Investing In The Great Wealth Transfer: Masters in Business with Adam Frank

Barry speaks with Adam Frank, Managing Director and Head of Wealth Planning and Advice at J. P. Morgan Wealth Management. They discuss his time at Bear Stearns as the company was acquired by J. P. Morgan Chase, as well as his start in law before pivoting to wealth planning. They discuss building trust with clients to help them with diversification, as well as providing tax advice to help them save their money. They also discuss J. P. Morgan's new program for athletes, the J. P. Morgan Chase Athlete Council, which helps athletes, from student to pro, create and keep their wealth. See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  At Brookfield, we invest in the thing behind the thing behind the next big thing. Our focus across infrastructure, energy, real estate, private equity, and credit is helping to build the backbone of the global economy. We combine deep operational expertise with disciplined long-term investing, uncovering value, and partnering alongside clients to shape tomorrow's economy today. Learn how you can own what's next at Brookfield.com/own. This is not an offer to sell or investment advice. Investing involves risks, including loss of capital.

• 0:33Speaker 01

  Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs and scattered information that you have to grind through to turn into something useful, can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro Plans.

• 1:15Speaker 02

  Never bet against American grit or American energy. Through innovation, Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost and a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy.

• 1:42Speaker 03

  Bloomberg Audio Studios, podcasts, radio, news.

• 1:52Barry Ritholtz?

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Adam Frank. He is the Head of Wealth Planning and Advice at JP Morgan. Previously, he held the same job at Bear Stearns before JP Morgan acquired them. The group manages about $1.4 trillion and specializes in sophisticated family business and succession planning, estate and gift tax management, philanthropy, estate litigation, taxation, and employee stock option analysis. JP Morgan's combined asset and wealth management business, including global institutional private

• 2:35Barry Ritholtz?

  bank and retail, is over $7 trillion. Adam Frank, welcome to Bloomberg.

• 2:51Speaker 05

  Barry, thanks. It's great to be here.

• 2:53Barry Ritholtz?

  It's great to have you. That was a mouthful to get out. I'm glad.

• 2:57Speaker 05

  That and $3 will get you on the subway.

• 2:58Barry Ritholtz?

  That's right. So before we delve into what you do at JPM, let's talk about your background because it's really very, very interesting. You earned a bachelor's in psychology at University of Pennsylvania, then a J.D. at Yale. I'm guessing the original plan wasn't wealth management.

• 3:17Speaker 05

  It was not. The original plan was practicing law because it was either that or being a doctor.

• 3:22Barry Ritholtz?

  One or the other.

• 3:24Speaker 05

  Those are what my mom told me.

• 3:26Barry Ritholtz?

  And you didn't just practice law. You begin your career as a law clerk to Judge Jacob Misler in the Eastern District of New York, a legendary court. And then you end up working with him for a year and a half, two years. You did the full clerkship. Tell us what that was like.

• 3:44Speaker 05

  It was very interesting because he was a senior judge at the time. So he got to generally choose his own cases. He wasn't really in the criminal wheel, so he mostly had civil cases. And it was fascinating to watch him from the bench or watch him on the bench, objecting on behalf of parties because their lawyers weren't quick enough. And encountering him, thinking, watching him think through or talking with him and understanding his thought process of how he would get to a conclusion, and then doing the research to back up that conclusion, or sometimes tell him why I thought the conclusion was not right. But the biggest benefit of the fact that he was senior, he and his wife had a condo

• 4:29Speaker 05

  in Lauder Hill in Florida. And so every year, he got, he would write to the chief judge, the chief justice of the Supreme Court, who would appoint him to the Southern District of Florida in Miami, where he would sit for four months. And each of his clerks, there were two of us, got to go down to Miami on combat pay from the government. So it was a nice gig. And that was a very interesting court as well because he was in the criminal wheel there.

• 4:57Barry Ritholtz?

  And, you know, I don't care how much you like or dislike Florida, there are worse things in the world than Miami in.

• 5:03Speaker 05

  In the winter.

• 5:04Barry Ritholtz?

  Yeah.

• 5:05Speaker 05

  In the winter, and it was the winter of 1993, and there were seven or eight ice storms in New York. So my wife was, kept planning to come visit me in Florida, and she kept not being able to because the airports were closed and the weather was so bad. And I felt a little bit guilty, but not that guilty.

• 5:22Barry Ritholtz?

  Not that guilty.

• 5:23Speaker 05

  No.

• 5:24Barry Ritholtz?

  So after you clerked your first year at Sullivan and Cromwell, and then you were at Schulte-Roth and Zabel, two highly regarded firms, you're focusing on high net worth clients and closely held businesses. Tell us a little bit about that practice. You can see how your progression is moving you towards wealth management.

• 5:44Speaker 05

  Well, it was interesting. When I was in law school, my third year, I just took a trust and estates class because it fit into my schedule because I didn't want to have classes on Fridays. And the T and E course was Tuesday, Thursday. And it was fascinating because the, you know, it's a casebook and you just, it's stories that the judges have written about the litigants in front of them. And it was all of the families fighting over who mom loved best, using their money or their business or their restaurant as a proxy for that. And I just, it was fascinating to me because I was a psychology major as an undergrad. I didn't want to go to grad school, which is why I ended up in law school.

• 6:26Speaker 05

  And I just thought it was a great intersection of law and property class, which I really enjoyed, and the psychology. And it was very human as opposed to a corporate practice or litigation practice, both of which are great if you're interested in them, but I wasn't in particular. So being at Sullivan, I did a bunch of work on estate litigation, actually. And it was the same thing. It was families fighting over who mom loved best. One of the people in the case that I worked on had found out about a year and a half before her mother died that she was adopted.

• 7:04Barry Ritholtz?

  Really?

• 7:06Speaker 05

  And so she and her son, the older woman's grandson sort of moved in, took over. Bad behavior, they stole money, they did a lot of bad things, which was terrible. And it was a terrible story. But as a third party, it was so interesting and so, like it's other people's problems, right? And that was, I enjoyed.

• 7:30Barry Ritholtz?

  Hey, soap operas are popular for a reason, right?

• 7:33Speaker 05

  And so that was it. It was a big soap opera. And then I ended up finishing that litigation successfully and then working, as you said, on wealthy families, air, inheritors of wealth, creators of wealth, business owners, people wanting to create a family compound or do whatever. And so it was a very varied practice. Sullivan called it the Estates and Personals Group because we did a lot of personal work. I sued a dry cleaner once because he ruined a couture dress by ironing out the pleats.

• 8:08Barry Ritholtz?

  So this is very rich veins for a lot of our later discussion. How do you get from Schulte-Roth to Bear Stearns? If I read your bio correctly, you joined Bear in the legal and estates department, not as wealth management?

• 8:27Speaker 05

  So I was, so the team that I run now, the wealth planning team and the wealth management team that I ran at Bear, is the team of former, it's generally planners, so practicing trust and estate and tax lawyers, CFP professionals, CPAs, and other designations of people who are enthusiastic about bigger picture planning, helping advisors work with their clients in the areas that advisors aren't necessarily great at talking about. So Bear, at the time, it was the late 90s, it was like 2000 when I started talking to them, was still very much in the transaction mode.

• 9:09Speaker 05

  It was, they had stockbrokers calling clients to say, got this great bond, or we've got this great stock idea. And what they wanted was people who could talk to wealthy people about something other than the next stock or bond idea, their kids, their plans, their goals, their estate documents, their ownership structure, right? All of the ancillary things that are critically important to somebody, but you're not necessarily going to your financial advisor for that unless you know that they have it. So I was hired into Bear to basically start that group up or help start that group up. And it grew significantly while we were at Bear.

• 9:48Speaker 05

  So the fee-based revenue, which is how we measured the success, when I got to Bear in 2001, early 01, was about 3% of the net revenue of private client. And by the time 2006 ended, it was about 37%.

• 10:04Barry Ritholtz?

  That's a big move.

• 10:05Speaker 05

  It's a huge move. And we hired the right people, the right advisors, the right planners. But it was really changing the culture of how the advisors interacted with their clients, as well as bringing on managed platforms, which Bear didn't really have when I joined. And then we hired a group of people from Oppenheimer when they got sold to Fonstock, or when they got sold to CIBC, CIBC tried to sell them to Fonstock, and we brought a lot of them over. So it grew significantly. And then after 06 is when Bear started, like the beginning of 07 is when Bear started having trouble. It's when the housing market first started to crack. And through the summer of 07, our stock price continued to fall.

• 10:45Barry Ritholtz?

  We'll talk more about that a little bit. I want to ask you about that transition. But I want to stay with lawyering for a bit. You're lawyering for years for very wealthy families. How does that tee you up to run a wealth management practice? And what does it teach you about what the industry just gets wrong about what wealthy people need?

• 11:10Speaker 05

  I don't know that it's what they get, what the industry gets wrong. It's even now, there's a little bit of a blind spot.

• 11:18Speaker 05

  Because the focus of the wealth management industry broadly is investment product and investment success. Measured against, and part of this is regulatory and it's partly the

• 11:34Speaker 05

  result of the kinds of oversight that we have at the governmental levels. But it's a focus on relative performance relative to an index, relative to a benchmark, relative to something to prove how good an investor you are.

• 11:48Speaker 05

  And at this point, I think people expect that their investments will perform in some way relative to the S and P. Everybody can see you, CNBC, Bloomberg, right? Everybody has all of the news at their fingertips and the democratization of information that came about with the internet and decimalization of pricing has caused a lot of people to become more knowledgeable generally.

• 12:22Speaker 05

  But the industry still attracts people who are really interested in investing and thinking about why am I going to buy this company or that versus that company? Or why am I going to buy this manager versus that manager, this fund versus that fund? And what I see, what I saw in the legal practice and moving over into wealth management is really, people have a purpose for their money or people have an idea about what they want their money to be able to do for them.

• 12:50Speaker 05

  And if you can talk about what are your goals? Look, what's the intent of your money? What's this for really? Why do you need to beat the S and P? Well, I want to make sure that I can retire well and maintain my three homes and make sure my kids go to the best schools and make sure my grandkids are taken care of. And if you can show them that they can do all of that and more, they can give charitably, they can get a fourth home, they do whatever.

• 13:22Speaker 05

  It's very freeing for them to not have to focus on investment returns. But it's not the same skill set usually for somebody to be comfortable talking about the numbers, talking about the underlying fundamentals of a company or the alpha that this manager brings, right? And using Greek letters to people who are very smart, but they're not trained in finance is like you're talking Greek to them, right?

• 13:52Barry Ritholtz?

  Literally.

• 13:52Speaker 05

  And a lot of times people smile and nod because nobody wants to, nobody wants you to think that they don't understand what you've told them. But at the same time, a lot of times they don't really. But if you take away all of that and say, what's the purpose of the money? And does it need to grow at this amount? Or if it doesn't, here's what happens. Like if your money never grows again, you can live your life as you have it today with inflation for the next hundred years and you'll be fine. And people, and you can see people like say, huh, I haven't thought about it that way. Nobody's told me, nobody's thought about it or given me that framework.

• 14:35Speaker 05

  Let's talk about what I want to do, what I've thought about in the background, but have not been able to. I didn't think I had the freedom to do that.

• 14:44Barry Ritholtz?

  I'm so glad you framed it this way. Let's both agree that the industry over emphasizes investing and are we beating the benchmark? Where are we? What do you think the industry? You mentioned a blind spot, but what does it under emphasize? Is it taxes? Is it estate planning? Or is it the whole family dynamics around succession planning and generational wealth transfer? Where should there be greater emphasis if there's too much emphasis on, hey, how'd my portfolio do this week?

• 15:24Speaker 05

  I'm in a unique position because I think JP Morgan is in many regards at the forefront of this and we're not like the first mover. But we focus a lot and ask our advisors to focus on exactly those things, the estate planning, the succession planning, the family dynamics. We have a team dedicated to family engagement and governance. Thinking about the purposes of your wealth and how to make sure that your plan, your estate plan, your financial plan is successfully transitioned from generation one to generation two to generation three.

• 16:06Speaker 05

  Because it's usually not a failure, usually isn't the result of bad documents or poor drafting or a bad investment plan. It's the people who aren't prepared or the people who aren't executing what you thought they would execute because they're not you and maybe you didn't train them enough. So I think generally the blind spot is more of an emphasis on purpose and intent and goals, right? The industry has moved, it's moved from transactions to fees and managed money. And the conversation around managed money is generally, what are your goals? Like what's the time period you need? What's your risk tolerance, right? All of

• 16:47Barry Ritholtz?

  The financial plan de-emphasizes this quarter, this year.

• 16:51Speaker 05

  Right. But it, which is good and it's a step in the right direction. I still think that it, it could be taken further to say, here's the overall financial plan. But you've got some short-term needs, you've got medium-term needs, you've got longer-term needs. Let's think about this and whether it's a bucket framework or whatever you want to call it. And then particularly for legacy, the legacy bucket, the succession bucket, whatever it is.

• 17:18Barry Ritholtz?

  Philanthropy, wealth transfer, down the whole list.

• 17:21Speaker 05

  How do you effect that? Because that's the stuff, the short-term spending, I want to put an addition on my garage, I want to get a third home, I need another car. That's spending money, like you can plan for that, but that's what people are doing in their day-to-day lives. If you can help them, that's great. And if you could help get their cash, like, you know, the move your cash out of a savings account into an investment account where you're getting an extra few percentage points, that's great and that's very useful at the margins. Once you start talking to people about their kids or nieces, nephews, their pets, right? Their grandkids, then you're talking about the things that people really care about. And a lot of people think of their businesses as a child and really care about their business.

• 18:05Speaker 05

  You can talk about the business and how they can think about transitioning the business, whether the succession plan is giving it to one of their kids or more than one of their kids or selling it to a third party or employees. Once you start talking about those things, the conversation turns and I think that's where you end up developing the much stronger relationship that doesn't rely, even if it's not quarter to quarter, it's year to year and still relative performance to something.

• 18:35Barry Ritholtz?

  So when did you realize that your psychology degree was going to be more valuable than the law degree?

• 18:40Speaker 05

  Yeah, it was probably a couple of years in, once I realized what I was supposed to be doing.

• 18:44Barry Ritholtz?

  Really, really fascinating. Coming up, we continue our conversation with Adam Frank, head of wealth planning and advice at JP Morgan, talking about how JP Morgan Wealth Management grew from a small part of the firm to a substantial entity. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

• 19:05Speaker 00

  At Brookfield, we believe you can own wealth that's measured in generations because true ownership looks beyond today and beyond cycles. For 125 years, we've built long-term wealth through expertise, discipline, and a clear vision for the future, providing investors access to alternative strategies built for what's next. Brookfield, own what's next. Learn more at Brookfield.com/own. This is not an offer to sell or investment advice. Investing involves risks, including loss of capital. Past performance is not indicative nor a guarantee of future results. Please review performance and offering materials before investing.

• 19:42Speaker 01

  Some people treat ChatGPT like some kind of smart search engine and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting work mode, available on Plus and Pro plans.

• 20:25Speaker 06

  Hey, what's up, guys? It's Haley Bailey. Okay, I need to tell you about something. I just got YouTube Premium. It's got tons of awesome features like offline downloads, so I can download my favorite videos before I travel and watch them whenever I don't have Wi-Fi because we all know airplane Wi-Fi is the worst. I get ad-free, I get background play, and there's like a ton more in there. You should try it. If you like YouTube, you'll love YouTube Premium. Try it now for two months free at youtube.com/premium.

• 20:52Speaker 07

  If you like YouTube, you'll love YouTube Premium. Hi, I'm Sean Evans from Hot Ones and I want to tell you about YouTube Premium. It has offline downloads, so you can watch without Wi-Fi. Background play, so you can lock your phone and it still plays, baby. Oh, and it is completely ad-free. Yes, I said it, ad-free. Try YouTube Premium for two months free at youtube.com/premium. Trial eligibility varies, terms apply, cancel anytime.

• 21:25Speaker 08

  If you enjoy Bloomberg podcasts, you'll love listening to Bloomberg 991 FM in the DMV. Hi, this is Joe Mathew. Here in the DC area, the story is always changing from the White House, Capitol Hill, to K Street, Wall Street, and the Fed. Bloomberg 991 keeps you connected to the news that's driving decisions in the nation's capital and around the globe. Check us out at 991 FM or stream us anytime on the Bloomberg Business app.

• 21:52Barry Ritholtz?

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Adam Frank. He's Head of Wealth Planning and Advice at JP Morgan. His group runs about $1.4 trillion in client assets. So I want to talk a bit about Bear, which led you to JPM. You ran a very similar wealth management group there. And you mentioned earlier what it was like in '06, '07, but I'm fascinated by September '08 and March '09. You're right in the center of the storm. What was that experience like? That had to be sheer mayhem?

• 22:37Speaker 05

  It was, in fact, sheer mayhem. It started probably over the summer when the hedge fund blew up.

• 22:45Barry Ritholtz?

  That was '08 or '07?

• 22:47Speaker 05

  That was '07.

• 22:48Barry Ritholtz?

  That was a year before.

• 22:49Speaker 05

  Right.

• 22:50Barry Ritholtz?

  And the market was still rallying?

• 22:52Speaker 05

  The market was doing very well. And in fact, after Bear went under, not went under, after JP Morgan agreed to buy Bear Stearns on March 16, 2008, the market rallied through the summer until September. And there were indications before that, countrywide, like there were a few other firms that were teetering. There was one bank that started at the beginning of '07 that went under, and I can't remember which one, but that sort of started the crack, to demonstrate the cracks in the housing market. But the summer, the hedge fund was collapsing, and Rich Maron, who was the head of Bear Stearns Asset Management at the time, was like out, and he was posting a movie review on his blog. Like, he was

• 23:34Speaker 05

  completely tone deaf, and we got a lot of, we got a lot of flak for that. And then being there in September, when the

• 23:43Barry Ritholtz?

  Lehman and AIG?

• 23:45Speaker 05

  Well, it was Lehman first over the weekend, and then the Reserve Fund, which broke the buck, which we had a relatively large position in for clients. And just watching that, that week, and an advisor I know had, when I saw him the following year, in like the summer of 2009, so after the crisis, right, it was the September of '08, March, sorry, March of '08 was Bear's collapse, September of '08 was the beginning of the crisis, Lehman and AIG and the rest.

• 24:21Barry Ritholtz?

  And then by the time you get to March '09, the market's bottoming, so by the summer, people are still nervous, but things are getting much better.

• 24:28Speaker 05

  But the, he had this stack of Wall Street journals on his desk upside down, and when clients would come in, being nervous about the market, not wanting to invest, he would take them one by one and flip them over, like Bear Stearns, AIG, Fannie and Freddie, right, which was over the summer, Lehman, Merrill, right, if you remember, all of that, Morgan Stanley, Smith Barney, boom, boom, boom, Madoff, which came in the middle of all that, right? And just the stack, the weight of the papers hitting the table was just such a visceral reminder of that. But in March, we had no idea that that was coming. We actually thought that it was capitulation. Bear didn't manage the balance sheet of those

• 25:11Speaker 05

  funds well. We ended up taking a couple billion dollars of assets, bad assets, onto our books, which caused that collapse. The weekend was, the weeks leading up to it were chaos, because everybody kind of knew that we were going to go out of business, but we were still in business. And in fact, the Friday, so March 17 was Monday, the 14th, that Friday, a client wanted to come in and talk about moving their accounts over to Bear Stearns. And three of us met with her, like, you know, we're going to go, like, we're going out of business this weekend, right?

• 25:42Barry Ritholtz?

  Can you wait till Tuesday?

• 25:43Speaker 05

  We don't know what's going to happen. Are you sure you want to move forward with this? Oh, yes, no, I definitely want to, want to do this. So we had the most surreal meeting of my career.

• 25:53Barry Ritholtz?

  That's unbelievable.

• 25:54Speaker 05

  And then that weekend, we had the, there was an auction, right? So Saturday, we were in the tower, and all the different businesses had their books open, and like, Flowers, Chris Flowers came in, and JP Morgan was there, and a bunch of other firms were looking to buy either pieces of the firm or the whole thing. And by Sunday, it was a done deal, and 8 o'clock Sunday night, we got the, we were on a Zoom call with Jamie and Bill Harrison and the people on the Operating Committee for JP Morgan and the Bear Operating Committee, saying, we've reached a deal, we've sold to JP Morgan, because we didn't know if we were coming into work on Monday.

• 26:32Barry Ritholtz?

  Right.

• 26:33Speaker 05

  Right? So Friday, like, you see people were taking the, you know, the Aeron chairs and using them as dollies, to like, take their boxes out. And so one of the guards, I was at 383 Madison, and one of the guards said to a woman who was rolling out three boxes on a chair, he's like, we can't take that out of the building. He said, I'm going to bring the chair back, I'm just taking the boxes out. He's like, yeah, okay, go ahead. This is the most bizarre time I've, I've lived through in a business sense.

• 26:59Barry Ritholtz?

  And it was pretty clear JP Morgan was by far the savviest acquirer during the financial crisis. What was that transition like, not just that weekend, but from Bear, which was doing something in a very specific way, to JP Morgan Chase, which was large, but clearly getting larger. And they had cleared out their book of any derivatives and securitized junk years, years earlier. So they were in a great position. What was that transition like?

• 27:32Speaker 05

  It was, for a while, it was numbing. I mean, we were numb. And JP Morgan bought all of Bear. There were, I think, four primary businesses that they were interested in, but they'd gotten everything. And I think it took six or eight months for them to, if not more, to really understand what they had gotten. And so for a while, we were just operating as a standalone division, right? It was Bear Stearns, a division of JP Morgan. I've done, I've been doing the same job since basically 2001, but starting in 2008, I was doing the same job, I must have had six different business cards, because we were Bear Stearns, then it was Bear Stearns, a division of JP Morgan, oh, no, Bear Stearns, a JP Morgan company. Then after the closing, it was, so for two months, we were a JP Morgan company,

• 28:16Speaker 05

  then we were a division of JP Morgan, then we got rid of the Bear Stearns name, then we moved across the street, same thing.

• 28:22Barry Ritholtz?

  Just the same, same gig, different business card.

• 28:25Speaker 05

  But they, they, while they were figuring out what they had and what they wanted to do with it, especially on the private client side, because JP Morgan did not have a broker-dealer based wealth manager. They had the branch-based advisors, who used a broker-dealer, but they were, they were branch advisors, generally working with, not proprietary investment products, but proprietary thought leadership, and, and the private bank. And they didn't have the, the broker-dealer based wealth managers, the wirehouse model, even though Bear was more boutiquey. And so they didn't quite know where to put us, and they left

• 29:09Speaker 05

  us alone for a while. So it was, we were part of JP Morgan with all the benefits of that, but still sort of off to the side. And it took a couple of years for the, for the company, for the firm to start to integrate the, the heritage Bear business into the broader wealth management channels. For a while, we were aligned with the private bank in the line of business, the asset and wealth management business. And then we moved over in 2019 into the consumer bank, where we sit today. So we're in the Consumer Community Bank, aligned with the branch advisors, who are, we're working, JP Morgan has worked

• 29:52Speaker 05

  very hard to get them more aligned to a planning framework. And so I think that, on the whole, it was a good transition. It was just weird for a couple of years.

• 30:06Barry Ritholtz?

  Yeah.

• 30:07Speaker 05

  And then, you know, the transition, it's different cultures that you're merging, and ultimately, I think that the culture that's emerged is a very good one.

• 30:13Barry Ritholtz?

  What's the big takeaway from that experience about risk and liquidity and just fragility of institutions? What do you, what do you look back at that and say, hey, it's almost 20 years ago, here's my, here's my big lesson? This margin, it's 20 years.

• 30:30Speaker 05

  It'll be 20 years. No, I know. I had, I still have, I have a confirm on my desk that I had framed, and then I had the frame broken and moved. I sold a couple hundred shares of Bear Stearns that I had, because I had exercised some options, and I was just holding them, because like, it was, Bear Stearns is a great stock company.

• 30:45Barry Ritholtz?

  And the stock had done nothing but go up for decades.

• 30:48Speaker 05

  Right. And so I sold that stock at like $3.79, that Monday, the 17th, because it was somebody's office.

• 30:55Barry Ritholtz?

  Left a little money on the table and went for 10 bucks.

• 30:57Speaker 05

  Little, I know, I know. But Monday, they, I said, why is the stock trading at three and a half bucks? It's a $2 deal.

• 31:02Barry Ritholtz?

  Because nobody believed, well, enough people didn't believe it.

• 31:05Speaker 05

  Enough people didn't believe it, but the shorts were covering. There were a lot of market explanations, like, oh, I'll go up and sell. So it reminds me, I don't know what I'm doing in terms of investments.

• 31:14Barry Ritholtz?

  Well, at least in terms of trading.

• 31:16Speaker 05

  In terms of trading, for sure. But the market's unpredictable, and it reinforced the lesson of diversification as a way to preserve wealth, not a way to build it necessarily, but it's definitely a way to preserve it. And it, it really reinforced the value of relationships and the value of

• 31:44Speaker 05

  Knowing other people, the clients, a lot of clients stayed with us, partly because it was JP Morgan, but in part, especially in the months leading up to March of 2008, because they had personal relationships with the advisors and they trusted the advisors not to, not to lead them astray, not to do anything that was not in the client's best interest. And the good advisors who had developed those relationships didn't do it because of their investment returns, or because they were beating the index, or because they were the best investment managers, although some of them are very good. It's because they got to know the people and they got to know their kids, they got

• 32:25Speaker 05

  to know what they wanted their money to do for them, and they were able to remind them that, like, diversification didn't work in 2008, right? The stocks were down, everything was down.

• 32:36Barry Ritholtz?

  Right. Correlations all went to one.

• 32:38Speaker 05

  Right.

• 32:39Barry Ritholtz?

  Everything went down. But you brought up a fascinating point about it's not just about accumulating wealth, it's about preserving wealth. Talk a little bit about that, because in my experience, that pivot from, I'm working, I'm saving, I'm investing, to, alright, now I have a big pile and I have to think about preserving it and maybe even spending some of it. What's your experiences like with that?

• 33:07Speaker 05

  It has been, it's a, it's a change in mindset, and particularly for business owners who step back from the business, either because their kids are taking over, because they've sold it, or because they affirmatively want to do something else. It's a very hard mindset shift to go from an owner-operator, whether that's of a business or of your portfolio, right? You're an owner-operator, you're accumulating, you're focused on growth and accumulation. And you're willing to take risks to grow that wouldn't make sense if you were really trying to preserve and extend, or if you wanted to spend.

• 33:51Speaker 05

  Making that shift has, as I've observed it across the years, is very difficult for people. Some people do it better than others. Some people prepare for it for a couple of years, and the best time to prepare with a plan, or whether it's a retirement plan, or a financial plan, or some kind of plan, is a few years before the event. And most people wait until, okay, I'm ready, I'm retiring in December.

• 34:16Barry Ritholtz?

  Sixty-five, let's get something.

• 34:17Speaker 05

  Let's get, let's put a plan together.

• 34:18Barry Ritholtz?

  Right.

• 34:19Speaker 05

  And like, okay, the second best time, right? The best time would have been two years ago, the second best time is now. So like, let's do it now, because it's always better to have a plan than not, even if it would have been better to have a plan before. But really thinking about stewardship of capital, and for families of significant wealth, where there's going to be a generational transfer, wealth transfer, and/or philanthropy, it's thinking about how to preserve it, grow it, because you want to make sure it keeps pace with inflation, and most people who are successful at business, successful athletes,

• 35:00Speaker 05

  successful at whatever they do, aren't content just treading water or keeping pace with inflation. They, they have, there's a competitive juices, they want to.

• 35:11Barry Ritholtz?

  Sure.

• 35:12Speaker 05

  They want to do better, but they want to do it thoughtfully and in service of their goals, whereas I think a lot of people in earlier stages are doing it in service of growth for growth's sake. And preservation, it's not what you get, it's what you keep. So preservation's important, and taxes come into it, and you mentioned, you meant, you mentioned them, the words will come out eventually, you mentioned them before. But taxes are an important component, and it's an important component for advisors to be thinking about, even if we can't give tax or legal advice, and we're, make sure that clients always work with their own tax advisors.

• 35:52Speaker 05

  But the more you can help clients to minimize tax, whether it's by asset location in tax-advantaged accounts, or by vehicle choice, or by the type of investment they have, or by various strategies, the more they have in their pocket, the more they have to keep. So it's, it's a combination of that, but for many people, it's a very difficult transition.

• 36:16Barry Ritholtz?

  It, it's kind of fascinating. Let's stay with taxes. One of the biggest surprises I've experienced over the past decade, hey, if you're 50 basis points ahead or behind the index, clients don't even notice, but save someone 50 or a hundred thousand dollars in taxes, because you have a tax group that specializes in tax preparation for investors, which maybe the average CPA doesn't know all the ins and outs, you have a friend for life. It's amazing to me how, I mean, I guess I shouldn't be surprised that people hate paying taxes, and if you could just find, I'm not talking about, you know, Wesley Snipes or

• 37:01Barry Ritholtz?

  anything that's going to get you in trouble, I mean, just black letter law, here's, here's how we can reduce your total tax burden, it's enormous. So, so talk a little bit about all the things around the investment portfolio that may matter as much or more.

• 37:17Speaker 05

  Well, it's at least as much, right? If you think about it, advisors charging a fee, and the fee's basis points, right? It's 20, 30, 40, 50, whatever the advisory fee is. If you can save a client several million dollars in taxes, which, you know, it's capital gains taxes 24%, like, you can really talk, you can justify your fee, because the fee isn't just an investment management fee, it's an overall advisory fee. And if you're advising clients across the portfolio, including tax strategies, again, not giving tax advice, but thinking about tax strategies, so there are products, there's tax transition management, as you're moving from, right, somebody, a new client comes

• 38:02Speaker 05

  to you, they want to move over, but they've got a lot of funds with built-in gains, they've got a lot of low basis stocks, well, how can they move into something that you're recommending? There are ways to do it that are thoughtful, slow, right? Because you can't realize all of the gains in one year, or you'll pay a lot of tax. But you can do it over time, you can generate losses to offset them, there are other strategies to harvest losses, and be very thoughtful on a net basis. And, and there's these, so there's the income tax strategies, which usually focus on capital

• 38:42Speaker 05

  gains, because there's very little you can do for ordinary income. And there are some financial products that work, and obviously asset location, putting high turnover portfolios into your retirement accounts, or into another tax-advantaged vehicle, is a good strategy, or something that generates ordinary income versus municipal bond income. And then there's the transfer tax strategies, which I think the, the big headline, 30 million dollars for wealth transfer, the, the lifetime exclusion, has got a lot of people thinking that they don't have any exposure at all, because most families don't have 30 million dollars between two spouses.

• 39:27Speaker 05

  But at the federal level, that exemption's portable between spouses, somebody dies, the other spouse can use the deceased spouse's exemption. In New York, the exemption's 7,350,000, not portable. In Massachusetts, it's like 2 million dollars. In Oregon, it's a million dollars. In Illinois, it's like four. So there are a lot of families who don't consider themselves super wealthy. They're not flying private, they're not renting helicopters, they don't have multiple homes in different countries, but they might be subject to those taxes. If you can save people those taxes just by re-titling accounts, or doing something else

• 40:10Speaker 05

  that's very simple and doesn't affect their life at all, right? Nothing's going to change.

• 40:15Barry Ritholtz?

  It's a little paperwork.

• 40:16Speaker 05

  A little paperwork and that's it. That's the kind of thing where, especially if you can demonstrate that through, you know, some kind of, like, a software, or Excel, or something, where you could say, here's what would happen if you do nothing, and here's what happens if you just change the title on these three accounts, and here's what it is. And you're going to save a million dollars in tax to the state of Illinois, or to the state of New York. To your point, it's huge. And helping somebody keep that money, now, they're not keeping it, their, their kids are keeping it, right? Because they have to both die in order for that to take effect, but it's money that they now have available for their legacy. So if they think about, well, I would have paid a million dollars in tax, now I don't have to worry about that, I can spend a little more.

• 40:58Barry Ritholtz?

  Right.

• 40:59Speaker 05

  Right? Because my kids are going to get this extra million bucks. So it's a, it's a way of thinking, and this word is so overused that I, but it's a way of thinking very holistically about what do people have, and not just what do they have in their portfolios, but what do they have in their families, what do they have overall, and what do they want for it?

• 41:18Barry Ritholtz?

  So you mentioned tax loss harvesting. I'm curious what your approach is. Do you use direct indexing? Do you use the long-shorts, the 150-50 type stuff? What's the approach to tax loss harvesting from your perspective?

• 41:34Speaker 05

  I'm old enough to remember the 130-30s.

• 41:36Barry Ritholtz?

  130-30, right.

• 41:37Speaker 05

  That didn't turn out that well.

• 41:38Barry Ritholtz?

  We've had great experience with it. It's the other one that seems to have gotten into trouble, where you're using futures losses to offset ordinary income, which when I first saw that, I'm like, I'm an attorney also, and I looked at it and I go, that doesn't make any sense to me. But the, the straight-up direct indexing and long-short seems to just be black letter law.

• 42:02Speaker 05

  And, and just, just like plain vanilla loss, so direct indexing, but plain vanilla loss harvesting, you know, the classic is you have a stock and it takes a loss, or it takes a dip one day, and you sell it and you buy a similar stock. I'm not, I can't use company names, or I would, I would say something, I'd be a little clearer in that example, but.

• 42:26Speaker 05

  There are a number of financial products that allow us to be very thoughtful about loss harvesting. And there have been a number of companies that have come down the road that specialize in tax management, not just loss harvesting within a portfolio, transition management, overall, ongoing tax management. And we, we've generally used all of those strategies. Some of the financial products, some of them JP Morgan and some third party, right? Because we have an open architecture platform. And then some things that are proprietary that we overlay onto client portfolios. And it's been, it's been successful.

• 43:11Speaker 05

  We are ramping up that capability currently. And I'm excited for where that's going to go in the next six months to a year, I think.

• 43:22Barry Ritholtz?

  Yeah, no, there's a lot of really interesting things happening there. Last question on this, because I can, you know, go down this rabbit hole and, and lose half our audience talking about taxes and, and loss harvesting. Typically, successful entrepreneurs arrive with a lot of concentrated risk. They became successful because they built up either their business or their stock options or whatever it is. And so much of this wealth is tied to just one stock or one business. How do you persuade somebody who has that concentrated wealth that, hey, if you want to preserve this, you have to think about diversifying. As you mentioned earlier, you've already won the game. Now let's think about keeping it.

• 44:07Speaker 05

  So for some people, it's easy because they recognize that they are heavily concentrated. I spoke to somebody a day or two ago, very concentrated in his employer's stock. Ninety-five percent of his net worth is tied up in it. He completely recognizes the overweight and is looking for ideas of how to get out, not trying to be convinced of whether he should get out or not. I think he's the exception, or not the exception, he's in the minority. More entrepreneurs and C-suite executives of public companies or private companies

• 44:46Speaker 05

  are very optimistic about the future of their company and prefer to retain their holdings. There are also a lot of restrictions on what executives can do, particularly public company executives.

• 44:58Barry Ritholtz?

  And you can always file a plan and say, I'm going to sell X a quarter and this way there's no inside.

• 45:05Speaker 05

  No inside information. And 10 B 5 1 plans are very common, but there's also investor perception. There's the board of directors and their perception of a senior executive who's selling rather than acquiring. And that comes, that plays into a lot of those decisions. Again, more than the executives would like, and those executives are ones who understand that they're concentrated, are trying to get out and aren't able to as much as they want to. For people who need to be convinced, like you can give them all the statistics in the world, show them, right, the Nifty 50, right, it was GE, Kodak, IBM, AT&T, like all of those companies, they're all gone, right?

• 45:47Speaker 05

  Or they're, they've morphed into something else and the stocks have declined significantly over time. But that's never going to be my company, right? My company is not going to do that.

• 45:57Barry Ritholtz?

  I mean, just look at GE after 2000. I mean, talk, and they had the world's most generous stock. I think they subsidized employee stock purchases by like 20%, a crazy number. So there were all these GE millionaires with one stock.

• 46:12Speaker 05

  Right. And this same thing happened at Microsoft in like 2000, 1999, 2000, the tech wreck. There were a number of companies that had those very generous reloads or, or stock grants, right?

• 46:25Barry Ritholtz?

  And RSUs.

• 46:26Speaker 05

  And they, the employees believed in the stock as the executives did, and a lot of them ended up paying taxes on the value at exercise or at vesting, holding the stock and watching it decline to the point where it, they couldn't, they didn't have enough cash to pay the tax.

• 46:45Barry Ritholtz?

  Right.

• 46:48Speaker 05

  And so you can tell people that all day. It's, for people who really believe in their stock, it's very hard to convince them to diversify. For people who understand that they have a concentration, they don't necessarily want to sell everything, but they're willing to take 10% off the table, 20%, 5%, whatever it is. Then it's a question of how, what's the most tax efficient way to do it? What's the most thoughtful way to do it? And then that's where you get into things like qualified small business stock for private companies where you can exempt up to $10 million of capital gain from taxes. A lot of, to your point earlier, a lot of CPAs don't know about that rule. And so I've talked to clients and just mentioned, hey, your stock sounds like it might be eligible

• 47:33Speaker 05

  for this QSBS, qualified small business stock treatment. Have your accountant mentioned it? No, he hasn't. When did you buy it? Like, do you meet all these criteria? You know, you could save taxes on 10 million bucks. We just saved you 2, 2.38 million dollars in taxes. Isn't that great?

• 47:50Barry Ritholtz?

  That QSBS has come up time and time again where you're looking at somebody and it's like, you're looking at a, a returns and why isn't this a QSBS? Why are you paying capital gains on the sale of a small business? My accountant did it. It's amazing. Coming up, we continue our conversation with Adam Frank, head of wealth planning and advice at JP Morgan, talking about the state of wealth management today. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

• 48:22Speaker 01

  Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at chatgpt.com by selecting work mode, available on Plus and Pro Plans.

• 49:04Speaker 06

  Hey, what's up, guys? It's Haley Bailey. Okay, I need to tell you about something. I just got YouTube Premium. It's got tons of awesome features like offline downloads, so I can download my favorite videos before I travel and watch them whenever I don't have Wi-Fi, because we all know airplane Wi-Fi is the worst. I get ad free, I get background play, and there's like a ton more in there. You should try it. If you like YouTube, you'll love YouTube Premium. Try it now for two months free at youtube.com/premium.

• 49:33Speaker 07

  If you like YouTube, you'll love YouTube Premium. Hi, I'm Sean Evans from Hot Ones, and I want to tell you about YouTube Premium. It has offline downloads, so you can watch without Wi-Fi. Background play, so you can lock your phone and it still plays, baby. Oh, and it is completely ad free. Yes, I said it, ad free. Try YouTube Premium for two months free at youtube.com/premium. Trial eligibility varies. Terms apply. Cancel anytime.

• 50:05Speaker 09

  AI is entering its most consequential phase where scale, safety and sovereignty will determine who leads and who lags. Join Bloomberg Tech in London on November 2nd and 3rd as global leaders across business, finance and policy examine the defining trade-offs shaping the future of AI. Thank you to our presenting sponsors, Salesforce, and supporting sponsors, IDA Ireland and Schneider Electric. Learn more at bloomberglive.com/techlondon.

• 50:34Barry Ritholtz?

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Adam Frank. He's the head of wealth planning and advice at JP Morgan. So let's talk a little bit about what's going on today in wealth management. I'm intrigued by what you guys do with student athletes. Tell us a little bit about the, the board you guys have, have put together and what is that space like today?

• 51:01Speaker 05

  So at a firm level, we put together an athlete council to help inform us how to engage with athletes across their careers. So at every stage from student athlete to pro and making that transition, then from pro to retired athlete and making that transition, and really everything in between, when you're a pro, et cetera. And the council has been great at helping us think about how to talk to athletes, not because they're different, they're all people, right? And that's the one thing, again, coming back to my psychology degree, everybody's people. But a couple of the council members had said at one point, you have to be a little delusional

• 51:44Speaker 05

  to play at this level, to, to excel at a sport. And you can't tell somebody, well, you can't do that, don't do that, don't spend this, don't do that. So it's really helping us as advisors and planners frame what we're talking about in a way that resonates with athletes. And you know the statistics, that there are millions of kids who play high school athletics. A small percentage of them go on to play at NCAA schools. And there's hundreds of thousands of kids who play at NCAA schools. A small percentage of those, less than 5% or 10%, go on to play pro. Now, right, so they're going to be delusional for a while and then they'll, that delusion

• 52:28Speaker 05

  is going to end pretty quickly.

• 52:32Speaker 05

  Now with NIL, some of the kids, even in high school and college, are able to monetize their name and their image, their likeness, they're able to be paid some significant sums. And there are kids who are getting relatively smaller amounts, 10,000, 15,000, 20,000. And then there are kids who are getting 60,000 a month, or a couple million dollars, over the course of a contract or a year. And helping them realize, not realize, helping them plan for the potential that they may not be in that small percentage that goes pro, and in pros gets a big contract.

• 53:13Speaker 05

  But helping them enjoy what they have, but really think about it as, they're the CEO of their money. What do they need to do to make sure that it's doing whatever it can, it's maximizing its value for them, while it's working for them? Because at some point, it might stop working. And in the same way that an athlete can, their career can be ended unexpectedly by an injury or something else, we don't want that to happen with their portfolio. So it's helping to educate the students in particular to think about money in a different way. And for a lot of the student athletes who are getting significant sums, they're having

• 53:57Speaker 05

  to make really adult money decisions, at a time when they don't have significant background in it at all. And a lot of times, their parents don't have significant background. The parents are obviously the, one of the key advisors to these kids. But we're trying to use the council, as people who these athletes look up to, as a way to say, we're doing this because it's important to us to give back to the athlete community. And we're doing it here because JP Morgan's made this commitment to provide education and advice to athletes, not only at all stages of their careers, but really, we're not looking

• 54:38Speaker 05

  only for the pro making a multimillion dollar, 100 million dollar contract. We're looking at the kids in D3 schools, who, maybe they're getting NIL, maybe they're not, but we know they need good money habits, they need to develop good skills at thinking about money, and thinking about it as wealth. Because a lot of these kids, sometimes the kids who are earning the money are the first, like, they're gonna have the most money of anybody in their family.

• 55:06Barry Ritholtz?

  So, let's stay with that a little bit, because I'm sure you remember the, was it ESPN 30 Under 30?

• 55:13Speaker 05

  Yeah.

• 55:14Barry Ritholtz?

  I don't know, about a decade ago, 20 years ago? One in four NBA players filed bankruptcy, and I think it was one in three football players? The numbers were just shocking and horrifying. I know you don't want to just scare the kids, but how do you make them aware that, hey, you know, there's a right way to do it, there's a not-so-right way to do it, and here's what history has told us is the wrong way to do it, look at the bankruptcies?

• 55:42Speaker 05

  We've tried that. I mean, the industry has tried that, over the years. It's very hard to go in and tell somebody, who's come to you for financial advice, like guidance, to say, you can't do this, you can't do that, look at what might happen to you. Because again, these, if the kids are any good at their sport, they're a little bit delusional, right? Based on that, that comment from one of the council members. And so, you've got to figure out a framework that works. And one of the, one of the components of that is, we know you're gonna spend some money. Let's figure out what you're gonna spend, like, what do you want to spend the money on? You've got this big lump sum. You want to buy a car? You want to trick out your apartment? Like, what do you want to do? Let's put money aside for that.

• 56:26Speaker 05

  Now you've, do you have anything left? And actually, before that, it's, okay, you've gotten this money, let's say it's 200,000 dollars. You gotta put aside, because you're a 1099 person, you're not getting a W2, you're not being withheld, right? You gotta put money aside for taxes. And like, I, you know, I remember my first paycheck, right? As I worked for-

• 56:44Barry Ritholtz?

  Who was this FICA guy?

• 56:45Speaker 05

  Right. And why am I giving him a third of my money? He really annoyed me. And so you've got to make sure that they know, like, if you have a deal for 200,000, you can't commit to spend 200,000. You've got to commit to spend less than that, and here's a guidance as to, you know, sort of rates and everything. And then, you don't know how long your career's gonna last. Not telling them you could go bankrupt in five years, but you don't know how long your career's gonna last. Instead of committing to a three-year car lease for this, right, great sports car, what about doing something like this? Or what about a different car? What about maybe a sponsorship with a local dealer? And you get something like that.

• 57:28Speaker 05

  So it's, it's helping to reframe it. But the way that we do that is to be one of the people that the, that the athletes trust. And right now, or when we're introduced, they trust their parents, for the most part. They trust their agents, they trust their coaches. And they look up to the people who've been in their shoes before, who have made mistakes and been successful, been open about the mistakes they've made. And that's the purpose of the council, as well, is to help us, by virtue of putting the council together, really help us, sort of ride their coattails, but, but gain a little bit of trust that way. But also, make sure that we're there for the coaches, and we're there for the parents,

• 58:13Speaker 05

  and we're there for the agents. And, you know, make sure that the kids have a good team around them. Agent, attorney, accountant, and advisor.

• 58:22Barry Ritholtz?

  Who's on the council? Tell us about the folks that are on that.

• 58:25Speaker 05

  Let's see, Meg Rapinoe, Sue Bird, Tom Brady, Jalen Brunson-

• 58:30Barry Ritholtz?

  You couldn't get anybody who won any championships?

• 58:33Speaker 05

  I, yeah, sorry.

• 58:34Barry Ritholtz?

  That's an amazing list already.

• 58:37Speaker 05

  Ali Love, Dwyane Wade, Alex Morgan, I knew I missed, and Kayvon Thibodeau. All to a person really committed to making sure that the student athletes didn't, to the extent they can, didn't make the mistakes that they did, really wanting to give back, and like, pay it forward to some extent. And KT, Kayvon in particular, because he was in the first or second NIL class, he has firsthand experience, and he knows what it, what it's like to have that money at a young age. Now, fast forward, he's been very successful in his athletic career, but you gotta think that nine kids out of 10 who are following him, they're not gonna be the ones who end up on the Giants.

• 59:21Barry Ritholtz?

  Right, to say, to say the least. So, so let's talk a little bit about what I keep hearing about this intergenerational wealth transfer, that's supposedly underway. There's been a number of news stories and opinion pieces where people are saying, hey, you think the Boomers are moving all this money? They're gonna spend a lot of it down, they're gonna spend it, they're not downsizing home-wise, they're gonna spend it on healthcare and other issues. Are we really looking at a 50 or a 75 trillion dollar wealth transfer? And if we are, when is it really gonna ramp up?

• 1:00:00Speaker 05

  Those are the numbers that you hear about, I hear about them, like, we all read about them. I've written about the Great Wealth Transfer. We have some, we have some white papers out on the Great Wealth Transfer. I believe it's happening, as the Boomers have started to pass away and transfer money. But if you think about what the transfer is, the first transfer is horizontal, right? It's spouse one to spouse two. And then, from spouse two, it's potentially the kids and grandkids and so forth. But I think you're right, a lot of the money will be spent. Healthcare is very expensive, and, and more people who have the means are able to be cared for at home. And that costs a lot of money.

• 1:00:41Speaker 05

  But I, I do think that there's something to, given the bull market that we've participated in for the last 13 years or so, there's a lot of wealth. And, to a large extent, it's concentrated in older people, who've had more time to accumulate and to have their, their portfolios grow. And so I think there's something to it. I don't know that it's going to feel materially different. It just, it, it means the same thing for advisors that we've always had it. I think it's a different way of framing it, which is if you, as an advisor, you're talking

• 1:01:23Speaker 05

  to mom and dad and they've been clients of yours for 20 or 30 years, you grew up with them or they grew up with you. They're getting older. When they eventually pass away, if you don't have a relationship with their kids, that money is likely to move somewhere else as an advisor. So it'll go to a self-directed platform, it'll go to a competitor where the kids have a relationship or where they know somebody they went to school with works. So it's important for advisors to develop those relationships with G2, G3, and for advisors to have potentially a multi-generational team so that you've got somebody who can relate

• 1:02:06Speaker 05

  better to a 20-year-old than the people who are relating very well to the 60-year-olds because the cultural frame of references are different. And it's, it's easier for people to relate to people who are more like them. But at the end of the day, you, people generally are going to do business with people they know, like, and trust. If you can develop that, so you have to know the people and you have to know them for a while to develop that trust and hopefully you're likable.

• 1:02:34Barry Ritholtz?

  So let's talk about what I think is the most interesting trend when it comes to wealth transfer, which is inter vivos. For those of you who don't speak Latin, why wait until you're dead? Why not enjoy your kids or grandkids spending their inheritance now when you're here to see it? How big of a trend are you, is this, what are you, what are you seeing with this space?

• 1:03:00Speaker 05

  We're seeing some. It's still for families who aren't in the top, the, the top, top echelon where there's plenty of money, it doesn't matter what they do. There's still a lot of concern because your point earlier is exactly right. People have spent decades being savers and being told, "Don't touch principal." Right? Save it, accumulate it, grow, make sure you have enough. You always want to make sure you have enough and they're not spending what they could. So it's hard to shift people out of that mindset. And I, the, I don't want to say easiest. One of the ways to do it is like, start small.

• 1:03:45Speaker 05

  Right? It doesn't, "I want to leave my kids millions, $2 million each, I got three kids." Okay, great, but you don't necessarily want to give them a million dollars now. That's a lot of money, that's $3 million off your balance sheet. Like, that's scary. But could you start making annual gifts? $19,000 each, so maybe $38,000 to each kid, maybe 38 grand to their spouses, another 38 to their, to their kids, to your grandkids. And that's a more manageable number, that's hundreds of thousands of dollars, depending on how big their family is, as opposed to millions. And it's a way to get people started with that idea. And if you do that for a couple of years, especially over the last 13 years, the people who are giving the money away can see, "Well, my portfolio is still growing," even though

• 1:04:28Speaker 05

  I'm spending what I want to spend and I'm giving my kids $100, $200,000 total. Okay, now I'm ready to, like, now let's talk about that gift that you talked about before. So I think it's a gradual process, but you have to have the relationship and the, and the trust.

• 1:04:46Barry Ritholtz?

  So before I get to my favorite questions, I have one last question and you're really the perfect person to ask this. So we've talked about estate planning and gift planning. We, we watched various permutations of the tax cuts and job acts and the threatened 2026 sunset, then a higher exemption, then a lower exemption, then the hole in the donut, "Don't die this year."

• 1:05:12Speaker 05

  Yep.

• 1:05:13Barry Ritholtz?

  Oh, good advice. I'll try not to die in, what was it, 2023? Don't, don't die.

• 1:05:17Speaker 05

  Yeah.

• 1:05:18Barry Ritholtz?

  Otherwise it'll cost you too much. How do you think about multi-decade plans for families when the tax code has, I don't know, certainly no more than a 10-year life and, and more often a two or a four-year half-life?

• 1:05:35Speaker 05

  Unfortunately, if you got a, you've got a plan for the tax code you have, not the tax code you want. So what, and what I've seen practitioners do over the course of the last 30 years is really make plans more flexible. Disclaimer planning, planning with trust where there's a lot of flexibility as to who gets the money, when they get it, who can give it to them. So it's, it's building in flexibility and it's also, we, we tell clients and we, we recommend, like, look at your plan every three to five years. If there hasn't been, if, if there's a major life event, you get a job, you lose a job, you win the lottery, something happens, check your plan, make sure it works.

• 1:06:18Speaker 05

  But if there's not, like, every five years, just look at it, make sure that what you have in, on paper is actually what you want to happen. And then it goes back to what I said before, the paper can be fine, you still need to make sure that the people who are involved, the people who are inheriting, the people who you put in charge of their money, if you have trust, the trustees, you've got to make sure that those people want to do the job or capable of doing the job and have the same values around money and, like, what you don't want to do is put somebody in charge of your kid's money and they never learn the lesson about spending. They don't want your kids to spend anything.

• 1:06:59Speaker 05

  So if your kids want a new car and they currently drive a Corolla, they can get another Corolla. But if they really want to, if they want a Lexus, they want Acura, no, they're not going to, not going to do that. So it's, it's a lot about the people, but, but, um, but that's, that's it.

• 1:07:19Barry Ritholtz?

  And you, throughout our conversation, you've spent a lot of time talking about litigation between siblings, across generations, fights, all the psychology, and, and all the things that I know from a distance just look foolish and wasteful. How do you guide people to make better decisions so that their kids aren't fighting over the inheritance or that there isn't an expensive litigation that's going to fritter away 20% of the, the estate?

• 1:07:55Speaker 05

  It goes back to having a plan or making a plan early enough so that you, you as the wealth owner can have conversations because it's about communication. It's about making sure that your kids or your inheritors know what you expect of them, know what you expect of them with respect to the wealth that you're providing to them, but also with respect to the relationship that they have with each other. There are plenty of parents who have two kids and one of them is not great with money and the other one's terrific and they want to put the terrific kid in charge of the spendthrift kid's money.

• 1:08:38Speaker 05

  Like, do you really want to have your daughter going to her brother and saying, "Can I have $1,000 for whatever?" And he's in a position to say no? Like, what happens at Thanksgiving that year? It's, it's really just thinking about what are you, what are you telling your kids? How are you training them to think about money and wealth and to think about what it can do for you? And we talked to athletes about this too, because we do a lot of athlete education as part of it, the Athlete Center of Excellence. And it's really thinking about what do you want your money to do for you? Right? It needs to work for you, you shouldn't be working for it.

• 1:09:23Speaker 05

  So having it grow is great, what is it going to do for you? What's it going to do for your life, is it going to, in your life? Is inheriting money, is this going to change your life? Is it going to change your life? And is it going to change the relationship between you? If, and, and this is common with business owners. Family, the, the business owner has three kids, two of them are in the business, one of them's not, or one of them's in the business, two of them aren't. That one's going to be in charge of the business. Is that sibling going to be working for her brothers and growing the business and her brothers who are taking no part in the business benefit from it? And if so, maybe the answer is yes, but if it is, you've got to communicate that and make sure that everybody's on the same page.

• 1:10:06Speaker 05

  So I think a lot of it goes back to communication and that family governance, what's the framework within which we're thinking about our money? How can we put people in the best position to make good decisions? But ultimately, there's still going to be family fights and litigation because that's the way the world works.

• 1:10:26Barry Ritholtz?

  That's how people are. All right, I only have you for a few moments more, so let's jump to our speed round, starting with, who were your early mentors who helped shape your career?

• 1:10:35Speaker 05

  Uh, my dad. There was my sixth grade biology teacher, Jim Van Tassel, but not sixth grade, I guess he was eighth grade. And in my career so much is like, he, he gave me ideas about what I could do, like what was possible. Lila Gleitman at Penn, a couple of my professors at school, at law school. Jack Michler, Judge Michler.

• 1:11:14Speaker 05

  But it was, it's just, you know, there've been a bunch of people through my career who've sort of given me more life advice than career advice necessarily. And most of the, most of the advice was just, it's always thinking about people.

• 1:11:26Barry Ritholtz?

  Huh, that's really interesting. Let's talk about books. What are you reading currently? What are some of your favorites?

• 1:11:32Speaker 05

  What I'm reading currently, I can't remember the name of it, but it's the book about Alex Murdaugh.

• 1:11:37Barry Ritholtz?

  Uh huh.

• 1:11:38Speaker 05

  The guy from South Carolina who killed his family. It's like, he was a terrible person. I didn't realize quite how bad a person he was, because I was like tangential. In the heart of, I can't remember the name of the book. Great book.

• 1:11:51Barry Ritholtz?

  Really? Let's see if I can find it while we're...

• 1:11:53Speaker 05

  I'm sure, I'm sure you'll be able to.

• 1:11:55Barry Ritholtz?

  Alex?

• 1:11:56Speaker 05

  Alex Murdaugh, M-U-R-D-A-U-G-H.

• 1:12:00Barry Ritholtz?

  Oh, there are tons of books on, on this.

• 1:12:03Speaker 05

  In the Heart of Evil, or is the...

• 1:12:07Barry Ritholtz?

  Blood on Their Hands, The Devil at His Elbow.

• 1:12:10Speaker 05

  Devil at His Elbow.

• 1:12:11Barry Ritholtz?

  The Devil at His Elbow.

• 1:12:12Speaker 05

  Yes, Devil at His Elbow.

• 1:12:14Barry Ritholtz?

  Alex Murdaugh and the Fall of a Southern something.

• 1:12:18Speaker 05

  That's it. Fall of the Southern Dynasty, right? Yeah.

• 1:12:22Barry Ritholtz?

  Yeah.

• 1:12:23Speaker 05

  Fascinating book.

• 1:12:24Barry Ritholtz?

  Really?

• 1:12:25Speaker 05

  Yeah, really fascinating. I just finished a book about the Belgian expedition to the South Pole, to Antarctica, I should say. Also can't remember, my memory is terrible.

• 1:12:37Barry Ritholtz?

  A Belgian one, not, not, what was the famous?

• 1:12:41Speaker 05

  Shackleton?

• 1:12:42Barry Ritholtz?

  Not the Shackleton one, which was an amazing, amazing book.

• 1:12:45Speaker 05

  It was an amazing book.

• 1:12:46Barry Ritholtz?

  Endurance, that was the Shackleton one.

• 1:12:48Speaker 05

  That was the Shackleton one. This was about a different guy who went, I think before Shackleton.

• 1:12:54Barry Ritholtz?

  Hmm.

• 1:12:55Speaker 05

  And it was sponsored by the, he was, he was Belgian, but, or half the crew was Dutch. I, I can't remember. Again, not a great memory for titles of books, but a terrific book, really gripping story about their, their trip and, and the problems they had, again, because of the people who were trying to execute the plan.

• 1:13:15Barry Ritholtz?

  Dig it up and...

• 1:13:16Speaker 05

  I'll dig it up and let you know, yeah.

• 1:13:17Barry Ritholtz?

  What about streaming these days? What's entertaining you, either podcasts or, or Netflix or what have you?

• 1:13:23Speaker 05

  Oh, we, we just watched on YouTube, the, there was a documentary about the villages that was fascinating.

• 1:13:35Barry Ritholtz?

  Down in Florida?

• 1:13:36Speaker 05

  Called The Bubble, yeah.

• 1:13:37Barry Ritholtz?

  Okay.

• 1:13:38Speaker 05

  Really interesting, Dutch filmmaker, like she, I think she was Dutch or Swedish. She did a great job. We're watching the fifth season of Ted Lasso, but we're waiting, my, my wife is not interested anymore in waiting, like week after week, so we're waiting till the whole thing drops.

• 1:13:51Barry Ritholtz?

  I'm in the exact same position. I'm, can't wait to watch that. And my wife is like, and we've been watching Reacher on Prime, and there was a giant cliffhanger, and she's like, this is why I hate doing this. And I think it drops tonight, so we'll find out.

• 1:14:05Speaker 05

  Oh, there you go.

• 1:14:06Barry Ritholtz?

  But she's the same way. She won't let me watch the new season of Lasso till they're, till they're all, all out. Our final two questions. What sort of advice would you give to a recent college grad interested in a career in either wealth management, advice, planning, or estate and trust law?

• 1:14:26Speaker 05

  I talk to a lot of kids in college about their careers. It's really think about what you want to do. Do you want to work with clients one-on-one? Like, do you want to be an advisor? Do you prefer to work with clients but not have that responsibility for decisions? Because there are plenty of ancillary careers on Wall Street or in law where you're giving guidance and giving advice, but you're not the primary person. You're not the person they call up when there's a crisis. Some people want to be that person, some people don't. And kids come in, they say, well, I want a career in investment banking. Okay, well, I don't do investment banking. Do you want a career at a bank? Do you want to work with individuals or institutions?

• 1:15:10Speaker 05

  And there are some people who want to work with individuals because they like that, the thing that I loved about the casebook, the families fighting. There are some people who want nothing to do with that. They don't want the drama. They just want institutions, because they're still people. But it's people who are usually making, they're not as emotional, because they're not as emotionally invested, because it's not them, it's their company. And it's really just understanding what's out there and thinking about how what exists, which is hard to find out, everything that exists, aligns with what you're interested in. And then just talk to as many people as possible who you know in the industry to understand what there is and what you could do.

• 1:15:54Barry Ritholtz?

  And our final question, what do you know about the world of planning and advice and wealth management today might have been useful 30 years ago or so when you were first getting started?

• 1:16:05Speaker 05

  Nobody cares about, not that nobody cares, it doesn't matter where the numbers come from. People want you to make them feel good. And, and people don't want you to lie to them, but people want, want you to make them feel good. They want you to talk to them like a person. They don't want you to talk to them like a client or to prove how smart you are. It took me a while to make the transition from a legal career, where my job was to be smart and to, right, like, speak in Latin, right? Talk about intervivos, whatever, and, and everything else, to a career in wealth management, which is, it's very different, even though I'm generally talking about the same topics, but I have to talk about them very differently.

• 1:16:48Speaker 05

  And it would have been useful to understand that before I went in. Instead, it just took me a couple of years to get into it.

• 1:16:54Barry Ritholtz?

  Really interesting. Adam, thank you for being so generous with your time. This was really quite fascinating. We have been speaking with Adam Frank. He is the head of wealth planning and advice at JP Morgan. If you enjoy this conversation, well, check out any of the 650 we've done over the past 12 years. You can find those at iTunes, Spotify, Bloomberg, YouTube, or wherever you get your favorite podcasts. I would be remiss if I didn't thank the crack team that helps us put these conversations together each week. Anna Luke is my producer. Sean Russo is my researcher. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.