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Thanks. Great interview. A few of his sentiments stuck with me:
"know what you own!"
"If you can't explain your investment strategy to a 10-year-old you have no business being in that investment."
"I owned plenty of investments that went to zero."
"If you surround yourself with smart people they will eventually rub off on you."
"While my friends were delivering newspapers, I made a lot more money as a golf caddy. I met a lot of influential people as a golf caddy. Later, I was hired at Fidelity by Ned Johnson who I caddied for. I guess I impressed him years earlier with the advice and guidance I gave him on the golf course."
What does anyone else think of Brown? I read a lot of their stuff for a while but then ran across a piece he wrote to the rest of their firm emphasizing how important it was to grow the AUM. That seemed to be his top priority
Joshua Brown is Cofounder & CEO of the wealth management firm Ritholtz. He also posts on social-media and has podcasts, but he isn't a journalist or economist by education or training. https://www.ritholtzwealth.com/
Every money managers top priority (although they might not admit it) is growing AUM. That's how they grow and get richer. Fees, fees, fees the more AUM the more fees. I followed him for a while, some good guest on some of their podcasts (Youtube: The Compound)
I try to remind myself of these fees each time I am offered a "free" steak dinner from these wealth management companies.
In my world, management fees would only be allowed on positive performance (the gains), not the initial investment amount (the principal).
For example, If I give you $10K to invest and that investment becomes $11K in a year, I am willing to pay you 1% on the gain (1% of $1K or $10), not 1% on the entire $11K.
You helped me make $1K... I brought you $10K.
Conversely, If you lost money for me that year, you get $0 fee.
Or even better, how about you pay me 1% of AUM in the years when my portfolio had negative returns. We are a team, right? If "we do better when you do better" is true, than how about "we both do worse when you suffer a loss (do worse)".
In terms of retirement Safe Withdrawal Rate (SWR) of say 4%, a typical 1% management fee equates to 25% of that SWR (1% of the 4%). That a significant reduction in retirement income.
@bee, My understanding is that wealth management fee is bases on AUM, not solely on the gain. Win or lose for that year, the management firm, say Schwab or Fidelity, still charges 1% of AUM.
We must talking about different arrangement or fee structures entirely.
In my world, management fees would only be allowed on positive performance (the gains), not the initial investment amount (the principal).
Are you referring to the asset management fee in wealth management that brokerages offer ?
Exactly...We should share in the gains we made together, not the assets I brought you. In real estate its called ROI (Return on Investment).
That reminds me of a futures trading system firm years ago that approached me through my broker about helping seeding their new strategy and then potentially recommending it The offered a typical 2-and-20 which I laughed and said if I was fronting the money, I shouldn't be paying you ANYTHING beyond transaction costs. We haggled and I got them down to .50-and-zero but by that time I was feeling like a potential chump and decided not to play in the end. Probably made the right move, since I never saw them again anywhere.
I try to remind myself of these fees each time I am offered a "free" steak dinner from these wealth management companies.
In my world, management fees would only be allowed on positive performance (the gains), not the initial investment amount (the principal).
For example, If I give you $10K to invest and that investment becomes $11K in a year, I am willing to pay you 1% on the gain (1% of $1K or $10), not 1% on the entire $11K.
You helped me make $1K... I brought you $10K.
Conversely, If you lost money for me that year, you get $0 fee.
Or even better, how about you pay me 1% of AUM in the years when my portfolio had negative returns. We are a team, right? If "we do better when you do better" is true, than how about "we both do worse when you suffer a loss (do worse)".
In terms of retirement Safe Withdrawal Rate (SWR) of say 4%, a typical 1% management fee equates to 25% of that SWR (1% of the 4%). That a significant reduction in retirement income.
I'll take that steak dinner to go please!
Yeah, well said!
Maybe I am just a cheapskate, but I am not paying for anything that I can do myself, that doesn't involve a septic tank.
A free steak is not worth hours of my time and enduring a sales pitch.
Joshua Brown is Cofounder & CEO of the wealth management firm Ritholtz. He also posts on social-media and has podcasts, but he isn't a journalist or economist by education or training. https://www.ritholtzwealth.com/
I have been a fan for years, from seeing him on CNBC.
@bee, those hedge-fund type performance-based fees are not allowed for listed funds by the SEC. At best, there can be base fees plus a small incentive fees (+ or -) - that has been used by Fidelity and others.
People complain about high CEF fees. But the OP video mentions that other firms tried to tempt Peter Lynch with lucrative offers to run some CEFs. That explains in part why the CEF ERs are high. The other part is that CEFs are forced to include the cost of leverage and shorting in their ERs. FWIW, Morningstar and others also provide fund administration/ management fees, but CEFs must report the total ERs.
Not sure there is a clear understanding in some of these comments about what services financial managers provide, which is of course OK. It's not just about investment returns; it includes tax, insurance, legacy & estate planning.
It is for Qualified investors only $1.1 million in their account or $2.2 million net worth.
they get 10% of profits, nothing if your account does not increase in value
Maybe someone with better programing skills can tell us which decade that would have worked out as a good deal. Surely in a ten year flat market it would be a better deal but not lately
For risk-adverse clients, we recommend that five years of withdrawal money initially be placed in Bucket #1. Stocks, as represented by CCM’s Quality Growth Program, have always reached a new high within five years of refilling Bucket #1. For clients willing to accept a little more risk, we believe the allocation of just three or four years of withdrawal money to Bucket #1 to be appropriate.
RE: Lynch, from all the things I've learned about Lynch, I think the large thing that made him successful was that He's never "in the office" he was always on the phone or in the offices of the companies he was investing in or potentially investing in. This is prior to the FD rules being in place. this tenacity and relationship building gave him an edge. he really did know these companies in and out.
I'll listen to this when i'm on the tractor later this week.
I started listening to Animal Spirits with his colleagues in 2018. I started listening to the Compound when it began in 2020. I feel like they are one of the best financial podcast groups out there. its always interesting. they interview everyone, stay very topical to whats going on and seem to have a solid grasp of most of these concepts.
They are a growing wealth management firm. I believe they opened an office in Chicago last year and are opening one in Charlotte next year. So of course growing AUM is important. what I appreciate about this group is they are largely "active strategy while being more index forward" advisors, which helps a person not pay double "AUM" if you will (compounding 1% ER with 1% AUM can be quite a portfolio drag).
the Ritholtz team are great interviewers IMO. it is funny that they will often be like "I'm going to talk for an hour about why you should invest in target date funds...that hour is brought to you by INNOVATOR BUFFER 3X TSLA ETFS"
Check Capital is interesting. Anyone know what their track record is and what they invest in? Also they have listed qualification criteria but not what minimum account size they want.
They've been around since the 80's but it largely appears that they put you in individual stocks. They hold 2.2 billion and have 1200 clients(per other sources had 200 million in 2002) thats an avg of 1.8 mil per. for them to legally charge this way requires at least 1.1 mil under management OR 2.2 in assets.
thats all from their website. They are rated as a top planner from CNBC.
Thanks mskursh for the context. The Quality Growth program is pretty much on par with benchmark returns. Given the unusual compensation program, I might just call them to find out more about the Private Program which certainly has impressive returns.
There’s no question that Peter Lynch was a great fund manager. Great interview.
But would he be as successful today, or over the past 5–10 years? I doubt it.
The internet has made global data instantly accessible, and information moves at lightning speed. That makes playing the valuation game much more difficult.
High-tech companies have dominated for years now — even though their valuations remain expensive.
Buffet said years ago "diversification is protection against ignorance," for investors who know what they are doing, the other 98% should buy the SP500.
BTW, Peter Lynch was different; Magellan was diversified with over 1000 stocks, a stark contrast to the concentrated portfolios of investors like Warren Buffett.
I’ve always told teenagers to find work they enjoy — but to also go where the money is.
For example, a friend of my son loves working on cars. I told him, “Be a mechanic at a Mercedes-Benz dealership, not at Ford.” And being a caddy is also a great job — good pay, great connections, and valuable experience.
Comments
A few of his sentiments stuck with me:
"know what you own!"
"If you can't explain your investment strategy to a 10-year-old you have no business being in that investment."
"I owned plenty of investments that went to zero."
"If you surround yourself with smart people they will eventually rub off on you."
"While my friends were delivering newspapers, I made a lot more money as a golf caddy. I met a lot of influential people as a golf caddy. Later, I was hired at Fidelity by Ned Johnson who I caddied for. I guess I impressed him years earlier with the advice and guidance I gave him on the golf course."
https://www.ritholtzwealth.com/
In my world, management fees would only be allowed on positive performance (the gains), not the initial investment amount (the principal).
For example, If I give you $10K to invest and that investment becomes $11K in a year, I am willing to pay you 1% on the gain (1% of $1K or $10), not 1% on the entire $11K.
You helped me make $1K... I brought you $10K.
Conversely, If you lost money for me that year, you get $0 fee.
Or even better, how about you pay me 1% of AUM in the years when my portfolio had negative returns. We are a team, right? If "we do better when you do better" is true, than how about "we both do worse when you suffer a loss (do worse)".
In terms of retirement Safe Withdrawal Rate (SWR) of say 4%, a typical 1% management fee equates to 25% of that SWR (1% of the 4%). That a significant reduction in retirement income.
I'll take that steak dinner to go please!
My understanding is that wealth management fee is bases on AUM, not solely on the gain. Win or lose for that year, the management firm, say Schwab or Fidelity, still charges 1% of AUM.
We must talking about different arrangement or fee structures entirely.
Maybe I am just a cheapskate, but I am not paying for anything that I can do myself, that doesn't involve a septic tank.
A free steak is not worth hours of my time and enduring a sales pitch.
Thanks for the link!
People complain about high CEF fees. But the OP video mentions that other firms tried to tempt Peter Lynch with lucrative offers to run some CEFs. That explains in part why the CEF ERs are high. The other part is that CEFs are forced to include the cost of leverage and shorting in their ERs. FWIW, Morningstar and others also provide fund administration/ management fees, but CEFs must report the total ERs.
The only investment firm I have ever seen with an incentive arrangement is Check Capital
https://checkcapital.com/performance-based-fee
It is for Qualified investors only $1.1 million in their account or $2.2 million net worth.
they get 10% of profits, nothing if your account does not increase in value
Maybe someone with better programing skills can tell us which decade that would have worked out as a good deal. Surely in a ten year flat market it would be a better deal but not lately
This link explains there 4 investment strategies:
https://checkcapital.com/investment-programs/#quality-growth
They explain their 2 bucket strategy as:
I'll listen to this when i'm on the tractor later this week.
I started listening to Animal Spirits with his colleagues in 2018. I started listening to the Compound when it began in 2020. I feel like they are one of the best financial podcast groups out there. its always interesting. they interview everyone, stay very topical to whats going on and seem to have a solid grasp of most of these concepts.
They are a growing wealth management firm. I believe they opened an office in Chicago last year and are opening one in Charlotte next year. So of course growing AUM is important. what I appreciate about this group is they are largely "active strategy while being more index forward" advisors, which helps a person not pay double "AUM" if you will (compounding 1% ER with 1% AUM can be quite a portfolio drag).
the Ritholtz team are great interviewers IMO. it is funny that they will often be like "I'm going to talk for an hour about why you should invest in target date funds...that hour is brought to you by INNOVATOR BUFFER 3X TSLA ETFS"
thats all from their website. They are rated as a top planner from CNBC.
here is info on their holdings :
https://hedgefollow.com/funds/Check+Capital+Management+Inc+Ca
But would he be as successful today, or over the past 5–10 years? I doubt it.
The internet has made global data instantly accessible, and information moves at lightning speed. That makes playing the valuation game much more difficult.
High-tech companies have dominated for years now — even though their valuations remain expensive.
Bill Miller beat the SP500 for 15 years and then he lost most of it.
He made so much more by investing in AMZN and bitcoins https://en.wikipedia.org/wiki/Bill_Miller_(investor)
Buffet said years ago "diversification is protection against ignorance," for investors who know what they are doing, the other 98% should buy the SP500.
BTW, Peter Lynch was different; Magellan was diversified with over 1000 stocks, a stark contrast to the concentrated portfolios of investors like Warren Buffett.
I’ve always told teenagers to find work they enjoy — but to also go where the money is.
For example, a friend of my son loves working on cars. I told him, “Be a mechanic at a Mercedes-Benz dealership, not at Ford.”
And being a caddy is also a great job — good pay, great connections, and valuable experience.
I looked at material Check Capital sent about their returns since 2000 through 3/31/2025.
They give cumulative and annualized returns for both of their fee programs, the fee based at 1% per year or the 10% of profits only
Cumulative 10% has done a little better 590% vs 554% or 7.95% per year vs 7.72%