Subscribe
Share
Share
Embed
The wealth management industry is changing fast, but many financial advisors are still using the same old playbook. Join hosts Sean Allocca and John Manganaro, along with leading industry expert guests, as they break down the trends shaping your business.
Each week, we'll cover critical topics while also having a little fun. It's all on the table, from retirement income planning and Social Security to the behavioral side of investing and what clients are hearing elsewhere. We've created The Advisor Upside Show because staying informed isn’t enough anymore. You need to stay ahead.
New episodes every Wednesday.
#FinancialAdvisor #WealthManagement #FinancialPlanning
John (00:00)
This episode is brought to you by Fidelity.
Growth, it's fundamental, and wealth management firms of all types are proven to grow faster with Fidelity, because we'll work closely with you to help make your vision come to life. Deep expertise, powerful technology, and unmatched scale. We have everything you need all in one place to help your firm grow. Move forward faster with Fidelity. Visit i.fidelity.com slash growth.
John (00:29)
President
he asked the DOL ⁓ to consider democratizing quote unquote access to alternative
Sean Allocca (00:37)
first of all, I wanna say I hate the word
for me. I just
John (00:39)
saw your skin crawl whenever I used it.
Sean Allocca (00:41)
yeah, I got a little
All right, welcome everyone. Welcome to the Advisor Upside Show. My name's Sean. I'm here with John.
today. We're gonna talk about the DOL rule and some public comments that came about putting alts in 401ks.
And we're gonna get in some other topics as well. But first, we're a couple episodes in now.
We're having a blast. I know John is as well. Please give us your feedback. We've had a lot of great ⁓ feedback already, some great engagement on our YouTube channel and and elsewhere. So please let us know if you have thoughts or comments. Let us know what's going on, what's working, what you want to hear about, or if you want to come on, join us, come talk with us and and hang out with us. We'd love to have that too. So your feedback is super important to us. I'll kick it over to John
John (01:24)
we would just encourage you to rate ⁓ and subscribe to the podcast on your preferred podcast platform or
if you prefer YouTube or on there as well, where you can see Sean and I and our guests each week. the easiest way to give us feedback is at podcast at thedaily upside dot com. We encourage you to reach out to us directly with ideas for the show.
with ⁓ segment ideas, guest ideas. If you're a newsmaker yourself and you want to throw your hat in the ring and and join us for an episode, we'd love to have you. With that, Sean, why don't we head into the first segment?
Sean Allocca (01:56)
So the big news of the week last week was the 40,000 comment letters that were sent to the DOL about proposed regulations that would, among other significant effects, expand access to private assets and other alts within workplace retirement plans. So your your 401ks and other things. And the comments show the views are complicated, decidedly mixed, ⁓ including within the financial services industry itself. As with a lot of these, you have
sort of the the advocacy groups on on one side and the industry groups on the other. But to what extent the DOL will respond to the commentary as it prepares a final version of the regs remains to be seen. And advisors are going to be interested to see what they will do as this all shakes out. So, John, I know you've reported on this a lot. we we had it ⁓ a big story on it last week. Let's start off with what are the two sides of this coin of this issue. What's the case being made for why?
John (02:49)
For sure.
Sean Allocca (02:52)
Alternative should be included in the four one case.
John (02:55)
Yeah, yeah. It it's a very interesting story and and just a very quick comment.
You don't see forty thousand comments on many DOL proposals.
The norm is several hundred to several thousands. We've seen bigger in the past, but not not too much bigger than this for a specific sort of retirement industry topic. So just off the top, I wanted to mention that. It it shows that this has really struck a chord. the the case for alternatives and four one K plans, I think on paper it it makes a lot of sense. And it was actually
Sort of brought to the fore by an executive order ⁓ from President Trump. I don't remember exactly when that was. I think it was late last year. It might have been in in the ⁓ like January, February period. But he asked the DOL ⁓ to consider democratizing quote unquote access to alternative investments. So things like private credit, private equity, ⁓ real estate, potentially, all the different categories of alternatives that are out there.
⁓ really opening up those sorts of investment opportunities for your mom and pop investors who have most of their money stocked away in a 401k plan. And the argument there is that, you know, pension plans and other institutional investors, your your big, you know, college endowments, ⁓ city endowments, they've been investing in alternative assets for for decades and decades. And it it works out for them. It's it's sort of a volatility hedge in some cases. It depends on the asset class, of course, but they're
p you know a pretty substantial allocation in your typical institutional investors long term portfolio and and you know there's good reason for
so naturally you would think, you know, 401k plan investors get access to these things? Maybe. outside of the world of 401k plans for a lot of these investment opportunities, you have to be an accredited investor to access some of these things.
some of the listeners will know a lot more about this than me. but you know the the basics are that a lot of these
Potentially lucrative, interesting hedging sort of investment opportunities are aren't really in the reach of your typical investor who may only have a hundred, two hundred, three hundred thousand dollars saved. So in a sense, the four one K plan could be a good vehicle for distribu you know, getting these products into the hands of of people. And so that that's the case in the pro side. And and Sean, I think it it makes some sense, right?
Sean Allocca (05:04)
Yeah, for sure. And I I think this is one that well, first of all, I wanna say I hate the word democratization. I just hate I think it's like such a buzzword for me. I just I got like, yeah, I got a little
John (05:10)
Yeah. I saw I saw your skin crawl whenever I used it.
Sean Allocca (05:15)
⁓ but
I don't know. I I don't wanna I don't wanna come down on folks that that use it. But what I was gonna say is that yeah, I do think it makes a lot of sense. I actually talked to to one person who provides alternative ⁓ investments, but he said
Especially with long time horizons, like you would have in a four one K, right? Like you don't need a hundred percent of your assets a hundred percent liquid a hundred percent of the time. Like there's definitely a case to be made that let's get some of it at least. I think the institutions that you said have been using for decades, they're usually around thirty percent or something. Your regular folks like me and you are zero to whatever we can get into. A lot of reason of that is a lot of the bars just to get into these deals are a million, five million dollars. So it is an interesting opportunity for sure. ⁓
for the regular Americans to see some of these, like you said, lucrative gains. It does come with downsides and with some potential risk, some complexity, more more expensive, for example. What are the the big drawbacks or what the critics are saying?
John (06:10)
Yeah, yeah. I mean, you you kind of pointed to them right there. It's the the inherent complexity of a lot of these products and and thinking through how that could actually work with the the complicated plumbing, you know, that is behind the scenes in the four one K plan industry. you know, ideally investors should understand what they're investing in and arguably your tip I don't want to sound elitist, but your typical four and K plan investor out there, they may have a d sort of an understanding of stocks and bonds and and correlation, but
As soon as we, you know, bring in up the term alternative investments, that in itself is a huge category. So it, you know, questions about whether people understand what they're getting into, questions about, you know, liquidity and in market downturns, it's it's an unfortunate fact. Even though 401k plan is meant to be people's long-term savings, when markets do tank, there is a group of people that inevitably trades away at the bottom. And if you add on top of that, the idea of
being lo locked into a sort of a private equity fund with big potential surrender issues. That could be very problematic. So there there are I defin I think definitely concerns about this idea. know I would encourage folks to kind of go into the the DOL's website where they have all of these comments categorized and just go in and click through some of them and read them. I mean there there's a lot of very coherent arguments for and against, you know, the the inclusion of of assets, but I think
know I didn't do an exhaustive study, but I think the majority of the comments are are negative and and that kind of makes sense, right? People if if you agree with something, your incentive to, you know, write a letter in and agree with it is is a lot lower than if you have a strong opinion in the negative, you tend to take action. So but yeah it's things like the fees, the complexity. And
a lot of people kinda and for example, Christine Benz at Morningstar, she's
kind of come out pretty strongly against this and and her argument is more like, let's set aside, you know, whether alts are are useful or not. Like, and we should be focused on the basics that we know work, which is getting people enrolled, getting people to, you know, stay enrolled, educating people about not trading off at a downturn, you know, educating people about the dangers of holding too much cash, you know, getting employers to increase their match. I mean, these are all
relatively low hanging fruit that that we could really make a big difference. is bringing alternatives into the four hundred one K plane system right now super necessary? I I thought that was a very
coherent sort of counter argument.
Sean Allocca (08:32)
For sure. And it I think automatic enrollment, we've seen huge ⁓ gains there. And I think Christine Bence from your reporting said it's a solution looking for a problem, right? Like there's there's ways to do this other than taking these big investments from from some of those alts providers and and sticking them into your average American's 401k plan. You didn't ask for my opinion,
John (08:41)
Basically.
Yeah.
Sean Allocca (08:52)
I will say
I do think that there's some issues, but given the long time horizons, I do feel like it could be it could be helpful. And I don't generally side with all the industry lobbyists a lot of time, but I think on this one, there's a point to be had. Is that why they're doing it? I don't know. That's a whole nother thing. You know, why why the actual and the fees that are gonna come with it is a whole nother argument. But I do think that there could be some value that outweighs some of the risks, especially if
John (09:11)
Yep, yep.
Sean Allocca (09:20)
The average American isn't going in there tinkering around with these things that they don't they don't understand, which brings us to to another good point that a lot of supporters often say the participants, right, aren't going to
buying the actual PE or private credit funds directly. Instead, they're going to be professionally kind of managed inside these target date funds that are going to be, you know, weighted appropriately, et cetera. So how does that how does that sit with some of the critics? And how do you think?
Just materially that kind of reduces the those concerns.
John (09:50)
Yeah, I I think it's a a very important point. I'm sure our listeners will know, you know, about the role that target date funds have s have now begun to or have been playing in the four one K plan industry. they're pre diversified investment options that folks can just sort of opt into. Many plans, not all, but most, especially big plans with lots of participants and lots of assets. They're in the business of shunting people straight into a a target date fund automatically. It's it's not even an election that you choose.
as you join these plans, you have to elect not to be put into this default investment. And so there's a a great argument to be made, I think, that there is a role for private assets and and other things, alternatives to be within those target date funds that are managed professionally, that, you know, they are gonna be able to understand the liquidity problems and and have, you know, a liquidity sleeve potentially that that they can use if there are redemptions and and sort of protecting some of these
from their own worst instincts. I I think that's a pretty
solid case to be made, to be honest.
guess it could raise the cost on some target date funds and and some of these funds are already fairly pricey. So that would be a concern. But if if the fees are right, I think it I think it makes a lot of
Yeah. There we go. Yep.
Sean Allocca (10:57)
we agreed on that. That was great. I'm loving it. We're off to a good start on this show.
next question was kind of stepping back. We we did talk a lot about the the alternatives entering into the 401ks and what can that can mean for for Americans and clients and et cetera. But in your reporting too, you mentioned safe harbor.
And even I said, maybe we should explain that to our to our readers that might not know. So
Is that even like a bigger story? What is this this kind of safe harbor proposal that's in there? And and what's what's the importance of that?
John (11:28)
Yeah.
the it's it's kind of like this sleeper issue that's really
almost the private equity sort of topic is is a spotlight that's actually hiding what's really, you know, going on here. And this this rule is if you read it, is much broader than private ac private assets. It it actually is asset agnostic. so what it effectively does is give plan sponsors, the the fiduciaries who are selecting investments within 401k plans
It gives them a quote unquote safe harbor, which in layman's terms just means straight up insulation from litigation, as long as they follow a quote unquote prudent process in the investment selection. So the the rule goes through five or six different points. But effectively, if a plant sponsor
through an investment analysis and looks at the fees, the current valuation, the complexity, sort of liquidity, and there's one or two other bullet points.
If they go through and they look at those points and they have a reasoned discussion and they decide as a group that yes, we've considered all these factors and we feel comfortable with this investment, we are going to put it on the platform. That's it. If they go through that process, you cannot sue them over the performance of these funds, the fees that they charge. So it's a very powerful
sort of legal technique or framework that exists under the Employee Retirement Income Security Act, which is
the law that dictates all of this stuff. It sounds a bit technical, but in practice, it could actually have some really major effects, according to the reporting that I've done. And one of them would be insulating plant sponsors from cookie cutter lawsuits. So folks who are sort of involved in the 401k plan world, they'll they'll know about this trend. Others, you know, it might be news to them, but for decades now, large plant sponsors have just been
hamstrung by just cookie cutter lawsuits, literally copy and pasted lawsuits that accuse them of b imprudently investing in funds and underperformance or excess fees. And of course there are egregious cases where fiduciary breaches have occurred, but Sean, literally these plant sponsors are getting sued for having chosen a a ⁓ a fund with a 25 basis point fee instead of 23. And it's really driven by the litigators who they they target these massive plans. They get these settlements and they walk, they left
To the bank with $30, $40 million in settlements, and you know, the typical plant participant literally gets a check for 50 cents. So this is seen as a way to sort of prevent that. And personally, you know, kind of taking my editorial hat off for a moment, I think that's a good thing because I spent in a prior publication, the amount of time that we spent covering this litigation and just how sort of not pointless, but how just targeted it seemed.
I think this is a good development, honestly. We'll we'll see where it goes. It it's a bit technical, but honestly I think it could be end up being a very good thing for plant sponsors.
Sean Allocca (14:15)
You have a personal vendetta against these friv frivolous lawsuits from having to report on every single one for years and years. But again
John (14:17)
Yeah.
Yeah. Well
a certain
had an editorial discussion, like, are we part of the problem here? Like we're we're giving attention to all these suits. And like at one point, so there was one famous law firm that I won't name that was really driving this. But then over time, th two or three or four or five other law f law firms got into the game. And I for a second I like, Is our reporting like promoting this like cottage industry of of excessive fee litigations? I don't know, but yeah.
Sean Allocca (14:46)
I remember that from
my from my days at investment news and Emile Haley, who's our now here with us at at the Daily Upside, but he used to report on those very, very and I used to edit some of those stories and yeah, he had the same kind of point of view as you. And I I remember it was one big firm. I don't remember the name, so I I don't even I can't even tell you who it was, but I do remember it was one firm and he always used to yeah, he he would have the same kind of point of view as you, which
you know.
John (15:09)
And it
in the interest of fairness, the case that they make is that, you know, yes, we may be suing this company over a five basis point difference in performance, but they really felt like they were on a a bit of a crusade to sort of clean up the industry and because they're, you know, ninety five out of a hundred plant sponsors could be doing things right. But there, you know, if there are fiduciary breaches out there, it's important to recognize that. And to their credit,
Fees have come down across the board. Plant sponsors
have been very diligent in general about their decision making. And so I think this is almost kind of like the best of both worlds where a lot of the bad behavior has already been cleaned up. A lot of plant sponsors understand their responsibilities. And now they have potentially, if this becomes final, a very clear legal framework for protecting themselves. So it could, you know, in the end this really could come out as a win win, I think.
Sean Allocca (15:59)
And I
think to to your other point about twenty five bits or twenty three or twenty one, that can be significant with when you talk about how many participants are in there and just the amount of hundreds of or billions of dollars in assets that are in
John (16:10)
Yeah,
lot of concerns about self dealing amongst the record keepers and asset managers that that need to be considered as well.
Sean Allocca (16:14)
Worry.
Yeah,
It
seems like the lawyers were were were taking that to the bank as well. So
a related question to that then. The proposal seems to say fiduciaries should be judged primarily on their process rather than the investment outcomes and what happens afterwards. Is that a fair characterization of the of the proposed rule?
John (16:36)
Yeah, yeah. And it's really, really driving at the heart of what this is all about.
main thing to say is that nobody has a crystal ball, right, Sean? I mean, we can go into an investment opportunity, it can check all the boxes, there can be a black swan event and you've lost money. I mean, that that's a reality in investing. It's a reality for personal investing and it's a reality for retirement plan sponsors who are selecting funds. No nobody bats a hundred percent
Nobody can see where the markets are going and and what sort of unacknowledged risks might be out there for a fund that otherwise looks on its face to be a perfectly prudent decision. So that's where this proposal really has a lot of power, I think, as as I was kind of alluding to earlier. It really sets out a very clear legal framework for what is to be considered a prudent process under the law. And that's something that plant sponsors have really been hungry for. I mean
So if they go through the process, they look at an investment, they consider its fees, its current valuation, its liquidity, a number of other bullet points that are enumerated in the proposal. If they have a discussion amongst the group, they talk about the pros and cons of all of this, they document those discussions, you know, what they thought about it, and they make a confident decision that this, yes, this is a fund that we feel good about in including and and offering to our plan participants, we're putting it on there.
and they sign off on that decision and they all agree it was a prudent process, then that will give you a very strong degree of legal protections in the case that something goes wrong in the future. And and personally I think that makes a lot of sense, right? I mean, Sean, who would want to participate on a retirement plan investment committee if you weren't given that that guarantee? Because I don't I don't know if you're aware of this, Sean, but actually as a retirement plan fiduciary, the way the law is written, you can personally be held liable for these decisions. It's not something
Yes, the company can be held liable as well, but you as an individual can be sued over some of these questions. So I think it makes a lot of sense to offer plant sponsors a a a very clear definition of what a prudent process is, honestly.
So that that's really where this is driving. We'll see what happens in the the final version,
could change. And it actually just occurred to me that ⁓ I wonder, you know, whether the the the final version of the rule could be significantly curtailed. I mean, it's just occurring to me now that
This all started from a a suggestion from the president that we try to get alternative investments into 401k plans. What this is result, what this has actually come to be is a fundamental reassessment of the investment selection process within retirement plans. I think it's a good reassessment, but I could see a world in which, you know, there's people challenge that premise. There, you know, oftentimes these rules can be challenged in court. That's something that we could see coming down the pike. So long story short.
It's all about process and this story is not over.
Sean Allocca (19:25)
thanks, John. That was awesome. I I learned a lot. Actually, I'm I hope our I know our audience did as well. So let's move on to our next segment.
Sean Allocca (19:30)
This episode is brought to you by
Growth, it's fundamental, and wealth management firms of all types are proven to grow faster with Fidelity, because we'll work closely with you to help make your vision come to life. Deep expertise, powerful technology, and unmatched scale, we have everything you need all in one place to help your firm grow. Move forward faster with Fidelity. For more information, visit i.fidelity.com/slash growth.
Sean Allocca (20:00)
Alright, so moving on to our second topic of the episode. John, you recently interviewed the
idol of our industry, Bob Dahl, at Crossmark. he's obviously been very, very popular in our industry for a long time. Does his 10 predictions that I know readers love love to hear, and a lot of times he actually comes back halfway through the year and does does a update on him. So we all love to hear what he says. What did you guys talk about this time?
John (20:26)
so of course we talked about the markets in general to start
he gave me a great quote, which was that if you had asked him at the beginning of the year, you know, if it were possible for there to be a a large scale war in the Middle East, for inflation to be running hot,
for the markets to still be having a ripoar in time, he would have said that's impossible. But the key that he's seen that's really propped things up and has continued to lead to strong record equity market returns is corporate earnings.
Sean Allocca (20:41)
Yes.
John (20:53)
If you know, anybody who's been following earnings seasons and and sort of listening to the the news about earnings this year, it's been a remarkable story of durability. And Bob hopes and expects that to continue. We never know.
the day of we're recording here, another very solid jobs report, 172,000 jobs created last month. That's a very encouraging sign for the consumer economy and for for corporate earnings here in the States.
The way he characterized the current moment is a high risk bull market, which is kind of an an interesting thing, right? Things are going very well. If if earnings hold up, that he has full expectations that, you know, we'll continue to see very strong potentially record equity market performance through the second half of the year. That being said, if there begins to be a sign of of weakness in earnings, that could really, you know, turn things around. So that that's what he means when it's a a high-risk bull market. It it's a market where a lot of
Upside is there, but there's also a lot of risk. So I don't know if if anything it ⁓ jumps out at you, Sean, but it's a it's a pretty precarious but interesting moment in the markets.
Sean Allocca (21:54)
For sure. Yeah, I don't know where all the that durability is coming from. I mean, oil prices are also hitting historic levels. So we'll see what happens. I kind of have a feeling for no other reason, besides it's a feeling that it will probably I mean, I think there's still room for this bulldo run, but I do think we're gonna probably come back down to reality in some areas. I think the AI investments are probably booing this kind of run that we've had for the last couple of years, or I guess since it's 2022, right?
Are the returns on investments there? There's lot of questions. and all the ex the the just consolidation of of those the few stocks that are really the ones that are driving all that performance, where the rest, the 80% of the SP 500 is actually not not doing that great. So how long it can last, I don't know. I'm waiting for a little bit of a pullback and I'm gonna invest a little bit more, get out of cash a little bit, but I'm gonna hang I'm gonna hang out a little bit for for a bit here. I know that you also spoke
John (22:41)
Yep, yep. Always
Yeah.
Sean Allocca (22:48)
To Bob about another interesting topic. I mean, obviously he's great talking about the economy and the markets, but he's very much now in the faith-based and value-based world of investing. And he said
Gen Z and millennials, are are ones that are really pushing this, where they're trying to invest for performance, but also on on their values. what what are the highlights about what he said about the those conversations?
John (23:11)
Yeah. Yeah. I found that to be interesting. It was kind of cool having the the dual-sided conversation. Number one, just about the markets. But the main reason why we had connected was they recently conducted a s a survey of I'm not sure how many thousands of Americans, but a a broad-based, you know, I think a pretty well done survey where they asked folks about, you know, their understanding of and willingness to engage in faith-based and values-based investing. And what they found is that forty-four percent of millennials in Gen Z said values-based investing is important to them. And
What's eye-opening is that's more than double the rate of retired respondents who at this point are are baby boomers and and the silent generation, I guess. So that's pretty
another thing they found is that three and four respondents under the age of forty one say they would choose an advisor that offers value-based investing over one that doesn't. And I I think that's that's pretty eye-opening.
What really caught my attention though, Sean, was that, you know, having talked to Bob about that and knowing that he, you know, represents Crossmark and of course they do faith-based investing. And, you know, if this is a survey about, you know, the acceptance of faith-based investing, you have to have to put your reporter hat on and look for alternative sources of information. So what I did was went to the financial the FPA, the Financial Planning Association. They have a really helpful tool that lets journalists like ourselves query their members. And I put in a a, you know,
A basic query and said, I, you know, just spoke to Bob Dole. Here's what he told me about faith-based investing. You know, folks are willing to leave their advisor for this. Have have any of you guys seen this in practice? And Sean, it was I got an outsized response. You know, normally I do an inquiry like that. You might get five or six responses. I think I got just north of 15 or 16 responses on this from from advisors out there. And by and large, they said, Absolutely. you know, our our younger clients.
You know, that it whether it's faith-based investing or more values-based investing, they're both very
what I heard is that a lot of and I think this makes sense. I mean, think about our, you know, millennials and and Gen Z. They're they're folks who are, you know, just in saturated with information about what's happening in the world. You know, the wars in the Middle East, you know, p ⁓ domestic problems here at home, social justice issues, you know, whatever you think about them.
You know, people are just inundated with information about what's going on in the world. And it it's very and and Bob Dole agreed with this while we were talking, it's just much harder, I think, for them to sort of just separate the concept of saving and investing for the long term from what's happening, you know, more broadly in the world. They they don't see a distinction there. And I I think there's a lot of a lot of merit to that. I I think about a lot of my friends and folks in in my generation. I'm a I'm an elder millennial and and I think that's spot on. I mean, people
they really they don't necessarily want to just think about investing in returns on one hand and and sort of living their own social and personal lives on the other. I think there's there's more of a a ⁓ unity there. What do you think?
Sean Allocca (25:56)
I think it's one
way that they feel that they can empower themselves and their generation to actually make a change when it sometimes feels like the powers at B are are already there and th there's not a lot of ways to impact that. But I'd also say that I I always hate the argument that like it's either performance or your values or ESG or faith based because there's no real I mean, there's data on everything. You find data points to to back up any statement you wanna make or any argument that you wanna have. I I just it doesn't seem like they're
Mutually exclusive. Like you have to give up performance to have ESG in a portfolio. And I frankly, I don't see why you you would. There's so many products out there ⁓ and a lot of research point to otherwise. So I I don't really get that. It that it's either or. Another thing that struck me, I mean we'll get out of here on this question, though, is that you said that clients are willing to leave their advisor over a lack of these space. That kind of thought to me, as you were saying what the reporter had on, like, is that just is that really, really happening? Are clients really saying?
you don't have this or that fund and I really want it. So I'm gonna just repaper and do all I mean, these relationships are are pretty sticky. So I feel like that I might push back it just a little bit to say, I'm wondering just how pervasive that is or what would it take for a client to actually leave you if you didn't provide these services.
John (26:56)
Yeah.
Yeah, I'd I'd agree.
I think that that's that there's some truth to it for sure, but I think that's maybe an example where, you know, survey respondents are kind of giving an a giving an opinion about, yeah, I think faith-based or value-based investing is important. And I I would theoretically leave my advisor when push comes to shove, you know, in reality it happens a lot less frequently. I did want to give a special ⁓ shout out to an advisor who wrote back to me,
Higby, I think it is, at Birchwood Capitol, because he
didn't just write with an opinion. He actually crunched some numbers for me that was really fascinating. So he did a review of biblically responsible investing funds. There's like 10 of them out there that are pretty well known and have a decent amount of size. And he found that their performance,
some of them were actually par with their benchmarks, like the broad equity industry benchmarks. One of them is actually superior performance, which was really interesting, but most have lagged by between 100 and 400 basis points. So it is important to distinguish between.
Things like values-based investing, where you're maybe making a call about the importance of sustainability on a long, long term portfolio. That's one thing. You know, applying biblical principles to a portfolio is something different. So it's important for people to understand that, you know, this is a broad category. And to Matthew's point, he's some of his clients,
they're devout Christians, they're perfectly willing to give up a hundred basis points if it means that their portfolio actually aligns with their beliefs. So that just quite interesting.
We could go on and on, but I I th I wanted to thank ⁓ Matthew for his the math that he did. It was quite interesting.
Sean Allocca (28:38)
kudos to him for sharing that information, even though he is very much in the faith base. I think the faith base is probably ⁓ like you alluded to, a little bit more, I don't want to say extreme, but they they will be giving up performance or willing to give up performance. 400 base points seems like a lot when ⁓ you know, I mean I know the markets are getting 15% annually or whatever it is, but if that compresses and if there are only five,
John (28:51)
Yeah.
Sean Allocca (28:58)
percentage points up, giving up four hundred basis points or four percentage points seems like a lot. we'll see how that plays out. But yeah, kudos to him for sure.
John (29:06)
All right, Sean. Well,
it's a busy time here at the Daily Upside, but it's awesome getting to carve out a little bit of time to do the podcast. I think it really compliments our newsletters very well. If folks aren't subscribed, you know, please go ahead over to the website. We have the advisor upside newsletter, the ETF upside newsletter, the flagship daily upside, and we have ⁓ the newsletter that's maybe nearest and dearest to my heart, the retirement upside.
Sean Allocca (29:08)
Yeah.
John (29:31)
Please, you know, consider subscribing to those. If you do, you'll get a very holistic, up to date, you know, news driven ⁓ source of information ⁓ that will really help you, we hope, and in your practice. So, Sean, why don't you close out the episode?
Sean Allocca (29:44)
Hope you're enjoying the podcast as
give us a review wherever you can. subscribe on YouTube.
we're also on anywhere you get your podcast. So please give us a a big thumbs up. We'll love you forever. And we'll see you next time. Thanks a lot.