nick Lincoln:

and you can explain to your blue in the face that if you reinvest the commission rebate it, that pulls the premium down over the life you contract, you're going to save X what people don't care, you know, they just they've got what, it's

Alan Smith:

effectively a loan to the client given by the insurance

Andy Hart:

company, something which gets little air time, but we spoke about a bit on here is the protection payout rates, because the companies now that their underwriting is so fine tuned and sort of mastered it, when there's a payout, they pay out almost immediately. And the payout rates for all the larger insurers now, we used to say above 90% most of them now way above 95 Yeah, I think, I think Royal London had a 99% payout last year because they don't want to dispute anything. They don't want the lawyers to be back in two. Yeah, there's an 85,000 pound critical illness payment. By the time the clients put the phone down, they've done the transfer. They just want out their lives so they don't want to dispute things, which is, you know, the sort of fear of people taking out these policies, the payout rate is just astronomical. So yeah, I'm all for saying human insurance important,

Alan Smith:

very important for people at a certain point in their life and their journey, when they are younger, and you take on a lot of debt and you've got young kids and all that sort of thing, definitely get protected. But I guess all of us have. Our clients have grown older, become more largely wealthier, more financially secure. And therefore the need, not saying it's not required at all, the need is certainly reduced. Interesting, okay, yeah,

Nick Lincoln:

definitely. Okay. That was quite interesting. That was we managed to manage spun sync out of that

Carl Widger:

energy here, so maybe some music you can do it,

Nick Lincoln:

we can do it. We can do it. Okay? Ultra life recordings, yeah, I

Andy Hart:

saw this in the Times a couple of weeks back. There's a company called Life Story recordings. Life storyrecordings.co.uk, really good, really good. Amazing little company. They basically rock up to someone's house, let's say a usually an older, older person, like a mother or a father. And rather than you sit there with your iPhone and ask them a load of questions, it's professionally done. The prices they charge are astronomically cheap. I think basically it's 1000 pounds, 995 pounds. They'll rock up someone's house. They'll sit there for a day, they'll ask a load of questions. Or edit the film beautifully, 60 minutes, and you've got it as sort of a memento. I know Alan, you've looked at this a little bit with your dad. I know Carl. You've talked about various clients. Yeah, you've done it. Obviously, you and George, if you and Gord, George, I think, went up there and did a did an interview, did a whole days of recording, which was, yeah, okay, so it's, yeah, that was, that was a lot of hassle. If there aren't any advisors that have clients that are, you know, thinking about putting something together that check it out. Life Story recordings.co.uk, and as I said, Yeah, we think it's reasonable 1000 pounds.

Carl Widger:

I will check it out. We are going to do something like that to jump on the idea that Alan saw deceives with me on but I think it's really, really nice idea.

Andy Hart:

There might be an equivalent in Ireland. I'm not too sure. I'm sure they'll fly over and every day their accommodation,

Alan Smith:

hardly for everybody, if it was 1000 pounds for some of your you know the some clients, for sure. Particularly if they are elderly, getting older, was that sort of time you want to capture this for the children, the grandchildren. What a beautiful gift that would be for an advisor to be able to give to some clients. That's a good one. I'll check it out as well.

Andy Hart:

It is decent. Yeah, I'm sure they're probably inundate since they've been featured in The Times, that probably going to jack up the prices since

Carl Widger:

they've been featured on trapped

Andy Hart:

Exactly.

Nick Lincoln:

Well, this is true. This is the trap effect. It ripples through the universe. Okay. Watch Standard Life Survey. Yes.

Carl Widger:

Standard Life did a survey basically on kind of what is bothering people who are approaching retirement. I just thought I'd mention it, because do you know what nearly half of them said? Are we going to be okay? So I know we all know this, and I know it's, you know, we're kind of flippant about it sometimes. And we are going to be talking about investments, and maybe we're talking about investments too much, I don't know, because you know, we're going to have this job of ours is going to be in front of us forever more. In my opinion, people want to know the most basic question, it's like going back to Maslow's hierarchy of needs, are we going to be okay? So I just thought I'd mention it. Yeah, I'm

Andy Hart:

amazed. Carl, they're saying almost half feel financially unprepared. What so half feel financially prepared for retirement? I think if you lined up 100 people on the street, I think like three of them would say, yeah, actually, I think I'm ready for my retirement. So it's quite interesting. I think it's quite pro

Alan Smith:

some, a fair percentage, will have a defined benefit work in the public sector or

Andy Hart:

something, they still feel a little bit

Alan Smith:

anxious about it.

Nick Lincoln:

Might it? Might that might also be the sort of the Donald Trump thing they don't want to admit that they haven't prepared for it because they might feel a bit embarrassed or

Andy Hart:

something. Yeah, yeah. But we

Carl Widger:

all know loads of loads of scenarios whereby people think that they are going to be okay, but they're not sure, and they just need that reassurance. And that's what we that's what the financial plan will do, and that's what the financial planning process does, because year on year, life throws these curveballs, hopefully not year on year, but life does throw the curveballs, and we'll be there to, you know, say, Okay, well, we have this curveball. Let's put it in to the model, and let's see how we're fixed now. So I just thought, you know, now did the survey doesn't say, are we going to be okay? But that's, that's my summary of the survey. That's the, that's the question that people are waking up at night thinking about, I

Andy Hart:

think most people underestimate how much actual money and cash they need to accumulate and create to be financially bulletproof in retirement. A lot of people say to me, I think I've got enough. Andy, because they think, like, three, 400,000 is going to be enough. They quickly work it out the head. I'll just spend a bit of that and then I'll be it's like, you need to times that by about three or four my friend, like, I 100%

Carl Widger:

and then the other thing you know the defined benefits of civil servants or whatever, right with defined benefit. Do you know? What I found often is that they don't know. Well, they know what they're going to get if they stay to 65 but a lot are like, can I go early? And they have no idea how to even go about trying to find out what kind of pension, what kind of income they would get if they went at 58 or 60 or 62 so, you know, look, there's, there's a that's what that's what we do, and people are telling us through surveys like this that that's what they want. And

Alan Smith:

do you know within that those numbers, or any, any sort of survey, ask 1000 people, 10,000 people, some of the ones who say, Yeah, I think we'll be okay. Definitely won't be because I'm always reminded, a few years ago when somebody came to see me and says, Can I just want to sort of bounce something off? You just want to double check. But he built a quite a useful model, retirement model in Excel, quite a ways on Excel, with one fatal flaw, which I saw straight away, didn't build in any inflation. Yeah. So, you know, I can retire on 60 grand a year plus, plus I got this, and estate pension will

Andy Hart:

kick in, though he argued, what he did was right. It's in real terms. If the numbers were sort of

Alan Smith:

numbers growing, there was assumptions. Yeah, you were well, as soon as I said, I said, everything's just flatlines. No, there's no inflation, right? He says, Can you imagine the difference that makes on a 30 year? Oh, my God, it wouldn't. It would

Andy Hart:

likely not include tax Allen to any degree. It

Alan Smith:

was absolutely flawed, and there's, this is the issue people do. I built the perfect

Nick Lincoln:

airplane, but I forgot to put the wings on. Yeah,

Alan Smith:

it's perfect every other regard, yeah, well, I

Nick Lincoln:

mean, just to echo Carl's words and for younger advisors who are out there, and I've done about this for years, begin with the end in mind, and build up. Practice around answering the one key question, and the one key question is, are we going to be okay? Clients may never emote that directly, but that's what they're thinking, and that's what they want you to answer for them, and they will pay you handsomely for doing so. Give people money peace of mind, right? Storyteller, woven advice,

Alan Smith:

just a quick one for those. This may be of interest to there's a company called woven advice. Who it's advisor, data tracking effectively. I know Carl, you've got your own version of this in house, but we've all got may not apply to you guys running solo operations. Maybe you quite got a good handle on your data, but we've as a business, we've got lots of data sources coming in. We've got a back office system, we've got marketing, we've got sales, we've got pipeline, we've got regulatory data, the bunch of different things coming in, which is quite, we've been using Power BI, which is the Microsoft tool, but it's just, it's very, very complex. You've got to kind of download the data one at a time from various different sources. A bit fiddly. But what Wolverine advice Do they aggregate all the data they plug into a lot of the existing design specifically for financial planning. Financial advice does look interesting. It does look interesting and gives you a really nice, elegant dashboard which you can whatever it is that you want to track, which is important to you. And it could be about growth, assets under management, new clients, net new assets, all that sort of stuff. You using Alan or not yet? Yeah, we are, we are trialing it. We are trialing it right now. Shireen is doing a great job, and she's using it. And there's a cup for all the main things. There's a couple of other sources of data which are yet to be plugged in. Everyone talks about APIs. There's, there's a, you know, there's quite a varying degree of what APIs really mean. Some work properly, seamlessly, and some don't really do but we are putting it all together. So we're gonna have a really beautiful, elegant dashboard where we can track both kind of trailing data, historical data, as well as future trends, as well analyze future trends. I think, I mean, it could be a subject of another nickel through his toys out the pram, but a subject of another conversation. Because certainly, when I showed Carl, when you showed me, when I was over in Limerick A while ago, yeah, I thought was brilliant. What you had that is that a proprietary system that you've built yourselves, or

Carl Widger:

so, basically, for Irish advisors, it's called, which is t, I, S, H, K, I n t, I think you mentioned that before. Yeah, yeah, it's really good. Basically, how tishken was born a client of mine. I was sitting down with him and telling him, I we didn't even know how much AUM we had, and he went off, and he's a whiz on the on the computers. He's good at

Alan Smith:

those computer things control, delete, yeah,

Carl Widger:

turn it off and turn it back on. Anyway, he went off. And so he developed this thing over a number of years. He's since been kind of a bought out great guy, and now it's available to all advisors in the market. So we have this dashboard that everyone logs into. We put all of our client notes in it. We can, yeah, it's absolutely fantastic. I know we're we are meeting up shortly, so I'll certainly bring hope

Andy Hart:

he's still not charging you a monthly fee, considering you are the reason the business developed.

Alan Smith:

Yeah, and I will showcase negotiated a mutually beneficial arrangement.

Carl Widger:

I would highly anyone

Alan Smith:

who's good at those computers. Very, very good. But, yeah, it is interesting. We are with a sort of business, you know, generically, financial planning companies. There's a hell of a lot of data within our companies, but there's very little to aggregate it, streamline it, sorted out, and make it meaningful and useful.

Carl Widger:

Because so the guys in tishkin have gone to all the providers, right, and they've got the data feeds from all the providers. And obviously that was no that was not easy, because obviously you have to make sure everything is secure and blah, blah, blah. So there was an awful, awful, awful amount of work done in the background to get all of that done. But it is really, really fantastic, really, really brilliant. We'd be lost without it. We would really be lost.

Alan Smith:

So anyone in the UK, check out woven advice and speak to them if you're interested. But we are. We're using it. It's good. I'm looking@tishkint.com

Andy Hart:

is that right? Tishkin

Alan Smith:

I not confused with

Nick Lincoln:

don't push it on my

Carl Widger:

laptop when I open. I know you have to log in and there's all right, good

Unknown:

morning. Yeah, cool, yeah.

Nick Lincoln:

Okay. All right, so our new government apparently has found a black hole in the public finances of 22 billion pounds, which you didn't know about before it became the government, which I find I struggle to believe, because I thought all incumbent potential governments were briefed thoroughly by the Office of whatever it is, the one that always gets everything wrong anyway. But apparently they found this 22 Million pound black hole, and they've got to fill it. And there's an October budget coming up, and none of us ever make prediction. You know, we don't. We don't know what the future holds, right? But I can tell the deer TRAPPIST that there won't be tax cuts galore in this budget coming up. That's about five. Let's go reasonable guess. It's a reasonable, prudent guess. So I've just started, if you guys are doing I'm just starting to get from clients the odd questions about realizing, realizing some assets now. So I've got, I've got a client couple who I'm seeing later this month for their annual planning meeting. And they, they're spending some money on this overseas property. It's a seven figure some and they want to know where to take the money from. They've got a GIA, they've got a night they've got ISIS, they've got personal pensions, and they're old enough to access their personal pensions that they want, and they're and the question is, should we take it from the from the GIA? Given that, I think it's, again, this is not advice, and I'm not categorically saying this is happening, but I'd be very surprised if capital gains tax has not come out of this budget unscathed. And there is talk of aligning capital gains tax rates with income tax rates. They're currently 10% and 18% for that listener who listens in and criticizes me for getting CGT rates wrong, I have Googled these, and I just wondered, how you guys, are you experiencing this kind of question? Jeff, I'm leaning with this particular couple to saying I would take, I would take the money from the capital gains tax, the GIA element, if you can, because those taxes are ever going to going to go one way. You mean, you

Andy Hart:

can't take the 20% hit now, Nick, rather than just take a tax free out the eye. So again, I don't know the numbers. There's more to it. Yeah, I'm

Nick Lincoln:

going to do the cash flow, but I do various what if scenarios, but it's just, yeah, it might just be a case of, listen, you know, these capital if the rates go up, the capital gains tax, they're probably going to stay at that. I can't see them coming down. Even we get a change of government,

Andy Hart:

the allowance won't change. The allowance won't change because on the floor anyway, so they've already just the headline rate will go up, definitely. I mean, they they tweaked it down on TGT, on additional properties, which was ridiculous. That wasn't needed. Was it 2824 or something? Anyway, that's why I think, I think it's going to go up. It

Alan Smith:

used to be really complex, didn't it, with indexation? Yes, you just want to do the calculations computers now that can do that. And it's got nice and neat and simple, and is relatively low, I suppose, currently. So it's an easy they've already stated that they will not increase income tax or inheritance tax. I believe maybe they

Andy Hart:

can increase CGT, but the old historical entrepreneurs relief, that's now called bad, maybe they should be kind to these people that create a lot of tax in the system. As in entrepreneurs, they

Alan Smith:

don't care. Difficult, very difficult to come in. They

Andy Hart:

did care to be 10% on 10 million. So they did care at some point anyway, we will see. But

Alan Smith:

they've come, they've come in on the basis of, you know, of building Britain, you know, growing enterprise, creating a more vibrant economy. So they can't just slaughter business owners. Let's

Andy Hart:

just keep it simple. Nick and let's say CDT goes from 20 to 40. Do you think it would happen immediately on the announcement, as in, you know, that's an interesting

Nick Lincoln:

that's because in this, in this group that I run, I might have mentioned it Chinese CC slash IFA forum. There was an email today, and one of the questions, yeah, do you know about it? One of the questions was posed was, if this happens in the budget, do you think it'll be immediately, or do you think it'll happen on the sixth of April the following year? I'd, I'd imagine they'd have to do it immediately, wouldn't they? Otherwise you just get a mad rush for the doors of people selling out to lock in

Andy Hart:

at the low dilemma with those clients and Nick, if they've got a liquid

Carl Widger:

is there a CGT rate 20% basically it's 10% for

Nick Lincoln:

Basic Rate taxpayers, Carl and 20% for a high rate and additional rate taxpayers, what are the rates in 33 just a flat

Carl Widger:

Yeah, it's like entrepreneurs relief is 10% on the first million, or something like that. So yeah, 33 on the next and the rest. Yeah. But an exit taxes on funds is 4133

Andy Hart:

would be introduced that you've been selling it with income tax. I think that's just way too harsh. But anyway, sorry,

Nick Lincoln:

what's this? Exit taxes? And I was trying to ask for his talks over again by Andrew Harper the 58,000 time.

Carl Widger:

And we've received a message about that, haven't we? Yeah, exit tax on funds, right? So your dimensional fund, or your vanguard funder, is 41% and it's every eight years, whether you take the money out or not. So I've been buying on about that. So that's, you know, we're trying to

Alan Smith:

if you haven't even sold, you haven't, Yep, yeah. And

Carl Widger:

capital gains is not payable on death, so there's a massive discrepancy there. And then it's same here, you know, you know. So it's, whereas it's, it's deemed, after every eight years, an exit tax. So I've been banging on about that, and there's a something else I've been banging on about. So it's getting a little bit of traction, but probably not even I think,

Nick Lincoln:

I think all the left leaning governments around the world, they must have read from the same script, because on the last episode of the all in podcast, they were talking about this proposed tax that the Democrats are going to bring on unrealized profits. Yeah, and that just sounds to me like a nightmare. You know what? Who knows, on investments, and of course, until you sell that, you don't have the readies to pay the bill. And they're saying, oh, they'll give dispensations and they'll be waiting, yeah, even monitor that. It's just like, Nightmare, yeah? Nightmare, um, to answer your question, Eddie, what rule I go down with these clients? Well, this is the joy of having world class cash flow modeling software. I'll just do the various what if scenarios, taking it from different pots, different amounts, and just see what's the better long term outcome for the client. Even begin to do it? I'm

Andy Hart:

sure the withdrawal from the ice or win. But interesting.

Nick Lincoln:

Yeah, yeah, yeah, maybe, maybe. But then in retirement, the clients

Andy Hart:

are going to draw down on the GIA for 30 years rather than a big hit now. But yeah, okay, yeah, okay,

Nick Lincoln:

thanks, gents for your time on that one voice. How do you even say that? Saisa,

Carl Widger:

oh, the ssia, yeah. So this is yeah, kind of following on from that previous point. So we used to have it the ssia, which was kind of a version, but much smaller, whereby, if you put in, I think it was 200 quid that government would top it up by 25% which is a kind of a version of the ISA. So there is a little bit of talk about, there's an awful lot of money being saved at the moment. So, you know, can we we also have a housing crisis here where all the young folk can't get on the housing ladder. So maybe this is something that they can look at introducing. Not sure it's, we have a budget coming up as well. It's, it's, it's first week in October. Not sure it's going to be introduced just then, but I think some version of an ISA here is looking more and more likely. And if we can just keep it on the agenda, it would be fantastic. And if we can encourage a culture of saving, then, you know, and real investing and saving, then, you know, I think we'll do well, if we take a long term view, and that's the problem with politics and budgets, of course, it's like we have an election coming up. So this is going to be, we're going to have, you know, tax cuts all over the shop to try and buy votes. Drives me insane. But anyway, yes, politics for

Nick Lincoln:

you. Ditto.

Andy Hart:

I was, I was pretty blown away Carl by the percentage of after tax income that Irish people are saving. Historically, it's been a lot higher than a lot of the developed countries, and now it's at 20% obviously it peaked during covid Because people couldn't spend money on anything. So yeah, it's pretty impressive. Is that, like, a cultural thing or what? Because it's much other than the UK. UK is like low single digits. Well,

Carl Widger:

it has gone up dramatically in the last few years. But I'd say, if you know your history, as they say, the financial crisis here was everyone had four properties. You know, they had three investment properties, probably one in Bulgaria, and that it was debt all over the place and culturally, I think we learned our lesson, so there's a lot less debt, which is really, really good. I think we've kind of grown up. And they'll also they'll also see that I was deeply uncomfortable with the content of some of today's podcast, owing to the Irish versus UK cultural differences. I'll point out again Nick that every time you play that it costs us money that we do not have we're not

Nick Lincoln:

getting. Yeah,

Carl Widger:

I know exactly again. Yeah, so, but, yeah. But kind of follow on from that point Andy, it's, it's all then been put on demand deposit accounts in the banks,

Andy Hart:

yes, yeah, yeah, I get that, but still

Carl Widger:

massively up because they're not putting them into deposits

Andy Hart:

Island having a massive saving culture

Carl Widger:

that's changing. That is changing because people are as if things don't Yeah, slowly, exactly, yeah, yeah. So okay, yeah. Interesting.

Nick Lincoln:

Looking at our YouTube channel, we're 894 subscribers, so we're not only 106 away from the magic 1000 where we definitely will not get money that would otherwise come to us. And we've taken on 39 subscribers in the last 28 days. So thank you to those 39 new people on YouTube watching us forge your bronies. Whittle on and whittle away. Okay, we're coming towards the end of the topical timestamp, uh, Tibbets, we've got one more thing to do, and that is ultra I don't even know how you said noggers or Norges. Norges, I

Andy Hart:

guess nor. Nords, bank, Investment Management. This is the N,

Nick Lincoln:

O, R, G, E, S is pronounced Nord, yeah, I believe so it's you're not sure, are you? Yeah, Norwegian.

Unknown:

Say it again. Say it again. Andy,

Andy Hart:

don't worry. Sovereign wealth fund. So question to you guys, the Norwegian sovereign wealth fund in the first half of 2024 How much did the fund increase by? Give me a number in the Norwegian currency? No, no, no, nothing to do. No, no, the the Norwegian sovereign wealth fund. So the money? No, no, no, Give me. Give me a monetary number. That's what

Nick Lincoln:

I'm trying to get out of him. Okay, yeah, Sterling, you give me whatever you want. I've

Andy Hart:

got it all on here. 4,007,000,000,000 good car. Thank you for giving us sort of reasonable guesstimate. Okay,

Nick Lincoln:

23 million yen.

Andy Hart:

The Yen is not anywhere near that Nick anyway. It's gone up by 1470 8 billion kroner, which is 105 billion Sterling, $138 billion that's an amazing sovereign wealth fund has gone up by $138 billion in the first six months of this year. It now stands at 1.6 trillion. So anyway, they came out with their results. The founder or the sorry, the CIO has got a podcast, which is very interesting, yeah, and it, their equity element has gone up by 12% their fixed income has gone down by minus 1% their real estate has done minus 1% on that, and their return on unlisted renewable energy infrastructure with minus 18% they basically bought nine and a half 1000 public companies. They're about 70% invested in global equities. It's a very interesting fund. So the Norwegian people are incredibly wealthy. If you divide the total amount of people by the 1.6 trillion. It's now the official biggest world sovereign wealth fund. China. Have a couple, but in terms of an individual one, it's the biggest. It's quite an interesting story. And they keep it very simple. I think there's about 45 people that work in the investment team that look after about 1.6 trillion. So yeah, I

Carl Widger:

thought I mentioned, I've mentioned him before. He does a book. Is a brilliant podcast episode where he interviews, uh, Michael O'Leary, yeah, he's good.

Andy Hart:

He's obviously a sharp cookie. Yeah, yeah. It's really good. In NIKOLAI tangeni is called Yeah. Again, Nikolai tan, I think

Nick Lincoln:

you got that right now. Hold on a second. Hold just, let's just say something here.

Andy Hart:

You could pronounce Nords.

Nick Lincoln:

We did Norges. It's Norges Bank. Norges bankers. I'll put a link to the correct pronunciation in the so called show notes, dear Listen, but it is Norges Bank.

Alan Smith:

So what you're saying, Andy, in other words, linking the last couple of conversations is that they have increased in value by about five in the last six months, by about five times the amount of our UK apparent fiscal black hole, yes. So there are net positive deficit. They are looking for 22 billion down the back of the sofa, and they've

Andy Hart:

made it. They've made it out of this thing called the stock market, which I call the closest thing to magic. 105 billion has been created in the first six months of this year. They're now stat stood at 1.6 trillion. It's insane, these numbers.

Carl Widger:

But if you guys in the UK are stuck for 22 billion, like we're making that in corporation tax profits, like probably on a monthly basis, just give us a shout. We'd be happy to

Nick Lincoln:

help out. Well, you're based in the way, aren't we still probably contributing in somewhere,

Alan Smith:

no way. Never we thought this was a joke. Turns out, good

Nick Lincoln:

stuff as ever, as ever, somehow we've mentioned back topical tidbits last almost again 44 minutes. It's always between 40 and 45 minutes, more or less, and we've come to the end of topical tidbits. So let's move on. Let's move on to the meat and potatoes of episode 53 of the real advisor podcast. For those of you watching us on YouTube, you can see I'm now struggling with my I struggled by fours. I'm now struggling with my fives on the high tech digital whiteboard behind me. The meat and potatoes today was inspired by a guy called Robin Wigglesworth, who's a writer for The Financial Times, and he had an interview recently with Dr Eugene farmer. Gene farmer, the architect, really of something called the efficient market hypothesis. Interesting article. It is behind a paywall, but there are sites that enable you to go behind paywalls. I'm not sure whether I should be boosting them or not, because I'm a bit dubious about the ethic. How ethical that is, because that is some company's IP anyway, it's an ft article. He interviews Eugene farmer, who you know is 85 years old, won't be around forevermore. He's still. He and as driven as he ever, ever was an interesting guy. And of course, farmer is famous for the efficient EMH, the official market hypothesis, for his work with with Ken French on the three factor model, the size, the size and value premium. And I know that we are all big fans of a and they hate this phrase, but I'm going to use it as a catch all passive investing index investing, and the dimensional approach to it, and the work they do in terms of education for us as advisors, and then stuff that we can give on to our clients, they just throw it at us. Everything is ultra transparent, but the efficient market hypothesis is one of those lightning rod subjects that seems to agitate as many people as it, uh, excites or convinces and and Robin Wigglesworth, I put a link to it, the circle show notes. He put a LinkedIn post referring to his articles in his interview. 112 comments the last time I checked on on this, and a lot of them are slating the efficient market hypothesis. I'm going to read a couple of these ads. Some of these people are right in the weeds, and they probably don't have a big circle of friends. Circle of friends. It's not a theory. It's a hypothesis, as farm himself points out, it was disproved in the three factor paper. Cap and beta has a T squiggle stat of squiggle, point eight, and only squiggle 1.2 when combined with size that is far below the T stat of two required. Blah, blah, blah, blah, blah. These people go on and on. Somebody else says EMH had a lot of assumptions that have to perfectly align, like the stars for it to come out true in real life. It never works out for individual stocks. Now, I think there might be a disconnect between what I certainly understand EMH to be and what its detractors say it is, and I so I want to quickly go through it, and then we'll just bounce this around the room, because in my business and what I do for my clients, and then think of hours all for all four members of the trackpad, DFA have played a major part in our progression, and I think they had a lot of value. And it's obviously built around the work of pharma and French. So what is, what is the image? And in my simple mind, I try to keep things simple, right? Because I'm not, you know, I've got a P shaped brain. This is my definition of it. Eugene farmer wrote this paper back in 1965 the random walk of stock prices, long story short, and he is very mathematical. And if you ever see photographs of him in front of his Blackboard, it looks like something. It's just like a word vomit with some brackets thrown in, just incredible formulas. My understanding of it is that basically what farmer said all those years ago, and he's won the Nobel Prize in Economics for it as well, is that it's really hard all the aggregate aggregation of all the players in the marketplace, all the Now, certainly, but back in 1965 but now with the computing power, the algorithms, the analysts, it's very, very, very hard to find a security, a slice of equity in a company that is not appropriately valued. You know, everyone else is, everyone's going through balance sheets all the time. And that's, that's, to me, that's what it is, the efficient market hypothesis. And on the back of that, of course, that very simple statement, you've had this rise of the index funds, which kind of proves that, well, something is right here, because it's very, very hard to beat the market in aggregate. And you know, we every year, we see these reports, and they're coming from standalone pause and so forth that just show how many active funds, especially in the very developed markets like the US and the UK and Japan. It's really, really, really hard for these active fund managers now to outperform and over any sustained period of time, which to me, indicates the efficient market is, is very, very efficient. I think where people get confused or or maybe I'm wrong on this, but the detractors of the EMH say, well, it's not efficient, because you get things like the tech bubble and you get these booms and bursts in the market, therefore they're not efficient. And I don't think you, by the way, in the interview, Gene farmer's very honest, he said, There's only ever a hypothesis, you know, I It's an evolving working practice. But I don't think Gene farmer ever said that markets are rational. The EMH is not about that. To me, the efficient market hypothesis, and which underpins all of DFA stuff, fundamentally underpins how Vanguard has done so, and the other the index trackers is that markets are ruthlessly efficient. You can't find these mispriced securities. You're better off buying the market in aggregate, and then if you want to stick a bow on it, you can then delve down into the size and value Premier. Now that's a bit more debatable, because those premier disappear for long periods of time, as we all know, but certainly the The EMH in terms of of finding an undervalued security to me, to me work, so I'm i in the round. I'm a big fan of, I think Gene farmer is brilliant. I think DFA are brilliant. And I am just an advocate for the EMH. Is my understanding of the EMH Correct? Is that what you guys think it broadly is,

Andy Hart:

simple answer, yes, but again, as many moving parts to it, but yes, fundamentally, I sort of Concur most of what you said.

Nick Lincoln:

So do you think the pushback against it is from people that perhaps have a vested

Unknown:

interest in every inevitably?

Andy Hart:

The. Was a waiting to just again. Do paragraph after paragraph about investment. Bs, it's just

Alan Smith:

look, he's, I think he's my take on I think you've summed it up pretty well. Don't Nick my understanding of what it is. I read that article. It's very good, by the way. He's, he's, he's quite a character. Is Mr. Farmer and the this is all about, as you say, the price of the security reflects all known information. Information has never moved as fast as it does now. Within within a fraction of a second, information is available to everyone in the combined market. So inevitably, that's how prices are are formed. The argument that some people have against that is, well, how come Warren Buffett has outperformed the market? How come, you know, and several people, have consistently outperformed the broader market over the longer time? And the answer to that is, assume that you're not Warren Buffett. Assume that your fund manager, managing your portfolio, is not one of this these handful, I mean literally, tiny handful of people who seem to have bucked the trend of the last 100 years. And that's why they're so famous, because it's so unusual, and people like Buffett seem to be able to or historically anyway, to see anomalies, to see where securities have been mispriced because of something he's read in the balance sheet. And and there is evidence of that. But of course, you've got literally a multi, multi, multi trillion dollar pound industry that if this happens to be true, if the world believes it, they're out of work. Because that's that is a fundamental premise of the active investment management industry, is that the market is inefficient, and we and our experts and our economists can spot those inefficiencies and trade and take advantage of them consistently over a long period of time, and there's scant evidence that that being the case.

Andy Hart:

Buffett and Munger are big detractors with the efficient market hypothesis, and if you've heard them speak about it, but yep, the thing that always blows my mind, there's more funds than companies, which, again, is just insane incentives, incentives, which is, I do remember having a very entertaining dinner with the Eugene farmer's son. I think he works at DFA. Did any of you meet him? He was a very interesting character. I don't think, yeah, I

Nick Lincoln:

didn't meet him. I'm not, I'm not as ultra crapiderial as you. But I did. I did go to my the foundations. Course he was, he was there about 15 years ago. Character,

Andy Hart:

I don't think he's winning a Nobel Prize anytime soon, but, um, yeah. Interesting. Character, anyway,

Nick Lincoln:

why do what I know you've read all 3000 of the Berkshire Hathaway annual newsletters. What can you summarize for a sulfur why? Why Buffett and Munger weren't fans? Well,

Andy Hart:

not, not in a sort of elegant way.

Nick Lincoln:

Elegant, I wouldn't expect it, but you just give a

Andy Hart:

summary of what they were just saying. How could we possibly outperform the market? If the market was efficient, thinking the market's efficient is ridiculous. Well, obviously the market's a collection of, you know, humans opinions. So back to your point. You know, it's not rational. So that's they're focusing on the human participants in the markets. You're right, over a 30 year period, about 1% of funds are going to beat the market. So that tells you the answer. But again, people don't care about the long term numbers. They're just bothered about now, I think, for now, the market is pretty inefficient. I mean, how would you assume a different price? If that makes sense. So, so I'm all about the price being the price at the time. Long term, I think markets are quite inefficient. But again, it's not really my my wheelhouse. Carl, over to you to shine some light.

Carl Widger:

Yeah. So for me, it's all about the best way for us to be able to put our clients into something that we can believe in the long term is to base it on the evidence that has gone before us. So that's what DFA do, right? It's an evidence based investing philosophy. Will it that be the very best outcome? It won't be right, because they'll always be people who, you know, fly ahead. But the evidence tells us that this is the best thing to do now, that's whether you're doing indexing or whether you have the dimensional, you know, the various factors. And I see very recently, I got an email from dimension. And going back to their evidence based investing philosophy, they had a how often do small cap value, how often do they outperform? So they're giving you the evidence, and they're not saying it's going to be 100% of the time they're going to go however, most of the time. So the evidence is stacked in your favor. In the same email, there was another article where dimensional or having a pop off index investing. Now, for me, I don't know is that productive, and I'm not sure, getting into the weeds of the investing and talking about Eugene farm. Views on the efficient market hypotheses, is necessarily going to make us better financial planners. And for me, it's look we we're going to base this on the evidence that we have in front of us. It's going to stop us going into the next best thing. We say, I had a look at Bitcoin. My for my favorite my favorite one to look at, right? So Bitcoin is up 28% this year, but it's down 20% in the last three months. So I know, because I'm experienced at this, that that's far too volatile for me to be able to keep my clients in their seats and whatever your investment philosophy is, if you have something that you can buy into and that you can convince your clients is a good idea, well, that's the best strategy. And I think getting into the weeds of it, and I read the comments on that post from Robin Wigglesworth, none of them are advising clients in the real world, absolutely none of no way. They're not. They're not entirely what they're doing. They're running actively managed funds. That's what they're doing. Yeah, they're, you know, putting in, I read it. It's absolutely ridiculous stuff. We are, we are working with real people in the real world. And if we try and overcomplicate the these things, then we're actually just going to get in our own way, and we're also going to get in our clients way. Yeah, so we, we've, we've decided that an evidence based investing philosophy, I think everyone in this group, certainly metas Ireland, have decided that an evidence based investing philosophy is the best way forward. We're sticking to it. We have stuck to it, and we will be sticking to it going forward. But also,

Andy Hart:

for me, work, also, you've seen it work car with real clients. You've seen the wealth being created. So you know, you've got skin in the game and actually seen it happen,

Carl Widger:

yeah, 100, 100% and It Ain't Rocket Science, although people try and make it rocket science, right? And they try and way, way, way over complicated. And for me, what would I do if my money, I would do exactly what I am telling my clients to do exactly, full stop. End of story.

Alan Smith:

Yeah, agreed. I think we, we've obviously all of us on this, and many others have arrived at this conclusion over many years. And I think what eventually happens is that you reckon that the investment piece you need to have a very thoughtful we've spoken about this many times before. We did a very thoughtful investment philosophy, but one that you will back up all day long as much as you can articulate that. And if someone wants to go deeper. And occasionally you have clients and prospects who want to say, yes, but tell me more. Tell me more. Where are these academic papers that you refer to. I remember we had a client who asked exactly that a few years ago. Unfortunately, you can speak to

Andy Hart:

dimensional pages, look yourself. This

Alan Smith:

particular client actually read them, which is another story, but this is the point. So from our from I'm just thinking commercially as well. I want to keep things just really simple, and I want something that I can believe in. I can stand behind that to some degree. I can articulate and explain to clients, prospective clients, if someone wants to get more and more and look at the evidence, they can do. So this is stuff which has won Nobel Prizes. This is not made up Mickey Mouse type stuff, and people comparing charts. And the data goes back literally for decades and decades and decades, and it stands up. That's the point. Now, is it perfect? Is it could there be some flaws in it? Maybe. But I'm all about the balance of probabilities. I'm all about saying that there seems to be sufficient compelling data evidence which has been reviewed by other experts, and they say this stuff stacks up. And I stick with that. Stick with the program. Of course. You update it, you review it, and there's always new papers coming out, and new research has been created, and you go in with an open mind, and things can change over time, but fundamental, the efficient market hypothesis does work, does make sense to me. There's the occasional time when it you might question it, but look, I'm in it for the you know, for decades, and it seems to stack up.

Carl Widger:

Yeah. And to your point like, Are there flaws? Yes, there are. It's not like that. There may be flaws. Of course, nothing is perfect. You can't have the perfect investment philosophy doesn't exist. It doesn't exist. It's we're doing, we're recommending the best we possibly can. I am interested, as you boys know, and you all think I'm wrong. I'm interested in finding out better ways are more ways of helping our clients get a little bit of comfort that this is the best thing I am I and I am definitely going to look at that much more closely.

Andy Hart:

You've hired someone called to help you with that, haven't you? Really? Is that for another's day?

Carl Widger:

That's for another day?

Nick Lincoln:

Okay, fine. No,

Alan Smith:

exactly. If you think, hold on, Andy, if you think again, as I'm trying to sort of refer to it more commercially, if you're running and most of us, most firms in the country, are relatively small financial planning. Companies, if you think about the unit of energy or time, resource, money, everything being applied the various component parts. So those firms, and there's plenty of them who they attend investment company seminars, and they speak to the latest fund manager about his views on, you know, what the dollar is going to do against the yen next year, and all that stuff that takes up a lot of time. It's a lot of costs, and you know, you're traveling to some web, some meeting or some presentation about it. And if you, if you effectively, just remove 99% of that, you still, course, you keep your eyes and ears open for it, for, you know, evolution and changes. But you no longer have to do that. Guess what? That allows more time to be creative, to sit in front of clients, to, you know, to listen to their stories, to articulate and to do the proper work, which is good stuff. You've got a world class engine just, you know, fueling and funding all this stuff that we're trying to achieve. So again, it's just a better way of operating as a business. In my

Andy Hart:

opinion, 100%

Carl Widger:

like to, I'll be more bullish about that. Alan, if you are spending time talking to fund managers and your ambition is to, you know, deliver world class financial planning to your clients. You're wasting your time. You are wasting your time. And I that's coming from experience. I used to do it until I saw the lights, right? But it's go and look. Go back to what, what we said earlier on. The number one question people have is, are we going to be okay? If you can, they're not like, are we in the right fund, or is Eugene farmers efficient market hypotheses, correct? They don't give a shit, right? But they need to know you've caught this thing out. They do like. So anyway,

Andy Hart:

I think it's the great I think it's the greatest professional gift I've given myself. I've been looking after money for 16 years, and one year in, I turned off the active management BS and all in full on dimensional asset class investing. And for the last 15 years, I've just been focusing on the good stuff, which is the client focused stuff, and the investments is dealt with. Obviously, I need to, you know, top up my invest in vitamin C every so often, and etc, similar vein. And though, if we're going to go on to it, or if I should go into it now, but I don't if you've ever come across it as Ray Dalio is all weather portfolio, and a lot of people get right into this as well. I'll just explain to you what it is. It's basically 30% equity stocks, 40% long term bonds, 15% immediate term bonds, 7.5% gold, 7.5% commodities. I mean, this dude is a credible investor. Runs on the biggest hedge fund he was in the world. He's got a load of money. He's written some great books. He's a super sharp cookie, and this is what he's this is the guff, the financial trash he's telling the world to invest in. And a lot of people get right into it, because obviously, he's a credible voice. I just think it's absolutely horrendous. I mean, golden commodities gone straight away bonds, you know, I'm not too much of a fan of that. My average portfolio is 85% global equities, 15% global bonds, and I'm comfortable with that long term, you know, my job is to control the clients. You know, through all market cycles, get them calmer more you know, become more acceptable around volatility. And that's the emission prior to long term. Well, blah, blah, blah, blah, blah. Anyway, so any thoughts on Ray Dalio is all weather portfolio?

Carl Widger:

Yeah, I read the book called The fund number one. Yeah. And I've only tried to read one book by Ray Dalio, and I got 30 pages in, and I was like, Oh my God.

Andy Hart:

I like principles. I like principles.

Nick Lincoln:

I think we've, you've taken the words out my mouth like I mentioned it on this. I mean, I've read the biography of the guy, and I tried to read one book of his I was given. My brother in law, gave it to him, and I gave it back to him, I think, and he laughed at the time car. And I brought that up because I thought that's classic Lincoln. Yeah, unreadable, unreadable, guff and the guys before. The fun is great, but I'm talking about one of Ray Dalio books, and maybe might have been principles, and

Carl Widger:

it was, that's the one I tried. It was

Alan Smith:

just, well, it's quite hard going though. Now we'll

Nick Lincoln:

come on to your book choices later in the culture corner, storyteller,

Carl Widger:

you're being lined up for an ambush

Alan Smith:

behind my back. Offline. Yes, we

Carl Widger:

have early today. So

Andy Hart:

me and Ray have got a similar sort of IQ level, so it was probably a bit above you your boy station. So

Carl Widger:

he's a little bit more wealthy than you.

Unknown:

Andy, the ultra crap with Darren, Andy, he knows about everything, and he can be told anything. His name is Andrew Hart, Andrew,

Andy Hart:

yeah, he's only about 99.99% more wealth than me. Okay, all right, no

Alan Smith:

worries that portfolio, though, there was a time I think you see the data if you had you invested that in 1999 In for the next 20 years, it would have shot the lights out, as it turns out,

Andy Hart:

recommending void anyway, all right, done. Okay, one

Nick Lincoln:

thing that's closing on that there we're done on the in that ft article, which is paywalled, as I said, farmer does come out. The good quip, he says, If markets are inefficient, how come you're not mega rich, making the point that you know, okay, go and find these easily undervalued securities and make a ton, which I think summed it up and summed up his personality as well. Okay, great stuff, guys. Thank you for that. We're 65 minutes in. We've still got to do TRAPPIST questions. We've still got to do culture corner. So I think we'll I can see her walking up the drive now carrying the bulging sack of TRAPPIST questions. Yes, it's the postie. There she goes. As ever, if you want to leave a question for us, please do in the pinned tweet on Twitter, slash x, slash whatever, and we will get round to your questions in due course. Takes us a little while to do so, because there are so many questions, because there are so many beloved Trappists who just want beloved Trappists who just want to, for some reason, get whatever in prayer they can out of our P shaped brain. So let's have a look at this first letter and see who it's from. It's got a Greek stamp on it from the island of Lesbos. This is from Phil the Greek dragomis, hi, Phil. Uh, fan of the show. He's on Twitter as p dragoomis. Philip asks, excuse me, you all say rightly that investing in equities will outperform inflation over the long term, but currently, inflation in the UK is 4% and is expected to fall to below 2% this year, cash and bonds are still, however, paying us yields of four to 5% This means they have a real yield of one to 2% what makes you so sure that these asset classes won't at least match or slightly beat inflation over the long term for considerably lower volatility? Now, on the surface, that's that's a pretty decent question, and I think it does deserve some unpicking. Who wants to have a girl. I'm picking it first. This is what I love about you guys, is that it's the prep, it's the homework, it's doing the hard stuff.

Andy Hart:

This has got Ultra written all over it. No, definitely. Come on. I've had enough of these same, same questions, rinse and repeat. You know, market volatility. Get market volatility. You know, volatility is emission price long term wealth. I mean, he might be right at the time. That's not a long term philosophy. And, you know, an investment strategy to implement, because we will just be doing everything at the time. You know, we've got, we've got to take a long term time horizon here. And we know that equities massively outperform bonds by three times long term, in real terms. That's it. I

Alan Smith:

think, I think that's maybe that's the overarching point here. We try to avoid being short term tactical. We are long term strategic. We've got a lifetime to deliver these things to our clients, the clients lives. So we optimize for that, as opposed to trying to, you know, there's, there is actually currently, as you rightly said, This is a short term arbitrage. It won't last for very long, and you can get a decent, you still get a decent return on cash holdings, and it is probably above inflation. Currently, there's a whole other question about, what

Nick Lincoln:

inflation? Yeah, come back. Sorry, sorry, Alan, come back to inflation. May well the government, the ONS, may churn out a figure that somehow gets below 2% a year. I'm telling you, most of our clients with their lived experience of inflation, that they are suffering an inflation rate way above bond yields. That's one way of answering your question, and the other part, Phil is in the first part of your question to us, you say, and this backs up what Ultra said, You all say rightly that investing in equities will outperform inflation over the long term. You all say rightly that investing in equities will outperform inflation of the long term. We are long term financial planners. What happens in the short term is utterly, utterly meaningless to us. So unknowable, unknowable, unknowable, much, much like the workings of your inner soul, Andrew, as much as you have one right, we are at one hour, nine minutes into the show. Shall we move on to what many people call culture corner.

Alan Smith:

Okay?

Nick Lincoln:

Longest? You longest pause yet,

Andy Hart:

the podcast that I sent to you, cool mate, yeah,

Alan Smith:

that I was never going to find otherwise without you mentioning it to me, not what I listen to every week. Thank you. You're welcome. It's not this is not one for Nick but we have mentioned this podcast is for modern wisdom. Chris Williamson, so I think Williams Williamson, Chris Williamson, modern wisdom, and he has no favorites. Alex homozi on it. I think they're good mates, and they just kind of, it's a three hour long podcast, and he just kind of unpack all his tweets effectively for the last few months. He and I kind of go. And back and forward with homozy. Used to love it. Read his book last year, a couple of years ago, and then I got a little bit bored of the relentless kind of hustle culture. He's like working relentlessly. But I've kind of fallen back and love him again. I think he's a modern day philosopher. He just, he just thinks deeply. He's got some really smart ideas, and there are so many, I reckon. I honestly, I do recommend this to listen to it. There are so many little sound bites. Not everything he says is brilliant, but within it, there are little nuggets of just, wow. That's great. How he thinks about that is spot on. Thank you, Andrew, for recommending it. I would never find it without you. I really appreciate it. I'm just going to chuck in this one extra thing, which I discovered that the other day, if you do consume podcasts, there's an app, a new app come out called overlap. And what it does it, first of all, it interrogates your the podcast that you subscribe to and or you can ask for a subject is using AI technology, and it's rather than having to listen to all that, if you just want to listen to about I don't know, fitness, or want to listen to some specific subject, you can then ask it, and it will go and suck up that, you know, one minute, two minute, three minute sound bite from any number of podcasts that you are the nut subscribed to, and also some that you don't subscribe to. And then gives you five or six of these short summaries of the podcast. It's a decent app. It's free as well. Do check it out. And

Carl Widger:

Shireen is currently trialing it. At the moment, we believe, like she trials all of your AI stuff. Alan, in fairness to her,

Alan Smith:

no, this has nothing to do with business. For those that consume consumer podcasts, as you do. So do

Unknown:

you like it? Alan, have

Andy Hart:

you started using it? I've

Alan Smith:

just sold you literally two, three days ago, and I thought this is really good, and I'll just it gives you a few suggestions. As to what subjects if you want to talk about, if you want to just get into productivity, for example. But it will give something from Tim Ferriss, something from Ali Abdal, something from somewhere else, just little, sort of two or three minutes rather than necessary. Because, as we know, a lot of podcasts, there is, you know, there's maybe 510, 15 minutes, which are really super valuable, and you got to wade through an hour and a half to listen to, like this one.

Nick Lincoln:

Pretty much every Joe Rogan podcast then.

Alan Smith:

But if you can just say I'm interested in this subject, this area, it will go and find half a dozen podcasts.

Carl Widger:

Do that anyway, Alan, do they not suggest stuff for you anyway based on what you listen to, what's what I use the apple thing, which I know you guys don't, but when I hit browse, it kind of gives me,

Alan Smith:

yeah, can you search for a subject you want to talk about your business, building or productivity, or fitness, or the search is not that great on Apple, but it's all it's all right. It will extract the actual clip for you. This overlaps. Yeah, check it out. It is good. You're welcome. Now I'm ready. I'll have to leave soon, but carry on.

Nick Lincoln:

Quick. Let's go. Okay, so Alan, you reckon you recommended a book a few episodes ago, the price of tomorrow, which I read. And I have to say, I didn't think much of it, to be honest with you, disappointed, and the second half was like a psychology book had no connection to the first. I thought one stage I'd switch books on Kindle. So thank you, but no thanks for that. But did you recommend secret trade craft of elite advisors? Was that from you did? Yes, I am enjoying that. I'm enjoying it wasn't

Alan Smith:

on this. Was it? I read that on holiday. I think I can't

Nick Lincoln:

remember father David C Baker,

Alan Smith:

he writes a lot of stuff. He's good. Got good blog, yeah, and he's very easy. He reminds me of you, actually,

Nick Lincoln:

it's got Bret. I was about to say he's got Brett Davidson kind of approached an American guy. He's got Brett. He's quite direct. And it's all about how you make yourself a trusted advisor, the sort of traits you need to embody, the fact that it's not easy, and it can be a hard slogan. You got to be true to yourself. I've only been back a third of the way through it. If that through it, if that actually, so I'm just, but I'm liking it. I'm

Alan Smith:

liking that. You'll enjoy the rest of it, so I'll come

Nick Lincoln:

back with a full

Andy Hart:

it's only three hours on Audible, yeah, yeah, yeah. I'm

Nick Lincoln:

yeah. I'm going to throw it quickly, but my book recommendation is, and there's nothing to do with financial services. But you know what? Even, even this cultural wasteland that you listen to and see in front of you for watching YouTube, even this cultural wasteland does have some sort of hinterland set the night on fire by Robbie Krieger. He was the he was the guitarist in the doors, a band that kind of get overlooked sometimes because of all the hype around Jim Morrison and the and the drugs and the and the runs running with the law. But it's a really good book about a really, really good band. The doors. Music is brilliant. And if you like your rock and roll, set the night on fire by Robbie Krieger, good read. Right next.

Andy Hart:

My recommendation is Diary of a CEO, Mark Randolph, who's the founder of Netflix. If you're into business stories getting sort of early business off the ground. It's amazing. I can't tell you how good it is. Brilliant. He set it up with Reed Hastings. Is it the other founder of Netflix and the stories around blockbuster being involved? Amazon wanted to buy them, but just also starting any business and getting proof of concept as quick as possible. It's absolutely brilliant. I can't recommend it enough. Check it out if you're. Early in your business career or into business stories. That's it over to you. Carl, great

Nick Lincoln:

stuff. Thank you.

Carl Widger:

The Human Side of money. Brendan Frasier interviews Michael Kitsis, it's interesting because we're used to hearing Michael Kitsis interviewing other people, but actually this one is Brendan interviewing Michael. There's a Andy, I think you love it, because he kind of goes through his background and how he ended up where he is. But he's lots of different brands going on, and he's, he's, he's a force of nature, for sure. And then as it goes through, there's, there's some good stuff about reframing questions or reframing points to make to clients, you know. And one of the big things he was saying is, you know, clients don't give a crap about the behavior gap, you know. And if you sell that, that's your proposition, you're not talking to what the clients want. So, you know, we'd often talk about giving the clients what's the phrase I don't use? Give them what they might want and show them what they needed on, yeah, exactly.

Alan Smith:

Well, you've got to, you've got to give them, yeah, you got to bring them towards what they need. But they

Carl Widger:

don't necessarily know that was the main what the end that's the main premise of, kind of the second part of it. So it's really, really, really good and an honorable mention for the sky documentary, King of the metaverse. If, like me, you're getting a little bit concerned about Zuckerbergs and mosques of this world and how they're controlling our lives and everything that goes on, have a look at it. I think it'll freak you out. That's me.

Nick Lincoln:

Excellent, excellent. Well, chaps, somehow running on fumes, running on empty tanks. Well, three of us, certainly, well, one of us, I can't talk for us. That's not fair. Me, we are at one hour 17 minutes in which by Matthew take 60, put down the 10s unit, 77 minutes in. I think that's a wrap for this show, gentlemen. Episode 53 has been flushed down the crapper. Thank you, dear TRAPPIST for your precious time and input onto the show, please leave a review on iTunes, six out of five stars or on Pocket Casts now. That'd be great. And like have subscribe to our YouTube channel. 894 people are out there watching us. It's unbelievable. I can't believe it. It can't be true, but I trust it, so until the next time trap pack from us. Andrew, yeah, classic,

Andy Hart:

a quick shout out. By the time this comes out, the following show, I'll be in South Africa with humans under management. So if you're listening to this in South Africa and you're a Trappist, I will see you soon. That's it. Nick over to you to close out. Okay,

Nick Lincoln:

I have just about finished until the next time. Track Pack. It's adios from us. And take care out there. Thank you for your precious time. Goodbye. Get the hell out of my computer. You.

People on this episode

Head Shot

Nick Lincoln

Host
Head Shot

Alan Smith

Co-host
Head Shot

Andy Hart

Co-host
Head Shot

Carl Widger

Co-host

Podcasts we love

Check out these other fine podcasts recommended by us, not an algorithm.

Maven Money Personal Finance Podcast Artwork

Maven Money Personal Finance Podcast

Andy Hart: Personal Finance Expert, Financial Planner, Financial Adviser, F