The Compound and Friends - Joe Moglia on the State of the Brokerage Industry

Episode Date: May 24, 2024

On episode 143 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Joe Moglia, former CEO and Chairman of the Board at TD Ameritrade, as well as the former Head Football Coach and current Chairman of Athletics at Coastal Carolina University. They discuss: how Joe went from coaching to Wall Street, the brokerage industry, what's next for Nvidia, the meme trade part 2, college athletics, and much more! This episode is sponsored by Global X and VRGL. Visit https://www.globalxetfs.com/ to explore a lineup of more than 90 ETFs, along with insights to help you navigate a dynamic investing landscape. Join VRGL’s co-founders on May 30th at 1PM CST to learn more about how VRGL’s new Risk Tolerance workflow can accelerate client acquisitions for your firm. Register at: www.vrglwealth.com/events. Sign up for The Compound newsletter and never miss out: https://www.thecompoundnews.com/subscribe Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

We went to Yankee Stadium last night and we got there at like 7 15. Yeah game started at 7. Yeah, absolutely Packed packed packed thousands of people outside waiting to get in tens of thousands, right? I was on there's probably 50,000 people there and it's it was gorgeous night So this is good night for a ballgame, but I was I couldn't believe how hot how busy it was Well, I was watching today on air when you talked about One of your buddies had to go around to drone. That was you. I had to go around to Joe 160 to that Jerome I mean, I know that able they go you can't bring a lap to him. Wait, excuse me Michael found a Michael found a bouncer at a ball at a bar

He said can I leave my bag with you? No, no. No. I said, where's the storage block? He goes. I got you, bro So I said for real he's like no. Yeah, I said, all right I'll clock? He goes, I got you, bro. So I said, for real? He's like, no, yeah I said, all right. I'll take care you wanna get back and he I did Wes great man Good guy, what's gonna be in the shot? Wait you spoke about that TV in what context We're talking about live nation. I got my ticket in Saying how easy it is to move a ticket on the app. And that's Live Nation's ticket, like how seamlessly it works with venues. How we doing?

How we looking? Can we talk about Nvidia real quick? It's not going to be a big part of the show. Yep. 10 for one stock split. That means we're ready already? Yeah. I mean, I'm on air now?

Sort of. We're not doing a sound check? We're not doing anything? This is the sound check. This is the sound check. The kids love the stock split still. Everybody does. I think in all fairness though, everybody says the value is the exact same thing, but I think most of the time, at least anecdotally,

you guys might have real research on this, when they do a stock split, the stock does tend to go up a bit. I think that's not a bad time to trim, by the way. So, I think a 10 to 1 split in the video is going to bring more buyers in. It's probably going to give another pop to the stock. And, you know, it's probably something we should trim a little on. Well, think about it this way. A stock only splits after a great run.

Right? So, it's strong stocks that split. I agree. I agree. You know, what's the kiss of death? The reverse stock split. You don't want to be that. You have 25 more shares now. 25 times more shares.

The recent history of the big stock splits though hasn't been great because it happened during the Tech Bear market. So the Amazon. The trade desk did a 10 for one. Shopify did a 10 for one. One in 2021, one in 2022. Amazon and Alphabet did 20 for ones. You know that? So many shares. That was like two years ago. Apple did a while ago. Apple did seven for

one specifically to be in the Dow. Yeah. Well, that's why they all do it. It's like Google did it. I think there's something with stock based compensation also. I also think that it makes for more options trading activity. Well you know what else? It's a bullish headline. They know what's up, they respond to incentives, and it's bullish. Whether it is or it isn't, the price responds.

I mean I agree, but you were saying a second ago that in a bear market, that doesn't necessarily hold up. Doesn't help. But I think in an overpowering bear market, things tend to go down no matter how good you are. Likewise, in a real, real positive market environment, things tend to go up, right? I was going to say, in a bear market,

you get market enforced splits. You don't get double the amount of shares, but you do get a lower price. You just get a lower price, that's right. Your overall value's down. Do you think, do you think Nvidia is gonna go down in history as one of the greatest stocks of all time just given like this is this is a stock that's up like six or seven thousand percent in less than ten years and not

just that but the size of it. This is not like a small cap or I mean this is this is trillions of dollars. Yeah. So number one. So number one, it is already one of the greatest stocks of all time, but you said, Josh, you had said, go down in history. So 30, 40 years from now, whether or not it's still one of the greatest stocks in history, I think a lot of that's gonna depend on the next five or 10 years and what they actually do with AI.

And then they gotta continue to have the type of leadership though that never becomes complacent. And I think that becomes the kiss of death in some great companies over time. GE, they're still fine, but they're not doing what they used to do because they become conservative, they become a little bit complacent. It's kind of like they have the attitude,

that's not the way we do it here. They killed it. Right? That's bad in athletics, it's bad in the business world. And they lose their founder eventually. And so Nvidia still has their founder. Yes, yes. Like he's bad in the business world. And they lose their founder eventually. And so Nvidia still has their founder. Yes. Like he's not coming to the company forever.

Part of that though has got to be, they've got to be well prepared that whenever that happens. Succession planning is important. It's critical, it's critical. You've got to bring in the right person. The thing with Nvidia is everybody is gunning for that market now, and there's no way

they'll keep it all to themselves. Like obviously, you're not going to have a company with 35, 40% margins growing 100% a year, and no one else is going to get in there. They reported 79% gross margins. Estimates were 71, it's absurd. Who does that? 79%, it's insane.

I saw that. So it's about to pass Apple in market cap. It's hard to believe. Yeah, well number one's Microsoft, right? Then number two's Apple, number three's now, it's going to be, number two is going to be Nvidia. 60 analysts cover the stock. Seven holds, seven neutrals, 40 something buys, no sells.

How about this? So you guys are geniuses, so what's the difference between a hold and a neutral? I just want to Educate me none. I heard somebody say something funny today. I was down at the exchange somebody said man I wish I owned that stock so I could sell it This I mean you'll be better used to say that That's good. So Nvidia has it's got a trillion dollar almost trillion dollar lead over Amazon and market cap That sounds nuts doesn't not it that doesn't? It doesn't sound like it should be.

It shouldn't be. One of those things that shouldn't be. And I own both stocks, but it seems like something that's not sustainable. I own both stocks as well, but I think what happens is, we all know this, right? The market wants to be getting a bit emotional, it wants to fall in love with certain names, really hate certain names,

and for that period, you want to be able to take advantage of it. That's why I think it's important to have a discipline where you tend to trim into strength, and you tend to buy on weakness, as long as you still feel good about the company and the value of the stock. Stock went up 10% today.

Yeah, I saw that. Who are the buyers? Literally. I think when something like this happens, any institutions that were on the sideline, got to jump in. I think there were people that still might have institutions that were on the sideline gotta jump in. I think there were people that still might have been short. Because if I remember correctly,

what I looked at earlier in the week, the option game on this one was 7.7%. So you looked at it 7.7% up, 7.7% down. And I can see some people betting that by going short the stock at the level it was. So you're gonna have some people coming in and covering the shorts. You're gonna have some people that were on the sideline,

oh my god, I better jump in because now I'm going to miss it. I said I was going to buy it at $800, now it's over $1000. I got to jump in at some point. I think that's like career risk driven panic buying. If you're a large cap growth manager you don't own Nvidia, what are you doing? What are you telling your investors? Again, I think panic buying is a big reason why a stock could pop 10%. So last thing before we start the show actually. So, we haven't started the show yet. I think panic buying is a big reason why a stock could pop 10%.

So let's say before we start the show actually. So, Goldin's- We haven't started the show yet. This is from Goldin. So 12 million shares traded last night in after hours and another 700,000 shares this morning. That is serious buying. It's a thousand dollar stock.

12 million shares. That's a lot. The options market alone in Nvidia is bigger than most industries. Like the daily dollar flow industries, the daily dollar flow, industries, the daily dollar flow coming and going in Nvidia on both sides is just gigantic. Without question, in full disclosure,

we sold 10% last night. I think at 10.85 just after hours, just with a pop. We just felt we had to do something. Good for you. You ready to go? Johnny Boy. Yep. Some music. Three claps coming in. Oh boy. More than three. We just felt we had to do something good for you. We ready to go boy

Three claps coming in. Oh boy more than three Welcome to the compound and friends all opinions expressed by Josh Brown Michael Batnick and their cast mates are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Today's show is brought to you by GlobalX.

Since 2008, GlobalX ETFs has been committed to empowering investors with unexplored and intelligent solutions. GlobalX specializes in ETFs that track emerging trends like the rise of artificial intelligence, as well as strategies aimed to generate high income potential. Visit globalxetf.com to explore a lineup of more than 90 ETFs along with insights to help you navigate a dynamic investing landscape. Globalxetfs.com. Today's show is brought to you by Virgil Wealth.

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I'm your host downtown Josh Brown here with my cohost Michael Batnik as always. Michael, say hello to the folks. Hello. Hello. All right. I'm in downtown Josh Brown here with my co-host, Michael Batnik as always. Michael, say hello to the folks. Hello, hello. All right, Duncan is here, John is here, Nicole is here, who else? Sean is here, Rob is here. We have a very special guest today.

We have two special guests, our special guest and our special guest's special guest. And we're so excited to have you in the studio. Ladies and gentlemen, Joe Moglia is someone that I have looked up to for a very long time. He is, I think, one of the most storied leaders anywhere on Wall Street, but specifically in brokerage, in asset management, wealth management.

Joe is the former CEO and chairman of the board at TD Ameritrade, as well as the former head football coach and current chairman of athletics at Coastal Carolina University. Joe grew TD Ameritrade's market cap from $700 million to $10 billion, not quite Nvidia, but pretty good. Right? Why didn't you do AI? We would have gotten there.

Joe spent 17 years at Merrill Lynch and led Coastal Carolina to four conference championships. Ladies and gentlemen, welcome Joe Moglia to the show. All right. I want to start with your story. Your story's amazing. We don't have to do like the whole biography, but I want to give people who haven't heard of you enough so that they understand how you've done what you've done with your career and where you're coming from.

I think it starts with football first, then Merrill Lynch, then Ameritrade, and then back to football. But give us like the, give us the Cliff's Notes version. I grew up in the diamond street section in New York City, gang area, immigrant parents, two of area immigrant parents. Which gang were you in? The Tiny Tots. Okay. Okay two of my very best friends I was with every day in Grammys. Why do you know them? You know? Are you familiar with it? They rejected me. The two of my very best friends in Grammys who got killed in high school. One died of a drug overdose, one was killed by the police robbing a liquor store. If I had not been playing high school football I would have been

with him. My goal was to play football, baseball, and college, and my girlfriend got pregnant. So I had to give up sports, and I began as a freshman at Fordham University in the Bronx. I majored in economics, I wanted to go to Wall Street. My freshman year, I supported my wife and my daughter, paid every penny in my education.

I drove a yellow cab here in New York City, a truck for the post office, and worked at my father's fruit store. Not the most fun a freshman ever had, the history college freshman. You were doing that at 18 years old? Yeah. Oh.

Yeah. Okay. But it was also the first year I didn't have sports. Now, for the prep, Old Boys Catholic High School in the Bronx, same campus as Fordham University, that's where I went. They gave me a coaching job.

So, my sophomore, junior, senior year, I coached high school ball during the season, worked for my father in the off season in the fruit store, major in economics, wanted to go to Wall Street. But by the time I finished my third year coaching, I really loved the coaching and decided if I could get a head of high school football job and pursue a career in coaching,

if that was gonna try to go to Wall Street. I applied 100 schools. One school gave me a head of high school job offer. At 22, I became the youngest head coach in the history state of Delaware, still am at a place called Archman Academy. By the way, a segue that happens to be where Joe Biden and all of his kids went, right?

So that's how I began my career as a football coach. How did you learn how to coach? Like you were a kid. Well, how do you learn to do everything? You do it, you do it. Plus, I mean, I love playing and I took this very, very seriously. I was either gonna continue to drive a cab

or work for the post office or work at my father's fruit store. So my alternative was those three things as opposed to learn how to coach. I was able to learn how to coach. But you take it like everything else. You guys have far more experience today than you would have been 20 years ago, right? Well, certainly that was the case for me as well.

I began as an assistant JV high school football coach. My career was pretty solid as a football coach. You're coaching people a couple of years younger than you. That's right. To my point. So you had to learn how to be a leader really, like really quickly. You didn't have 10 years to stumble around until you learned leadership. Plus I was a father, plus I was a husband, plus I had to pay for my education.

So I had to get this right. Yeah. Had to get it right. Okay. And I had gone through, and because I had come from that high school, a lot of the kids I was coaching, they were younger when I was actually playing there. So they kind of knew who I was.

So I had a degree of respect from the very, very beginning. But to me, kind of knowing what I went through, to what extent might I be able to help them not make some of the same mistakes and look at life a little bit differently. We all think we've got it tough. You don't know what tough is until you really, really have something tough.

And that's all relative anyway. So the bottom line is my goal is to be the head coach at a major, major school. If you want me to continue the story, you want me to stop there and just say I went to Wall Street. Well, so yeah, I mean, I think like the transition to Wall Street's really interesting because, you know, you're walking into Wall Street

the way I walked into Wall Street. Like, all right, what do we do here? Like, everyone's making money, there's a lot of action, but like, what do we do? And you figured that out really quickly, and I think excelled, also again, at a very young age, you didn't waste a lot of time. So I would love to hear that part of it.

Okay, so fast forward 13 years, and I'm the defensive coordinator at Dartmouth. Now we have four children, and it's my first season at Dartmouth and the sheriff from Hanover, New Hampshire comes in and needs to see me and my heart starts to beat. I think there's a death of the family and he says, coach, I'm really sorry. He hands me divorce papers. So now I can't afford to live independently and support my wife and four children. So I get permission to move into a storage room above the football offices.

Now Dartmouth is in Hanover, New Hampshire. The problem with that storage room was it had no heat, so I could see my breath in the wintertime. Well, I wound up living there two years. All right, January 1984, Miami upsets Nebraska for the national championship. They offer me a job to go there and ultimately become their defensive coordinator.

Now, I'm gonna go from defensive coordinator to the Ivy League, to defensive coordinator to the national championship team, and every one of those guys got major jobs all over the place, NFL and college. I cannot have a better job. But guys, a football coach's life is seven days a week, 80 hours a week, no days off for five months,

then you go on the road recruiting. Back then we didn't make much money. I'm gonna live with Carl Gabels. My kids are still gonna live in New Hampshire with their mom. I can't afford to fly four kids back and forth. Toughest career decision I've ever made in my life, to this day in my life, was turning down that job. Because I didn't think I could do my job as a coach

if I couldn't live up to my responsibilities as a father. So what else did I have interest in? I always had an interest in Wall Street, especially the institutional side of Wall Street. So I hustled and eventually Merrill Lynch gave me an opportunity where they put me in their NBA training program. There were 26 of us.

25 NBAs from Harvard, Stanford, etc. One me in their MBA training program. There were 26 of us. 25 MBAs from Harvard, Stanford, and the Center. One football coach. 1984 training program. 83 was my last season. One football coach. I was one football coach. And everybody said the football, they were shorting me. I didn't know a short man.

So I thought that was a compliment. I thought that was a compliment at the time. But that's not the case. And a few years later, most of those MBAs were working for me. The training program was for what? To be what? MBAs, the institutional side, so, investment banking and equity debt municipals.

So these other guys were snickering because they came from Ivy League schools and they were like born and raised to be on Wall Street. And here comes the football coach who, not long ago, was sleeping in a storage unit, and then you outworked them all and you end up running the joint. You know what, though, in a storage unit, and then you outworked them all, and you end up running the joint. You know what, though, in fairness, Josh,

they all worked hard. The issue was, though, I already had a life under my belt. I had gone through a divorce, I had four kids, I supported myself, I grew up in a gang. Uneducated parents working in a fruit store, plus as a football coach, you gotta make serious decisions every 25, every 30 seconds or so during the span of a game your entire career is dependent upon those decisions that you make and

Whether or not you win on Saturday is going to depend on where your family is going to be able to live the next year or so so you got a lot going on a lot of the guys a lot of the NBA's ladies and Guys that struggled was because they had difficulty handling the stress in the institution side of Wall Street If you don't produce you're gonna be out. You can make a lot of money but you're gonna get fired. That was your whole life up until then. I could handle that piece. I could handle that piece. So that was the transferable skills from coach to successful. I was a much better, I began as a bond salesman. I was a much better bond salesman because of my

skills as a football coach than I would have been without that. So alright, so then you excel there, and then how do you make the jump to executive management from sales? I think in the late 80s, we had, Merrill Lynch had our own problem with mortgages back then, we had a $377 million problem, you had Salomon Brothers blowing up,

you had the Black Friday when the equity markets were blowing up, so what happened was there was a time, I remember actually my very first check as a bond salesman, and the guy that hired me was complimenting me and breaking the record, and he gave me my check and I said two things. Number one, this is going to be the smallest check you ever give me. But number two, you'll find when we have issues or problems, I will be a much better leader than I am a bond salesman.

And I was a pretty good bond salesman. So as the firm started to struggle, late 80s going into the 90s, I started moving to middle management. I went from being a bond salesman to assistant in New York, running New York, running national. That was six months. Then I got the executive job

where I ran all global institutional sales, okay So that that must have been pretty Just from that point forward and you've accomplished so much more since then you must have at that point though Giving yourself some credit for everything that you've you had accomplished up until then. It's a pretty big 180 career wise and you must have been pretty impressed with yourself or not really? I was impressed with myself is a bad term I think but I was incredibly proud of what I was able to do and I knew I worked for it and I knew I deserved it. Okay, so now what? You get offered a role to do something completely different outside of Merrill Lynch

or are you looking for that at that point? No, eventually what happens is they move me from sales, they wanted me to run a business, so they asked me to run the municipal division for us, I did that, and then I was the first executive on the institutional committee to be moved to the private client committee. The second actually was Stan O'Neill,

who ultimately became our CEO. So I went to the private client side. So my last job at Merrill Lynch, I ran 100% of all investment products, the 401K business, the insurance company, and the middle market business. But now, that's through the 90s, so we know what the dot com boom was like.

March 2000, the dot com bubble burst, and the dot com names and all the technology companies that were part of that really started a struggle. Places like Ameritrade were going out of business, and eventually they wanted to do a national search, and they wanted to offer me the job to move my family at the time. I had remarried from New York City to Omaha, Nebraska,

where we were headquartered, and a time in my life where I was probably one of our top 10 or 15 executives out of 47,000 people in the world, I took a shot. I went from a firm that was known as a global powerhouse to a firm that everybody anticipated was going out of business. All right, because Ameritrade, at this time,

is looked at like a dot com, like E-Trade, and I guess DLJ Direct was part of DLJ, so maybe that's not a good example, but you had a handful of dot com brokerages, they looked every bit as shaky as every other type of dot com, whether it were e-commerce or anything else. Probably worse, because their customers left. Yeah, probably worse, because there's no stock trading.

People were just unengaged with the market after the blow up. Well, one of the mistakes that Ameritrade made, they really wanted, because you got paid by your trades, along with payment for the flow. So you wanted to get as many trades as you could get done. So we started a cater, before I got there So we started a cater before I got there, we started a cater to the day trader.

So day traders, which is not a bad top to come up in today's world, but during the 90s, if you were a day trader, even if you went home flat for four years, the market did nothing but go up. So day traders did very, very, very, very well through that period. When do day traders not do well?

When the market's going the other way. So March 2000, the bubble burst. March 2003, that recession wasn't going to an end. There were around 900,000 day traders in the United States in around 1999. By the end of 2003, there were about 20,000. They went broke. They went out of business.

And one of the things I realized when I got to Ameritrade, the very, very, very, very, what year was that? 2001, middle of 2001. In fact, a couple months prior to 9-11. I was in the middle of that March 2000, March 2003 recession. And so one of the things I realized was that we really weren't a financial service company.

We were a technology company and a financial service rapper. Just realizing that, I don't know anything about technology. I don't know that much about online brokerage, but I do know something about business, I do know something about what matters, et cetera, et cetera. I know who you need to have in the right spots to be able to get the job done. So we transitioned out of that, and we focused,

and we found out our core competencies were transaction processing. So we are in financial services, so what transaction processing does what? Buy and sell stocks. So we are in financial services. So what transaction processing does what? Buy and sell stocks. So we got, we were in seven countries, we got out of all of them, we're in multiple prices, we got out of all that, we got out of the day trading business, and we took half our savings and we offset it against our losses.

We had lost money 25 years in a row. And we took the other half and we poured it, reinvested it back into being able to buy and sell stocks as best we possibly can. Did you have the board's acquiescence to that strategy? Because I remember a time when stocks like Ameritrade lived and died by darts. Yes. Daily average revenue trade. This was that come out every month.

Yes. So your stock would go up and down based on how many trades were placed. And you saw that was a dead end. Well after three years in a row of the stock going down, all we're doing losing money. So the stock was, two months after we got that, the stock was trading at three. Again the market was probably lower than $700 million.

And so my pitch, they brought me in because we were going out of business. So they were looking for my thought process with regard to this. And all along I said, here's what we're doing, here's why we're doing it. Then my presentation was something that they welcomed. There was death to stay the way they were staying.

And we drastically were changing things. And the board welcomed me. Why'd you agree to dive into that dumpster fire? I think there were two reasons. I said, first, Joe Rickards was the founder. And one of the two things that he did well, I thought he invested a lot of money in technology, and the other thing he did well,

he invested a lot of money into marketing. So back in the 90s, people heard of Ameritrade. You know, they were on commercials, people knew who they were, so they kind of had a reputation. They were the two reasons initially why I looked at it. But the other reason why, I was halfway through this recession, there should have been tremendous consolidation.

Tremendous, there were 200 firms in the beginning, when I got there that had online brokerage presence. By the end of 2003, there were about 20 that had online brokerage presence. So you thought you could win. I thought if we could, I knew we could fix our stuff. I knew we could figure that out. That's kind of what I've always done.

But then if we figured our stuff out, there was still an incredible opportunity to consolidate the industry Nobody had done that Schwab I think should have done that but they were trying to be Merrill Lynch So we began the consolidation of the industry So once we got our act together we started to consolidate the entire industry to the point two three years later We were number one in the world of what we did and by the time we got to 2008 that includes the financial crisis Yeah, I showed it shows had a 500% return including the financial crisis

We have performed every financial firm in the globe, but so Joe I I I have a chapter in my first book Talking about the marketing that the online brokers were doing in the late 90s And I don't disparage that because that was the the moment that that was the zeitgeist I don't disparage that because that was the moment that was the zeitgeist. But Jackie Chan throwing a laptop up in the air, beating up to a silence and then kicking the trade into his laptop. Phil Jackson sitting in the back of the limo. My next big trade is and it's a, you know, it's a f***ing internet stock. Anna Kornikova giving stock tips on the tennis court.

Shaquille O'Neal. Again, that was the moment. Everyone was doing it. But what I found funny was, right around 2001, maybe you had something to do with this, the messaging and the marketing could not have been more starkly different. You had the guy from Law and Order, Sam Waters. Yeah, he was our guy. Okay, so the guy from Law and Order said, investing is serious business. Oh, we're not kicking trades in on the laptop anymore. No more Kung Fu. So I, look, that was also the zeitgeist in 2001.

I remember the Super Bowl commercial with the E-Trade, with the chimpanzee on the, with the monkey on the horse. And it's like going through Death Valley, all the dot com companies were broken down. So you kind of had to pivot, not just the business model, but the mentality that you're trying to engender with the existing clients who didn't blow up. It's like, okay, you guys are still here,

still investing, still trading, now we're taking this stuff seriously. That seems like it was an important moment for the industry where it went from online casino to, oh, actually, we can help you help yourself here. It was a critical moment, certainly, for us. In fact, our mission back then was to, everybody's got a mission here,

we want to be the firm of choice, blah, blah, blah, blah, everybody says the same thing. Our mission was we wanted to bring financial literacy to every family in this country. That was what our mission was. But that's also when we looked at what we were good at, we were good at buying and selling stock. We weren't good at all these other things. So remember, I didn't have an online background.

I didn't have a technology background. But I do know something about running a business. I didn't care the way we were advertising, but our marketing people were proud of that because we got a couple of awards. I didn't care how many awards we were getting for marketing. I cared about what our profitability is.

So with regard to that, the shift was after about three months, was okay, we're going to focus on transaction processing. We're tripling our investment in that, and we're eliminating everything else. And our clients are going to be, three priorities, our clients, our shareholders, you got to make some money, otherwise you're not going to stay in business. And I recognize that for me it's also about your people

and we're going to deliver value to each of those constituents through our employees. That was it, nothing else mattered. Okay, so let's fast forward a little bit. My first professional involvement with TD was on the RIA custody side. And I have to tell you, I love my current custodians, but TD was incredible to us. I joined a firm where that was the custodian. I started a new firm with

Barry and we asked TD to be our, we had nothing. And they said, yes, we'll work with you and we'll support you. And they like went above and beyond. And I I think even to this day if you ask RIAs who have Been around for a while they will you bring up TD They will tell you how much they love the people how much they loved working with TD So I don't know how much of that comes from you. I'm sure a lot of it And people probably still tell you that to this day Whose idea was it for TD to go whole hog into RAA custody? Because it strikes me as that created a ton of value

for you guys. What year was that for you? 11? I would say 10, 10, 11. Okay, so when I got there we had minimal assets in the RAA space. And we didn't think they were important because they weren't doing day trading.

So I thought, again I came from Merrill Lynch, so gathering assets was a big deal to me. Plus, I thought, allow the customers, don't dictate to the customers whether they should be online or have an FC. Allow them to make a choice. So we know we've got people that are willing to do online business with us, but we know they had money elsewhere. So suppose they had the opportunity to get more of their assets to us, and we needed to be able to provide them with another solution

That was the financial advisors. So and again can we come from Maryland? I had tremendous respect for them In fact, I've shared this I've shared this with you guys in the past I am a partner and a chairman and a kid in a wealth management company called Capital Wealth Advisors in Naples, Florida They told me for several years now They told me right from the beginning was they loved their experience with TD Ameritrade. TD Ameritrade. They never competed with us. That was the other thing.

No, they didn't. You mean TD Ameritrade? TD Ameritrade. No, we didn't need to because we didn't look at it that way. Remember, the way it's been set up is, like if you're running the, they had the same people running, sorry, different people running the separate channels.

So if I'm running this channel, I don't want anybody taking anything away from me. I said, focus on the client. Let the client tell us what they want to do. So if I'm running this channel, I don't want anybody to take anything away from me. I said, focus on the client. Let the client tell us what they wanna do. So we were the client. Yes. And you guys weren't calling our clients to compete with us.

No, we were allowing your clients to do what they wanted. And if one of your, hopefully you would think this way anyway, if one of your clients wanted to do some online trading, well let them do that. Why don't you open up an account with TD Ameritrade? And that's what we did. Now, I was struggling to make sure that we maintain that,

meaning I wanted to focus on the RA business. Part of the reason why we did the deal when Ameritrade bought TD Waterhouse from TD Group, and part of that deal was we took on the TD name. We were never their holding-own subsidiary, but they did become our largest shareholder. They owned 39% of us. They were in, it was Fidelity, it was Schwab & Fidelity

and TD Waterhouse that were the three big players back then in the RA space. By definition, by doing that deal, we immediately became a player in the RA space and came number three, number three in the space. That's part of the reason why I wanted to do the deal. A lot of other reasons as well. So for me, it made us whole, it made us whole. And eventually we began when I showed up at 24 billion. When we did the deal with

Schwab, we had 1.7 trillion in assets. Yeah. Well, I was going to say, the other thing is you guys were scrappy. You would work with firms that were in an earlier stage in their development. You would cater to firms that needed something really specific and special that maybe the other custodians didn't want to waste their time with. What you guys said for us would never happen now, ever. It's the exact opposite. I actually, I tell this story, we had however many clients, we had 50 clients or maybe 100 clients, but it was so overwhelming to start a firm. We had to do physical FedExes with

account forms to clients. Not account forms, LPO firm. We had to do physical FedExes with account forms to clients. Not account forms, LPOAs. They had to reassign themselves to our new firm. Your people did our envelopes and return envelopes, like addressing to clients for us. Which, I don't know why they did it to this day, but like it's just a, it's emblematic of the attitude of the TD people. They were just like TD Ameritrade people. TD Ameritrade people. Excuse me. Let's support our

customers the best way we can. And they they really did and I would shout out Neil Curran, Chris Engelbert, you know some people that... Tom Bradley was running the operation back then. Tom was terrific. So anyway we we we loved the experience working with you guys and I didn't meet you till way later, but it was just a great partnership. It was a partnership. Yeah, and people remember that stuff.

The custodial business is looking a little bit different these days. But one of the reasons why guys that happened back then was because initially the way Ameritrade wanted to approach this, and the way Ward House tended to approach this, they wanted to do it on price. And first of all, it's not like you guys get charged

that much money to begin with. So we said, okay, how are we gonna differentiate ourselves from what Waterhouse was doing or what Fidelity is doing or what Schwab is doing? We gotta do it on service. We gotta be able to do it on service. So let's do everything, everything that our RIAs need to be able to help them do their job better. So as a bond salesman growing up, covering large portfolio managers in the fixed income

world, it was like, could I learn their job well enough that I could almost do their job so they'd get bigger bonuses at the end? So if I could do their job almost for them, they're going to give me more than my share of business. That's the way we approach it. You also had leading edge tech. You had Veo, which is the advisor interface to see their client accounts. And iRebell, which lives still to this day, Schwab integrated TD. Everybody wanted them to keep iRebell and they did. Another smart thing that you guys did was you saw our growth trajectory,

that we were growing like weeds, and you gave us a dedicated service team before we were ready for it asset-wise, because you knew that we were going to get there in a hurry. Yes, you guys deserve the credit for that, but having said that, the RIA channel was growing like crazy, it still is if I'm not mistaken. How many people want to stay and get 85% of the cost of defect taken out

even though they're getting 45, 50% by being at Morgan Stanley or being at, you know, paying Weber, wherever they might be. So it really, really was a matter of, it was a fast-growing channel. It wasn't the most profitable, but to me it was the right answer for our direct clients because they all have money where they're going to need help from somebody else.

So fast forward to the deal. So it's 2018, 2019, guys have probably been approached a number of times to be acquired or be merged with somebody or something. For whatever reason you decide, okay, this is the time. And it so happens to coincide with the onset of Commission free trading becoming industry standard. What was it like? To do that deal. How do you feel in the aftermath of that? And what do you think people that are in the investment community should hear from you about that whole situation in?

2005 we announced the waterhouse deal. We closed it in 2006. We integrated in 2008. 2006, I reached out to Charles Schwab and we talked about would not a perfect marriage be- To jump himself. Yes, look at what we've done. Look at where we came. Well, you guys weren't even paying attention to us.

Where now we gotta be a little bit of a thorn in your side. Oh, this was your idea. You approached that. Yes, 2006. Okay. Yes, 2006. And now we may have done that through investment bankers, but yes. And we actually had a private meeting at some hotel in Chicago that lasted a couple hours

and we didn't go too far from that. But I said, what a perfect marriage this is going to be. Okay, now fast forward. It was 2017 where I got a call. I was still chairman of Ameritrade and I'm still coaching, by the way. And I got a call from Walt Bettinger talking about the same thing that happened in 2006 because he was part of that and And he said well Benger the CEO of the CEO Schwab right and he said you guys have been outstanding on the trading side We've been outstanding on the asset gathering side. Amen

I couldn't agree more with that and we always thought going back to 2006 that this would be a perfect marriage in heaven I said I could not agree more could not agree more now It took a little while to be able to get that done and in the middle of that it was Chuck that came out To cut commissions to zero, but that wasn't because of I mean we were only charged at 595 at the time That wasn't because of Robin Hood Commissions were not an impediment to any of these trading They were not. They had zero Robin Hood and IBKR had zero impact on any of us.

Wasn't an issue. But. Well, wait a minute, wait a minute. Hold on. In fairness, if Robinhood never came along. It still would have gone to zero. Oh, you think? I'm going to explain why.

He doesn't know. He wasn't around for ZECO. Don't point. You were not around for ZECO. There was an attempt at zero dollar. Oh yeah, they had been. They had been. I think Bank of America actually tried it one time.

So there were people out there trying to do that, but it never amounted to anything. Plus, remember, we thought we gave pretty good value, we thought, for this. We had all sorts of risk management tools and great systems and great support. And for $5.95, how much of a trade, how small of a trade do you have to do? Nobody cared about commissions in terms of paying them. Agreed, agreed. Unless you were so small, it really mattered. So you look at the average balances back then, you don't have to go too far back. At Robert it was like $250.

As were solid six figures, Schwab was like $250,000. We weren't competing with each other. That was what happened. Here's the inside story on this, and here's what I've been told from outstanding sources that back around 2009 during the 1990s Chuck had Chuck had predicted that eventually there would be zero commission. It's in his book. Right yes yes okay his book was about to go public it's in his book right it was about to go public he almost unilaterally went to his board and said let's go with zero commitment we were in the middle of negotiating a deal yeah and I said let's go with zero commitment. We were in the middle of negotiating a deal. Yeah.

And I said, let's go. And part of that would have been the fulfillment of his prediction 20 years before that. Yeah. Right. Now, all that happened, so we immediately, within 48 hours, we did the same thing. So did E-Trade, so did Fidelity, so did everybody else. Well, hang on. The news breaks.

Schwab stock falls 5%. Yours falls 18%. Right. It was a brilliant move on their part, business-wise. Andab stock falls 5%, yours falls 18%. Right. It was a brilliant move on their part, business-wise. And they're in the midst of negotiating with you guys. That's fair. But you're saying...

That's fair, that's fair. You're saying he did this because he wanted to be able to say in his book, look, I did it? I'm saying that's at least 50%. I'm backing up a little bit. That's at least 50%. Okay. That's at least 50%. No, but he said, no, we'll fall.

They're going to fall a lot more and then we'll swallow them Well, they did everybody did understand because we had a greater percentage of our well because they're back revenue But we had that but we had TD as our bank, right? Which was I thought a great deal they had a much bigger percent of their bottom line from the bank They had a much bigger percentage of bottom line from assets We had a much bigger percentage about bottom line from trade you needed that you needed to trade We would do more trades than we so so let's say 65 percent of of our bottom line from trading. You needed to trade. We were doing more trades than we were. So let's say 65% of our overall revenues came from trading.

65% of theirs came from assets. So that was what ultimately won a bet. But it was a natural marriage. Yes. 100%. A natural marriage with a four year engagement. I mean it took a very long time. That's what happens to some engagers.

They take a while. they take a while. You got the courting phase to go through all those things. Yeah. But in terms of, but what happened? The day you struck the deal though, you're happy because it is a great match ultimately, but also it's the culmination of something that came into your head 12 years prior.

But wait a minute, answer this. How, because I forget, how far between, how much time had elapsed between commissions going to zero and the announcement of the deal? It wasn't that long, was it? A year? Oh, it was. Okay. No, no, it was a year.

It was a year. We could double check that historically. It was about a year. Okay. It was about a year. Okay. And first of all, stop conversation for a while because even if they were going to do this, you're in the middle of negotiation.

Don't you think you'd get a heads up? Don't you think everybody got a heads up on this? No heads up. No heads up. All this time it was an as a what? I could imagine your face when you saw this announcement. Yeah, that was a little bit of surprise. Now what happened to them?

They did what? Yeah, but what happened? Again, could it have impacted the price of the deal? That's very fair, and I'm giving you 50% 50% of that, okay, but but the other piece of that was All that happened was the everybody matched so everybody had the exact same market share three months later Just we took the pool and we shrunk it by about 50 60 percent So we just want to make it less money now. We all made that up

Yeah, but whose idea was it to bring Tom Bradley back? So Tom Bradley had been a longstanding face of TD Ameritrade custody for advisors. And they brought him back to help integrate the two businesses because from the TD Ameritrade side, he was someone that those advisors trusted that the integration would go smoothly. Is that your idea? No, what happened was TD, Tom ran the RA business at Waterhouse. So he was one of the senior executives that we inherited

that I thought the world of. I thought the world of Tom. Yeah, he's great. Okay, now my successor was Fred Tomczak and then his successor, then he had a successor. So there was some little bit of friction there, and Tom decided he was gonna step down and retire. But he was still incredibly well known in the industry.

I thought that was a loss for us. Later on Schwab hired him, and brought him in, and he's only done a great job for him. But he was a loss. I think we love this. I mean, there's 100,000 plus people coming together? These are massive companies. Yeah, but remember we're online, okay? So we had 11, 12,000 plus people coming together. These are massive companies. Yeah, but remember we're online, okay?

So we had a little, we had 11, 12,000 people. I think they had like 22, 23,000. So you're talking about 30,000 people, whereas in more of a full service place, or a different type of place, you'd have two to three, four, five time. When you look at our numbers, you'd think we'd have hundreds to thousands of employees.

But we were online. So meanwhile, it took two years, and the integration integration is behind us and it was all things considered they did a pretty great job both sides and under your stewardship shareholders did incredibly well I shareholders did very well yeah I'm very proud of that. Bernie Clark who was in Tom Bradley's role but on the Schwab side stepped down or announced his retirement a couple weeks weeks ago. You wanna say a few things about Bernie's legacy or Bernie's capabilities in this industry? Because-

Well, I would love to. I think you go back, Bernie's been in that position a long, long time and you look at- Is it 20 years-ish? Long, long time. So that goes back to around the time that shortly after I joined Ameritrade.

And one of the things that Chuck really was right on early on was we got to gather assets. Whereas early on, Ameritrade was about doing trade. So was Wart House, so was Scott Trade, so was E-Trade, et cetera. But Schwab was, Chuck was about, we got to gather assets. And in the RIA space, the ability to be able to do that, that was led by Bernie. So I look at him as a pioneer in the industry, I look at him as somebody who's had an incredible impact in terms of the overall growth of Schwab, and we're not close friends,

but I have the utmost respect for him as a professional. There's a lot of change in the industry right now, a lot of people moving around, and I don't know if there's any specificity as to why right at this moment, but we have a new incoming CEO at Vanguard. We have, what else did we want to say on that? I mean, just the state of the-

Shalini. Yeah. Yeah. So we'll get to Vanguard in a second, but just the state, what's your opinion on where is the custodian business today? Because things look a lot different today than they did even five years ago? But I still think it's one of the fastest growing channels

in our industry, period, across the board. And I still think there's going to be kind of the runaway broker, right? The person that's no longer happy being at one of the major wirehouses or being someplace else. And they recognize over time the value, frankly, going into an RAA, like you guys are,

and having somebody else handle a lot of these problems that they would have had to handle themselves or they would have had Morgan Stanley take care of for them, but they're gonna make much less money. So there is less hassle and there's a potential to make more money by still moving into the RAA space So I still think it's a significant growth growth business as far as far as the wealth management It's not as good of a business though for the custodians at this moment

Because it's great that commission free trading is now the standard But they still have to make money the custodians still need a reason for why they're doing all this work on behalf of our clients. And I don't think that they necessarily are thrilled with the status quo. Well, money markets are killing them, obviously. Well, killing is strong, but you know what I mean. It's hardly margins. Right. People are being more deliberate about not leaving cash balances and 0% yielding. So I think it's still a tough time on the custody side. Let me ask you this so in ten years from now

Do you think it's likely that the I'll call it a duopoly that exists between Schwab and fidelity? I know what market sure they have I'm making it up 90% It's huge yeah Do you think that there's room so bank of you know approaching is way far behind and an altruist is getting started Is it gonna look like this in ten years or is there room for a potential disruptor to actually come in and create change? Goldman Sachs is in the business now. If you're going, if somebody else is going to be doing it,

it's probably somebody that you're not necessarily thinking about now, and I would predict if somebody does it, it's gonna be because they figure out a way to take advantage of AI to have a major impact in what their overall cost structure is. So even though they may charge the RAAs a similar amount of money, they're going to have more more of that's going to drop to the better line, bottom line, because they're going to be more productive, more efficient. So I'm making this up, but like

a JP Morgan, for example, they're not in the business right now. With something, I'm not them specifically, but somebody like that. Well it's Goldman. Goldman is in the business. John Waldron is, he's, this is not, this is not like, they're not dipping a toe in the water. Well fine, but they're in the business. Doesn't mean that they're gonna be successful in the business. They've they've not been successful in a lot of businesses, so they've gotten to. I agree, but they're a serious competitor. I guess my point is, I think that there's a lot of appetite for advisors for a legitimate third option. So the

only, again, my argument against that might be, I'm not disagreeing, disagreeing, but my argument against it would be, you can't, you can't, Fidelity's got what, how many trillions of assets do they have? Let's say 10. 10, 10, Schwab's got 8.5, 8.7, something. That's 18, 19 trillion dollars.

25 base points on 18 trillion dollars for the assets is a lot of money, right? It's a half or 8.7 something. That's 18, 19 trillion dollars. 25 base points at 18 trillion dollars for the assets is a lot of money, right? It's a lot of money, okay? Plus, if they are smart and they're not complacent and they're taking advantage of it, because right now with money market funds where they are and you know, with the very front end of the curve where it is, that's gonna change over time too.

So profitability's gonna change there as well. But can you not figure out a way by really being thoughtful, really being creative, either figure out a way to get 50 basis points out of your expenses on $18 trillion, okay, that will have a major impact on your bottom line, or figure out a way to be able to charge 25, 35, 45 basis points.

Be creative, be thoughtful, take advantage of AI. It looks like it's going to be some combination of finding those efficiencies via AI to your point, using that channel of RIA custody to push more asset management, which you know obviously Fidelity has a much bigger business there than Schwab. It's still a monster growth engine, you're right though. Yeah look household fees are a thing they swear Okay, meanwhile Eric Belchunis tweeted equity mutual funds are working on their 82nd straight month of outflows

Did you ever think that this would be the case the state of mutual funds not over the span of my earlier lifetime? But I know I was still running I was running products at Ameri- Ameri- Lynch when we got very much involved with ETFs in the very very beginning So when people start to recognize what the cost of the actual mutual funds are right and some of the restrictions and some of the Tax issues etc etc and you recognize the simplicity especially as the ETF fees have come down and The liquidity in the ETF fees and everybody understands how an ETF they may not not everybody knows what ETF actually stands for But they recognize that ETFs kind of better than mutual funds. I see a major transition from the mutual fund industry.

Not usually when you say coming out of equity funds, you think about they're going to fix the income of cash. No, no, they're going ETFs, right? So ETFs is just an alternative for mutual fund. And that shouldn't surprise anybody because over time, mutual funds, I think will very much give way to ETFs. And remember, we already have actively managed ETFs. So the idea of a mutual fund is actively managed versus one that's indexed versus an ETF that's

actively managed. ETFs are going to take over that business over time. In the last two weeks, there's been a wave of actively managed fund families filing with the SEC for ETF share classes of existing funds. Well Vanguard's pattern expired recently. So the wave is... That's huge. That's huge.

So this is the wave. I wanted to ask... It's happening like crazy in the crypto world, right? Isn't the SEC supposed to make a decision today on Ethereum? Today. Yeah. Right? We just had the Bitcoin thing of a few months ago.

So I wanted to ask you, did anyone at any point at TD Ameritrade say we should be creating ETFs or some sort of asset management product or was that like sort of verboten because you guys wanted to play the role of a provider and not an investor? Like what was the thought process there? We kept talking about that.

So one of the things we got about, we had a product called the Merivest, which was a way to be able, it was like a black box where you could put all your qualifications in as an individual investor, and then here would be your asset allocation model pop on the other side, and would automatically every quarter,

however so often, would rebalance for yourself. And we're gonna charge like 85 basis points or something for that. The reality is, the reality for- It's on the retail side. Yeah, it was on the retail side, right. So the reality is, as far as that goes, you've gotta make a real commitment to it,

and we were also faced with the Fidelities and the T-Row prices and all the other incredible mutual funds that you know Not mutual funds the asset management companies that are out there that were way ahead of us So how can we be better off to gaining market share making money fighting against these powerhouses? Or being better and better in terms of what we did I also think a better business for you guys was the commission free trade at ETF platform. You had ETF companies, asset managers, lined up to pay you to be on the platform

so that advisors like us would have access to commission free trades of those products. 100%. We call it the ETF command center. So that's how we did that. It's a great business. Yeah, it's a great business. And the advisors loved it, and advisors' clients loved it. I pine for the days of $5 commissions because they really didn't bother me at all.

The one, I shouldn't say the one, a silver lining of commission free, even if it's a lot of confusion about how custodians make money, the direct and custom index and explosion that's taken place since 2019 is pretty astonishing. Also, that's true, also just SMA, people who had SMAs,

because we were trading, it was an asset-based pricing fee, and I think we were paying whatever, 22 basis points, so that we don't have a trade ticket every time. And that's gone, that opened up the aperture to do a lot more things. I can see that, I can definitely see that. I totally see that. So let's talk about Vanguard and iShares for a second.

So Vanguard's new CEO came from iShares. It's the first time in the history of the company that there's an outsider running it. I think Buckley was at Vanguard for 30 years, and there's a reason. Bogle. No, no, Buckley too. Yeah, yeah.

Buckley started under Bogle and he had been there for three decades. So we made a chart of iShares and Vanguard. This is just the assets in ETFs. But the spread here, so what we're looking at is iShares in the light blue, Vanguard in the gray, and the, I'm sorry, Vanguard in the dark blue, and the gray is the spread, iShares less Vanguard.

And iShares is taking over and I think part of the reason why their lead has expanded to a 1.2 trillion dollars in ETFs is because Buckley was not not super super kind to the advisor community. Oh, let me say that permit me to say that very differently I met Buckley once this is not personal. I met him at a TD Excuse me. I met him at a somebody's somebody's Christmas party. I don't know why. He said, coming in the door as the CEO, you see what we just did to the asset management business? You're next.

Now we're going to do that to the advice business. You're next. That was his comment to the investment advisory industry. And then holy shit, a trillion dollars went to iShares in the next few weeks. Who could have imagined? The new guy is probably not going to be talking that way about advisors who love Vanguard. Probably, right? I would think so.

Okay, let me set this up. Vanguard is not known, this is Barron, is not known for surprising investors. It's about steady eddy index funds and reliably low fees. But Vanguard has shocked its huge following twice this year. First in February with the sudden retirement of CEO Tim Buckley and again last week when it announced his replacement, Saleem Ramji. A former BlackRock executive, Ramji is the first outsider to run the $8.7 trillion in assets firm in its 50-year

history. He starts in July. He told Barron's he's not planning to make any big changes right away. He'll wait a couple of days. But a lot of Vanguard people that we've spoken to off the record, I wouldn't say horrified, but I would say shocked and nervous that that there's gonna be a cultural shift and that being the cheapest option is no longer gonna be good enough

if Vanguard's gonna continue to grow. What are your thoughts about the move that they just made? I think there isn't any question that they wouldn't bring in a person from the outside if they didn't want some sort of change of pace, at least tell me what's going on. So let's say the three of us got that opportunity. We're coming in and we've got Salim's job.

And I don't think we'd do anything to negatively touch this incredible business that we've built over the span of the 50s. One of the best brands in finance. What else can we do? We just talked about ETFs and actively managed ETFs, right? So indexing is one thing. Actively managed ETFs is very reasonably priced.

There's no reason why we, but you can charge more for an actively managed than you would for a normal S&P 500 fund index, right? So there is no reason why they're, can they basket things? Aren't there different ways, go back to, they've got 10 trillion in assets, right? So how creative do you have to be

to come up with 25 or 50 basis points in terms of an idea? Is that his mandate to come in and find more profitability? If they wanted to keep it exactly the way it is, I don't think they'd bring in somebody else from the outside. So that is what his- I don't know that, Josh, but I would think so, right, Mike? I mean, I would think that. So you bring somebody else from the outside, you're looking for something to change. Now,

anytime you have major change, people, somebody coming in from the outside. You're looking for something to change. Now, anytime you have major change, people, somebody coming in from the outside, I think it's always an issue. People get used to doing things a certain way. If within Vanguard they're becoming complacent, they're becoming a little tired, or they go, that's the way we do it here at Vanguard, that's not the right attitude.

In fairness, there was internal dissent over ETFs. ETFs ended up being one of the best things Vanguard ever did. Bogle hated ETFs. Bogle despised the idea. I think to the end, he just was not a fan of anything that enabled you to trade more. But it's a great business for them and they're serving people. So internal dissent in a firm is good because some good things come out of that provided it's with the best intentions of the clients which I think the ETF business was for

Vanguard and by the way thank God for them that they did it because we just we just talked about 82 months in a row of flows out of actively managed mutual funds where would they be yeah so Bogle and Vanguard massively disrupted for the better one of the best thing to ever happen to this, to individual investors, obviously. And there was a race at the bottom that they started, and we're at the bottom. There is only a limit to how few basis points you could charge on an ETF.

And so now what else? Well, I'll say one thing. There were a lot of Vanguard customers who would say they would be happy to pay higher fees if this service and tech were up to more modern standards. So maybe that's something that that he could bring to the table that... So Liam can do. Yeah. Which is... He's got a back-granted technology I believe. Yeah. So just that for example. Again, remember I said you kind of get a little bit complacent. So if the service... In the early part of the show we talked about

there's three priorities, right? There's the client. Without a client you don't have a business but if you don't make some money you're not gonna have a business either so you got to balance the profitability with the deeds of the client and you deliver those to your people that's it there is nothing else that's it if you get away from those three things your ego starts to get in the way you start to make mistakes you take your eye off the ball if they're not delivering the service to the clients that they should be delivering the service, that by itself is something that should be able to improve. The Bogle heads are worried that within two or three years this thing is going to come public

and then it's going to be subject to the whims of the stock market, the quarterly earnings treadmill, the expectations of millions of shareholders who don't necessarily care about the product. It's a legitimate concern. I'm not saying that's what's gonna happen, but that's what the people who love Vanguard and love its current private structure, that's what they worry about.

You think that's a valid concern? Well, yeah, wouldn't it be another reason why you'd bring somebody in from the outside, especially if somebody comes from a public company? Yeah. Yeah, I think any one of these thoughts or ideas could be something I would think for Saleem coming in the door new,

things that he should be at least thinking about and starting to have these discussions. Yeah, should we be public? Maybe the answer is no. It should be a discussion. Right. But it should be a discussion. Right.

Every one of these things should be a discussion. Should we increase our fees by baseballs? Of course, it should be a discussion. But leaving things status quo is not what you do, and you increase the probability you're gonna do that if you're promoting from within. You're bringing somebody in from the outside that's got real expertise and a different perspective

than what everybody else has been used to. It's not a bad thing to shake things up. I think, right, I think people should like give it a beat before they decide that this guy is the Death of Vanguard. This is my personal opinion. But you know, we could end up with a situation, could end up with a situation where all of a sudden people start to get excited about new things that Vanguard's doing or upgrades to their technology.

Like this could have a very happy ending. It doesn't necessarily have to be doom, gloom and doom. They didn't bring this guy in to blow the place up. Of course not. Okay. I give them the benefit of the doubt. Meme trading. GameStop, AMC, two weeks ago, all of a sudden these stocks doubled and tripled overnight and they fizzled out really fast this time. Do you think people learned?

What? You think nobody ever learns? I think it becomes gambling after a while, right? So in other words, when do you decide you're never gonna go back to the blackjack table? When do you decide that you're never gonna, you know, put everything in on black? And I think it's fair to back up for a minute, guys, in terms of where we were a couple years ago

with regard to GameStop and all the others, the two or three or four names. At least Reddit put together a pretty good plan then. Remember that was at Melna Capital that had a humongous short in GameStop. And they did some homework on this and they said, hey, we're going to do this. And everybody got on board and went crazy. The apes were sophisticated. So I gave them a lot of credit for that. I gave them a lot of credit for that. Okay, now, but then what happens, at what point you went, I forget where they started,

let's say you go from 10 to 20, well, that's 30 minutes ago. At what point do you say I should start to trim and take something off the table? Now, at what point at the top do you start to hedge this, have a stop-loss, or do something? That's where I think they were lacking. They didn't educate their customer base to try to protect their...

Who should have done that? Robinhood should have done that? In fairness, they didn't really know that much. I think Robinhood should be doing something like that, but Robinhood and their problems had only their own issues. They didn't have a fortified balance sheet, they didn't have a diversified income stream.

They had a net cap violation in the midst of their best trading day ever. Right, in the middle of it. You talk about risk management, but this wasn't about that. It became tribal. And it became like, if you sell, you're gone. You're not part of the tribe anymore.

Well, you're going after the man. Right. The man with the institutional investment. But they tried to stoke that again in the last two weeks, so very deliberately on Twitter, more so than Reddit, I think. They tried to wake that component of it up, like this is our revolution or whatever, and it fizzled in two days,

because I think they did learn something. They learned that like, oh, this doesn't work forever, so I'm gonna get out before these other maniacs, and that's why it fell apart so easily. When they did this a couple years ago, whenever it was, they did have a plan. This time it was like, get everybody to jump jump on board. It's kind of like let's just go do this together. What was the spark this time? I don't remember. A tweet from Roaring Kitty the first time in three years. All he said was I'm buying the stock or something. No not even. I'm looking at it.

There was a picture of him leaning forward. He tweeted a picture of a kid sitting up in his chair and it just went we're back. But there was a lot of option kid sitting up in his chair and it just went we're back. But there was a lot of option volume leading up to that so people were preparing for this. Somebody's getting punched. I feel like the regulator is gonna figure that out. I think the bottom line is you know as long as in gambling like just to teach my players even my family you know the it's entertainment right so as long as your discipline and you limit yourself at the amount of money you can lose.

You know what, there's nothing wrong with that. It's entertainment. And you could use the stock market for that, but it should be a limited amount of assets. I completely agree. And you're saying, I'm having fun here. I don't think most people are doing that. I don't think people are mortgaging their house

on GameStop. Let's hope not. You can say as much or as little about this as you want, but as a leader, I wanted to just hear what your thoughts were. John, on screen please. So this is Robert F. Kennedy with a Falcon on his shoulder and an ape behind him holding another Falcon or an eagle.

It says Robert F. Kennedy Jr., independent for president, apes together strong. Read the tweet. And then I'm going to read you what he tweeted along with this image. I'm very aware of what the average retail investor has been saying about the need for greater transparency in our markets, stronger regulatory oversight, and tougher penalties for market manipulation and criminal behavior. My administration will support the ape retail rebellion, this is real, I'm not making this up, and enact aggressive Wall Street reforms. So we like that kind of manipulation.

We don't like the other, okay, got it. To match words with, to match action with words, I just invested $24,000. This is a f***ing Kennedy, by the way. I just invested $24,000 in GameStop from the fees I earned from suing Monsanto. I love the idea of making Monsanto support GME and the Apes. We need a free and fair market.

Let's punish predatory short selling to the moon. By the way, I ride with you and I'm not leaving. I predict he'll leave. But I mean, how much of a stunt is that? Is there a real voting block that's meaningful for Robert F. Kennedy by doing stuff like this? You could say no comment too. Oh, I don't think I've ever said no comment.

All right, no, I don't know you for saying that. I don't, ever. So not a political opinion, but almost like a, what has this country come to? I'll give you a personal opinion. Okay. So one of my biggest concerns is that we live in a world today that is

Is as stressful from a geopolitical perspective we've ever seen in our lifetime Yeah, I can see the possibility of World War three ten years ago I could not have seen that we're about to threat of terrorism But not not see that and it comes at the same time when I when our country is divided as we've ever been and at a Time when I question our leadership as much as I ever have. So I've heard this guy a couple different times and I thought he did a good job. In fairness, a worm ate part of his brain. He said this. So this is little. Okay, well then I would ask as a scientist, I would ask how does a worm get inside your brain to be able to do something like that? AI. Go on.

So we have, so I thought, and I thought he didn't duck questions and I thought he did a good job of answering things and frankly I find him refreshing relative to the respective cadets that are up there now. So I kind of like the guy. I'm not aware of this. Now my initial reaction is,

okay, the guy does have a little bit of his brain missing. From the person, from the person that I used to say, hey, I kind of like this guy, I literally kind of like of like this guy to like I got to think about this a minute but the only thing I think of right off the top of my head is is he appealing to the Millennials? Of course. That just like that that he's gonna get more votes. One of us. Because that's what he's doing. But is that gross or has every politician done some version of it we just didn't have Twitter? I think most politicians have probably done something like that.

And I'm not defending this. I don't like this. Can we read Cliff Astness' tweet responding to this? Josh, did you have an endorsement you wanted to do there? And that's why I'm following. Look at you. Very good. Very proud of you.

Pull up the Cliff tweet and then we can move on because it's an all time trend. So Cliff Astnes of AQR quote tweeted this and said, You're a moron and you're insane. It may be one or the other, but I'm betting I'm both. Whack job. Who's he talking to? He's talking to Robert F. Kennedy. He quote tweeted the Robert F. Kennedy tweet and that's what he's talking about. I thought he was talking about one of you guys. No. I would go after the guy.

I would go after him. So I think in fairness to Kennedy, he's got, you know, Gen Zs and millennial people running his social media. They probably talked him into this. Guess what? We're talking about him now. And what does he have to lose, honestly? But there's a bigger stakes version of that happening with the crypto stuff in Washington, where the White House is now recognizing

that crypto is a meaningful voting block amongst a demographic that Biden is not resonating with. Young people care about crypto. We could mock them. We could say it's stupid, but like, it's a fact. They're into this stuff. And it looks like Republicans and Democrats are now going to both be embracing pro crypto stuff, probably to raise a lot of money, but also to energize young people. I mean, I agree. I think, well, the other day when Trump announced that they were going to accept crypto as part of their campaign funds.

And then I was wondering how long it would take Biden to say something like that. Well, he said. Right. But if he said anything that was different from that, now you're going to make it a political issue. You don't want to be a political issue. You want to appeal to a broader range of a broader spectrum of voters. So I think the Democrats recognize that the young people are on crypto the same place they were on gambling,

on cannabis, and stop fighting it. I think the Republicans recognize a lot of these crypto projects are in red states where there's wind power. There's like Wyoming is very heavily pro-crypto. So like both sides have more incentive now to be accepting of this world, this crypto world, than they did two years ago,

three years ago. And I look at the RFK thing as being like in the same mode. I agree. It was only a year ago we had Jamie Dimon call him Crypto Pet Rocks. Yeah, he still hates it. Bitcoin. Yeah, but they're in the business.

They're in the business. He has no choice. He can hate all he want, but he's still in business. He's been calling gloom and doom for a long time, by the way. Hurricane is coming. We were going to do this. We don't have to spend a lot of time on this. You talked about AI, and everyone's equally excited slash terrified of the potential of AI.

If you were worried about Sam Altman and his willingness to move fast and break things, this week we got some news that kind of confirms those fears. Some of the AI founders maybe being too aggressive or caring too little about privacy. Scarlett Johansson is suing OpenAI. She's saying that they mimicked her voice after trying to make a financial deal with her. They couldn't, so they just said,

well, we're going gonna use her voice anyway. Why her? She was in a movie called Her, where she was the voice of a mobile phone operating system that a human fell in love with. So there's some rhyme or reason to this. Forget about whether or not she'll win the lawsuit or the issues around that.

It is another example of an AI founder kind of just doing whatever they want anyway. And I think you combine that with recent resignations by people from the trust and safety part of open AI. There's like more and more cause for concern as much as there is Nvidia excitement. I agree. I mean, I agree. I think I think there's a little bit about the nature of an entrepreneur that once especially you once you become successful that you kind of think you could do pretty much whatever you want because everybody said You're never gonna get there. Is that for me? Tell them I'm busy. I'm gonna show no, I'm busy

That's that's for me. Yeah, you're gonna gonna finish that you want to answer it. No Guy that wanted to it's it's Sam Altman No, a guy that wanted to raise seven trillion dollars doesn't play by the rules. Who would have thought? In the beginning, I'm sure, I have no doubt everybody thought, this is not going to work, not going to work, not going to work. Yes it will, yes it will, yes it will. And then at some point you become a little bit arrogant and you think you can kind of

do whatever you want. Yeah. And you're going to need to make mistakes along the way where you really get your hands seriously slapped before you kind of turn around. I don't think Scarlett Johansson's suing is the type of mistake that makes Sam Altman sit up straight and say, I'm going to do this differently. Unfortunately, I feel as though something really bad has to happen before any of these AI people stop and just say, wait a minute, what are we really doing?

I agree. I said really slap your hands. I mean, really, really slap your hands. I mean really, really slap your hands. Cut off your fingers. But the Scarlet thing is a little bit of a wake up call. Right. Because you're getting national attention. Right.

Do you worry, are you equally excited and nervous about the potential of AI? Or do you fall more on one side versus the other about like the immediate future of all this stuff? I fall more on that ultimately. It's a more more positive The so I'm trying I'm trying to also well I go back to I kind of compared to the internet You know when the internet started in the mid 90s everybody there was a lot of question marks with regard to that right and But then look at the impact that the internet had over time. What would we be today without the internet?

I think the AI is far more powerful far more significant than what the internet had over time. Where would we be today without the internet? I think the AI is far more powerful, far more significant than what the internet was, and this is still like the first inning of this, right? So there's going to be slip-ups, there's going to be problems, there's going to be issues. People are going to take advantage, but that's true about almost anything that takes place

in society. Nothing is good or bad. There's good and there's bad. And on balance it'll be more good. Somebody's going to take advantage of that. But I think it's more good than bad. I want to ask you about workplace culture and in the industry There's an article this week about the Citibank caused a flash crash with European stocks

This sounds like it could have been avoided. This is a 444 billion dollar fat finger trade that crash stocks Cit Citigroup just got the bill for that. They have to pay UK regulators a pretty big fine as a result of that. But basically, they had a trader sitting at home who had the ability to do a $400 billion trade and blow through all kinds of computer warnings in the process of doing that. Why are these people sitting at home trading tens of billions of dollars for a financial institution of that size? I think it's easy to argue, just use this as an example, Josh, for why they ought to

be in a trading floor. But if you're on a trading floor and you're getting, if your computer's telling you this, careful of this, careful of this, careful of this, you're like think somebody's still going to come out and say, hey, you can't do that. But if you're going to ignore the warnings at home, you still might be ignoring the warnings on the trading floor. And I think it comes down to, you know, what's the argument?

Should you be working from home, hybrid, et cetera? And I think it comes back to the same three priorities. If you're doing a good job, then carry your clients. And you're doing it in a way where you're making a reasonable amount of profit for your particular company. And you're delivering on that. Then frankly, if you're home or not a home, I don't care. I don't care where you are. That's interesting. But as long as you're delivering the value. Now,

if I were an A performer in the office or at work and I'm a B performer at home, even though I'm still delivering on my numbers, that's not acceptable. I should get paid less. But if I were getting the job done at work and I'm still getting the job done at home, I think I'm okay with that I think I'm okay with that technology sort of allows us to do that when I got to merit trade I realized we're a technology firm. I rather have because we were in middle of Omaha We weren't necessarily tracking the best technology talent in the country So I was much more comfortable having the best technology talent like someplace else rather than in Omaha So we had the best people doing, like someplace else, rather than in Omaha, so we had the best people

doing what the job was. Now they weren't working from home, but they weren't, nor were they at Headquarters. CNBC has a story out this week. Millennials are quiet vacationing, rather than asking their boss for paid time off. There's a giant workaround culture. Let me just read this.

78% of US workers say they don't take all their PTO days, and it's highest among Gen Z workers and Millennials According to a new survey young professionals say they don't ask for time off because they feel pressure to meet deadlines to be productive and they get nervous Nearly four in ten say they've taken time off without communicating it to their manager. I Mean, I don't know if that's real or if it's not real, it's just a survey. It's just people self-reporting. There are people that would say, oh, I bet it's higher than 4 in 10. I think everybody does a little bit of that.

If you were still running TD Ameritrade, would you look at that and still have the same level of leniency about how many people could work from home versus how many people do you actually want to see? If all our numbers, we're still growing market share and we're still studying records in terms of profitability, we're doing what we need to do. And remember, I expect our people, our leaders to evaluate their people as well. And our people are delivering and they work three days a week and they're really giving us A plus work or really solid work.

I can live with that. I cannot live with it if they're working seven days a week and they're not getting the job. Because you're not going to have the performance if they're working seven days a week and they're not getting the job because you're not gonna have the performance If they're not working hard Yes, yes, yes, yes, yes, but Here's something sometimes you get the job done just because you're better than some of your competition you get away with it But you can't do that forever without you can't hide that forever. What you can't reach your capacity You can't reach your potential if you do that before we hopped on we were talking about college sports There's a big announcement today yesterday. What's going on last night? The NCAA agreed that they would

They would settle they would be willing to settle a lawsuit for two point seven billion dollars where they would go back to 2016 and pay college athletes that were participating, competing in 2016, they agreed to that, $2.7 billion. Now, the reason why they agreed to that, now there's a lot of details behind it, the reason why they agreed to that is because if you go back and look at all the individual athletes from 2016 on and how much money that would cost, that potential number is 20 billion. So Power Five's conferences seem to be reluctantly agreeing to this because everybody's afraid

of the 20 billion. But there's a lot of issues with how does that play out? How does that get divided? Where's the money going? To athletes? They have an algorithm, they have some sort of formula that they have not released

that would allow that to happen. So for example, you're a swimmer in 2016, do you get the same amount of money as the quarterback for the Ohio State National Championship 2020? I don't think you do it that way. Is Sean getting paid? You get any check? I would hope so.

I would hope he deserves something. I'm voting you get a couple bucks out of this. Sean was a... But this is huge. What position did you play? Tackle and guard. Tackle and guard. Would you have liked to have had Joe Moglia as your coach?

Hell yeah. That would have been pretty cool, right? I would have worked your ass to death, buddy. My God. Did you have fun on the show today, Joe? Thank you, guys. It was a pleasure being on. It was an honor being on. I'm grateful for being on. That's about the halfway point. We're going to take a brief intermission. We'll do another hour, 15. What do you think?

We're good. I'm ready to go. Joe, thanks very much for welcoming Mary on. Mary, we're so happy to have you. And I just want to say for Joe, you... Thanks very much for welcoming Marriott. We're so happy. Marriott, we're so happy to have you. And I just want to say for people, I want to reiterate, and then we're going to get your favorites, which I'll ask you about in a second. But I just want to reiterate for people,

you're somebody that I think generations of people on the street have learned from your example, people that want to be leaders, people that want to become leaders. I think there's a lot they could learn from watching you and listening to you. And I like that you're starting to do more. I don't want to say content because that cheapens it. I like that you're starting to speak more on that topic now. And I hope you do even more of it going forward. So, and I know you have some plans to do that. But I appreciate that Josh. Thank you Josh and Michael. Thank you. Thank all of you.

So we always end the show with favorites. We ask people what books they're reading, what shows they're watching, what movies. Just give us something that you think the audience should know more about. What are you into these days? I'm reading The Fault Line, which my daughter Kara gave me, which is the political changes of the United States from 1974 to today. It's about 500 pages. I've been reading it for about a year. I'm up to page 80. I'm struggling. I'm struggling to get through it But it's a good but it's a good but it's actually a pretty good book. Okay, Michael you have a favorite for us this week

Yeah, I finally saw 2014 equalizer. It's been a decade. Oh, it's on Netflix time Netflix Denzel big Denzel fan Yeah, I am he's a Fordham guy. It's Denzel playing John Wick. It's great. Have you did you see that? I love it. It's I saw all three of them. Did you see that? Do you see the third one? I started watching two this morning. I'm gonna finish them over the weekend. So in the third one he goes to Italy. Ooh Yeah, so I feel like Venice pretty good Uh, I rewatched House of the Dragon on on max to get ready for the new season that's coming out in June You're sick. Oh, How long did that take you? Is it Game of Thrones?

It's the Game of Thrones prequel series that came out two years ago. It's better than I remembered it being when I first watched it. The thing with these shows is they're so densely packed. You have to, and with so many characters and so much going on. It's a no phone show. Yeah, it's a no phone show and you have to watch it twice. And I think the new season is going to be a sensation this summer. I think it's going to be like one of their biggest shows

of the year. So I just, I love re-watching it. So I highly recommend for everyone that hasn't seen it yet to get ready for season two. Guys, what are we thinking? Oh, unlock, plug. We got to, is that the last thing we have to do? Yeah. All right. So, we started a channel for financial advisors and people that work in wealth

management. We're not going to, we kept hearing two things from the public. Number one, stop talking about financial advisor topics on the compound. Most of us aren't financial advisors. We don't want to hear that stuff. Okay, noted. I'm going to stop. We're not going to do that. But we also heard, why won't you guys talk more about financial advisory industry stuff? We want to hear that stuff. We want to hear about practice management and technology and things that financial advisors are doing. Okay, so that is what the unlock is.

It's advisorunlocked.com. You could subscribe. You'll get our updates there. And it's got its own YouTube channel. So we'll keep this stuff away from the compound. So if you are an advisor and you're a fan of the compound, this is another thing you can follow. And if you're not into advisory stuff, feel free not to follow. But I wanted to make sure that you guys knew that was available. Did I explain that well, Rob? Yeah. Covered all the bases.

All right, guys, our thanks to Joe Moglia and Mary. Thank you so much for coming up here. We had the best time. We really appreciate everything you've done for this industry and all of your leadership. And we hope to follow in your example for years to come. And we hope we have you back on sometime soon. Does that sound good?

I look forward to it. What are you doing next week? Okay, I'll come back next week. Alright, Joe Moglia. Ladies and gentlemen, thank you so much for listening. Have an awesome weekend. We'll talk to you soon. Bye!