More Money Podcast - 323 How Ego Gets in the Way of Smart Investing - Gil Baumgarten, Founder and CEO of Segment Wealth Management

Episode Date: April 13, 2022

It seems like every other week there’s a new investment craze and before you can wrap your head around it everyone on social media is already on to the next one. In this week’s episode, I’m joined by a veteran of the investment industry to help navigate through all the investing noise. Gil Baumgarten is the Founder, President, and CEO of Segment Wealth Management and the author of FOOLISH: How Investors Get Worked Up and Worked Over by the System.  Gil Baumgarten has been a part of the investment industry for over 37 years and has been the multi-year recipient of the Top 1,200 Financial Advisors in America distinction by Barron’s. He started his career on Wall Street in the 1980s but found it routinely emphasized its own interests over the clients. In 2010, Gil left the brokerage world to start Segment Wealth Management, a fiduciary firm where the interests of the client and the firm could align. He launched his first book, FOOLISH: How Investors Get Worked Up and Worked Over by the System last spring. In this episode Gil pulls back the curtain on Wall Street and why he ultimately decided to leave and do things on his own terms. Gil shares why a lack of understanding about short-term investing is what leads to major losses and ending up in high tax brackets. I also ask Gil what’s the difference he’s seen from working with high-net-worth individuals and what we can learn from their investment strategies. For full episode show notes visit: https://jessicamoorhouse.com/323 Learn more about your ad choices. Visit megaphone.fm/adchoices

Hello, hello, hello, and welcome back to the More Money Podcast. This is Jessica Morehouse speaking, your host of the show, and this is episode 323. So excited to have you back. And if you haven't noticed, you probably did notice, I'm very, very excited about it. I wanted to honestly announce it sooner, but quite honestly, so when I recorded like the intro and outro for last week's episode, I'd already sent it to my editor. By the time I, you know, then decided, oh, I'm gonna finally, you know, update my podcast artwork. But anyways, here we are a week later. So you may have seen there's brand new podcast artwork, which I'm so excited about, because I got, you know, all my new professional photos. And I personally, I love

this one. This is probably my favorite cover art. I think this is probably my fourth kind of iteration of cover art. I mean, I've had the show for almost seven years in June, it will be seven years, guys. How crazy is that? And gosh, I should probably try to find some of them and then you know, do a side by side. They some of the early ones were rough. I will be honest, my skills have improved. Also, thank God for Canva that really makes anyone a good graphic artist. But yeah, super excited to have new cover art. So hopefully, you know, more people will be interested in listening to the show because honestly, I feel like compared to the old stuff that I had, it just doesn't compare.

Like this is just so much more me and, you know, you know, I think a little bit more clear on what the show is about. It's about money, guys. So anyways, speaking of the podcast, I've got an amazing guest on the show who has been in the investment industry for a very long time. He 100% deserves the title of veteran because he's been in the investment industry for over 37 years. I've got Gil Baumgarten on the show. So a little bit about Gil. After beginning his career at EF Hutton in the early 80s, Gil became a top producer for UBS and Smith Barney, what is today Morgan Stanley.

However, Gil found Wall Street routinely emphasized its own interests over clients. Surprise, surprise. We all kind of know that. So in 2010, Gill decided to leave the brokerage world to start Segment Wealth Management, a fiduciary firm where the interests of the client and the firm could align. And Gill is also a multi-year recipient of the top 1,200 financial advisors in America distinction by Barron's, in which he also ranked the top 50 advisors in Texas for 2021. And in 2019, Gill was named one of the top 20 exchange traded funds thought leaders in America by Barron's and the Wall Street Journal. And most excitedly, he also has a book which I will be giving away a copy of. He is the author of Foolish,

How Investors Get Worked Up and Worked Over by the System, which is a number one bestseller on Amazon. And that is kind of the topic that we're going to be exploring in this episode. Us retail investors, regular folks, how can we make sure that we're getting the best advice, the best, you know, financial planning services, best, you know, wealth management, if that's something that we're seeking, how can we make sure that we aren't basically screwed? Because sometimes it seems like the only people that are actually getting, you know, good advice or taking care of are the, you know, people with money. And that's not fair. And, you know, what can we do about it? And so that is what we're going to be exploring in this episode. So I know you're going to love it.

But before I get to that interview with Gil, here's just a few words I want to share about this podcast episode sponsor. This episode of the More Money Podcast is supported by Oxio. Have you had it with the big internet providers in Canada? The contracts, constantly shifting prices, and customer service that will keep you on hold for hours? If only there was another option that could provide you with the same quality internet, minus all that other BS. Oh wait, there is! Oxio, a digital internet service provider that first launched in Quebec in 2019 and has since expanded to Ontario and British Columbia. Want to know why

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visit oxio.ca, that's O-X-I-O dot C-A, and use promo code MOREM money to try oxio for free for one month well welcome gil to the more money podcast i'm so excited to have you on the show thank you glad to be here absolutely um also it's funny i don't think i've ever met another gil i have uh an uncle named gil his full name is gilbert i'm like i think you're the only other person I've ever called Gil in my life. There's not very many of us around. That's for sure. I've encountered a few. But amazingly, not only is Gil an unusual name, Baumgarten is an unusual last name. And there is another Gil Baumgarten. Do you know him? Have you reached out? And he's here in Houston. So imagine that. I thought there might just be one of me in the world. So anyway, my gosh, wow, that's, that's something that's for another podcast. You need to like find out who this person is, see if you're related, you know, your long lost cousin or something like

that. But no, I'm so excited. I'm so excited to have you on the show. Especially to talk about your book foolish how investors get worked up and worked Over by the System. I thought it was such an interesting topic that hasn't really, or I haven't really read a book that really dives into talking about the investment industry because it does sound, it does kind of feel sometimes like it's smoke and beers or, you know, we're all told we're supposed to be investing, but then how do you choose the right advisor? And aren't they all really just out to get us and, you know, make money so they can buy their own yachts and who's making money anyway? And, you know, it just seems like there's just a lot going on. There is some truth to that. Yeah. Yeah. There's a lot. I know

there's some truth to that. There's some truth to that. And so for you, you've been in this industry for over three decades, almost four decades. I'm sure you've seen a lot, probably at all, maybe close to it all. I have seen a lot. Can you share? I'd love to kind of go from the beginning a little bit. Give us a little bit about your story. I always kind of ask people like this, especially if you've been in the industry for so long,

what brought you into like the financial services investment industry? What kind of got you interested in diving in? And I'm sure once you got in, you kind of realized, oh, wow, this isn't what I expected. Yeah, a lot of that. I'm really good with numbers. I've always been good at math. And so engineering was probably my calling, but I'd never had gone into engineering. I do recreational engineering.

So that would be woodwork and painting and other things, but financial engineering and dealing with math is really my strong suit, and so that's why I chose a career in the investment business. Started out in the mid-80s, early 80s really, with EF Hutton, an old name from the past. Ultimately, that firm became Smith Barney. I left there in 2000 and went to Payne Weber, and Payne Weber instantly got bought out by UBS. So I spent 25 years in the brokerage business and had some clashes with my firms. And what I ultimately determined is that the brokerage firms fight to own the gray area, and they try to define that gray area as wide as possible, and then they try to wrestle that away from the client, and they compensate the broker

inside of that gray area and demand allegiance for the line to be drawn in such a way that the firm wins the greater part of the gray area. And I would always find myself locking horns with my firm over who actually owned the gray area. And I would always find myself locking horns with my firm over who actually owned the gray area. And they made it clear that I worked for them and that I didn't work for the client. Well, that was the beginning of the end for me. And so I pretty much decided I would be better off and my clients would be better off if I could define the gray area in such a way that the clients owned it all. And then I got a fee for figuring out how to draw the lines for the client. And so I switched out of the brokerage business and into the advice side

of the business 12 years ago and have since raised over a billion dollars from mostly high net worth and ultra high net worth clients that essentially are looking for an advocate, somebody who will fight for that gray area and make sure they own as much of it as possible. So that was kind of how my journey began almost 40 years ago. Wow. Okay. Now, for anyone listening, even for myself a little bit, can I get some clarity on what do you mean by the gray area? Well, in the brokerage business, you're allowed to take kickbacks from third parties. You can get between the client and the marketplace and carve out a spread. You can buy municipal bonds from a selling client at 97 cents on the dollar and turn around and sell that for a dollar to another client and wedge your way into a transaction and compensation that is not the

purest form of participation. Purest form of participation would be to buy the muni bond at 97 cents on the dollar for the client and put it in the client's account at 97 cents on the dollar. And you just charge a fee for that. And so there's a lot of gray areas about what's legal in the brokerage side of the business versus what's legal in the advice side of the business. On the side of the business I'm on now, it's fully fiduciary. I'm not allowed to participate in that $0.03 of that $0.97 versus $1 example. I'm not allowed to do that. I can't make money in any way that's hidden from a client. And so just imagine all the ways that a little cutty hole could be created, whether it be in the mutual fund business or stock transactions or bond transactions or money fund

sweeps or whatever, where you create this little reserve and you can siphon money off into that little reserve and then carve that up in the bonus pool and the like. You can't do that on the advice fiduciary side of the business. You can clearly do that on the brokerage side of the business. So that's what I'm talking about, the gray area. Well, I think that's the biggest concern from investors, whether small or big, is I feel like some, yeah, someone's making money off me. And obviously, there is always a, you know, amount of money you need to pay in order to get that help, that expertise that you may not have. But I think a lot of people, especially over the years, feel like they're just being taken advantage of. And I guess that's a big reason why you decide to leave, especially it was interesting that you said that at your last, you know, when you were in the

brokerage kind of side of things that you, you know, who the client actually was, and who you were actually supposed to be, you know, focused on helping was pretty interesting. It's, you know, typically, most other industries, yeah, it's the client, the customer you should take care of. But in the financial services industry, it is kind of confusing. Like, wait, who's actually being, am I actually being taken care of? Or am I being taken advantage of? Well, I actually had a conversation with my former boss when I worked for UBS. I kind of cornered him in the hallway and was complaining about this particular turn of events that I felt like my client wasn't being taken care of correctly and that I wanted it to be done in a more efficient manner. And he got this puzzled look on his face and he said, I think you're confused about who you actually work for here.

And the sooner you come to realize that you work for the brokerage firm, the fewer frustrations you're going to have in your life. Essentially, he was demanding compliance to his way of thinking that my first line of allegiance was to the brokerage firm. And he made it sound like he was paying me. No, because he first had to take the money from the client. And so where we were in the ecosystem, our interests were not aligned and I decided to align my interests with clients. And so

another turn of events with the same guy, you know, he said that the firm actually owned the client relationship and that I was just a servicing part of the model. Every one of those clients had actually come from me to begin with. And I told him he was going to have the day, the day would come when he would have to prove who owned those clients and good luck with that. So, and that day came in October of 2010 when I quit and took $300 million worth of client money from UBS. That's always like the moment you always kind of wish for when you leave. It's like, I'll show you, you're going to be sorry. And I told him that. I did tell him. I was going to show him and he was going to be sorry. Oh, that's such poetic justice. That's, that's amazing. Yeah, I think, yeah, it's such a fascinating area. And I think like one kind of conversation I have often, you know, with people who listen to the podcast or ask me questions is, you know, people, you know, want to find someone who will help them with their investments, grow their wealth, so they can do the normal things like retire one day. This is kind of the smart, responsible thing to do. But it is difficult to find that person who is honest and trustworthy and is actually going to

take care of them, especially if you were working with someone who is selling a product. Because at the end of the day, even if they are supposed to take care of you, well, there's so many incentives and biases are running rampant. If you just go to a bank or an investment firm, well, maybe they will point you in the direction of one product that is suitable but has high fees. And there's one that's just as suitable with lower fees. Which one do you think they're going to point you to? So it's like, what do people do? Well, a lot of this is because we have to recognize that the world is on a continuum. And on that continuum, where a client finds themselves on the continuum

is going to determine what kind of advice they're entitled to. In my business model, we really can't deal with a new client coming on board has to have $3 million. It's just the math of doing business with somebody with less than $3 million just doesn't work for me. And we don't want clients to have a different type of experience. So a client that's trying to hire me with $100,000, I have nothing to offer them. I can't make my fee high enough. My registration document says that my fee can't be higher than one and one-eighth percent. That's $1,125 on $100,000. I can't spend 30 minutes with that client to engage with them and give them advice about the future. So it really takes a certain amount of minimum investment in order to engage with the fiduciary. And the business model of my

competitors is not that different from my own. That person probably would be better off to pay an exorbitant commission to a broker to give them some advice to keep them from making a mistake that's way higher than the $3,000 commission they might earn on a $100,000 purchase and move on down the road. They just don't have a set of options that are perfect for them. They just have various shades of bad. And the bigger the client gets, the more important it becomes to capture all that. And that was the economic model that I ran into the problem when I'm trying to put $20 million clients on a brokerage platform. It just doesn't work well enough. So that's what I had to go create.

Yeah, so it kind of sounds like if you have if you're just starting out, or you you know, even $100,000 to most people like, well, that's a lot of money. You know, it seems like it's kind of the unfortunate situation. There's not a lot of options. I think that's a big reason why I kind of advocate for working with a, you know, fee only financial planners, they don't take care of your investments, but they can give you that advice. Still, it's not cheap, right? It could be quite a big investment But you don't need to engage in it all the time. You don't need to engage with them all the time. You just need periodic checkups, pay for that by the hour, and then go out and buy some no-load mutual funds on the Vanguard platform. That's a fine solution. But talking yen off the ledge,

when the market drops 11% like it has in the last nine trading days, might also be worthwhile to be paying somebody to keep you from making a much bigger mistake than simply paying too high of a fee. Well, that's the other thing. I noticed in your book. There's a part where there was a client that wanted to work with you and then you kind of decided that they just weren't a good fit because part of it was to do with, I think, their kind of mindset. And you said, you know what, you'd probably actually be better off with a coach. And that's kind of an interesting, I think, how things have changed in the past while is there's so many different roles in the financial industry and you may not need, you know, someone who is like yourself, who's, you know, very

talented, but again, can only work with kind of high net worth individuals. Maybe what you actually need is maybe a team of a few different people, the only financial planner to help you set up your financial plan, and then a coach or some sort of person to help with kind of the psychological, emotional side of things. Because like you said, that is a big component. An accountability partner. I would call that an accountability partner. And so yes, find somebody who's like-minded and maybe I'll share resources, share war stories. An investment club can also serve some of that where you get together with like-minded people and have lunch once a month and kind of talk about what you're doing. Part of the problem with that is you're always going to have somebody in there that mistakes the game for something other than what it is.

A lot of people look for entertainment from their investments. They look for personal affirmation. They look to stroke their own ego. There's so many things that are involved in the process that are not performance seeking. It seems like it's performance seeking on the surface, but what really is going on underneath the surface is the seeking of personal gratification. And that's when people's judgment is going to go different ways. And I think that would make it difficult to find an accountability partner unless you were very closely aligned with both of you being results oriented.

Well, yeah, I guess that's the other factor is really finding people who are aligned with your values, but also your investment philosophy. I'm sure you've, well, I'm not sure, but have you encountered just what I've been seeing, just especially online, the conversations about investing and just, you know, I'm a boring index investor. That's how I like to invest. And the conversations I've been seeing, a lot of it has been around, you know, new kind of financial assets, cryptocurrency, NFTs, all that kind of stuff. And for me, what I keep on seeing is those conversations about these new types of investments are just very fueled by emotion and like fear of missing out and all that kind of stuff. I'm curious what are your thoughts on just how things are evolving in that way and how people are talking? Is this just kind of be like, oh, I've seen this before. This was similar to this,

you know, decades ago or two decades ago. Back in the 80s, people were selling mating emu pairs. You know, you could pick up the Houston Chronicle classifies and buy a mating emu pair for $25,000. In the book, we talk about that. And, you know, four years later, they had said, come shoot an emu on my property for $50. So, you know, you have these trendy things. Somebody was going to corner the market on mating emu pairs. You go back to the 1600s and it was the tulip mania that swept through Europe. And that's in the book as well.

You have all of this meme stocks where a stock is worth $3 and a month later it's worth $300. Somebody's going to get hurt. And so a lot of emotion feeds that and the desire to be part of the club and the desire to be able to brag on the tee box about, you know, you've got the market cornered on this or that. It's very few good results come from something like that. You as an index investor are going to run circles around those people. The other thing about it is people lose sight of taxes and they have no concept of how the tax code is written, what kind of behavior it discourages, what kind of behavior it encourages, and they engage in behavior that the tax code is

written specifically to, I don't know whether I want to use the word restrict or discourage, but people walk right into 40% tax brackets in the pursuit of another couple of dollars. They'll spend $4,000 in taxes to find a vehicle that pays them another $100. It just doesn't make any mathematical sense, but people do it. And there's also stories of people having $10,000 accounts where they have 45 pages of 1099 from the thousands of transactions that they did, half of which were losses, half of which were disallowed because they had a wash sale rule applied to them. And somebody has a $5,000 tax preparation fee on a $10,000 account that actually lost money last year. And then they have to write a check

to the government for $7,000 because they didn't understand the tax code. So you have issues that people just have lack of understanding about what the pursuit of higher gain really looks like from a practical standpoint. and they should not be engaging in that process, assuming they want to make money. If you don't want to make money and you're doing this for entertainment, you're playing a different game entirely from the game that I play. And I will eventually take advantage of that person one way or another. That person's money, their losses are going to end up in my accounts. I think the other thing that seems... Because the system is a closed ecosystem. The people who make mistakes lose money

to the people who don't make mistakes. And I'm just simply going to make fewer mistakes than everybody else. And you know what you're doing. You're not, yeah, I mean, it's similar. I had another guest on the show who wrote a book specifically about the GameStop situation and it's exactly what you're kind

of saying. It's a kind of a closed system. And so there's a lot of people who lost a lot of money, but Wall Street still actually made quite a bit of money. But I think everyone just got very lost in the storyline. I think one thing I also see quite a bit is, and again, I've seen this for years, and I'm sure you have too, is people always using kind of the terminology, this time is different, this time is different. And one thing that does seem a bit new is how celebrities are now getting into the conversation. I guess they're kind of like an influencer. And now that they're putting their name, oh, now, like I saw Reese Witherspoon was talking about NFTs. I'm like, what is going on? I don't understand what's going on. Well, first of all, those people get paid. They get paid for influence. And Ray Dalio,

the famous hedge fund manager says, there's nothing new in investing. There's just lack of your understanding of history. I like that. That's a good one. That's something you should have in front of you at all times. That's a really good quote. Yeah, I think yeah, a lot of people are just getting so caught up in just the next big thing. Why do you feel like people are always chasing the new thing? Is it because they don't want to take the you know, is it because you know, things like index investing just seems boring or just too simple? Or they just feel like no,, there's so much newness in this world. In order to make it to the future, we need to continue looking at new things. I don't know.

It's all of the above. In order to raise ourselves within the pecking order of our peer group, we have to be perceived as the one who's taking foresight and the future and turning it into personal investment policy in which there's a lot of one-upsmanship that occurs. And we try to get as far ahead of our peer group as possible. And we're blazing new trails right into the fire, if you will. And we're seemingly unaware of it in many cases. And we don't understand what it is that we are after. If we were just after best compounded return, they would do what you're doing. But they need emotional affirmation.

They need excitement. And low commissions, commissions having gone to to zero only feeds that even more so. The perception of the friction of the process goes down, only incentivizes people to have even more transactions and make ever more mistakes and ever bigger mistakes. And the worst thing would be that they would actually have some success at it. and then they go mortgage the house, and they take their second mortgage money, put it into the market, and then they lose that too. So there's just a feeding frenzy of all kinds of conflicts of mostly emotionalism that are at stake. Yeah, it's interesting because it's, you know, one thing I've learned over the years is, and you talk about this in your book, it's like the two things that people always kind of forget in terms of like, having a big impact in your future wealth generation is fees and taxes,

people do not pay enough attention to how these work. But But I feel like, you know, so so I've always been very cognizant of fees. But yeah, like you said, now we're in this weird world where there's so many brokerages that allow no commissions. And that only because there's no barrier. And I know a lot of these places like Robinhood are like, oh, we're democratizing it. We're making it more accessible. But really, without any kind of barrier, it is so easy just to take a gamble with your money.

Having sometimes just like a little bit of a fee or some sort of structure. So you don't feel like it's so easy just to go and trade. I mean, I can't tell you how many times like I'm based in Canada, we have some similar apps. And so many people will talk to they're like, Oh, yeah, I'm investing, I opened up an account with this app. And I don't know what I'm really doing. But you know, it's no fees. And I'm like, that is the craziest thing to me. You know, you're playing with your own real money. Yeah, it's almost like going to a casino and all the flashing lights and they make it easy and just throw your money onto the roulette wheel and maybe it works out, maybe it doesn't work out.

But I didn't pay anything to be there. The drinks were free. That's really what we're talking about. But the odds of the house winning are really, really good. If you're playing any game in Las Vegas, the odds are always favoring the house. And if you buy an index fund, you are the house. You are in the place where all the money is going to end up over time, especially when you consider low taxes and low fees. But there's just very few mistakes you can actually make when you own an index fund.

And all roads lead to where you are. And all the other mistakes that people make out on the casino floor really don't matter. Because if you're the house, sooner or later, you're going to end up with some or all of their money. And so I prefer to play the game the same way as you. Yeah. Well, so now I'm kind of curious, you know, because it just seems like, you know, everyone's just talking about this. How do you break through the noise? How do you kind of ignore, you know, all of the hype? How do you just set yourself up with a really good strategy for the long term? And, you know, I feel like there's something I read in your book that was on I'm going to get this wrong. It's like, be an owner, not a renter. But it's not quite that it's basically

you're trying to had a really good way of saying, like, you've got to be in this for the long term. And I think a lot of people are very short term focused. How do we change that mindset? I think they would have to have evidence that it actually works. And I'll just give you some statistics that we also went over in the book. And that is, if you're a long-term investor, you will make money in 81% of all circumstances. And over a lifetime, that's pretty good odds. As a matter of fact, if you went to Vegas and you found a slot machine that would pay off 81% of the time, you would never go to the bathroom. You would not want somebody to have the opportunity to hop onto your slot machine and have the lucky pull that hit pay dirt. And so that option is available, and 81% odds of success is available to anybody who will buy a broadly diversified index fund and leave it

alone and be patient with it. But people want to do better than that. They figure that they're actually smarter than everybody else. Well, I got news for you. Not only are you not smarter than everybody else, there are professionals in the room that are way smarter than you. And if you think you can get an angle on what they know versus what you know, you have got another thing coming. And so any angle that you figured out, somebody else has already figured it out and has already priced it accordingly. And whatever it is that you're paying for that asset today is based on the sum wisdom of everybody else who has already thought the same thing. And we always think that we're smarter than everybody else in the room. And you're not smarter than everybody else in the room.

As a matter of fact, with a lot of professionals in the room, you're probably a below average intelligence when you think about it. But a lot of people don't want to hear that. And, you know, they want their ego to be stroked. Well, OK, you can live in your reality and I'll live in mine. Now, that's a really good word to use, ego. I feel like ego is the biggest thing that I have been seeing just online with the conversations, you know, about investing. It's just people think that, no, they figured it out and no one else has and they have something different or, I don't know, something,

something's different. And that is just not the case. I think a lot of it maybe is just the lack of experience. I mean, me, you know, now being in my mid 30s, although I've been only investing, you know, for a decade, I know so much more than I did 10 years ago. So I feel like a lot of the newer investors just don't have that life experience to be like, Oh, wait, I've seen this before. And I know how it goes. So I feel like there's something to be said for just having that experience. But I actually wanted to kind of talk a little bit more about because you do have a section in your book about portfolio construction. So what should people take into consideration if they're either going to work with an advisor or do this on their own? What are some of the things that you believe are good aspects to construct a portfolio for the long term?

I think people need to come to grips with who they are from an emotional standpoint and then determine what it is they want out of the process. If they're seeking emotional support or ego, as we were talking about, well, then that's fine. Just you're going to have a different set of goals and objectives than somebody who is results oriented. If you're trying to build up enough net worth in order to retire, you're much better off to take the slow and steady path than you are to try to hit meme stocks out of the park. It's very enticing to go out and make a hundred times your money and think about how much better your life is going to be. But the reality is by the time you make a few mistakes along the way, how many Fs could you make in college economics and still end up with an A

in the class? You can't afford to make any Fs. And if you go out swinging for the fences by trading meme stocks, you're going to end up with a couple of black eyes along the way. And a few Fs on the report card is going to kill your GPA. You need to be managing for overall GPA, even if that means getting a B on every test. If you end up with an F and all A's, you're going to be a C student by the time the final rolls around. And you just cannot afford to make mistakes like that. So knowing who you are and what you want out of the process is number one. Then number two would be to determine, I would say people should have a mental stress test that they put themselves through. So a stress test would be, okay, I got $100,000 saved.

At what point and what circumstances would I cry uncle? When I'm at $50,000? When I'm at $70,000? And think about the stock market as a vehicle that will produce 8% to 10% returns over long time periods, but bouts of minus 20, an occasional bout of minus 30. So if you apply a certain number of doses of minus 30 as your stock market return, how much of something else does it take to tamp that down to the 20% loss or the 10% loss, whatever it is that you can tolerate?

So I think I would put my money through a mental stress test, and then I would come up with an asset allocation based on that. If I can't stand any more than a 15% loss, I can't have any more than half of my money invested in stocks. So be it. And then build an investment program based on that and let it run and try to keep transactional activity out of it because your ability to bob and maneuver to outwit the market is probably not going to be successful. So pick an asset allocation at a low cost way of participation that'll give you the opportunity to have the numbers add up over long time periods and don't chase shiny things.

Fish get caught all the time by chasing shiny things. Investors do too. Do not chase trendy vehicles. Buy long-term, low-cost, tax-preference vehicles. A Vanguard or S&P 500 type of an index fund is a great way to get equity participation, and it's low cost and low tax, you're going to have a very hard time outrunning that. I'm curious, since you work with, you know, really high net worth individuals, is there anything different that you do? Like, I'm just curious, like what, you know, what kind of portfolios you construct for them? Are they very different than, say, you know, an index fund? What are some kind of extra, I guess, strategies or things that you do for them so they can maintain their wealth? That's a really good question. So we find that

an index fund is a great way to participate. But if you had the components of the index fund, you would actually have a leg up. And the reason why is you can actually drive your cost to zero if you own the components of the index fund. And then if you look at the high net worth and ultra high net worth, they have a lot of charitable mentality among them and they have philanthropy as a big part of their accumulation strategy. Whereas if you own the individual components of the index fund, it opens up a whole nother powerful world of philanthropy whereby an unrealized gain, a profit you've made in stocks in years past that you've never sold them, gifting those to charity, in many cases, you're only dealing with $0.30. Whereas if you sold them and gave the proceeds to a charity, you'd

be dealing with regular dollars. And so owning the components of a broadly diversified strategy, whether it's index-based or whether it's not, it doesn't really matter. But owning those components is what I see individual ultra-high net worth clients leaning towards as opposed to bucketizing our money and mixing it with other people in a mutual fund or an index fund. So that's the primary defining difference between the ultra-high net worth client and the non-ultra-high net worth. The other defining thing is that people who count every dollar by sitting in front of their computer

because they have the scarcity mindset, I need to get to a million dollars and I've only got 100,000, therefore I view my situation as scarce, they're the first ones to run at the sign of trouble. Whereas somebody with a $10 million net worth is still rich even when they have a $9 million net worth and those people are risk-seeking. So the behaviors of the ultra-high net worth is still rich even when they have a nine million dollar net worth. And those people are risk seeking. So the behaviors of the ultra high net worth favor even more accumulation because they are risk seeking in their behavior and low net worth investors are risk avoiding in their behavior predominantly because they view declining prices as an affront to their pursuit of their goal net worth, where rich people only want to get richer. The $25 million guy rarely says,

what do I have to do to get to $50 million? That's not how he lives his life. The $250,000 investor says every day, what do I have to do to get to $500,000 and anything that gets in my way is a problem. Therefore, they view declines in the market as problematic, where the ultra high net worth views declines in the market as opportunity. And so that is the defining difference between low net worth and high net worth clients. And that's the reason why you hear the tune, the rich get richer. Yeah. I mean, that makes a lot of sense. If you don't have a lot of money, you can't take a, really, it's, if you lose money, you're like, well, I need that money because I don't have that much money. If you're already a multi-billionaire, if you lose a few million,

you're fine. You've got more millions. That's exactly right. So you have to have that margin. And that margin is the room that you allow your investments to move around in because there's so much of the world that can't be predicted. And the high net worth embrace that volatility and low net worth seeks to avoid that. And so it just is a very difficult situation to get out of until you accumulate some money and you have a psyche shift. Well, I've certainly felt like that for myself in my 20s when I really didn't have any money. I was like full-on scarcity mentality as I've gotten older, more wise with how to save and invest my money and build my net worth.

Yeah, I've seen my own mindset shift to more of an abundance because you have, like you mentioned, you've got that margin. I've got that safety net. Something happens, I'm not gonna have to move back in with mom and dad. And that makes a big difference and really influences

all areas of your life, but especially your financial life. No. And I'll give, I'll give you a tip as to one thing that you can do to begin to chip away at the scarcity mentality. Give money to charity. I don't care if it's $5. I don't care if it's $10. Whatever the number is, start small. Make it routine. Make sacrificial gifts to charity, and you can develop some of the same skill set that the ultra high net worth investors that put a huge priority on benevolence and on giving to charity adopt some of those same behaviors at whatever net worth you've got. And I think you're going to find that not only do blessings come your way,

but your whole attitude about your money and who owns who is going to change. Many people say to themselves, I have to take ownership. I have to own my money. That's not exactly the way it works. Because if you pay real close attention to that, you'll find that your money owns you. And if you let your money own you, you're going to make a string of terrible mistakes. Yes. I mean, I completely agree. I think that's something that I've always done since like even like the first year I moved out of my parents' no money. Giving back was always something that I've always done since like even like the first year I moved out of my parents no money giving back was always something that I wanted to create as a routine

and it really does make you think about money differently it's not just for you and you know to hold on to and hoard it really should be something that you utilize to to help yourself but to help others and like you said you feel you feel good after, you're doing so good in the world. And I always find it does come back to you in one respect. Like, you know, just like when you say, you know, hello to someone nice on the street, then you'll find someone else, you'll just be more open and see,

oh, you know, there's actually a lot of nice people and someone says hello to you back. It's just one of those things. That's right. Yeah, agreed. Well, it's been such a pleasure to have you on the show. Big fan of your book and I highly recommend everyone check it out because it is a very different perspective on, you know, I think really seeing the inside workings of the investment industry and some things you need to know from an insider who worked in there.

Foolish how investors get worked up and worked over by the system. Gil, where can people find more information about you and grab a copy of your book? My book is on Amazon. It's also on Target. It's on Audible as well. I did an author-read version of the book on Audible. So it made Amazon bestseller list back in last summer. So Foolish is the name of the book. It's a yellow cover with a ladder on the front of it. You can buy it on Amazon or buy it on Audible or whatever you want. The name of my firm is Segment Wealth Management. People can also sign up for our blog. We write a free blog about how a lot of this stuff works. There's no obligation. Nobody's going to call you.

You can just log on to the Segment WM website and go to blog and sign up right there. And when we write a new one, it'll come into your inbox and read it if you want and don't read it if you don't want. So it's another way for people to get more information. Amazing. Well, thank you so much once again for joining me. It's a pleasure having you on the show. Appreciate it. Thanks. on my website at jessicamorehouse.com slash podcast. But if you would like to, you know, learn more about him and his firm, first, you can find him at his personal website, gilbaumgarten.com. So that's g-i-l-b-a-u-m-g-a-r-t-e-n.com. Again, I will link that in the show notes. And of course, you can check out his firm Segment Wealth Management. That's at

segmentwm.com. And you can find him on LinkedIn, if you so please. And of course, you can grab a copy of his new book, Foolish, How Investors Get Worked Up and Worked Over by the System on Amazon and pretty much everywhere you can find the book. So again, I will also link that in the show notes. And of course, I'm going to give a copy away of his book and a bunch of other books. I've got lots of things to share with you guys. So stick around. Just a few words I first want to share about this podcast episode sponsor. This episode of the More Money Podcast is supported by Oxio. Empathy. Radical transparency. Simplicity. Free spirit. When you hear these words, I doubt the first thing you'd associate

them with is an internet company. Oxio wants to change that. They believe in disrupting the internet provider space in Canada and putting the customer first, finally. And they're doing just that by providing local and friendly customer service, unlimited internet, no contracts, and competitive pricing to customers in Quebec, Ontario, British Columbia, and Alberta. That's why I made the switch to Oxio myself. Not only that, when you sign up using the promo code MOREMONEY, you get your first month free. Plus, like everyone at Oxio, an Eero 6 router with ridiculously fast Wi-Fi speeds and better privacy controls is included. And once you've signed up, you can even use Oxio's referral program to earn free internet. Want to ditch your old internet provider like me? Just visit oxio.ca and use promo code

more money to try out Oxio for free for one month. It's as simple as that. Once again, visit oxio.ca, that's O-X-I-O dot C-A, and use promo code more money to try Oxio for free for one month. Okay, so things to share. Let's get to the book stuff the good stuff the giveaway stuff so i am giving away a copy of foolish but i'm also giving away eight other books so if you go to jessicamorehouse.com slash contests that is where you can find all of the books that i'm currently giving away um and honestly i only really i only promote this contest i think in my email newsletter and on the podcast um so you know it's only special, special people like you that really get the opportunity to enter to win. And so as a

reference point, what books am I currently giving away basically any author that has been featured on the season of the show. So I'm giving away the financial mindset fix by Joyce martyr, the revolution that wasn't honestly, that's probably one of my favorite books I've read recently by Spencer Jacob, financial adulting by Ashley Feinstein Gersley. Get the Hell Out of Debt by Erin Skye Kelly. My Money, My Way by Kumiko Love. Destroy Your Student Loan Debt by Anthony O'Neill. Elmer's Nine and Dine by Ryan Goldsman.

And of course, Money Like You Mean It by Erica Alini. And yes, I do have more authors coming on the show and I will be giving away their books as well. So, you know, it's just one of those things like get on my email newsletter list and you'll always be reminded to enter to win one of the latest books. Oh, I just remembered, besides contests, another exciting thing about the podcast, I have a double episode week. I have a brand new episode that is going to come out tomorrow. So you've got two episodes in one week, you're gonna love it. So make sure to subscribe wherever you're listening, or just, you know, check the podcast for the late, you know, the episode that will air tomorrow. So very fun. I love when I do a bonus episode. That's always my favorite. Because you know,

I love doing the podcast, quite honestly. So that's happening. So I also mentioned already mentioned the new artwork, that's kind of the big deal. But other things that I'm working on, and I'm so close to being finished, new website is almost there. I just gave my web designer my kind of final tweaks and edits. And oh my gosh, we're almost there. And it looks so freaking good. It looks so much better than the website that is currently up. It's not bad, the one that I have currently up. I mean, I'd say not not too bad for doing it myself. But you know what? I'm not a web designer. It's like good, but not good enough. You know what I mean? Also, I'm working with a specialist with my budget spreadsheets, and we are making them so, so good. I'm so excited to launch them.

If you've already bought one of or downloaded one of my old budget or my current budget spreadsheets, don't worry. You know, when you do that, you sign up to my email list. So if you're still on my email list, then you will get, you know, an email about the new ones and we'll get it for free. But if not, hey, you can look forward to when I launch these new ones. And they're good. They're so freaking good. They're better. You know, it's one of those things. One of the things that I've learned over the years as a small business owner is, you know, balancing not overspending because you don't want to, you know, be one of those people that spends all their business profits, but also like you need to spend money to make money. You need to

invest in your business. And sometimes that means outsourcing work, hiring people that are really good at things that you were not good at. And so that is what I'm doing a ton of this year hiring a bunch of experts that are, you know, really good with Excel or Google Sheets or web designing, or I mean, I hired a stylist to pick out good clothes for my photo shoot, because I have no sense of style, zero. And yeah, it's exciting. So far, it's it's worked out pretty good. So lots of exciting things coming down the pipe or pike, whatever version of that idiom you want to, you know, you like, there's both for you. Also, I want to remind you that I've got a YouTube channel, y'all. I feel like people don't realize all the different

things that I do. And maybe it's because I do too much. But I obviously have this podcast, which I love, but I also have a YouTube channel. And I feel like lots of people who follow me on the YouTube have no idea of a podcast. And a lot of people that follow me on the podcast have no idea, have a YouTube channel, but I do. If you go to, you know, Jessica morehouse.com slash YouTube, or just Google my name, Jessica morehouse into YouTube, you will find me. And I am finally releasing new videos because I finally have like a proper workspace in my home.

I mean, it's actually temporary. I'm going to set up a proper space in my basement. That's going to be like my little YouTube slash podcast recording room. So excited. Like my husband's so excited. He's going to get me like some sound treatment, some actual sound treatment. So I think I'm going to get like one of those, you know, those arms that you see, I always see like these like YouTubers and podcasters that have them that are connected to their desk. That sounds fancy. Maybe I should even get some new headphones. I literally still use just those free white Apple ones I got, you know, you always get with your phone or whatever. Yeah, I still use those. And I still see all these

podcasters with these like, really fancy ones like you know what, maybe I should upgrade. I am a professional podcaster. This is what I do for a living. But sometimes it's like, these are fine, though, you know, I'm still cheap. Maybe that's it. I'm just cheap. That's probably what it is. I think that's kind of it. That's really all I've got. But I think that's quite a bit, isn't it? So thank you so, so, so much for listening. And a big shout out to my wonderful podcast editor, Matt Rideout. And I will see you back here tomorrow because I've got that bonus episode that I mentioned earlier. So have a good rest of your day. I'm gonna see you back here tomorrow. And then we'll chat and then and then you'll see what

tomorrow's episode is all about. All right. See you then. This podcast is distributed by the Women in Media Podcast Network. Find out more at womeninmedia.network.