Will AI Displace Financial Advisors? (EP. 455)

12:26Phil Huber:She would also check to make sure there were any paper checks in there because heaven forbid you hold on to one of those for more than 24 hours for anyone who's in the business. And then she would then prepare Morningstar Principia Pro reports of all of the mutual fund holdings in our clients' portfolios so that we could have review meetings with them. So Betty's job doesn't exist anymore, right? Betty's job is Orion or or Black Diamond, or one of the other portfolio management software platforms that pulls all the information, money moves electronically, statements are continuously updated. Frankly, it gives much better performance reporting than Betty did.

13:06Phil Huber:I mean, we didn't actually report on a client's portfolio performance. We pulled the report for each fund in their portfolio and showed them fund reports because we actually didn't even have tools to do the calculation, and Betty was not doing that kind of math. So Betty's job is gone, right? We can say like it got technologyed away. So then I reflect on that for a moment. First of all, if I adjust for inflation, Orion for three advisors today costs more than Betty's salary used to. So we didn't save any money on this technology transition. We have, I would argue, much better end results to the client, like the end experience for the client is much better.

13:47Phil Huber:The portfolio management process is better. There's like all sorts of quality improvements here. But we didn't make any margin. We didn't save any dollars directly. And when I look at that on like a whole long list of changes that have played out, if you then go back and just look at like industry benchmarking studies back then, because this was when Mark Tversian and Moss Adams like just started coming out with industry benchmarking studies. And back then, like, the median advisory firm was charging 1 % fees. And today, they charge 1 % fees. The median advisory firm had about a 40 % overhead expense ratio plus or minus 5 points.

14:24Phil Huber:Today, the median advisory firm has a 40 % overhead expense ratio plus or minus 5 points. The median advisory firm had about 30 % margin. And the median advisory firm today has about 30 % margin. So nothing changed. Like, I mean, we weren't even using the internet. I mean, it was technically 2001 we had the internet, but like no software ran on it yet in our business. Like we had the internet, the smartphone, robo, AI, like all of this technology automation. And we charged the same fee for the same overhead expense ratios for the same margin. We did slightly change staffing. A three advisor firm today does not have eight support staff.

15:03Phil Huber:So we did shift some of the jobs a little bit. But in general, the jobs rotated up. Like Betty was pure admin. We have fewer admin now because we actually have more paraplanners and associate advisors doing just like higher level, more complex work than what Betty was doing.

15:18Ben Carlson:So do you think all the note taking and the email stuff that's going to do for you, is that going to give advisors at least more efficiency to have more clients?

15:26Phil Huber:No. Well, so if I look back to like the firm of 25 years ago, it's like same advisory fee, same overhead expense ratio, same average profit margin. Almost every metric of a firm today and a firm 25 to 30 years ago is the same, except one major metric is really materially different. Average client load. And it's dropped massively. I mean, for anybody who remembers back in the business 20, 30 years ago, I mean, like everyone had like 200 to 300 plus clients. The first firm I was at, there was like a guy who'd been there for 30 years and he had two offices, his office and his client file office. His client file office was the bigger of the two offices because the dude had like 1 ,500 clients, which was basically 1 ,500 people he had ever met and sold a product to over the preceding 30 years, and we called them clients.

16:16Phil Huber:But the only thing that's actually shifted is client loads went down. Because we do more services. Because we do more services, because we go deeper, right? Average revenue per client went up. We offer a deeper value proposition than what we did because the technology lets us go deeper and do more and be more awesome for clients. But to me, I mean, it's the striking thing when you look at the landscape. The only material thing that's changed in our industry in 30 years of technology evolution, it's not fees, it's not margins, it's not overhead costs, it's client loads. And they went down very steadily in a straight line for like all the years of the benchmarking data.

16:52Phil Huber:They didn't go up because when we get the time, I mean, for most advisors, early on any, any clients or revenue you can get as good. Cause you're like, just trying to make it and survive. And then eventually you get like, you get past survival stage. You get past like Maslow's hierarchy of like security survival needs and some other priorities start kicking in. You say like, I, I make pretty good money now. What do I, you know, okay, I got some tech. It saved me a little bit more time. What do I want to do? Like a go get another client. B go to my kid's soccer game. B, right?

17:30Michael Batnick:It's always B.

17:30Phil Huber:Yeah. Yeah. So what happens even as technology starts to lift up, working hours go down slightly once advisors are at a crucial level of income that they feel comfortable and safe. Or if you're like, no, actually, I do want to work a certain number of hours. I'm enjoying the work that I'm doing. I don't go get another client. I go deeper with the client I've got. There is always some clients like, I would love to be more proactive with some of my top clients. I know I should be calling them more and doing more things for them. And I'm kind of time constrained because of all the other stuff. So what do I do if I do actually manage to free up a new moment?

18:00Phil Huber:I don't go get a new client once I'm at a comfortable level. I go deeper with the clients that I've got.

18:05Michael Batnick:All right, so last question. We've got two minutes for this. McKinsey did a study recently about the future of AI and the advisors and the work, et cetera. And one of the things that they list, and I actually thought it was a decent report, was that advisors are going to become more. Life coaches offers all sorts of other adjacent things. That was the one thing that I said, I don't know that I believe that part of it. What was your thought on that? And if there's anything else in the report that you wanted to rip apart, feel free.

18:33Phil Huber:I do think directionally it's probably right. I mean, just life coach is kind of a loaded term. There's a lot to that. But, I mean, the general arc is clearly more services. I mean, we're already seeing it, right? that by our kids' research data, like one in six advisory firms has brought tax prep in-house for at least some subset of their clients. Like that was no one 10 years ago unless you actually came from a CPA firm and you just already did that for your clients. We're going deeper on tax. We're going deeper on estate. You know, CFP marks used to be like a special differentiating factor and now that's basically like a mandatory expectation for young people coming in today.

19:16Phil Huber:So that's becoming a new floor and then you're supposed to go and get deeper beyond that. So the increasing depth and the increasing service expansion, I think, is real. If you want to get kind of, you know, a little bit meta to it all, okay, when we leave, like, wives of one, when we leave lives of wonderful financial abundance because AI is making the world better and more rich, and then we're just trying to figure out what the hell do we do with our lives and purpose on earth when I don't necessarily need jobs in the same way and money is abundant, what do I do? I'm like, I guess I have, like, a lot of life coaching questions at this point about what the heck is my purpose on earth.

19:52Phil Huber:More generally, I mean, I think a lot of us have had experiences that there comes a point, at least for a subset of clients, where if they're still in accumulation mode, they're trying to get to a certain accumulation. And if they get to a point where they feel like they're financially safe and sufficient, other questions start cropping up about what am I doing? Where do I want to spend my time? It's why retirees often have crises of purpose and meaning. What do I do if I'm no longer attached to the work that was meaningful for me? So that dynamic still exists and I think continues. And if we make the other stuff simpler and easier, I do think directionally we probably spend more time there.

20:29Phil Huber:But I don't know if that means like full-on life coach. That has some other...

20:34Michael Batnick:All right. This was awesome. Thank you for doing this. Your report that you did on the stage this morning was fantastic. For people that are listening who weren't able to be here. Is that available?

20:45Phil Huber:Yeah, yeah. It's available online. So if you text advisor tech, all one word, like advisor tech to 33777, you should get it. If for some reason the text doesn't work, kids.com

20:56Michael Batnick:slash well-being has

20:58Phil Huber:the printout of the full screen.

20:59Michael Batnick:So advisor tech to 33777? 33777. Okay. Okay. All right, Michael, thank you. Awesome. My pleasure. Thank you.

21:08Ben Carlson:Do you feel better?

21:09Michael Batnick:Nicole. Nicole, Nicole. Cole, do I feel better? I feel great. We're in Miami. Oh, the AI stuff. No, how are you doing today?

21:19Ben Carlson:Do you feel better about the advisor space? Because there are a lot of AI-pilled people, I'm not going to mention any names, Chris, who think that, no, this really is going to change the world and it's going to make everyone more efficient and we're not going to need advisors.

21:29Michael Batnick:You know, I think Michael's point this morning about when advisors get to a critical mass and they're serving 80 households and a lot of their redundancies are stripped away and Now they have all this time. They don't want 50 more clients. Like that nobody wants seven meetings. As Michael said, it is exhausting. It is draining. You have the time back, and you're going to do other things with it. So I feel great about our space. I think this is a wonderful industry, a wonderful career. The clients need us. They value us. I don't think that they're looking to replace us. And if they are, then fine.

22:02Michael Batnick:They're not your client anyway. Or you're not doing what they need. It expands for everyone.

22:06Ben Carlson:And I think the people who don't use an advisor, they're going to have a better experience.

22:09Michael Batnick:I think so, too. All right, so in a little bit, we're going to roast each other. But what's it? Oh. That's Phil Huber's music. No wrestling fans? Come on. Mr. Huber's. Okay, so we're going to talk about private credit today. It's been in the news a lot. And I guess let's just start here. Phil.

22:35Ben Carlson:Wait, we've got to start with the fact that a middle-aged man came out to wrestling music. Yeah.

22:41Michael Batnick:Phil, what did you do? What did I? I didn't do anything. I mean, what did you do? Causing all these headlines.

22:47Ben Carlson:How busy have you been lately?

22:48Michael Batnick:Busier than normal, I would say. So let's start here. Yeah. What do you think?

22:53Ben Carlson:I want to introduce Phil for the people.

22:54Michael Batnick:Oh, I'm sorry. Phil is a good friend of mine. I just feel like everybody is inside my brain. I guess that's not true. So Phil is the something-something. What's your title?

23:01Michael Kitces:Head of Portfolio Solutions.

23:02Michael Batnick:All right. So Phil is head of Portfolio Solutions at Cliffwater. and Cliffwater is the OG of private credit, the first index creator, correct? Correct. Biggest allocator, biggest, I mean, 30-something billion dollar portfolio, bigger?

23:18Michael Kitces:Yeah, about almost 40 billion across two credit funds. And yeah, we've been allocating in this space for almost 20 years now.

23:27Michael Batnick:All right. So if advisors are allocating to private credit, there's a very good chance that they're using Cliffwater. Not to brag, right? Okay. So there's been a lot of smoke and for a lot of different reasons. What do you think is, what is the thing that you see repeated over and over by the media who is just dying for a meltdown? Like dying for a meltdown. What is the one thing that you see? You're like, that is bullshit. Like that part is not true.

23:52Michael Kitces:What did you do to the financial time? There's no one thing. There's many things and we'll talk about all of them. The summation of what they're all trying to arrive at is private credit is in a bubble and much in the same way Michael Kitsis just hopefully alleviated any concerns people have of AI, you know, making advisors obsolete. I'm here to say that private credit is not in a bubble. A lot of what you've been reading over the past six months or so is conflating a variety of different issues that have nothing to do with the actual health of the private credit ecosystem. And we could touch on a number of those.

24:26Michael Kitces:What I'll say is that this didn't start six months ago. There has been a steady negative drumbeat in the financial press around private credit for at least the last six years. And I think in the last six months, it's been turned up to 11. Why is that? Because, well, you have an asset class that while we know it's been around for over two decades, it's relatively new to a lot of investors, advisors, given the growth that it's had over the past five-plus years. And so naturally, it attracts a lot of attention. And I think the FT and Bloomberg and the financial press broadly and increasingly a lot of sub-stackers have come to the correct conclusion is if you write a negative headline or a negative story about private credit, you'll get likes and clicks, et cetera.

25:04Ben Carlson:People see the yield and they go, it can't be real. There's no way that it's got to be fake. There's no way the math works out. So I think people have been skeptical from the start as they learned about this asset class.

25:13Michael Kitces:Part of the position we sit in and having the benefit of this index that we have that has history dating back to 2004 is that we can measure how the asset class has performed over two decades, over many different market and economic cycles, and have an understanding of, okay, what have total returns been? What has income been? What have realized credit losses been? Historical default levels, et cetera. So we have a good base rate to go off of. And I think what you're seeing now is anytime there's a write-down or a default, the article wants to attach that to, oh, geez, this thing is blowing up.

25:44Michael Kitces:There's a canary in the coal mine. There's cockroaches. To level set with everybody, you have an asset class, the middle market, that has over 10 ,000 unique borrowers in it today. If you add to that another call at maybe 1 ,400 or so borrowers in the broadly syndicated loan market, and you use a historical default rate, which has been the average over 20 years of about 2%, guess what? You should probably expect over 200 defaults in a given year. Obviously, there's going to be years where there's more, years where there's less. Right now, defaults are below average still, which you wouldn't know by reading the headlines.

26:15Michael Kitces:And so if you try to treat every default as if it's something that's a harbinger of the next financial crisis, I think you're going to be disappointed.

26:22Michael Batnick:It is weird. The negative momentum is feeding on itself. And you're seeing massive redemptions. You saw it at BlackRock this week. You saw it at Blackstone. And it's just very bizarre because the equity of these companies are getting demolished. All of the publicly traded BDCs are trading at a severe negative discount to their NAV. So there is, I think the primary concern is a lot of these portfolios are heavily based in software. B-Cred was 26%. And the nature of the borrower, yeah, the defaults look fine today. The fundamentals of the portfolio look fine today. But clients are worried about what is it going to look like over the next five years.

27:07Michael Batnick:So I think that's 100 % valid. I think they should be worried. I also think, though, that a lot of the, let's use the publicly traded marks as a benchmark, They're pricing it in. So it's weird. Like, they're pricing in some of the worst potential scenarios that we've ever seen. And we haven't seen it yet. And it's just like a bizarre sort of environment.

27:27Ben Carlson:Is there anything, is any of the stuff that people are reporting, like the one people keep saying is, oh my gosh, 25 % of the loans are software related. And that's a big thing. Is any of it valid? The criticism, is any of it valid? Yeah, one more thing, Phil.

27:41Michael Batnick:No, because those negative headlines about the software defaults, it's not going to stop today.

27:46Ben Carlson:Phil's having to defend himself more than Daryl Hannah for a love story. Any JFK Jr. people out there? But it's good.

27:53Michael Batnick:These negative headlines about the AI stuff, that's going to continue, and it's just going to continue to scare people.

27:58Michael Kitces:Yeah. So I'll try to tackle that a few ways. So we'll start with software. It's the largest, or technology probably, the largest sector of the index. Like we have the index. We see it's the biggest. Why is it the biggest? Well, historically, it's been the sector with the lowest default rates. There's a reason why lenders have liked it. Obviously, software as a category is going through a period of transition. I'm not of the mind that software is not a going concern.

28:21Michael Batnick:You know the Winnie the Pooh meme? Getting f***ing wrecked, period of transition.

28:27Michael Kitces:AI will absolutely disrupt certain legacy software companies. And many companies will thrive and utilize it to their advantage. Obviously, that re-rating has already taken place in the public stocks that have been wrecked. senior lenders to companies are in a very different position than the equity in front of them. Often what gets left out of a lot of these private credit related headlines is any mention of private equity, which is where most of this financing is going to private equity-backed companies who are in their first lost position. And so if you are a private credit bear and you're not an equal, if not more bearer of private equity, you're not being entirely forthcoming or truthful.

29:01Michael Batnick:But that is an interesting point because KKR, all of these names that are getting destroyed, it's always like the private credit headline. It's like, wait a minute. KKR is like the private equity shop. And the equity of KKR is getting smothered.

29:16Michael Kitces:Right. And so I think with software re-rating, like as a lender to these businesses, you don't benefit from the growth. You're lending for yield. You're not necessarily in need of the upside long-term. And while the terminal values of a lot of these businesses are challenged, hence why they're now being valued lower and they're not being treated like these low-risk annuities, you're not lending it to them on a perpetual basis. And near-term cash flows are not necessarily at risk. And so to be paid back at par as a lender requires a pretty aggressive set of assumptions.

29:51Michael Batnick:Let me ask you this. So this is a very important part of the story. So the rates are floating, right? So when rates went up in 2022 and these companies were able to withstand it, everybody loved it. No defaults. My binds got killed. The loans pay me high yields and everything was copacetic. All great. But the duration of some of these loans. So let's say that like it's five years, whatever, right? You owe us money. You pay us back and then good. But where does the demand, I guess, who knows? Where does the demand for loans come after that? And if these companies are healthy today, I think that's what people are worried about.

30:26Michael Batnick:It's like, yeah, the loans look fine. The fundamentals look fine today. But I'm worried about what is this middle market? If Salesforce is down 60%, what is this middle market software company going to be like in three years? How are they going to pay us back?

30:38Michael Kitces:Again, it's going to vary by company, and they'll have to, you know, again, they're going to see what happens when they need to go refinance. The loans themselves historically in this asset class, while they might be five to seven years in term, typically they have an effective maturity of three or four years. So part of what also gets left out of a lot of these conversations is relative to, say, private equity or real estate or venture capital, there's a lot more organic liquidity in this asset class. Typically, if you have an average effective maturity of three, four years, about a 30-year portfolio is repaying on an annual basis.

31:12Michael Kitces:So you have a natural source of liquidity just for maturing loans. So this asset class, relative to, I would say, any private market asset class, is the best suited for semi-liquid evergreen structures.

31:22Ben Carlson:Is there any credence to the fact that, listen, there's so much more money that's in this asset class now, and they're just because of it. There had to be poor lending standards for some of these funds. Maybe not you, but maybe other funds, and those are the ones that are going to blow up. People are going to go, see, look.

31:37Michael Kitces:That's not new. There has always been a dispersion of really good lenders and not so great lenders. That's not new. There's over 300 direct lenders in the marketplace. We've been, again, we've known all of them for years now. We have an ABC rating system for lenders, and we think about 50 of that 300 plus kind of meet our A-rated standards. So there's always going to be a bifurcation of the better performers and the better lenders and the ones that run into issues. And so I think, again, a credit cycle will expose some of those weaker lenders.

32:06Ben Carlson:We don't have those anymore, credit cycles. We've literally had one in 17 years.

32:09Michael Kitces:Again, there's a difference between a bubble and a credit cycle. And I think this term bubble gets thrown around so much these days. And to me, a bubble implies valuations or prices that make no sense for any future return expectation. When you actually look at where spreads are today, both on an absolute basis and in relation to broadly syndicated loans, they're tighter than they were a couple years ago. but they're not at levels that would indicate, okay, you're not being compensated for the risk that you're taking.

32:36Michael Batnick:Here's the problem with this asset class. And it's not the loans per se. It's the people that are buying them and the people that are selling them. Because the advisors might understand exactly what's going on, but the client is going to see the headlines. And they're just going to say, I don't care. And the advisor is not going to stand up for private credit. It's like, fine, let's get our money back before everybody else wants it. And that's one of the fears that I have is that it's just going to be this thing that is a slow death by a thousand cuts, for lack of a better word.

33:14Michael Kitces:The constraints on liquidity in these vehicles, and again, it varies. It's a little bit different for BDCs than it is for interval funds versus others, et cetera. Those are there for the benefit of remaining shareholders. and as much as redemptions are a bit elevated today versus history, the vast majority of investors still have conviction in the asset class and like having these guardrails in place so that a fund is not necessarily forced in a position where they need to sell illiquid assets to meet redemptions. A big part of managing these vehicles effectively is having a thoughtful liquidity and liability management program implemented.

33:47Michael Kitces:Some do it much better than others. I think there's a perception out there that to meet redemptions, these managers have to sell private loans to meet investor redemptions. So how does it work? The ones that do their best job have, the last thing you want to do is ask for money when you need it. The best run evergreen structures have built out liquidity management programs that are not predicated on holding a bunch of public credit securities that they can sell at a moment's notice. It's in through building out a significant revolver capacity, working with a variety of different lenders. Each of these structures has different amounts of leverage they can incorporate at the fund level.

34:21Michael Kitces:Some of that is to maybe offset fees a little bit so investors can capture more of the expected return. Another is it's a flexible source that you can utilize in order to meet investor redemptions by tapping into those credit facilities that most funds have.

34:37Ben Carlson:Right, so you're not just doing a fire sale because these things are liquid, so it's harder to sell them.

34:41Michael Kitces:Right. You should build the liability management program around understanding that there are going to be periods of stress. There are going to be periods of inflows slowing, outflows going up. You want to be able to withstand what are likely going to be, in hindsight, cyclical periods. And if you can weather those without being a forced seller, you should come out the other side stronger. And I think if we're sitting here in a year, hopefully we're looking back at that this was a great proof point for the asset class and for these structures that they can and do work. It doesn't mean everyone's going to work.

35:14Michael Kitces:Again, there's going to be dispersion in terms of fund performance. But again, these mechanisms are in place for a reason. It's to protect remaining shareholders. And I think the other thing that gets tossed out in some of these articles is that if a fund has to prorate investor redemptions, the authors love to throw out, oh, the fund is gated. They're not letting the... No, most people are getting most of their money out, even when funds are prorated. It's not like 100 % of their capital is trapped. That's just not the case.

35:38Michael Batnick:I have a question. So here's, I think, where I'm at with this asset class. If software is a third of the index, I think that a lot of these companies will have stress.

35:48Michael Kitces:Not a third, but go ahead.

35:49Michael Batnick:What is it?

35:50Michael Kitces:Like a little over 20%.

35:51Michael Batnick:Okay. So I'm making this up. Let's say that default distress hits 10%, which is high, right? Like what was the GFC, 12? Yeah.

36:01Michael Kitces:So here, this is actually a great exercise to go through. So our index goes back to 2004. So I'm going to ask a question. What would you think is the calendar year with the worst index returns? And it's not a trick question, I promise. Okay, 2009? 2008. Okay. As everybody would expect, the GFC, the epicenter of the biggest recession and crisis we've seen in years, the index was down about 6.5 % in 2008. Do you know what credit losses were in 2008? About 60 bps. Wow. So why is that the case? Well, because as much as the naysayers will try to say that all these lenders are holding every loan at par until it becomes a zero, that's not true.

36:38Michael Kitces:we see in practice that unrealized losses in loans, in other words, values being marked down, are done so in anticipation of expected realized credit losses in the future. Often the market actually is over-aggressive in marking down lows. So what happens typically is that some loans priced for default end up defaulting, and there are credit losses. A lot that were priced, if they don't turn into a realized loss, it becomes a gain. And so the real credit losses in the crisis, that three-year period, we're in 2009, 2010. I think there was about 7 % roughly credit losses in 2009, about 3 % in 2010.

37:13Michael Kitces:Do you know what the index did in those years? It was up meaningful double digits in both those years. So in other words, the income is the consistent piece of returns, and then you have the dynamic of unrealized and realized losses. The realized losses should follow unrealized losses. In other words, much in the same way that a bank has loan loss reserves, again, lenders are, I think, thoughtful about marking positions that are at risk accordingly. and some of them turn out to be realized losses. That happens after the fact.

37:41Ben Carlson:Michael's buying Blackstone right after this.

37:42Michael Kitces:Everything that guy just said is bullshit. So I think you have to have a long-term perspective in the asset class. I think what happened when rates went up in 2022, a lot of new money flooded in. Yields were at 12 plus percent. And everyone expected that to be the baseline of what they expect in returns. The reality is this is more of an 8 % to 10 % return asset class. And when spreads came in, when base rates went lower and returns weren't the same that they got, Yeah, you have some capital exiting that was maybe temporary in nature and a bit more touristy. Those that really understand the long-term nature of it is that, yes, it's not always going to be sunshine and rainbows.

38:17Michael Kitces:It's still credit. There's a reason you're paid significantly higher yields than the risk-free rate, than public credit, et cetera, over time. We think it's a risk that you can thoughtfully mitigate by working with great lenders and by building a maximally diverse - All right, all right.

38:32Michael Batnick:We get it. We get it.

38:33Michael Kitces:Yeah.

38:35Michael Batnick:All right. So I don't think that in three years we're going to look back and be like, could you guys believe what we did with private credit? That was a crazy bubble. I also think that there's obviously smoke. Like, duh. I don't know that it turns into a fire. I think I'm a little bit – I think I'm team Phil on this one. All right, Phil. Thank you. Thanks, Phil.

38:53Michael Kitces:I don't get to stay out for the roast?

38:54Michael Batnick:You can stay. Yeah.

38:57Michael Kitces:Maybe I can separate you two. No, I'll get off.

38:59Michael Batnick:All right. Thanks, Phil. Okay, so here's – thanks, Phil. So in thinking about what we were going to do to have a few chuckles, we got an email last week and I was like, you know what? Let's do this. So what was the email?

39:13Ben Carlson:Okay. In case no one in Michael's life is calling him out on this, I figured I would. Haven't counted the transcript, but feels like Michael has used Any Who as a transition at least 15 times over the past three episodes. I didn't even notice. I didn't realize I was an Any Who guy. You're an Any Who guy. So Michael said, yeah, let's roast each other. And I said, okay, this is like when the Eagles broke up. This might be the last animal spirits we do. But we're gonna, I guess before we start, I have eight year old twins, George and Kate, and they are big into roast battles. That's what they do at school now.

39:40Ben Carlson:They roast people. And they're really not good at it, but they found out we were gonna do this and they got really excited and they wrote out roasts for us. So we're gonna warm up the crowd a little bit by reading some of their roasts. Okay? And they roasted both of us. This is from my son George. Michael, you're so lazy your favorite sport is sitting on the couch. That's not bad. Okay? Michael. I'll do one. Dad, you're so short, you can high-five an aunt. That's not bad. Michael, you're so broke, when burglars broke into your house, you had to help them look for your money. Okay? Dad, this is my daughter, did you get dressed in the dark, or did you do that on purpose?

40:18Ben Carlson:That could have been both of us last night, maybe. Michael, Kate went really hard into the bald stuff. Your bald head is so shiny, it looks kind of like the sun. Michael, the sun hit your head today and suddenly we got a lighthouse. And finally, both of you, your stories are so bad, not even ChatGPT can understand it.

40:39Michael Batnick:All right. All right, George and Kate. All right. All right, you go first. We'll do like a back and forth. Let me have it. Okay. All right. I'll go first. Okay. Sorry, sorry, sorry.

40:53Ben Carlson:By the way, comedians are safe because AI stinks at comedy. So bad.

40:56Michael Batnick:Yeah, I tried it too. Okay. Last night at dinner when oil spiked 27%, Ben said, zoom out, and then asked the waiter for another Diet Pepsi.

41:08Ben Carlson:All right. I mean, the easy one, I got feedback from our team. I said, what do I roast Michael on? And the easy one was every time we do the podcast, you are on social media, watching one of your 36 tabs that open, you're on Slack, and you're constantly ignoring me. It's kind of hurtful. was there a joke that's it okay um oh man my next one's not great all right the first uh the first

41:35Michael Batnick:thing that ben bought when he opened up a brokerage account in 1994 was a target date fund and that's not a joke that's just literally the truth that actually is

41:48Ben Carlson:sidebar i didn't know you were actually writing jokes like you're comedian i'm giving real things that you do. Oh, okay. All right. Go. Apparently we didn't just, all right. Um, you use the word ostensibly more than any human being I know. And maybe it's jealous because I've never been able to use that word, but you really use that word a lot. Oh yeah. Really? Yeah. 5 % of people use Chris. Do I?

42:10Michael Batnick:Ostensibly. Okay. All right. Um, all right. Ben has a new book coming out called risk and reward, how to handle market volatility and build long-term wealth. this is his fifth book about doing nothing I just saved you$30 and 200 pages Ben has published more words about index funds than Vanguard's entire legal department it's 20 bucks

42:36Ben Carlson:Duncan can attest to this when we record the show I think Michael was potty trained at gunpoint because he gets up so fast to go to the bathroom anyway Anyway Everyone's a show

42:53Michael Batnick:Alright Alright Most of you know this Ben is a big fashion guy He actually He looks like he was dressed He's like a male Jesse Spano Today That's not funny for the listeners But that's how you look Ben has been dollar cost averaging Into J.C. Into J.Crew Pastel Since 1997 The closest Ben gets to active management as a Stitch Fix account that delivers him a package of new clothes every month. Ben calls it buy and fold.

43:23Ben Carlson:That sounded like an AI joke. Come on. That's not bad.

43:31Ben Carlson:I'll just give a couple here. You've literally never once got a saying right. Grain of sand. Or you call that a grain of...

43:37Michael Batnick:Is it salt or sand?

43:39Ben Carlson:It's a grain of salt. It's not a grain of sand. You have absolutely psychotic taste in movies. just the people who like the same movies as you are psychos uh sam roe likes my movies hey hey sam

43:51Michael Batnick:uh all right all right um speaking of movies ben loves coming of age movies he shares his love for the genre with stephen hawking

44:04Ben Carlson:okay all right all right by the way michael had to remove a jeffrey epstein joke from his list move on from that one whenever my favorite thing Michael does is when we have a talk your book interview and someone comes on the screen and Michael notices that the guy on the other end is bald his face lights up and he uses the same icebreaker every time nice haircut eh nice haircut and credit to you though it works it gets the person

44:29Michael Batnick:every time nobody's ever said alright yeah everyone smiles alright we'll end with this a good way to bookend the show. I got one more. Okay. Well, it's my end. Okay. Ben wants to ban AI, right?

44:45Ben Carlson:Is it going to make us more depressed? Probably.

44:48Michael Batnick:I'm not quite sure what you're so afraid of. Jack Bogle discovered buying old 50 years ago and you still have a high paying job.

44:56Ben Carlson:Fair.

44:57Michael Batnick:Okay.

44:58Ben Carlson:All right. Last one.

45:00Michael Batnick:Thank you.

45:00Ben Carlson:Thank you. Thank you, Hamilton.

45:05Ben Carlson:A lot of times you call Chris and Josh and Barry your partner. But you say it in a way that makes it sound like you're in a long-term committed monogamous relationship. But you're not going to actually do the vows until all the polar bears are saved or something. You're a partner. My partner, Chris. It sounds like you've got to do a relationship. All right. That's all I got.

45:27Michael Batnick:All right. All right. We'll do better next time. Thanks, guys.

45:31Ben Carlson:Thank you.

45:33Michael Batnick:I think you have an announcement to make. Oh, yeah, yeah. Whoa, whoa, whoa, whoa. Okay. Thank you, Ben. All right. So that was just good-hearted fun, right? We're still friends?

45:42Ben Carlson:Yeah. I didn't storm off the stage. We're good.

45:44Michael Batnick:Okay. So Ben is obviously one of the best financial writers of this generation. And we are the greatest generation of financial writers. So ostensibly one of the greatest writers of all time.

45:56Ben Carlson:You're going to notice it now that I told you.

45:58Michael Batnick:Yeah. I've never, that was my last time. All right. So we started a software company called Exhibit A where we build the charts. ChartKid and team build the charts. And the advisors just upload their logo. You know the spiel. You get the charts in your own color. We do a chart of the week. There's 150 charts in the library. It's great stuff. One of the things that we just announced today, actually, is that this guy is going to be writing a monthly report for the platform that you all can white label with the platform to share with your clients. So still going to be using charts, still your labels and all the disclosures and all that good stuff.

46:35Michael Batnick:But we've had a million people over the years ask about how do you find the time? How do you do this? And now you can have them. Ben AI.

46:42Ben Carlson:Yeah, people said, I love the charts. I just want you guys to provide some commentary too. That's what we're going to do. All right.

46:49Michael Batnick:Thank you, everybody. Enjoy the rest of the conference. Thank you.

47:00Bye.