00:00I look at ERISA 74 as a failure. There's a huge percentage of America that's not getting
00:05retirement done. What's the biggest thing they could do to solve that other than just save more
00:11money? Well, I would say there's two things. One, we have to realize that we're living longer.
00:15So when you look at average life expectancy, it is increasing. The population above 80 is expected
00:21to triple by 2030, and the population above 65 is expected to double. So people are living longer,
00:27which means your money has to work for you longer. So the second kind of, I would say,
00:32error that a lot of people make is not investing early on. So saving, we do see savings rates that
00:38they've increased. But if you're not investing that money, and I heard Mike Wilson earlier today
00:42talk about the fact that, yes, there is an attractive yield on cash and short duration fixed
00:46income. But when you're thinking about what is my life expectancy, how long does that money have
00:50to work for me? If I don't invest, I'm going to be behind. And it's not just investing. It's also
00:56taking advantage of tax efficient vehicles and fee efficient vehicles. Like people think
01:00investing means just putting it into an account or putting into your 401k and kind of forgetting
01:04about it moving on. Absolutely. So I would say the first thing about being too overweight cash,
01:09we need to make sure that we're putting that to work. And whether that right amount in cash is 10%,
01:1215%, we've seen those slightly elevated. It shouldn't be 30%. But you're absolutely right.
01:17Taking advantage of any type of tax advantaged account or tax deferred account,
01:21making sure that your wealth is structured in the right way is also critically important.
01:26And then also there's more tax efficient investments. So if you're invested in fixed
01:30income and you're a U.S. investor, look to the muni market. Look to some of these areas
01:35where your after tax and after fee returns are going to be more profitable for you.
01:40There are some people who take this to the extreme, right? There's the fire movement of
01:44financial independence, retire early, people who save and invest very aggressively.
01:48I'm working it hard. I think you're a little bit, you and I are past our prime when it comes
01:53to
01:53the fire. The surveillance casket's right over here. Yes, yes, that's right. I mean,
01:57the idea is to be able to retire in your 30s, 40s and 50s and live your best life. But
02:03I'm sure
02:03there's traps that people fall into when they pursue fire at all costs. Yeah, I would also say,
02:08though, the investors that we work with and the clients we work with, they are in specialized
02:12industries. So we work with lawyers, we work with professional services, asset managers,
02:17pre-IPO, post-IPO companies. A lot of our clients, they like to work. Like this is part of like,
02:23they enjoy their profession, they're ambitious. And so what we see is actually something different.
02:28They want to work longer. And even in retirement, there's a great organization that's called Luster
02:33where it's founded by very successful women. And what they do is they say like, this is actually
02:38like, I'm going to live my best life in retirement. I'm not fading into the background. I'm not giving up
02:43on my intellect and professional ambitions. I may do something different with my time,
02:47but I'm still very active and very busy. What I see day after day, this is a beautiful quote from
02:51Citigroup and Kristen. Let's bring it up. And it's about the inertial force that's out there in our
02:56bad behavior. I'm as guilty of this as anyone. Leaving excess capital, idling cash, hoarding cash,
03:03far beyond the threshold, seriously penalizes long-term growth, inflation. It silently erodes
03:11the purchasing power of uninvested capital. Why do we do this? Start with, I mean, you're expert at
03:18this. Why do, what's the why of why we sit with cash up to our eyeballs? First thing is we
03:23don't teach
03:24people to invest. So when you think of our education in the U.S., yeah, you may be a business
03:29major and
03:30maybe you have some type of coursework in college, but many people grow. They could go to the best
03:36universities in the world and not actually understand financial planning, estate planning,
03:40and how to invest. So part of it is like, we are not educated to do that. Loss aversion is
03:45also a
03:45very, very powerful heuristic bias where people tend to think that it's safe. Cash feels safe.
03:52And the last thing that I would say is people are busy. The inertia part is actually very real. So
03:58Mike talked about this, that you're kind of, you could have the inappropriate allocation because
04:03you don't understand the outsized kind of positions in your portfolio. You have to have a more proactive
04:08approach. But to the chart we showed with Mike, which we could also show with Kristen, is there issue
04:12here, Scarlett, we're addicted to a bull market or we don't have to think? Right. To me, that's a lot
04:17of it. Right. I don't, there's the sweat with a VIX of 14, the sweat's not out there. So I
04:22guess the
04:22question is how do you go de-risking your portfolio? Mike talked about, you know, having too much
04:27concentration in the growthy parts of the market and it's okay to actually take some profit and,
04:32you know, put it aside. And pay Uncle Sam sometimes. Right. Pay Uncle Sam, even though
04:35everyone's scared to death of doing it. How do you go about de-risking your portfolio day in and day
04:40out? Because it's something people don't want to do. They're comfortable with seeing that number grow.
04:44Yeah. So this inertia concept, it's actually on two different, two different fronts. It's one
04:48on being too overweight cash. So that's then an element of how do I actually put capital to work?
04:53And I think that's easier, actually. If you're too overweight cash, the idea that you can leg in,
04:58you can use dollar cost averaging. I think that's probably an easier psychological component.
05:02On the front of, okay, I need to rebalance and potentially that does have tax impacts.
05:07One of the things that I would say is if tax is a major deterrent, that should not be the
05:11major
05:12deterrent. However, there are hedging strategies. There are a number of different strategies that you can
05:17employ where you take off some of the downside risk without triggering a taxable event. So I
05:22would encourage people who have really large embedded gains to speak to their advisor about
05:25that. And now we go over a few tread. Kristen Bitterly, one of the gimmicks is option writing.
05:31I bring in an income to get an enhanced income and I give up some of the future capital gain.
05:38Is it a sound strategy? Option overwriting? Absolutely. Look,
05:41I grew up in derivatives, so I probably have a bias in the options market. I think options are
05:47a double-edged sword. When you use them for leverage, when you don't understand what your
05:51max downside, max upside is, and the risk return profile, clearly some people can get on the wrong
05:56side of that trade. If you are long in equity position and you think it's going to be relatively
06:00sideways, you don't want to sell out of it because you like the company, and you're finding ways of
06:05a more tax-efficient augmented yield by selling listed options or covered calls against it,
06:10that can be a way to enhance your income, stay in the stock, not trigger a taxable gain.
06:15You mentioned how people are not educated on investing. Are we also not educated on debt
06:19and the role that debt plays? Because you've pointed out that the way people look at debt is
06:23they're either scared to death of it or they have too much in it. They're carrying high-interest
06:29personal loans, and there's never any in-between. It's so interesting because I think this is a very
06:33cultural component as to how you were raised, that what you see is there are many people who were
06:37taught growing up, like debt is bad, that any type of debt is bad. Clearly, there are some types of
06:43debt that are really high-interest-bearing debt that are your credit card, for example, the idea
06:47that you're very disciplined about that because it's a very high interest rate. However, we were
06:51just talking about mortgages earlier. If you're someone who locked in a 30-year fixed mortgage at
06:57maybe a 3%, 2% level, that is probably one of the, that's kind of the trade of the century,
07:03if you think about it, in terms of very cheap financing, that is also, there's a tax-efficient
07:08element to it, that is intelligent leverage, intelligent debt that helps you actually achieve
07:13your goals.
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