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It's an module online self-study self-paced course, 13 CE credits, with a world-class faculty. Scott Stornetta, who is the co-inventor of blockchain, is on our faculty; Shawnna Hoffman, who ran IBM's blockchain division; Anders Brownworth with the Boston Fed, and a lot of others on our faculty to just teach people what is this stuff? How does it work? How do I explain it to people? And we've had over 2, advisors and others from seven countries enroll in the program so far, and it's super popular.
And there's really no resource like it anywhere, which is why we're getting such demand. We're striking relationships with major Wall Street firms to teach their advisors about this. I think that probably is a good segue to the next topic that we wanted to take up with you to pick your brain on the future of advice. You've had a very storied career, delivering advice yourself and also building organizations that offer advice to clients at scale.
There's quite a bit of debate about what advice will look like in the future. What portion of what's handled by an advisor today is likely to be automated in the future, if you had to guess, Ric? Edelman: Data, pure and simple. This trend has been underway for the past 30 years, again, thanks to the internet, and it's going to continue. If you wanted to know what the price of IBM was, you had to call your broker. And this is why brokerage firms used to have big lobbies, lots of furniture with a ticker running across the wall behind the receptionist desk, because it was the only way for an investor to get the current pricing.
If you try to go to any other resource, it was a minute delay, which was of no value. Today, of course, real-time stock prices are available for free on our phone. You don't need a financial advisor to get that info. Advisors used to be the resource of information, and we aren't anymore.
And that trend is going to continue more and more. The data collection, the data display, and the distribution of data is increasingly automated. We're already seeing robo-advisors and online trading tools and calculators that are all free, all available in real-time that aggregate all of your financial info from your bank and your brokerage firms and your k , putting it all on a simple little dashboard for you so that you can see all the information about your personal finances.
You don't need a financial advisor for that. You also have mountains of data about what's happening in the financial markets, economics, the sociopolitical environment, all of this throwing huge amounts of data at you. And the advisors have access to that data as well, of course, often far more sophisticated because we've institutional resources of information that ordinary retail investors don't have access to.
The data is available in huge quantity. So, nobody needs an advisor for that. What we're going to need the advisor for and where the advisor will become even more vital in the future than in the past is in the interpretation and analysis of that data. What does it all mean? What matters? What actions should I take as a result of all of that information? We need the skilled training and expertise of the advisor to interpret the data to turn it into actions for the consumer without them having to spend huge amounts of time and that effort on their own.
That's where advisors will shine in their value-add to the client. Is it technical proficiency? It sounds like being able to convey some of the more complex concepts to clients is important, or is it emotional IQ? How do you think about what clients should be asking from their advisors and how it might evolve in the future? Edelman: There are only three things that advisors should be delivering to their client.
First, comprehensively showing you where you are. Too often, people have no idea what's going on with their personal finances. It's just a mess. It's befuddlement. So, let's clarify. Let's consolidate, condense. Let's make it simple and easy to help you understand your current state.
Where are you right now from a personal finance perspective? And this isn't just your money. It's every aspect of personal finance: your debt, your income and expenses, your current assets, your wills, your employee benefits, your homeownership and mortgages and real estate—just every aspect of your personal finances.
And intergenerational family issues are a big part of that. Second, where do you want to go? Most people are floundering because they don't have a real direction in life. They're so busy doing what they're doing, trying to get through the day, they haven't bothered to look up. It's the forest and trees situation. And so, let's help you identify the point to all this.
What are you trying to accomplish and why? What's going to make you happy? What's going to bring happiness to your life and that of your family? So, that's the second piece. And the third: How are we going to get there? How do we get from here to there?
And that mapping out of the plan is exactly what you should be asking for from your advisor who can't deliver it until they go through the steps one and two: where are you, where do you want to go? So, that's all you're looking for from your advisor. Everything else is a detail that you couldn't care less about.
The advisor cares. The advisor needs to care; but not you. I don't want to become an expert in this. That's why I'm hiring you. Make it simple, make it easy, make it quick, make it in plain English, and if you can, make it interesting and entertaining at the same time. That's all investors want. That's all the American household wants. And advisors who can deliver that are going to be the biggest, best advisors in the country.
Benz: One thing you mentioned is this idea of financial planner as kind of a life coach, or a financial life planner. One question I've been wondering though is, are people who have been trained in investing, first and foremost, necessarily well equipped to help clients sort out some of those questions? I just wonder how advisors can climb that hurdle if their skill set started somewhere completely different?
Edelman: You're right. The majority, traditionally, don't have the training or the natural inclination to do that. We're talking about humans. This isn't about money. This is about people. I argue, for years, that managing money is easy. Managing clients is hard. We know how to manage money. Wall Street has figured that out for decades. Thanks to Harry Markowitz and a dozen others, we all know how to manage money effectively. And you have a lot of conversations on your podcasts of those brilliant people and their strategies.
Managing money is easy. Getting people to do it and to stick with it is really hard. Because we are creatures of emotion, not creatures of intellect. We make decisions based on feelings, not thinking. And we're our own worst enemy. So, it's the hand-holding and the guidance that advisors provide. And that's not a traditional source of training.
That's not traditionally what attracts people into the industry. Historically, people got into the business because they love numbers, and they love money, and they want to pay attention to numbers so they can make a lot of money. And they don't really pay attention to risk or people's attitudes about risk, and they don't care about things that aren't directly related to stock prices moving up.
They don't want to pay any attention to employee benefits or credit and debt or the emotional toll that a family is experiencing because of a child with a substance abuse problem or a spendthrift problem or a bad marriage with a son-in-law or who knows what. All those seem to be too cumbersome and annoying and distracting. And it's got nothing to do with today's Dow Jones Industrial Average. So, many are simply misplaced now that that's what consumers are saying that they want.
Fortunately, the new generation of advisors entering this industry and already largely in it—you look at the millennials, people in their 20s, 30s, and 40s who are in this industry, they get it. They got into this because they enjoy the financial-planning angle.
They recognize that there's more to life than money, and it's not all about the investing conversation. It's about everything else going on in the family's life. You need to make sure that you're dealing with an advisor who thinks that way, behaves that way, acts that way and can help you deal with all those kinds of issues.
That's the advisor of the future. The stock-trading jockey of the past, they're dinosaurs. Ptak: That was actually going to be my next question, which is, what do you think is going to be that next big iteration in the advice business, which is, as you mentioned, it's transited from brokering to portfolio management, to asset allocation, now increasingly, financial planning.
But it sounds like what you foresee is, advisors who are equipped to help with maybe this softer side of things—not to use that as a pejorative—but focusing on issues like wellness and emotional well-being, that sort of thing. Do you think that's a fair characterization, Ric? Edelman: Very much so, Jeff, and it really leads to the next ideology, which is, life planning, recognizing that the traditional lifeline that people have experienced, the one that everyone's familiar with, and frankly, most are assuming will be theirs, is dead.
And our efforts are all on the new map of life, recognizing that the old lifeline, which was—you're born, you go to school, you go to work, you retire, you die—one thing at a time in that order, which is how it was for our parents and grandparents and great grandparents. That's not us. We're now in the aging and the cyclical lifeline. And it's all because of longevity.
We're going to live to age If you're listening to this podcast, odds are really good, you're going to live to age or beyond. The old paradigm of retiring at 65 and dead at 80, that's gone. That's not going to be us. If we're going to live to age , the notion of retirement at 65 is impossible. First, economically, most people will never afford to be able to do a year retirement. Second, you're not going to want to. At 65, you're going to be healthier than your parents were when they were In fact, due to medical innovations, by the time you're 95, you'll be healthier than when your grandparents were And so, you're going to want to be active and contribute to society and be engaged and you're going to need to make money at the same time.
So, this notion of retirement for 40 years will go away. It will be replaced by going to school, going to work, and then going back to school to get new skills, to get more training, to stay viable in the marketplace.
This requires an entirely new set of thinking about our approach to money and career and college and family in a way that is unprecedented. And it's the financial advisor who is going to guide people through that new approach. And it's going to make advisors more valuable than ever. How they do it technologically, what are the resources, what are the software tools and the AI programs that they use to guide the clients?
That's all back-office stuff. Clients couldn't care less. It will be simply available to the advisor through technological innovation, and it will simply allow the advisor to be of more value than ever to the consumer, delivering the EQ that will remain the elusive Holy Grail of technology. The notion of a computer being able to replace the humans' empathy is decades away.
Benz: You referenced the Stanford Center for Longevity. One of our favorite conversations over the past couple of years was with Dr. Laura Carstensen, where she talked about some of the work that she and the team are doing there. Edelman: Yeah. Benz: I guess the question is, if the separation between work and retirement is becoming more porous—as you seem to think is the case, she thinks is the case—how does that evolve?
It seems like many older adults I speak to still actually want to hang it up at the traditional retirement age of mids. Edelman: They're going to change their mind. The reason that they want to hang it up is that their job is no longer fun or interesting. Sometimes people say I've got 30 years of experience.
No, you don't. You have one year of experience 30 times. By the time you're doing whatever it is you're doing in your 60s, you've been doing it for decades, and the innovative fun, discovery element is long gone. It's rote. It's the same damn thing every day or every year, and you're tired of it; you're bored. It's no longer interesting. And you might not like the new company environment that you're in, you might not like the economic issues, you might not like the sacrifice. You're beginning to recognize your own mortality, and you'd rather go do something else.
And that is perfectly understandable. And this causes people to retire in their 60s. But after a few years of that, boredom sets in, the lack of social interaction, the lack of intellectual stimulation, the lack of economic remuneration, all of that is gone. And yet you feel physically and mentally fine. You're still perfectly able to engage. And this is when people figure out, it's time to reinvent themselves. And they do it by entering a brand-new career, starting a new business.
More businesses are formed by people over the age of 50 than people under the age of And so, they will start a new business. They will go back to school and get a new degree. They will engage in educational travel, not just for vacation, but for learning. And they will discover that they now have opportunities they didn't have before, because the kids are grown, and the dog has died. They're free and clear on what they want to do.
They now have money, and they have time. And they're going to take full advantage of this. So, people will discover after a few years of that gold watch and a pension that this ain't it. Sitting in front of the TV and eating bonbons, that's fun for a couple of years, but you're not going to do it for a couple of decades.
Ptak: Since we're on the topic of retirement, I wanted to also ask you about retirement income. There's quite a bit of debate about the right and wrong way to sustain one's spending in retirement. Or do you think retirees need to reconsider that given lofty market valuations and paltry yields? Edelman: I'm not sure it ever worked. It's a rule of thumb. It's just a guideline to help prevent clients from overspending in their early years of retirement.
I'm not sure it was ever something anybody truly relied upon, because there's so many unique circumstances to each client of income sources, and life expectancies, marital statuses, and so on. But the point is well taken that as we reach the point where we're going to stop earning the income we spend, we need to generate it from resources available to us. Pension, Social Security, investment income are the three dominant resources.
We need to reevaluate the legitimacy of those resources, the sustainability of them, how much can they genuinely produce and how much am I going to need given my lifestyle and the cost of living? Especially in this decade, we're going to be in an inflationary environment.
So, we have to go creatively through all of that. And so, what I have found is that most people are shocked to discover that they spend more in retirement than they spent prior to retirement—they spend it differently, but they spend more. The only people who spend less are people who are forced to. If you're spending less in retirement than you did pre-retirement, it means you failed in your financial plan.
You should spend or be able to spend at least as much as you spent before. You'll spend it differently in more fun ways, but the dollar amounts will go down, especially when you consider healthcare costs. You're going to spend a lot on that as you age. In addition to that, we have the longevity factor. And for that reason, it argues, as I mentioned a moment ago, that you're going to go back to work in retirement, but you're not going to go back to a hour workweek.
You're going to work for 10 hours a week, or maybe 15 or 20 hours in a month. So, all you got to do is work an extra year or two in your career. Don't retire at 65; retire at And then, go get a part-time gig until you're in your 70s. And you'll be amazed at how impactful that is in making sure you never run out of money. Benz: You mentioned annuities and that every advisor has an opinion about them. What role should annuities play in retirement?
And do you prefer one annuity type over some others? Edelman: None. They should play no role in retirement. I'm very concerned about the annuity marketplace. They had guaranteed features that the products no longer offer because the insurance industry realized they couldn't afford the guarantees that they were offering. So, the annuity products today—there's one flavor that I kind of like or I should say, kind of don't hate, and that's a low-cost, fee-based variable annuity.
For 50 or 60 basis points you can invest in a stock portfolio on a tax-deferred basis. What's not to love? So, it's kind of like a non-deductible IRA. So, great. That's perfectly fine. But to use an annuity, an income-oriented annuity, to generate income in retirement, I have a real problem with, again, simply because the longevity curve.
I haven't found yet—I keep looking, and I am, as I said, talking with insurance companies about the development of a product that solves the longevity crisis, meaning the actuaries of these products are assuming traditional life expectancies of 85, 90, or And they're basing the incomes they're providing on a monthly basis on that actuarial data, which is all valid historically.
But it doesn't take into consideration the exponential growth of changes in longevity due to advances in medicine and neuroscience, in bioinformatics, and 3D printing, nanotechnology, and so on, that are contributing to our longer life spans. The fact that over the next 15 years, we're going to cure the leading causes of death, we're going to eliminate heart disease, respiratory illness, obesity, diabetes. Cancer itself over the next 15 years will be gone. And what has been killing people in their 80s and 90s, is now going to allow us to live to age plus.
I don't think the annuity products today that are being sold, have that factored into their modeling. What happens if a whole bunch of the people who buy annuities instead of dying at age 90, like they're supposed to, live to ? I don't see how the insurance or annuity company that is guaranteeing those incomes is going to be able to continue paying those checks. Your principle is gone, and the checks are stopping.
Ptak: I wanted to make a quick left turn to portfolio construction if we could. We've seen, as you know, both the stock and bond market pullback recently, which is a little atypical given the way bonds have helped to cushion stock market losses in the past. Some are using this time to argue for different approaches to portfolio construction, including heavier use of alternatives.
Do you agree with that? And to the extent that you do, how do you think portfolio construction might need to be rethought in view of this? Edelman: Jeff, I think that is all absolutely correct. The party is over. And most people are totally unaware of this for the simple reason that our life experience has not prepared us for what's happening next.
If you were an investor in the s, you remember what the bond market was like with rising interest rates and the fact that as rates go up, bond prices go down. But very few Americans alive today were investors in the s.
Because if they were alive at all, they were children like me, which means our personal investing experience is more recent than And therefore, from to the present, if you owned a bond or a bond fund—any kind, government bond, corporate bond, municipal bond, I don't care what it was—it made money. You not only earned a lot of interest, but it rose in value. And that lolled everybody into a false sense of confidence that bonds are safer than stocks. It's been true for the past 40 years.
But that's only because we've had a declining interest-rate environment for the last 40 years. That party is over. Interest rates are now near zero. The Fed has turned the direction around and already begun to raise rates and they're going to raise rates a lot more over the next two years.
And as rates go up, the value of bonds goes down, and most people are completely unprepared for this because they have no knowledge or education or personal experience about it. And therefore, people who are running away from stocks into the perceived safety of bonds, literally jumping out of the frying pan and into the fire, and we're going to see massive losses in the bond market, we already have so far this year, massive more to come. And the sad part is that it's going to cause losses for the very people who can afford the losses least: safety conscious, income-oriented investors.
And it's a real crisis. And this is a generational shift—comes only once every half century. We're experiencing the crux of it right now. We're at the knee of the curve. And there's too insufficient, too little warnings about this from the financial advisory community, some out of motivated self-interest, some out of a genuine lack of knowledge themselves, because they're so young and inexperienced and uneducated.
So, yeah, we need alternatives that we need to implement to our clients right away to provide a different approach for generating income in a safe way. Sounds like a ridiculously high rate of interest, until you understand, again, that crypto operates totally differently from any other aspect of the financial marketplace. So, there are a lot of alternative approaches that need to be considered.
And you're right, Jeff, this is a huge deal. And the sooner advisors and their clients recognize this, the better off everyone will be. Benz: I thought of about 30 follow-up questions as you were talking. But I did want to ask you about financial education.
You've spent a career counseling others and helping them to set expectations and put together their plans. Can you talk about what you found are the best ways to inculcate good savings and investment habits and what doesn't work? Edelman: Richard Thaler has it best. I'm a big fan of behavioral finance and the work done by Tversky and Thaler and so many others. Nobel Prize-winning research all has it best. We're not going to change consumer behavior.
Because we're all humans, we act emotionally, we just aren't able to look 30 years out. We look 30 minutes out. We spend more time planning vacations than retirement. That is simply not going to change. So, what we need to do are two things: First, to help people understand the importance of the subject, help them understand that it's really easy to understand these concepts.
Wall Street does a good job at making things confusing to try to make you their slave. We don't need to do that. Helping you understand interest-rate risk is simple and easy to do. He said the space reminds him of another revolutionary tech development a few decades back.
We have to recognize that this only comes along once in a generation. And the innovative technology is allowing businesses to operate faster, cheaper with greater transparency, greater security, and this is why businesses are falling over themselves with development of blockchain technology," Edelman told CNBC's " ETF Edge " on Monday.
Cryptocurrencies and blockchain technology could have far-reaching applications just like the internet, he added. Edelman highlights one interesting use case currently being floated — the potential for digital tokens to be used to help people find parking spots in urban areas. The broad potential for bitcoin, other cryptos and blockchain technology presents massive opportunity for investors, he said.
We know how the internet just exploded in growth through the s," Edelman added.
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Today, Edelman Financial Engines serves more than million Americans, managing more than $ billion in assets, providing services to workplace (k) plans, and helping consumers . Here For You, No Matter Where You Are. Individuals and employers across the country rely on our modern wealth planning approach for their financial needs. Awarded each September . May 17, · Investing Specialists Ric Edelman: Crypto, Retirement Planning, the Advice Business, and More The financial expert and founder of DACFP, discusses the role of digital .