Beating Presidential election & other emotions-based investment & life challenges.

Michael Sakraida's guest is John Coyne, who is Chair of Ategenos Capital.  This podcast is for individuals and financial advisors.  Both will have a greater understanding of your journey for a Total Wealth life that Mike covered in his book, Money, Balance, Joy - Improving Your Life Story (Amazon).  And both will feeling calmer and more optimistic about their lives than they've probably have felt, lately.

John was generous enough to offer to help individuals find advisors who follow the Money, Balance, Joy approach, and help advisors better help their clients in today's investment and economic environment.  Just go to the ategenoscapital.com website and click the "Contact" button on top.

In this episode, Mike and John talk about the presidential election and other current life and investment issues that are causing a high degree of stress for people.  This includes the need for wealth management help that isn't that of the non-Boomers' Boomer fathers.  And this new approach - mirroring that spelled out in Money, Balance, Joy - also can help Boomers.  John's investment and political background give him great insight into the investing and market climate no matter who wins the election.  

Transcript

(Recorded November 1, 2024)

Michael Sakraida - Welcome to another episode of the Money Balance Joy podcast. I'm Mike Sakraida.  One of the advantages of having a podcast this day and age is it actually lowers our stress because our bodies are built for hearing conversations, hearing narrative, rather than just having a bunch of sound bites and different ideas thrown at you.  This podcast is both for individuals and financial advisors. 

And, of course, all our podcasts are trying to give us the tools and the knowledge to help us on our journey to a more fulfilling life of money balance and joy and as you know from the book, this is not do-it-yourself.  You need help particularly from the right financial advisors. Really excited about today's guest is John Coyne with Ategenos and I pronounce it, right?

John Coyne - Yes you did.

Michael Sakraida - There you go, which is Gaelic for birth. And one of the things I love is what they're about is hospitality. And as you know from my book, when I criticize the financial industrial complex, which certainly Ategenos is not a member of, it's not about hospitality, certainly with them. Now, John has been, let's see, a client, a competitor. He has many, many years of helping countless individuals have more fulfilling lives of money, balance, and joy through asset management platforms. Throughout this time, he's been a friend and an industry colleague, even when we were in competition. But that's not why I have John on. The reason I have him on is his wisdom and ability to present ideas and concepts and action plans related to, again, having an asset management platform that helps people have more fulfilling lives of money, balance, and joy.  We'll find out later. One of the things I love about his firm is how they morph away from not being your Boomer daddy's asset management platform and all that entails for people, for the non-boomers. let's get started. Hello John, welcome to our podcast.

John Coyne - Thank you, Michael. It's great to be with you again.

Michael Sakraida – Terrific!  John, we have inflation, we have all these contradictory reports on the economy. It's good. It's bad. It's of course the national election going on right now while we're recording this. Just a lot going on for both financial advisors, and for individuals - their clients. So, what are you seeing right now with all this that's hitting everyone?

John Coyne - Well, the first and most important thing I can tell everyone - I once run a presidential election campaign in Pennsylvania in 1980 - is to calm down. I think the most important lesson that I've learned that was the year that I became a financial advisor also. Since then, I've obviously lived through quite a few election cycles and in each one there is an element of disinformation, but it has really reached a crescendo in this particular one. But the bottom line is this, presidential elections and politics in general have very little to do with the performance of markets.

Markets have done very well in Democratic administrations, they've done very well in Republican administrations, and vice versa. For instance, in these past four years, the market's up almost 70%. That's not a bad return on your money, okay.  So, for somebody who had a horrible economy and did everything wrong, Bidenomics somehow has given us a soft landing.  We're going to be okay regardless of what types of activities the government engages in - the thing that we most hope for is a divided government. So, regardless of who wins the White House, what you'd like to see is one party control the House and one party control the Senate. 

Because we have a tendency in those time periods to strike that balance that is important, frankly, to most common-sense Americans as it regards their economics. There is no one answer. What there is, there's compromise and thinking thoughtful solutions. So, brinksmanship and shutting down governments and making decisions that have generational impact on the economy is usually kept in check. And I think that's essentially what we're going to see. So, when I say calm down, just wait and see what happens on Tuesday.  Somehow this place has done a pretty good job since 1776 of moving forward. I think we're going to continue to do so.

Michael Sakraida – Yes, certainly, we talk about disinformation. There's certainly a lot of that regarding investing, regarding the markets, especially from these influencers. And that certainly adds to the stress and confusion that people are having right now. I like that, let's stay calm. In my book, I talk about how financial advisors, many of them, just kind of think that the price of admission is enough for them to be great advisors for them to help their clients. Price of admission being, “I have my licenses”, “I know how to do financial planning”, but so much of the three E's in my book of having a fulfilling life is managing the three E's, emotions, emotions, and emotions. So, it comes into play not only for individuals but comes into play with financial professionals. They let those emotions take over.

Great example, what you're talking about with politics, when Trump was elected in 2016, the markets plunged, the options plunged that night and then bounced back, because everyone was afraid for whatever reason, for their own reason rather, but including the financial professionals. 

How does the work you do with advisors, how does that help them both have more time for focusing on their clients’ emotions and also help them better focus on their clients’ emotions?

John Coyne -  So, you said the word hospitality and that was a very carefully arrived at phrase that we chose because when you might have the opportunity to go with your family to a Four Seasons or a Ritz-Carlton, what it does is it creates the expectation of an experience. And what Ategenos tries to do is create that expectation and deliver on that experience for the financial advisor and then ultimately for that investor.  The sense of well-being, the sense of security, and the finest advisors, the greatest advisors that I've had the opportunity, like yourself, you and I have both worked with literally thousands of advisors. And that 1% that you would hold up and say, wow, what an incredible person. They all share one thing in common - the ability to show empathy with the client and whatever their particular circumstances are. Whether they're doing something out of joy or they're doing something out of necessity or they're  doing something that keeps them from making a bad decision is what is at the heart of that advisor's role. 

If that advisor finds themselves in a situation where they are constantly burdened with what I refer to as non-revenue producing activities. Things that take them away from focusing on the hospitality they want to show to their own clients, then unfortunately they're going to miss something or that person is going to somehow feel neglected. And what we want to make sure of is not only when we have good markets like we've had for instance this year, but in time periods like I learned and many many of my colleagues learned in 08-09 that when true financial panic sets in and people begin to fear for their lifestyle and people begin to fear for their security, that that advisor does not have to worry about middle office or back office operations. They don't have to worry about communication. They don't have to worry about having incredible minds taking care of the portfolios and managing the selection and rebalancing at the appropriate times and doing everything they can to protect. Now markets are going to do what markets do and we don't control markets and there is no magic ball.

There is no soothsayer that's out there that's going to tell you how markets are going to perform. But when markets perform well or when markets perform poorly, based on what it is that the client is trying to accomplish. And a key piece of our philosophy at Ategenos is that the marketplaces that we have served in the past are changing and that change is going to evolve how we manage money. But in the past, what has been critical is whether you were in an accumulation phase or a distribution phase of your life, that advisor has the time to help that client absorb the changes that are taking place because they can feel very comfortable that the assets are being looked after prudently and with a fiduciary law.

Michael Sakraida - Absolutely. You got to look at that change that's going on. And speaking of that change, when you think about it, most of the asset management platforms were kind of, they say started by advisors for advisors, but kind of started for Boomers, by Boomers based on the markets, how they act and how the Boomers act to those markets back when 1980s or something like that. And I like how with Ategenos that you kind of consciously looked at that and said this is not just for the Boomers. It's not just for the Boomers’ generation of markets, but for all the others and the current markets. And I know it's pretty critical in my book about those that just do the same old, same old, because “that's how we always did it”. So, kind of elaborate, what does that look like in terms of, again, not just being for boomers?

John Coyne – Well - so think about it this way.  If you're looking at the world, and it's always through one prism. And essentially, whether it was my old firm or any of the companies that were started to provide these types of services, as you point out, most of us were started in the late 80s and early 90s. We were designed to go after, frankly, white males that were in the marketplace to accumulate assets and grow those assets. And that's what we designed all of our products around, to eventually get to a stage where these people would retire. And, by the way, none of us had a clue what we would do with that pit. So, with Ategenos -meaning rebirth - just a few little simple subjects. Many of us, and I'm sure you've talked about it on your podcast in the past, the great wealth transfer, the $45 trillion that's going to move from the Boomer generation to younger generations between now and 2045. How about the most immediate transfer?

In the next five years, $11 trillion will transfer from the male patriarch to the spouse and to the children. It will make women in the United States the largest liquid financial shareholders in the world.  That's five years. So, we're talking about this election. That's one year after this administration, regardless of who it is, comes into (office).  How do they think? Do they think like their husbands? Do they think like their father? Or do they think differently? Are they more risk aware? Or are they more risk taking? The answer is both.

Now, for the majority of us, (we) did not necessarily start off this way, by the way. But by the late 90s, we had all fallen in love with modern portfolio theory and Moskowitz and the Chicago School and 60-40 was the great number. And it was a variation on a theme around covariance and how we would build portfolios with large cap, small cap, mid cap, international, emerging markets, fixed income - and that's what it was. And it was essentially with variations on a theme, a one size fit all approach. That is not the same going forward. 

Just a stat that I find fascinating - 70% of people under the age of 43 are more likely to have crypto, private equity, private debt, and direct investments than people over the age of 43. What does that say about risk? What does that say about portfolio construction? How are we supposed to approach that? Well, at Ategenos what we're saying is, wow! If this is the world going forward, perhaps we should be thinking about designing strategies and portfolios that take common sense and applied history into play, but in a way that has more meaning to younger people and to women as they look to have their assets managed. It's going to be a very different and very changing world.

Take the political rhetoric out of this, but both of those groups are much more likely to be attracted to sustainable investing. Both of those groups are much more likely to tie their investment philosophy to their personal and philanthropic philosophies. All right? We need to free up the time of advisors to understand that, and to begin to accommodate and have those conversations. Whether they agree with all of it or not, at least what they have to do is to be able to educate to the best of their time a lot on exactly what that means. Advisors - I spoke with a very successful RIA in Texas the other day, and we talked about his concerns and his team's concerns that they were not interacting enough with the spouses of their clients. They were not interacting enough with the children of their clients. That the conversations weren't taking place. 

One of the most dreadful stats that I've seen recently is with particularly in the family-owned business world - which is an incredibly important part of the US economy - that only less than 30% of the patriarch or business owner has discussed succession planning with their children. Think about that. Think about how crazy that is!  So, does an advisor really need to be on Morningstar Procipia, looking up the best emerging markets manager for a 60-40 portfolio until three o'clock in the morning? Or should they be trying to learn the best way to conduct family conversations around money?

Michael Sakraida - No surprise.  You bring up great points. Just for the listeners, 60-40 refers to 60% equity, 40% fixed income, like bonds and other income producing securities like that. Absolutely. In my book, I'm glad you brought up the whole sustainable investing, or what is referred to as ESG, approach.  I'm glad you brought that up because an important part of my book, (an) important part of the journey for the readers and people trying to have that fulfilling life, the easiest way to overcome that stress, overcome those fears and sometimes the greed that can hurt you as an investor over time is to view your investments as an extension of you. Of your values, of what you want. Just think of the non-financial legacy you want to leave your children and grandchildren - those are your values.  I'm glad you brought that up, that so many advisors feel that “my value is picking mutual funds”, “my value is picking stocks”.  “That's where I could justify my fee”.  Certainly, there's enough studies - and I cover that in my book - that shows you can far surpass the value what people pay you by managing their emotions, by having them view their investments as an extension of them. It is tremendous and by, as you said, having that higher risk because there's a comfort tax with that.  I'm so glad you brought that up, with that. Thank you. Now, looking at Ategenos you're, as I understand it, employee-owned right now.

John Coyne - Yes. We are majority employee-owned, and we hope to remain that.

Michael Sakraida - Certainly what I've, you and I have experienced personally with the, what's called the TAMP or the Asset Management Platform industry is that most or almost all of the companies are either public companies or have grown through just acquiring and acquiring and acquiring other smaller firms that do that. So, What do you feel is lost with that versus, in terms of helping clients, helping advisors versus your structure right now where you're mostly employee owned?

John Coyne - Well, we are primarily employee-owned. Obviously, we needed strategic partners to help us launch. But the critical issue is that we would like to remain (a) majority employee-owned going forward because we only want to have one master that we serve and that master is the interest of investors. We do that by being the best service provider that we can to financial advisors. We don't want distractions. So, for instance, as you're aware, many of the offerings that are in the marketplace (competitors) are proprietary. We have no proprietary product in our offerings, and we have no intention of having any proprietary product in our offerings. While that offers you a better path towards higher profits, we feel it creates conflict of interest. 

We always want to have the best lineup. Whether you're the Dodgers or the Yankees (the two World Series teams), there were still great players playing elsewhere this year in baseball. What we want to be able to do is pick an all-star team in the construction of our portfolios every time we go out the door. We have that freedom. We rely on strategic partners for services that otherwise we would have to build, where we would prefer to rent. Unlike many other companies, we are only in this industry to serve investors and advisors through asset management. We do not want to be a technology company. We do not want to be an asset management company. And I'm not arguing that there's not benefits to having all of those services. We are just simply saying we feel that, given our philosophy, that this is the best way for us to proceed.

Michael Sakraida - Absolutely. Nothing annoys me more than when I see commercials or I hear different firms say, “we're a fiduciary, we put your interest first”. And I cover this in my book quite a bit - have a whole chapter on it. And that's just nonsense. I'm sorry, you cannot be on the same side of the fence as your client whether the portfolio, the advisor or the platform, unless you can fire whoever's not working well. And if  you're doing it yourself and there's a number of asset management platforms, your competitors that have proprietary products. Why? Because their profit margins are better. Why do they need better profit margins? Well, they got to keep their shareholders happy. They have to just make more money, more money, more money as the first priority. So that's why I asked the question. (Will they) call you and fire themselves if their performance isn't good, relative performance? So (John), great, great point. So, what question didn't I ask, that I should ask?

John Coyne - So, one of the things that I think is really important that we provide is that suite of services that allows advisors the freedom that they really do need to go to their investors and understand what their needs are, what their concerns. I coined a phrase years ago; live the life you worked for. And obviously that is straight at Boomers that we're accumulating, right? Now that's evolved and I want to be that organization. We all want to be that organization that allows advisors to understand the new world. For instance, people under the age of 43, and you probably read this in the book, Die With Zero, but younger people, particularly, want an experience dividend.

Where they're not waiting to be 65. There is no magic to that number to them, the way that you and I grew up with our parents and our grandparents. And the magic number of 65 was frankly created around Social Security in the 1930s. There was no number before that. And going forward, I don't think there'll be a number either, with all of that happening. What we want to have is an evolving organization that recognizes change and doesn't insist on fitting everyone into a particular niche or into a particular cookie cutter solution. And what we want to do is work with advisors and help them be creative in solving the new issues. 

There's a great ad where a young couple says, “can we afford a ranch in Montana with horses?” All right, I love the ad. And I think it's for JP Morgan, who's a fine, outstanding firm. But the key to that with me is, you and I, when we got married, the last thing we were thinking in our 30s or 40s was, (was) “can I afford a ranch in Montana with horses?” That's not how we were raised. What we need to understand is that for advisors to address the kinds of thoughts and concepts and dreams and aspirations with these generations, and with their spouses of the boomers, who - as you point out with sustainability - want to have investment portfolios that reflect their life. I'd say that is one of the critical solutions that we want to help advisors solve. And we are incredibly excited about the independence that we have, our ability to do it unfettered, and to move forward in a way that is delightfully creative.

Michael Sakraida - Absolutely. Again, being on the same side of the fence as the clients, same side of the fences as the advisors and really recognizing that difference. Because when you think about it, so many times as Boomers, we'll criticize Gen X, Gen Y. Isn't there another generation I can't think of right now?

John Coyne - Gen Z.

Michael Sakraida - Yeah, Z.  And, to me, when you think about it, it's very logical how they're thinking. They've observed us, the Boomers.  We observed that the greatest generation and it was, you put the work in, you got the pension and if you were successful, you had the great home and everything. And we did the same thing. But a lot of us got laid off so the company could offshore work or outsource work. We lost the pension, so we had to (have) 401ks. We kept going after the status symbols, whether it's the house, the cars, and everything else, and didn't have that balance. Cause, like as you said, “well, I'll just work really hard till I'm 65”. And you know, the following generation saw that and it's like, no, this is crazy. And you know, I see people who parents died at 40 or 50 and didn't have any kind of life. 

The whole reason I wrote Money Balance Joy is because people are demanding that now. They want their status as experiences rather than that car or even a home. And you're so right. You need a platform. You need a platform that helps advisors really work with that different generation. So, (I’m) really excited about your company and the work that you do. Well, it's over. See, I told you this wouldn't be too painful for you. You had great – as expected - great, enlightening ideas. 

John Coyne - It was great, Michael. Thank you so much for having me.

Michael Sakraida - You weren't focused on the old ways but focused on the new ways and really having that intelligent understanding of the need to always be changing to match the needs and the personalities and the emotions and the wants and desires of each  generation.  So, I know you guys are going to do a great job. So, say we have individuals or financial advisors that agree with me on that assessment of your ideas and conversation. What should be the next step for each?

John Coyne - Quite simply, reach out to us through our website. I think that's the simplest way. 

Michael Sakraida - I'll put a link for the website.   [Ategenoscapital.com]

John Coyne - We love and look forward to having conversations and helping people that are searching for a direction that has meaning to them. And, whether that be an advisor or an individual, we're happy to provide referrals or to discuss with them how we can best work with each entity going forward. 

Michael Sakraida – If they’re an advisor, mean.

John Coyne - And, yeah, always through an advisor. We do not do business directly with individuals. We have a very important role. I always told, and I know you did the same thing, again, the best advisors are very gifted general contractors. We're a subcontractor. We have a very specific role to play, a very important role, but very specific. And we have CFPs, we have CFAs within our organization to help manage the portfolios, to help work on financial plans. Consultation with advisors to help create that hospitable experience that people are looking for.

Michael Sakraida - Absolutely, there's such a hunger for that - so glad that you're able to help advisors deliver that. Thank you. Okay, thank you very much. All right, bye bye.

John Coyne - All right. Take care, Michael.