The Compound and Friends - An Investment Tool Advisors Love (with Josh, Michael and YCharts CEO Sean Brown)

Episode Date: April 24, 2019

Sean Brown is the CEO of YCharts, one of the hottest investment research platforms on the web. Michael Batnick and Ben Carlson use YCharts for research projects all the time, whether they're answering a client question, creating a blog post or seeking to prove or disprove an idea about markets, the economy, investing or portfolio construction. Sean came by to discuss the various ways investors and financial advisors use YCharts for their daily work and research. Sean is surprised by how little time financial advisors seem to spend on their investment management-related efforts relative to things like prospecting, relationship building, etc. According to this survey of investors posted by Michael Kitces, advisors are spending an average of 10% of their time on investment management, which Sean believes is a big disconnect considering how important results are to the end client. Enable our Alexa skill here - "Alexa, play the Compound show!" https://www.amazon.com/Ritholtz-Wealth-Management-LLC-Compound/dp/B07P777QBZ Talk to us about your portfolio or financial plan here: http://ritholtzwealth.com/ Obviously nothing on this channel should be considered as personalized financial advice just for you or a solicitation to buy or sell any securities. Please see this 3,000 word terms & conditions disclaimer: https://thereformedbroker.com/terms-and-conditions/   Subscribe to the mini podcast on iTunes or Spotify Enable our Alexa skill here - "Alexa, play the Compound show!" Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hello, my name is Michael Batnick. We're sitting here with Sean Brown, CEO of YCharts and Josh Brown. Oh, we have two Browns. We are related. We're going to talk about why. We're going to talk about how advisors using YCharts stick around. Sean, as you know, I am a daily YCharts user. I don't know that my experience using YCharts is similar to all advisors. Why don't you just give a basic overview? How are advisors using your services? similar to all advisors. Why don't you just give a basic overview? How are advisors using your services? Yeah, I think the fundamental theme is we're fully focused on advisors and helping them make smarter investment decisions. So I liken us to a Swiss army knife, not one of those crappy ones that breaks apart right when you leave a trade show. One of those

really good ones where if the blade you're looking for is how to stay abreast on markets or how to keep abreast of news, great. If you're looking to do deep to stay abreast on markets or how to keep abreast of news, great. If you're looking to do deep dive research, we've got tools for that. If you want integrations to excel, hey, we got charts in our name. We're really, really good at charts and creating visuals for wealth advisors. What is the most used feature of YCharts on a daily basis by the most amount of people? What's the most popular thing? Definitely, definitely the dashboard. Everybody wants to stay abreast on what's going on in the market. What's for people that haven't used it?

And we're going to pop screen grabs up of the stuff that Michael looks at on Y charts, but like what's in the dashboard that makes it so popular with advisors or users? Well, first of all, it's fully customizable. So whatever you want to follow. So if you want to follow GDP, you want to follow the FAANG stocks, news, whatever you want to follow, it's there for you. And then if you want to deep dive from any of those points, you can go into several layers deep of data. Mike, what's in your dashboard? You know, it's funny you mentioned that. I don't even use a dashboard. Look at you. You're a contrarian. have it set up, but I also have thinkorswim open. So I know what's going on in the markets intraday. But I use it for everything from index stuff, index data, price data, ETF data,

what's under the hood of these ETFs. I use it for all sorts of things. So we have clients that ask us questions all the time. Frequently, they'll ask the advisor questions. And then a lot of times the advisor will punt that over to Michael or Ben or Barry, because it's like something market related that requires enough research where it should really be done right. It's not like, what did the market do today? So Michael, you'll jump onto Y charts and you'll say, all right, what did the index do the last four times interest rates had gone up 30% or answer a question like that. You can do all that? Yeah, yeah. So I pop all the securities in the chart tab and then I just hit export.

It goes right to Excel and then I do my thing from there. Yep, that's pretty great. And that's a big one we do, Excel. Everybody inevitably has spreadsheets that they need to have synced up with real market data. Right. And we help them do that.

So you have all sorts of plugins that I'm probably not taking full advantage of. Excel is the really big one. That's the really powerful one. And we kind of look at Excel like... Oh, so he can do that work inside of the app? I tend to do it manually, which is not necessary. Old school.

I like that. I like that about you. One column at a time. And he's representative of about 25% of our customer base. The rest are looking for it all in the tool. And we think the tool is pretty amazing. I mean, like our value proposition is pretty simple, right? It's get commodity, but the best commodity data out there.

Give it a personality, which is really, really, really easy to use. So if you want to create a picture, you don't need to learn anything. It's very intuitive right in front of you. You want to create a graph. You want to snap it into a newsletter or a tweet. Right. That's a 20-second endeavor. All right. So you were referencing, before we turn the cameras on, you were referencing this Michael Kitsy's chart about the survey that he took, which we'll assume is legit because almost every advisor reads Kitsy's and probably a lot of real ones would respond. I think he had a thousand responses.

And the gist of it was that they said how they spend their time. And let's assume they don't really know what they're guessing. That's fair. But still, they're saying like 10% of their time is spent on investment management. How much of that time should be spent on Y charts versus whatever else people are doing? What else would be thrown into that mix? Watching TV or reading 10 cues? I'm trying to picture what they're doing in that 10%. Well, before I answer, my premise is there's a disconnect between why people sign up and why people leave a given advisor. They come because they have a nest egg and they want it to grow and meet certain parameters. When you see that an advisor spends only 10% of their time on this fundamentally most important thing. And right now I see a lot of advisors saying, how am I going to improve my customer service? That's going to keep my customers. I think the number one thing you can do is

do right by their nest egg, try to generate alpha. So to answer your question, I think there's a lot of work that can be done to either manage their portfolio in a better researched way, or one of the big things we're focused on right now is how can you use model portfolios and smart commercial models behind the scenes to help you be smarter with that 10%? I was going to say, I think a big portion of the individual advisors out there use TAMPs for investment management because they've accepted that they're not going to generate alpha. But then there's a whole other contingent of advisors that are building models,

are running their own portfolio show. They're using building blocks like low-cost ETFs. But at the end of the day like they are answerable to the client for what happens with the portfolio so like why charts is a way that not only can they possibly construct better portfolios for a range of outcomes but i think it also gives you tools where you can kind of explain yeah well what's going on right and like mike you would say that's a big part of like if you say you're doing portfolio work, you should be able to explain and answer any client questions in any environment,

right? Yeah, absolutely. And YCharts actually has a portfolio tool, a new portfolio tool, where you could pop stuff in the user interface is really friendly. So I use that. Okay. Yeah. And I think the world, whether you're using a TAMP behind the scenes or not, you have an obligation to communicate that investment return and why and where the money is being invested and how that compares to alternatives. The model portfolio functionality we've put in allows an advisor, even if it's only 10% of their time, to be smart on how their TAMP portfolio is comparing to a bunch of model portfolios that the client may be hearing about. Right. So the big thing is communication and part of client service

is being able to make the results of a portfolio make sense to a client. Right. Even if markets don't make sense, at least you can explain what the drivers are. So that's an important thing. Absolutely. All right.

So this is a question you probably don't want to answer. When is the bidding war between Morningstar and Bloomberg going to take place for YCharts? And how can I personally benefit? Yeah. I don't know how you can personally... I'm sure you talk to firms all the time that are looking at you like... We're so focused on our vision right now. And the most

recent study I saw, T3 Advisor Survey said we were the number two in market share behind Morningstar. Huge gap. Market share for what? Market share for research, fundamental research on securities. We were the number two player with 8% market share behind Morningstar with 30. So I think we're going to worry about getting a much bigger share of the market before we worry too much about what happens from there. Gotcha. Okay. That was a great answer. As one CEO to another, I'm going to tell you that was like a nine. Well, another one you probably don't want to answer, but if Morningstar and Y-Trots are 38, who's the rest? Yeah. Who else is in the mix? Really fragmented beyond that. Really, really small, small forward or less percent of the market. Okay. All right. So that's a great market. That's the RIA market. Like even if you talk to

the biggest RIAs, they tell you I don't have scale. So one of the things that I like about working with you guys is pretty instant feedback when I reach out to you guys. So what are some of the questions that you're hearing most from advisors that they're requesting you guys build for them? Okay. So first of all, I'd say on that, I'd love to hear that feedback because our value prop is not to be this digital service that you can't find a phone number and can't talk to a human being. We think advisors need help. Sometimes they need analysis help. Sometimes they need help on the tool. So we love to talk to them.

The biggest thing that they're asking us for is how do I better filter securities and investment options to meet specific criteria? Hey, how can you help me filter on risk? So you have an equity screener. I'll use that. Yup. Yup. How can you help me filter on risk? So you have an equity screener. I'll use that. Yep. How can you help me sort on screens? How can you help me compare my model portfolio, which is our new functionality, to a passive security that my client wants it compared to? So we've turned a model portfolio into a security.

You can compare performance, risk characteristics, exposures. Right. So you build your portfolio and you can compare that portfolio as an individual security versus say the Russell 3000 or the Acquia. How did a financial advisor do that prior to something? I guess they would call a wholesaler who works at a fund that has a research department

and then that research department would miraculously be like, hey, it turns out you should own all iShares or you should own all Sage Street. It's a three-week lag to get back to them on a very simple question. And you guys just are like, here, go here, do it yourself. That's what we're trying to do. And what we've been really excited about is we did a client survey and said, what value do we provide to you? And we heard two things. Number one is

you help us generate higher investment returns. But the one that really, really, really excited us is we help save advisors three to four hours a week of time. And they told us $200 an hour is what they're worth. We pay for ourselves within the first five days of a month. And that made us pretty fired up. Based on that much time saved. Yep. That much time saved was a 600 and something percent. So listen, look into the camera. What do you want to say to the chief investment officer of every RIA in America that is not currently at least trying what you guys have built? You want to be like, what's wrong with you?

We are here to help you enable smarter investment returns. Great tagline. Please come talk to us. All right. That's a 10. Thank you so much for coming in. Thanks for having me. Appreciate it, Michael. Thank you. All right. Let's a 10. Thank you so much for coming in. Thanks for having me. All right. Appreciate it, Michael.

Thank you. All right. Let us know, have you tried YCharts yet? Is your financial advisor putting in the work to make sure that your portfolio makes sense? Sean is the guy to look to for thought leadership in this area. Make sure you follow him on Twitter. What's your Twitter account or YCharts Twitter? YCharts.

It's just at YCharts. At YCharts or at Sean Brown Chicago because the O had to get cut off. Gotcha. I'm starting my own thing. It's called Why Not Charts. Very sarcastic. All right, listen.

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